The impact of mutual recognition--inbuilt limits and domestic responses to the single market

Abstract

What have been the consequences of integrating the single market via mutual recognition? Did competitive deregulation result? Or were its implications less signi cant than expected? In this paper I analyse two previously highly regulated service sectors, insurance and road haulage, and study the impact of European policies in Germany and France. I nd that the Council instituted mutual recognition in a restrictive way. This limits its impact on member states, which is moreover mediated by national factors. In both sectors, the use of the freedom to provide services has stayed much below expectations. Consequently, the single market rules have primarily resulted in a liberalization of national markets, where this had not already been achieved, for instance, in Germany. The domestic insurance and road haulage markets have become very competitive, but they remain largely national markets.

Establishing an EU internal market for depositaries

“…Looking through the prism of capital markets integration, the concept of domicile became ineffective and the national borders were meant to be dismantled, allowing freedom of movements across the community. “In the field of financial services, the creation of [the internal capital market was] based on the fundamental principles of mutual recognition and minimum harmonisation” (Schmidt, 2011). While, undoubtedly, the development of an internal market for funds industry is a considerable achievement, “the limitations of the governance mechanism for mutual recognition based on minimum harmonisation of regulation” (Buttigieg, 2014), in the form of inconsistent application of the directives and the application of member state discretions, hindered the entire removal of barriers to the free movement of services.…”

The Importance of Cross-Border Regulatory Cooperation in an Era of Digital Trade

“…104 There is an argument that mutual recognition could lead to competitive deregulation because firms would move to countries with more strict regulations to those with looser regulations, but that also have a mutual recognition agreement. 105 There is no clear process for, or body involved in, creating or reviewing workable mutual recognition agreements, as the WTO does for trade agreements. Moreover, there are clear incentives for having mutual recognition between like-minded governments.…”

The Joint-Decision Trap Revisited

“…Starting with the Cassis de Dijon decision of 1979 (ECJ Case 120/78), the Court had signalled its willingness to intervene against national non-tariff barriers even in the absence of harmonizing European legislation. Since the default outcome -the mutual recognition of incompatible national regulations -would often appear undesirable or even impracticable (Schmidt, 2002), the mere threat of Court action would greatly increase the willingness of all governments to accept the minimum harmonization directives proposed by the Commission. In the field of competition policy, moreover, the Commission made strategic use of treaty violation proceedings against the public service monopolies of some Member States -whose governments would then support directives that would open the service and infrastructure functions of all other Member States to market competition (Schmidt, 1998(Schmidt, , 2000.…”