SME Chamber

The Single Market Act

The Single Market Act, up for public debate until February 2011, proposes a set of 50 actions. Actions in the Single Market Act proposal fall into three categories: Strong, sustainable and equitable growth; Citizens at the heart of the single market; Better governance and dialogue in the single market.

Strong, Sustainable and Equitable Growth

21 million European companies cater to 175 million jobs and supply 500 million consumers. The single market must encourage companies to expand, buy, sell, create, invest and hire throughout the European Union and beyond, because Europe is poised to think and act globally. 10 actions falling under this category are given here.

A European patent (Action Nr 1)

Our current fragmented system for patents stifles innovation and fails to properly protect inventors and centres for research and businesses.

Any company or individual registering a patent has to go through a process of validating it in each and every Member State. This involves translation fees, a costly business that deters smaller companies.

Registering a patent now may also be subject to expensive and risky multi-forum litigation in different Member States. The Single Market Act aimed to have the first EU patents issued in 2014, but despite several attempts to broker a compromise, Member States have been unable to reach unanimous agreement over language rules.

But an alternative solution is at hand. At the request of 12 Member States, the Commission recently tabled a proposal for "enhanced cooperation" for a unitary patent between those Member States willing to move forward immediately, leaving the way open for others to join at a later stage. The proposed decision to authorise enhanced cooperation on unitary patent protection needs to be approved by the EU's Council of Ministers by qualified majority, after the consent of the European Parliament. The Commission will come forward in 2011 with detailed proposals for implementing enhanced cooperation for unitary patent protection, including translation requirements.

Tackling problems for Electronic commerce (Action Nr 5)

The sector that poses the most problems to consumers is the online single market. Today, only 7% of consumers buy online. Too often consumers cannot purchase products from other Member States because of their nationality or place of residence. A recent study revealed that 61% of online purchases failed because companies refused to sell to people from other countries. In 2011, the Commission will support Member States by providing more guidance on how to rule out discrimination in e-commerce. On 2 December, the Commission issued a Communication on e-invoicing aimed at making it the predominant method of invoicing in Europe.

The absence of a European framework for copyright further complicates online purchases. Buying or selling music, books or other creations of cultural value is still too complicated. As a result, Europe's potential for an EU-wide exchange of works that are of cultural value remains largely untapped. In 2011, the Commission will propose a Framework Directive on copyright, in order to open access to art online while ensuring proper protection and remuneration for copyright holders.

Fighting Counterfeiting and Piracy (Action 3)

Counterfeiting and piracy have become major problems for world business. Twenty years ago, counterfeiting was a concern mainly for manufacturers of expensive handbags. Today, counterfeiters not only fake electrical appliances, car parts, toys and software, but even medication. This means that not only that millions in tax revenues are lost, but also that jobs and the health and safety of citizens are put at risk. The Commission will propose an action plan to confront counterfeiting and piracy in 2010 and will put forward a legislative proposal for a reinforcement of customs control. It will also re-examine its strategy on intellectual property rights for non-EU countries.

Deepening the single market for services (Action Nr 4)

Services are an essential part of Europe's economy and represent more than 70% of all jobs. But although progress has been made, the single market for services still does not work as well as it could. Cross-border services only represent 5% of GDP, which is very low compared to goods traded in the single market, representing 17% of GDP. Citizens and businesses, especially small and medium sized enterprises (SMEs) all stand to gain from a better-functioning Single Market for Services. The implementation of the Services Directive constitutes a major step forward, estimated to bring about economic gains of up to 140 billion Euros, representing up to 1.5% growth of EU GDP. More needs to be done, however, to tackle remaining obstacles. That is why the Commission will put forward further measures to improve the single market in services in 2011.

More efficient rules for common product standards (Action Nr 6)

Common standards means companies no longer have to comply with different standards for different markets. It reduces their cost and gives them better access to global markets, which leads to more trade and growth. New products that comply with international quality standards deliver a message of trust and professionalism. Common standards for products across the EU have also been essential to ensuring EU consumers have access to safe, quality goods, regardless of a product's origin. The economic benefit of standardisation is close to 1% of GDP. But there still is room for improvement. Standards should be agreed more quickly to keep pace with rapidly developing new technologies. Otherwise we deprive companies of export opportunities.

Access to capital markets for small and medium sized enterprises (Action Nr 12)

SMEs represent 99% of all EU companies. But they often cannot exploit their potential to expand because they are faced with difficulties of access to capital. It is still much easier to access capital for a big company than a small one. That is why improving SMEs' access to finance is so important. The Commission will encourage the creation of a network of regional stock exchanges and ensure that venture capital funds can invest freely in all Member States, which will favour small start-ups. It will take action on giving SMEs more visibility to potential investors and push for less complicated requirements for their listing on capital markets. The Commission also wants to simplify accounting rules for SMEs, and improve their access to public procurement contracts.

European bonds for citizens' savings (Action 15)

The Commission will look at finding ways to encourage private investors to invest in long-term economic strategies as well as in big European infrastructure projects such as transport and energy schemes. One option is the creation of "project bonds", an idea raised by President Barroso in his State of the Union Address of 2010. These bonds could be issued in close cooperation with the European Investment Bank.

Common consolidated tax base and improved VAT systems for companies (Action Nr 20)

The 27 national corporate tax systems all work very differently. This creates fiscal obstacles for businesses discouraging and often blocking cross-border activities. Hardest hit are SMEs, who are often unable to overcome the complexities of various tax systems. This is why the Commission wants to introduce a common tax base to address those provisions in the tax systems that limit the growth of companies seeking to benefit from the European single market. A common tax base would mean that a company has to abide by only one set of rules and would need to deal with only one agency on tax issues. This initiative will not affect the rates of corporate taxation that Member States apply.

Our VAT system has remained largely unchanged since it was first introduced in 1967. For businesses operating cross-border, costs are too high and administrative procedures too cumbersome. Fiscal fraud, tax- and duty evasion and bankruptcies have resulted in a net loss of 12% of VAT revenue. The Commission will propose a new VAT strategy in support of a stronger single market with simpler rules.

Greener, more innovative and more efficient public procurement (Action Nr 17)

Public procurement is the process whereby the public sector awards contracts to companies for the supply of goods or services, such as building and construction works. This has generated more competition for government contracts: on average, five bidders compete for every publicly tendered contract. Contracting authorities believe that this has delivered average savings of between 5 and 8% on expected costs. Goods and services bought after public procurement procedures constitute 17% of EU GDP. EU rules on public procurement have contributed to greater transparency in the awarding of public contracts. Over 150,000 contracts were advertised EU-wide in 2009.

However, there is still room for improvement. By 2012, the Commission will have put forward proposals for making public procurement greener and more innovative. Options to make economies of scale by testing trans-national public tendering with more than one Member State involved will be studied. The Commission will also look at ways to improve access to public procurement contracts for SMEs.

The external dimension of the single market (Action 23-24)

The EU is the largest exporter of goods and services in the world and one of the largest recipients of foreign direct investment. The single market should function as a solid base for European businesses, supporting their trade worldwide. It is important that our trade partnerships at international level are based on mutual interests and benefits. The EU needs to continue to be vigilant in its defence of European interests and jobs, and use all appropriate means to combat unfair trading practices. In general, the Commission believes that the adoption of more international rules would benefit both EU enterprises and global economic growth. The EU will also continue to push for more regulatory convergence with its trading partners at the G20 and in bi-lateral negotiations. In international public procurement the EU should work with a view to obtaining a level playing field for EU- and non-EU companies when competing for public contracts.

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