29 October 2009

Relations of the Union and the member states 5 – Single market

The European civil war (usually called the World War) is far in the past now and so economical reason of unification is more important for the Europeans than maintaining peace in Europe. It is actually the most important reason nowadays, but important in every time and the European constitution has to pay attention to it. So far, I wrote only about free movement of persons all over the federation but importance of free movement is not only economic and therefore it is necessary to write about the economy more.

The main feature of federation is that member states' borders are not borders of economic entities (as independent states are), economic activity is run regardless of these borders and federation makes up so single economic area. But this single economic area grows up not by itself, it can be established and retained only if the federation has corresponding competencies enabling to create the single market and to defend it against activities of the member states.

As I have stated already, I wrote only about free movement of persons. This matter by itself however will not be able to create a single economic area. Inhabitants of particular states could travel freely to other states but various regulations for exercise of professions could be in force in every state and inhabitants of foreign states would have complicated access to them in comparison with the residents of the given state. It can be prevented only that way that the federation itself determines (minimal) requirements for exercise of certain professions valid all over the union so that every person of every member state can exercise them in every state of the federation. When manpower came up for discussion, a question arises naturally of its social security. For example, every economically active one, in the end of his (or her naturally) productive life, has to obtain an old-age pension corresponding to it what he has worked during his economically productive life, disregarding in what and in how many member states of the federation has worked. But I do not believe that the federation should be the only who will make a social system and pay off e. g. the old-age pensions of it – it should be a matter of the member states – although it can be seen handy in the case of persons working in more member states. But it is possible to retain the social system in the hands of the member states and to use organizational possibilities of the federation having a provision in the federal constitution saying that the member states cooperate in social security of working people with each other and with the federation. I prefer however to add the words “if maintaining the single market requires it” because every power of the federation will have a tendency to spread in powers of the member states, therefore it is advisable to limit every federation's power with an accurate wording, especially in that spheres where competencies should be divided between the federation and the member states – and the social system is the case. What I have written about the social system, will be valid also about a health system naturally which is in fact its part.

However, ensuring free movement of manpower all over the federation is not sufficient for creating a single market in the federation. In the same way, it is necessary to remove any obstacles for goods and services movement and to unite rules of working of economic subjects in all member states. The first important principle is that no member state is allowed to impose a customs duty or any other fee on goods and services coming from another member state. It can be seen obvious for already in present non-state (international) European Union, there are not any duties among the member states. But if the provision is not in the federal constitution, it could happen that any member state could impose a duty on goods or services coming from any other member state in an extraordinary situation (see present economic crisis and attempts of some EU members to boost own narrow national solutions, though not in duties field).

Another provision must concern a common currency. A single common market cannot be created if every member state has its own currency. There must be therefore a provision in the federal constitution saying that only the federation can issue money and that the member states cannot do it and have their own currency. The federation will naturally issue regulations on the common currency of the federation. Also the bank system is closely connected to circulation of the currency and because (commercial) banks have great (even decisive) influence upon circulation of money and hence upon all economy, it is necessary that the federation has a power to issue regulations concerning the bank system and every financial institution at all and a power to execute a supervision over them. The provision on the currency will require also provisions about an institution which will supervise the currency, that is about a central bank. But more about it in that part of the constitution where institutions of the federation will be described.

An obstacle for creating the single market in the federation is also that different states can have different requirements on technological parameters of products, on their composition, on their influence on environment, on their labeling and so on. Products coming from one member state could be so rejected in another member state by reason of not satisfying these conditions. It is necessary accordingly that the federation has a power to issue regulations about parameters of products and what concerns them being valid all over the union. It is not said that any state is not allowed to adopt more rigid standards but it cannot demand them of goods (and services) coming from another member state. Uniting regulations obviously cannot concern only the goods themselves but also their production and transportation because all these economic activities noticeably influence the market. It is however necessary to determine concrete competencies of the federation in the field of requirements on goods and services because these matters are related to many other matters and if the federation decided about all of them, its power would be too great. In determining of the federation's powers over the economy it is therefore necessary to take into consideration how much every provision will serve the single market. In fact, it is necessary to secure that economic subjects have the same conditions in all federation. No member state will be allowed either directly either indirectly to advantage its producers (and carriers etc.) and to disadvantage the ones from other states. It can happen, for example, that some member state requires not so strict standards concerning handling materials damaging environment of its producers as other states do and so products having origin in this state will be cheaper and easier to be sold than products coming from the member states whose producers have to invest money into environmental provision of their production (and transportation) and therefore their products will be more costly and less competitive. The same concerns also security standards of products because their lower rate in some state can unfairly advantage products coming from this state. It is quite understandably.

