How Do Positive and Negative Integration Interact in the Law of Internal Market - Essay Example

How do “positive” and “negative” integration interact in the law of internal market? Illustrate your answer by reference to at least ONE of the “fourfreedoms.” Introduction The single, or internal, market wasn’t meant to be a cure-all for the problems of European companies, but instead, it is all about providing opportunities not only for the Member States themselves but also for their citizens (Tillotson, J & Foster, NG, 2003, Text, Cases and Materials on European Union Law, 4th edn, Cavendish Publishing Limited, London, p. 247). It is mainly concerned about the freedom of movement of goods, labor, capital, and services. The single market is usually considered to be an advanced form of the common market, because it aims to remove barriers, such as borders, standards and taxes, which obstruct freedom of movement of the factors of production. It is done by having Member States agree to common economic policies surrounding the movement of the factors of economy. This is a good thing, since Member States will have increased movement for their products. However, it also means that such environments are highly competitive, and a lot of companies can suffer great loss if they cannot keep up with the challenges of the competition. It is also very difficult to form a monopoly, and that is a good thing, because the consumers get the best value for the products at lower cost because a lot of companies compete to get the attention of the consumers, rather than having just one company dictating the price for maximum profit and having no choice for the customers of which products to use. Products and services are also given the chance to reach the places where they are most valued, without additional barriers, reaching their maximum efficiency. It is mainly achieved by prohibition. Article 25 EC (cited in Weatherill, S 2007, “Cases and Materials on EU Law” p. 319) states that “Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature.” There is no “customs control at the borders of Member States” (Four Freedoms (European Union), viewed 23 April, 2010), but rather, the “Physical controls of imports and exports now occur at the trader’s premises” (Four Freedoms (European Union), viewed 23 April, 2010). Furthermore, Article 90 (cited in Weatherill, S 2007, p.319) shows that “No member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.” Negative Integration It consists of prohibitions imposed on Member States of discriminatory behavior and other restrictive practices. The four freedoms mainly, but not exclusively, rely on this approach (Four Freedoms (European Union), viewed 23 April 2010, ). Article 28 EC (Weatherill, S 2007, p. 333) mentions “Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.” Negative integration mainly focuses on restrictive practices to prohibit discriminatory actions. This is very limited and so it has to be balanced by positive integration, which can re-direct by the creation of laws and standard to follow. Positive Integration It consists in approximation of laws and standards. Especially important (and controversial) in this respect is the adopting of harmonizing legislation under Article 95 of the EC treaty (Four Freedoms (European Union), viewed 23 April, 2010, ). It refers to the transfer of public market-rule-making and policy-making powers from the participating polities to the union levels. (Pelkmans, J, “The Institutional Economics of European Integration”, in M Cappelletti, M Seccombe and JHH Weiler (eds) Integration Through Law, Vol 1 Methods, Tools and Institutions (Berlin/New York, Walter de Gruyter, 1986) at 321. Cf A El-Agran (ed), International Economic Integration ((London, Macmillan, 1982), and M Jovanovic, International Economic Integration (London / New York, Routledge, 1998) Weatherill (2007, p. 585) believes that “The positive elements of Community policy-making may assume many forms and may be adopted under a wide range of Treaty provisions.” The Four Freedoms This is a term that refers to the movement of goods, persons, services, and capital and the rules surrounding their freedom of movement in the internal market. They are part of the substantive law of the European Union (Four Freedoms (European Union), 23 April 2010, ). They very important factors in the law of internal market because its results relies on the successful functioning of these four freedoms (Tillotson, J & Foster, NG 2003, p. 249). This is why it is of utmost importance that barriers, such as quota and customs duties restriction, be removed. However, this seems to be only applicable in terms of the free movement of goods, of which restrictions have largely been removed, but for the remainder of the four freedoms, such barriers are still in the process of being removed (Tillotson, J & Foster, NG 2003, p. 249). It may be such a herculean task, but once it is fixed, it can mean more opportunities and freedom. Positive and Negative Integration Interaction Although it is a great help to define positive and negative integration separately, it is more important to actually see how they work together. It is necessary for them to work hand in hand for either of them to be really effective, because each one alone will prove ineffective and will not make much sense. Each of them helps neutralize the weakness of the other. In the words of Weatherhill (2007, p. 585), “A common market can only be fully realized by common policy-making; by creating positive Community rules.” According to the concept of negative integration, for there to be real freedom, there should be no limitation, especially if it is due to discriminative behavior, as to where the economic factors come from. This alone, however, will not be enough for an effective transfer of goods, capital, services or persons, since not all the barriers necessarily discriminate. For example, there