Goods 2011 - free movement of goiods lecture notes PDF

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EU Law Goods The Substantive Law of the EU, Barnard CHPATER 1 The Importance of Free Trade 1. Introduction  Free trade --> specialization --> comparative advantage --> economies of scale which maximize consumer welfare and ensure most efficient use of wo...

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EU Law Goods The Substantive Law of the EU, Barnard CHPATER 1 The Importance of Free Trade 1. Introduction 

Free trade --> specialization --> comparative advantage --> economies of scale which maximize consumer welfare and ensure most efficient use of worldwide resources. ◦ “Maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy...” Adam Smith

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Trade translates individual advantages for many countries into maximum productivity for all.

2. Theory of Comparative Advantage.   

Ricardo 1817: Specialization results in higher productivity ( UK Portugal) cloth/wine example. Jackson, “It is not the difference of absolute advantages but of comparative advantage that gives rise to gain from international trade.” Free trade also produces dependancy. Prosperity of countries are now interlinked. And countries that trade peacefully less like to go to war. Also Monnet's vision for EU.

3. The Problems with the Basic Model 

Problem with Ricardo model, it is based on perfect competition assumptions. But some problems which are transnational and do not affect national markets in the same way. For instance, national regulators tend to respond to local concerns, ignoring external costs of their regulation by generating trade barriers and granting inefficient subsidies. ◦ E.g UK wine makers will go out of business, national parties have elections to win, will respond with measures like customs duties or CEEs. ◦ To avoid this, can set up agreement to say that do not charge one another anything and Recognize one another's products. This needs some form of control. WTO is a good step. EU thinks next best thing is slightly smaller EU grouping.

The Different Stages of Integration 1. Introduction 

Labels for different levels of intensity of market integration. ◦ CU: common ex policy in respect of non MS (e.g. Single customs tariff) ◦ CM: CU + free movement of persons, services, and capital. ▪ Idea: liberalization of factors of production allows for optimum allocation of labour and capital.

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▪ Note, as Molle points out, more likely that free movement of products and free movement of production factors are complements, not substitutes, ▪ Common market idea at heart of EU and encapsulated in treaty in 34,35,45,56,57,63. Based on principle of negative integration as removing barriers to trade (Gason Schul). ▪ Single Market  Lord Cockfield's 3 principal obstacles to the completion of the single market: ◦ Physical barriers to trade ◦ Technical barriers to trade ◦ fiscal barriers to trade  Up to 300 suggestions, resulted in Single European Act, deadline was 1992.  Today still not completely single market because its an ongoing process rather than a finite act. ▪ Note also the creation of “area of freedom, security and justice” by art 67(1) TFEU to complement the single market idea and stages of econ integration here outlined. MU: Cm + single currency PU: Economic Union + central authority sets not only monetary and fiscal policy but also responsible to a central parliament with sovereignty of a nation's government. Such a parliament might also set foreign and security policies. FU: the complete unification of the economies involved and a common policy on matters such as social security, income tax. Virtually no different than a nation state. Lisbon treaty shows how Eu moving towards political Union, but full Union still seems unlikely, understandably at this point.

2. Free Trade Area and Customs Union   

FTA: characterized by common internal policy (free movement of goods) but different external policy. Disadvantage: goods coming from non MS will enter area via state with most favorable trading regime, and then benefit from free circulation of its goods within the area. A CU can overcome these problems. Art 28(1) TFEU, the Eu comprises a CU where customs duties are prohibited between MS and and common customs tariff is adopted in respect of third countries.

UNDERSTANDING THE INTEGRATION PROCESS 

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Haas argues that there is spillover from one type of integration to another, if states integrate one sector of their economies, technical pressures would push them to integrate other sectors which are increasingly controversial. ◦ Example of lawnmower that has to fit every countries safety regulation. And even if harmonized standard by directive, still has currency issues. But single currency has the problem that countries loose their ability to devalue their currency. For many, fact that Eu went from coal and steel community to major econ monetary union in period less than 50 years only explicable by neo-functionalsim (idea that you have supra national regime). For Moravcsik however, the European Council is central, because integration proceeds only as far as they allow. Keohane and Hoffman try to reconcile these approaches, they argue that spillover does happen, but not in a vacuum, it needs the positive action of states. States not only actors, institution matter. Esp Commission, produced White paper on mutual Internal Market principle, and even individuals like Lord Cockfield. And Court also helped quietly by developing Fundamental principles of direct effect, supremacy. This reflects multilevel nature of governance in the EU (Hooghe and Marks): dem

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competencies are shared by actors at different levels rather than only govs. This multilevel governance model is perhaps most telling about policy-making in Eu law. Now look at the four freedoms, principles which the Court has played key role in developing.

