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Should Smes care about subsidiarity?
The European Union stands at a crossroad in its evolution. Almost everyone agrees that the EU needs reform to be more effective. On the 10th of November, The UK’s prime minister David Cameron set out his European reform agenda. The N-VA, the party I belong to, is just as convinced as the British Conservatives that the EU is in serious need of fundamental change. Change in which the principle of subsidiarity plays a key role.
The “British momentum” must be seized to reform the EU. This would not only benefit the United Kingdom, but also the other member states. Mr. Cameron’s agenda focusses on economic governance, migration, subsidiarity and growth. The EU should become more flexible, more competitive, and act only where necessary, leaving the member states in charge where possible.
The EU’s single market, its flagship project, was an important factor in Europe’s economic growth during the 20th Century. To create the single market, hundreds of technical, legal and bureaucratic barriers to free trade and free movement of workers between the EU’s member countries have been abolished. The world envied our 500 million consumers having access to European businesses all over Europe. The EU was very attractive to foreign investors.
In the last decade or so, the EU has lost a lot of its image as a positive economic factor. The EU is no longer associated with doing business, economic growth or helping consumers. The Eurozone crisis brought unemployment and economic despair. If you ask people about the EU, they all too often think of bureaucratic, centralistic and administrative burdens on our economies.
THE SINGLE MARKET:
FRIENDS OR ENEMIES?
So what can the EU do to return to be a positive economic factor? It can complete the single market. Unlocking a digital single market can provide 3.8 million jobs. A single capital market provides our startups a helping hand so they do not have to move to the US if they want to scale up. It also needs to conclude more trade agreements - such as the free trade agreement with the US – because they can offer many benefits to our consumers and companies.
However, completing the Single market does not equal ever more European regulation. All too often, the Commission uses harmonization where it’s not necessary. All too often European rules are custom written for (and by) multinationals. The single market needs to focus on opening competition, not on restricting it. Also in the single market subsidiarity is key. Less and better legislation will benefit primarily SMEs.
Completing the single market should therefore be done the right way. Sometimes you need European harmonization, sometimes it’s better to break down barriers to entry and scraping protectionist elements of national regulations. When European standardization is necessary, it’s important that the European regulation is correctly implemented by the Member States. It’s twice as problematic if you have European regulation and at the same time fragmentation of the single market. Gold plating and/or weak implementation make it very hard to do business all over Europe.
But we also need to look at the cumulative effect of European regulation. The EU needs to reduce the existing regulatory burden on the economy. The EU has launched this legislature the better regulation agenda, spearheaded by Commissioner Frans Timmermans, and it is definitely a step in the right direction. The Dutchman is coordinating the work on better regulation within the Commission and tries to ensure that every proposal respects the principles of subsidiarity and proportionality.
More is needed. Work needs to go further. The Commission must go with an ax through the forest of regulation in the EU and not only focus on better regulation but actuality deregulate. The EU can learn from what its Member States have been doing. Germany set up the federal “Bureaucracy Reduction and Better Regulation” programme. The UK has since 2011 a “Onein, Two-out, rule”, preventing government policymakers from creating new regulations that increase costs for business and voluntary organisations. This has reduced the yearly cost for entrepreneurs with almost £2.2 billion.
If we want to make our economies ready for the 21st century, we need to write competitiveness into the DNA of the whole European Union. The British reforms are only a first step in this exercise, but if we do it right, it can be an important one.