may be laws set up that require specifications of certain products from other states before they are allowed to enter one another state. Although this does not explicitly ban the movement of certain products, it can cause the products of other states to be more expensive, and so the local competition has the advantage. On top of that, there should also be active and useful rules that will help guide the proper exchange of the factors of economy. Whereas the power of negative integration is mainly in prohibiting discrimination, positive integration is designed to assist in developing social institutions that will guide the market activity towards a larger social purpose (Questia, 22 April 2010, ). Rules in the European Law have both a negative and positive function. The negative integration, by its very name and nature, cancels out any national ruling pertaining discrimination, as well as block any rule that may be created that is discriminatory of origin or nationality. On the other hand, it acts out its positive integration side by giving the option of making new rules and regulation for the Member States to follow and apply to better take advantage of opportunities available (Ortino, F. 2004. Basic Legal Instruments for the Liberalisation of Trade: A Comparative Analysis of EC and WTO Law. Oregon: Hart Publishing). Tillotson (2000, p. 43) mentioned in his “European Union Law” that while the negative integration gave “rise to ease of legal implementation (for example, in the fields of the free movement of goods and competition policy),” the positive integration dealt, according to the same source, “predominantly with economic and social issues other than the removal of restrictions and discrimination.” In addition, before the establishment of “the Single European Act in 1986, the programme of policies and procedures for positive integration was variously described as ‘vague’, ‘feeble’ and ‘permissive instead of definite and mandatory’” (Tillotson 2000, p. 43) so an improvement in the system is necessary. It should be mentioned, however, that the line between negative and positive integration is not quite clear in practice as it is in theory (Tillotson, J & Foster, NG 2003, Text, Cases and Materials on European Union Law, 4th edn, Cavendish Publishing Limited, London, p. 43). Now apply this idea in the context of one of the four freedoms as an example: the free movement of goods. How are the movement of products affected by the interaction between positive integration and negative integration? But first, it is best to observe first how things usually work outside of an internal market so the difference can be better appreciated. Normally, there are customs that will prohibit the movement of goods from one place to another, which are also dependent upon the local laws imposed, through regulation of overseas trade, import duties and quotas, and currency exchange controls. This is normally used so that local goods are given the advantage of wide range of movement, compared to their imported counterparts, and this does not inspire competition at all, but rather, this is an attempt to stomp out possible competition for local companies (Tillotson, J 2000, European Union Law: Text, Cases and Materials, 3rd ed, Cavendish Publishing Limited, London, p. 272). Often, such actions can lead to mutual resentment between the territories concerned, and a terrible retaliatory ‘war’ can ensue. For example, State A decided to impose huge amount of tax for imported products from State B. This means that products of State B will now cost higher than local products made in State A, and the movement of products of State B is severely limited. State B can retaliate by doing a similar stunt on products imported from State A, making its products more expensive than State B products, and as such, less desirable to consumers. It can be a never-ending battle, and worst of all, it can involve more than two states. In the internal market, the goods will be given more freedom of movement, more range and efficiency. Negative integration prohibits discrimination simply based on the source of goods, but this can also include removal or the decrease of tariffs (Ortino 2004, p. 23) applied on imported goods. Rules should be made that will harmonize the policies of the Member States so that there will be no conflict as to the agenda, and the flow of goods performs uninterrupted. Eradication of disparate rules between Member States can assist in the pursuit of trade integration since different rules may block the process of integration (Weatherill, S 2004, Why Harmonise? In: T Tridimas & P Nebbia (ed.), European Union Law for the Twenty-First Century: Internal Market, Hart Publishing, Oregon, pp. 11-32). Proper consideration should also be applied as to the limits and proper control standards for the free movement of goods, because such actions, in the words of Wulf-Henning Roth (2004, Export of Goods and Services within the Single Market: Reflections on the Scope of Articles 29 and 49 EC, In: Tridimas, T. & Nebbia, P. European Union Law for the Twenty-First Century: Internal Market, Hart Publishing, Oregon, Ch. 3, pp. 33-48), “have a direct impact on the structure and balance of decentralized decision making in the Union,” and such an impact can open “hard choices between the promotion of free trade and free movement of goods… and social choices pursued by the Member States on the other” (Roth, WH 2004, p. 34). Cultural objections refer to the controversial concept about the intrusive effect of the harmonization program. In reality, it is simply that it ignores and sacrifices the traditional and cultural roots of the national laws which are forced to change under its influence, simply to fit into the modern image of a utopia (Weatherill, S. 2004. p. 13). In his book, “Cases and Materials on EU Law,” Weatherill (2007, p. 473) further explains that “Harmonization requires