The PRINCIPLES UNDERPINNING THE COMMON MARKET 

Two ways to attain common market ◦ 1. Decentralized model: idea of non discrimination, market access, and competitive federalism, and ◦ 2. Centralized: concerns harmonization.

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Decentralized Model ◦ states remain free to do national rules so long as not interference with key principles of federal law. In early days, key principle was non discrimination. More recently it is 'market access'. Let's look at both: ▪ Non-discrimination  Requires out of state goods to enjoy same treatment as in state equivalents. Advantages are obvious. But, if there is unjustified discrimination, union law will require element of national measure to be set aside. - but substance of national rule remains intact.  Issue of having a rule that products sold in Portuguese must have so and so standard, even if they say that also domestically produced goods must have that standard, there will be indirect discrimination because british goods must possible be re-manufactured so imposes an additional burden. ▪ Market Access 

Market access v Discrimination tests ◦ Two drawbacks of discrimination test. Model thinks migrants and nationals similarly situated when by definition they are not. Also, effect of non discrimination model is to allow barriers to movement to remain because it permits the host state to impose its own rules on imported goods/migrants provided those rules apply equally. ◦ Thus, market access approach looks at national rule solely form perspective of claimants: does nat rule prevent or hinder their market access? COJ now favors this (Gebhard). Court uses language of 'obstacles' or 'restrictions'. ◦ Differences between two models seen when dealing with non discriminatory rules like in Commission v Greece (opticians) because under market access approach rule to only have one optician shop is unlawful unless justified (this is the approach courts took). ◦ Advantage of market access: long way towards building single market by removing unjustified obstacles to trade, noted by AG Jacobs in LeclercSiplec. ◦ Market idea based on idea famously articulated in Cassis de Dijon: goods lawfully produced in one MS should presumptively have free and unrestricted access to the market in another MS.

◦ Disadvantage of MA theory is its intrusiveness. And Keck argues that cases like Viacom show that Court recognised this risk that MA model is too all encompassing so it has experimented with different legal techniques to draw line between those rules which should be caught by Union law and those which should fall outside it. 

Meaning of 'Markte Access' ◦ It is inherently “nebulous” concept (Oliver and Enchelmaier). ◦ Spaventa offers three possible interpretations: ▪ 1. Barriers to MA are those created by circumstances or legislation that make it more costly for new firms to enter industry. Arguably finds support in Commission v Italy where Court said that an obligation on insurance company to provide third party insurance to cover any risks proposed to them and to moderate premium rates breaches Art 49 and 56 TFEU. ▪ 2. Any regulation can be seen as potential barrier to access. Approach seen in Commission v UK (BAA) 2003. ▪ 3. Intuitive: rules which interfere with intra Union trade should be subject to judicial scrutiny while rules considered neutral as regards intra Union trade should not. Seen applied in Laval. ◦ Despite problems, MA test is mainstay of Court's analysis, seen in GC decisions in 2009 Commisison v Italy (trailers) and Commission v Italy (motor insurance) ◦ Snell thinks notion of MA conceals rather than clarifies. He argues it covers range of situations including discrimination against free movers or free movement, substantial or direct obstacles to trade or free movement, etc, basically, because term lacks a clear content, Court may use it freely either to approve or to condemn measures that it happens to dislike.

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Market access v Exercise ◦ Further problem with language of MA. Suggests that restrictions on initial access to market (must have language skills) are more serious than restrictions imposed by host state when migrant has actually go on to market but is trying to exercise his freedoms. Evidence: Steinhauser. ◦ Court increasingly now says that nat rules are “restrictions” or “obstacles” to free movement rather than hindering market access. In fact, where persons are involved, must abandon commercial market access language and talk about if rule liable to dissuade individual from exercising his right of free movement.