Other thing is less understandable, namely that it is necessary to regulate working conditions of economically active people all over the federation; because here, the federation interfere with powers typical for member states and reserved to them. But I will introduce an example from an extra-European federation displaying that it is necessary. In the United States of America, a federal law prohibiting to transport goods made by children among the member states got to the Supreme Court of the federation in 1918. Though the law came formally under the power of the federation to regulate interstate commerce, the court reached a conclusion that the true reason of the law was to determine minimal age of employment which was not an explicit power of the federation. A pressure to regulate conditions of workers was however persisting in the USA, so a similar law was passed in 1938; it came to the Supreme Court again and the court designated the law complying with the competence of the federation to regulate commerce among the member states now. If barriers among the member states are abolished and the states then cannot hinder the import of goods from other member states, conditions valid for all states without exception must be determined by the federation. A demand on power of the federation over this domain is therefore undoubtedly, it is however necessary to avoid that power of the federation grows too much and intervenes in social systems of the member states. This can be avoided in my opinion in that way that that the provision giving to the federation a power to regulate production and transportation of goods and to regulate services (including the money services) is granted only to the extent that is necessary for establishing and preserving the single market of the whole federation.

In order that all member states (possibly other territories of the federation) are united in single economic area, the federation has to have a power to determine measures and weights. On the contrary, I do not believe that it is necessary that the federation deal with matters of time (including consequently the summer time (daylight saving time) like in north-American federations and unlike in the present EU or, e. g., Germany) because it is not essential for the single market.

Other important matter concerns law on companies and other economic subjects acting in the federation. A single market requires that companies can be established, act and be dissolved under the same condition in the whole federation. The current European Union has its single market not yet established and this natural requirement is provided clumsily through a so called “European Company” in it – but creation of this institute even in intergovernmental environment of present international European community shows in itself that this matter belongs naturally to powers of the federation, not singular member states. What is also important in commercial law is economic competition and relations among companies at all. This is an area in that already the present EU is active, fair competition and control of it is its competence – therefore I hope it is unnecessary to add more words about it in relation to future European federation's power.

A question is what to do with agriculture. In present time, it is a common policy of the European Union members, which everyone knows, and various people could presume that this economy domain will continuously pass over in power of newly established European federation. But if we look into constitutions of other federations, we do not found much about agriculture in them, if something at all. The question is why agriculture cannot be handled as whatever else part of economy. The common agricultural policy raised in quite different circumstances than which are today and will be after an European federation comes into existence. After the World War II, Europe was divided and had to import certain portion of foodstuffs because it was not capable to produce them in sufficient quantity – it caused a security hazard. With introducing the common agricultural policy the objective was fulfilled – Europe (the European Economic Community) became self-sufficient in food products but because essential part of the policy have been made up with subsidies for agricultural production, sufficiency became soon abundance. This has necessitated introducing production quotas which has been complexly divided among the states. The common agricultural policy is very costly in addition, costs on it constituted 45% of expenditures of the Community in 2004. Another objective of the policy is to support the countryside, to avoid its depopulation and to grant high living standard to farmers. Four percents of EU inhabitants feed on agriculture which is in great disproportion to expenditures on agriculture, besides it is not evident to me how the common agricultural policy of the EU can still avoid depopulation of countryside today if only so small amount of its inhabitants feed on agriculture.

The greatest advocate of the policy is France such that – if I pass over today not more needful demand on food self-sufficiency – maintaining (and creation too) the policy can be put on account of egoistic interests of this state (see also the articles French farmers survive but multinationals cash in on EU subsidies or Fraud Plagues Sugar Subsidy System in Europe). It is not usual in other federations that agriculture comes from power of the member states to power of the federation, care of agricultural production and of own landscape is matter of the member states as well as of maintaining acceptable living standard of countryside inhabitants. Many of present common agricultural policy mechanisms will anyway pass in competence of the federation after its creating for they are competencies that belong generally to the federation. There are for example import duties on agricultural products from outside countries because import duties are a matter of federation at all. Similarly, regulations of breeding agricultural animals and their transportation as well as regulations about protecting animals and plants from epidemic diseases, about storing and transporting foodstuffs and similar hygienic, security and veterinary regulations and regulations applying to environmental protection in agricultural production. Words speaking about a power of the federation to make these regulations ought to be the only provision concerning agriculture (including fishery and forestry) in the federal constitution, because they are necessary for the single market (of agricultural products). I do not believe that a return to insufficient coverage of food consumption in Europe threatens so there is no reason to give a power of extra-market regulation of agriculture to the federation as it is in present EU. If the European federation wants to support agriculture some day, it will be able to do it the same way as whatever else.

Important part of present economy are patents, registered trademarks, production procedures, trade secrets and similarly, with other words intellectual property; it is also part of commercial law that was already mentioned above. In such interconnected complex as a federation, it is not possible that another law on intellectual property is valid in every member state. It could be got around in the close connection of states but above all an obstacle in the single market of the federation would arise if every state would have its own intellectual property law. That is the reason why legislation about intellectual property has to be an exclusive competence of the federation.

This is now all what I wanted to write about a power of the European federation in economical field. If I have forgotten something, I will write it in some other post where other matters concerning relations of the federation and the member states will be discussed.