all professionals to meet common standards, wherever qualified. There is then no obstruction to free movement.” However, he does admit that achieving harmonization can be “extremely difficult.” He continues: “Profession by profession, progress has been slow, doubtless because vested interests, many of them perfectly legitimate, are at stake” (Weatherill, 2007). Weatherill (2007) further promotes that “The barriers created by long-standing professional requirements should fall. The migrant lawyer must demonstrate a basic ability, but is not to be subjected to the full period of professional training normal in the host State.” However, it is often the case that when the Court of Justice faces a choice that they end up checking if the goods are in competition with one another, in deciding if there is discrimination (Chalmers, D, Hadjiemmanuil, C, Monti, G, & Tomkins, A 2006 European Union Law, Cambridge University Press, New York). Generally, cultural goods can be considered non-discriminatory in the sense that local and foreign works are not competition, because they are unique in their own way, since usually each country or territory have their own culture that cannot be practically compared (Chalmers, D, Hadjiemmanuil, C, Monti, G, & Tomkins, A, 2006). Tillotson mentioned in his book “European Union Law: Text, Cases and Materials” (2000, p. 46) that “The process of linking the economic concepts of negative and positive integration to the EEC Treaty (as successively amended) has enabled us to sketch the outlines of the economic and social law of the Community.” It is Tillotson’s belief, therefore, that to reach the ultimate aim of the integration process, which is ‘union,’ “an attempt must be made to say what is currently understood by that term in practice” (European Union Law: Text, Cases and Materials, 2000, p, 46). Conclusion The internal market has been explained to clarify what it is and what is not. The internal market was developed to provide equal opportunities for everyone to succeed. However, this is not always as simple as it seems. Internal market is never meant to be an all-around solution to every problem in the European Union. This is just a means to make sure everyone gets an equal opportunity to succeed by removing barriers which limit the reach of goods. This is why the internal market is considered to be a highly competitive market. To survive, a company needs to have products or services that can easily challenge its competitors. This means that the risk of a monopoly is highly reduced. This is good news for the consumers because they will receive high quality products at reduced price. Negative integration is the prohibition of discriminatory regulations based on certain factors, which can often include discrimination based on the nationality of the persons, products, goods or services. However, it is incomplete because not all regulations are discriminatory in nature. Positive integration is necessary to clarify guidelines to give equal freedom. The four freedoms were quickly explained as the movement of the economic factors within the Member States. They include goods, persons, services, and capital. The process of positive and negative integration and how they interact in the law of internal market was also explained, within the context of the free movement of goods within the Member States. Negative and positive integration must work cooperatively if they are to succeed at all. It is best to provide an overview of how things work outside of the internal market because only then can its advantages can be properly appreciated. Taxes levied on imported products can make the imported products more expensive, therefore making them less efficient. This can provoke the first country to levy high taxes on imported products from the second country. This is where the internal market proves its advantage. Through the negative integration aspect, any discriminative rules will be disallowed so that competition can increase. Rules must also harmonize policies. Eradication of conflicting rules can also support completing the integration process. However, this process can prove extremely sensitive, and this is where it will take some more serious consideration because situations and rules in each Member States can vary, and some rules may not be applicable in other states. References Chalmers, D, Hadjiemmanuil, C, Monti, G & Tomkins, A 2006, European Union Law. Cambridge University Press, New York. Four Freedoms (European Union), viewed 23 April, 2010, . Pelkmans, J, “The Institutional Economics of European Integration”, in M Cappelletti, M & Ortino, F 2004. Basic Legal Instruments for the Liberalisation of Trade: A Comparative Analysis of EC and WTO Law, Hart Publishing, Oregon. Questia 1994, Europe 1992: from customs union to economic community, viewed 22 April 2010, . Roth, WH 2004, Export of Goods and Services within the Single Market: Reflections on the Scope of Articles 29 and 49 EC, In: Tridimas, T. & Nebbia, P. European Union Law for the Twenty-First Century: Internal Market, Hart Publishing, Oregon, Ch. 3 Seccombe and JHH Weiler (eds) Integration Through Law, Vol 1 Methods, Tools and Institutions (Berlin/New York, Walter de Gruyter, 1986) at 321. Cf A El-Agran (ed), International Economic Integration ((London, Macmillan, 1982), and M Jovanovic, International Economic Integration (London / New York, Routledge, 1998 Tillotson, J 2000, European Union Law: Text, Cases and Materials, 3rd ed, Cavendish Publishing, London. Tillotson, J & Foster, NG 2003, Text, Cases and Materials on European Union Law, 4th edn, Cavendish Publishing Limited, London. Weatherill, S 2004, Why Harmonise? In: Tridimas, T. & Nebbia, P. European Union Law for the Twenty-First Century: Internal Market, Hart Publishing, Oregon, Ch. 2, pp. 11-32. Weatherill, S 2007, Cases and Materials on EU Law, 8th edn, Oxford University Press, New York. Read More