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The convergence or Unity Thesis ◦ One big debate around free movement: whether single principle like MA or Non Disc should cover all four freedoms. ▪ Yes: clarity, certainty, etc ▪ No: there are too stark differences between the freedoms. ◦ Shift to MA test suggests increasing degree of convergence. Shifted balance back in favor of Union, giving Court power to scrutinize an ever wider category of national measures for their compatibility with Union law.

▪ Competitive Federalism   

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Non disc and MA tests premised on decentralized model to market building. MS retain freedom to regulate provided they do not overstep limits laid down by Treaties. Forces national systems to compete to produce best rules to attract or retain valuable assets. For competitive federalism to function, two conditions: ◦ Federal authorities must lay down rules giving goods people and capital freedom to exist one MS and enter another, ◦ 2. States must remain free to reg production of goods and qualifications of people according to their own standards to enable regulators to respond to the competition. Reg competition also promotes diversity and experimentation in search for effective legal solutions by providing for comparative data. Reduces risk of widespread adoption of flawed laws. Delaware have done great job at this. Comp Fed influenced drafters of Treaty of Rome. Original EEC Treaty owed much to ordo-liberal school which originated in Freiburg in 1930s. Ordo Liberals believe that the Constitution should protect economic freedoms from public intervention in same way as it protects civil and political rights. “Ordungspolitik” But cf Chalmers who thinks that ordo liberalism assumes too rigid and discrete a separation of market from other policies.

The Centralized Model ◦ Need for centralized standards largely based on market failure. Must have host of ideal conditions, and in reality never met. Individuals dont exist so much because not likely to leave for linguistic, cultural, financial personal reasons. Creates risk that type of regulatory competition which emerges is undesirable. ▪ Consider e.g.: pg 28 ◦ Some commentators argue that this is true explanation of what is happening in Delaware: its success is due to tis victory not in race to the top but in race to the bottom. ◦ Centralization has advantages in terms of economies of scale by est a single set of rules applying to a broad class of transactions. Also reduces the cost that stem from evasion. Disadvantage: legal – does central body have power to act? , should it act, and how? And creates political problems: no room for nat diversity, no more local accountability. Assumes a developed system of enforcement capable of preventing more complete forms of evasion.

CONCLUSIONS    

Driving force behind EU: no war. As changed from EEC to EU so too tis policies changed and its self perception. Towards free trade. Eg. Art 3 TFEu shows this shift. Also Deutsche Post case and the courts reading of Art on equal pay shows this. Book looks at 4 freedoms but also considers how free trade imperative is counterbalanced by these broader interests. Begins by considering free move of goods. (chapter 2 looks at different treaty provisions on goods and places them in broader context of the WTO in which the EU must operate.)

Chapter 3: FISCAL MEASURES: CUSTOMS DUTIES AND INTERNAL TAXATION A. INTRODUCTION B. ART 30: CUSTOMS DUTIES + CHARGES HAVING EQUIV EFFECT.  

Art 28: Def of Customs Union: Internal element provides that not customs duties between MS ' or charges having equivalent effect'. Art 30: 'Customs duties on imports and all charges having equivalent effect shall be prohibited between MS.: So, Art 30 prohibits CD and CEE.

Customs Duties 

Customs duties prohibited because they are protectionist: make imported good more expensive than rival domestic product.

Charges Having Equivalent Effect to Customs Duties 

Introduction ◦ Fuller def of CEE in Statistical Levy case:

“any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of them crossing a frontier...is CEE...even if it is not imposed for benefit of the state, is not discriminatory or protective in effect and if the product on which the charge is imposed is not in competition with domestic product. “ ▪ “any pecuniary charge...”: Reminds us that Rat 28 and 30 apply only to fiscal measures. No deminis rule (in Statistical Levy found small charge of 10 lire on each importer a breach) ▪ “...whatever its designation and mode of application...”: Idea that name doesn't matter. So health inspection found to be one (Rewe Zentralfinanz). eg. But Donner v Netherlands says VAT not CEE ▪ “imposed unilaterally on dom or foreign goods by reason of fact that they cross a frontier...”: emphasizes the distinction between Art 30 and Art 110. While 110 applies to charge borne by imported, exported, and domestic products internally within MS, art 30 applies to charges at frontier. Also interstate frontiers (Legros) Court said this type of charge “as least as serious”. However, Oliver and Enchelmaier point out that this decision given without any authority in support of the proposition. And overlooks fact that Art 28(1) expressly states that principle of free movement applies exclusively between MS. Response to that is art 26(2): must have internal market without frontiers' ▪ “Even if not imposed for benefit......domestic product.': Absolute prohibition on CEE applies even where money is not used for a protectionist purpose (this can be seen in Diamantarbeiders). Thus under Art 30 Court is concerned with effect of charge, no account taken of potentially beneficial purpose to which the charge is put. IN Gingerbread case rejected as 'absurd' Belgian gov claim that needed to charge

imported product to 'equate price of foreign product with price of Belgian product'. Remedies 

Direct Effect ◦ What if private parties are responsible for collecting duties? Dubuis v Garanor Exploitation Court said that Art 30 would still apply. Made no difference if charge came from unilateral measure by authorities, or as in Dubois from series of private contract.

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Repayment of Unlawful Charges ◦ San Giorgio: restitutionary claim available if trader paid CD or CEE. ◦ Comateb: developed san Giorgio and said if charge had been passed on to TP, they could obtain reimbursement from either the trader or the state (if from trader, trader get reimbursement from state.) ◦ More likely, consumer vote with wallet, so trader can claim damages for loss of sales from state for unlawful levied charge.

Permissible Charges 

Charge lawful in three circumstances (Commission v Germany) ◦ 1. Payments for genuine admin services render to importer or exporter ▪ Court wary about abuse of this rule, e.g. Commission v Italy 1989. Court said that for charge to fall outside art 30, must confer a specific benefit on iporter/exporter, not simply deprive something you ought to give them. ▪ Borderline situations: Warehousing case, Court held, but AG disagreed, that warehouse close to border where customs formalities can be dones can be regarded as consideration for a service actually rendered to the importer. ◦ 2. Charges for inspections required by Union Law ▪ Will not be CEE providing 4 conditions are satisfied:  (a) do not exceed actual costs of inspections in connection with which they are charged.  (b) the inspections are obligatory and uniform for all products concerned in Union  (c) they are prescribed by Union law in the general interest of the Union  (d) they promote the free movement of goods, in particular by neutralizing obstacles which could arise from unilateral measure of inspection adopted in accordance with Article 36. ▪ But note, charges fro inspections required by national law is CEE. ◦ 3. Charges falling within scope of internal taxation ▪ If charges relate to general system of internal dues then fall to be considered under Art 110 and not Art 30. Let's look at 110 closer!

C. ARTICLE 110: INTERNAL TAXATION Introduction 

Art 30 deals with frontier, art 110 deals with fiscal rules that apply internally. ◦ 110(1): Prohibits discriminatory taxation in respect of goods which are similar, like one beer and another. If not similar, then

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◦ 110(2): Concerns products in competition with one another like beer and cheap wine. “Ensure together the complete neutrality of internal taxation” Co-frutta 1987 Art 110 applies to indirect taxation, ie, on products, not affect direct tax like income tax on producer. Let's look closer, basic rule, MS have autonomy to determine its own taxation policies

Member state Autonomy to Determine Its Own Taxation Policies  

This is the principle of 'fiscal autonomy' and emphasized in Johnnie Walker case. Any scheme of tax that makes distinction between products based on objective criteria is compatible with Art 110. Highlights a key difference: Art 110 is essentially permissive, allows MS both to raise revenue by taxation and to determine the content of their won taxation policy.

Scope of Article 110   

Court has interpreted Article 110 widely so as to cover all procedures which, directly or indirectly, undermine the equal treatment of domestic products and imported products. (Stadtgemeinde Frohnleiten). Accompanying power in 113: harmonize legislation concerning turnover taxes excise duties and other forms of indirect taxation to extent that such harmonization is necessary to ensure the establishment and functioning of internal market. 113 and 110 apply independent...