Which enforcement barriers are hurting Nordic businesses?

Authors:

Christian Jervelund Amanda Stefansdotter

October 2013

Copyright Nordic Innovation 2013. All rights reserved.

this publication includes material protected under copyright law, the copyright for which is held by Nordic innovation Which enforcement barriers are hurting Nordic businesses?

Nordic Innovation Publication 2013:03 © Nordic Innovation, Oslo 2013 ISBN 978-82-8277-053-8 (Print)

ISBN 978-82-8277-054-5 (URL: www.nordicinnovation.org/publications)

All Nordic Innovation publications can be downloaded free of charge as pdf files from www.nordicinnovation.org/publications

Authors:

Publisher

Nordic Innovation, Stensberggata 25, NO-0170 Oslo, Norway Phone: (+47) 22 61 44 00. Fax: (+47) 22 55 65 56.

E-mail: info@nordicinnovation.org www.nordicinnovation.org Cover photo: iStockphoto.com

Senior innovation adviser

Phone: +47 469 34 360

Which enforcement barriers are hurting Nordic businesses?

Which enforcement barriers are hurting Nordic businesses?

Executive summary

1_{This study is a spin-off of the Copenhagen Economics study for Nordic Innovation entitled ‘Delivering a}

Which enforcement barriers are hurting Nordic businesses?

Chapter 1

1

Main findings

Table 1

Table 1 Comparative advantage

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Figure 1

Source: Based on analyses for this current study and Copenhagen Economics (2012).

1.1

Services

Service directive/mutual recognition Mutual recognition

Public procurement/mutual recognition None None None Transport Food Green technology Computer and communications/ICT Pharmaceutical products Machinery

Which enforcement barriers are hurting Nordic businesses?

Box 1 Falck

 Worldwide revenue (2011): DKK 10.2 billion (approx. €1.3 billion)

Source: Based on CE interview June 2012, company website and other material.

Box 2

Box 2 Swedish waste handling company in Estonia

A Swedish waste management company was through its subsidiary a majority owner of a producers responsibility company’ in Estonia. An Estonian legislative change, how-ever, limited the Swedish company's ability to hold shares in this organisation. The new Estonian rules prohibited companies with waste management as their primary business to be a member of a producers responsibility company, and no company was allowed to hold an ownership interest exceeding 25 per cent of such an organisation. The new restrictions on free movement could according to SOLVIT Sweden not be jus-tified under EU law, and they turned to the Estonian authorities to mend the situation. The Estonian authorities agreed that the rules constituted a barrier to trade but claimed that the rules could be justified for reasons of environmental protection. Up-holding the principle of producer responsibility, could, according to the authority, only be ensured if packaging producers themselves can control the size of the fees charged by the producers’ responsibility company. This was not possible as long as the waste management company could hold a majority ownership in such an organisation. SOL-VIT Sweden disagreed with the Estonian authorities' assessment that the restriction could be justified, and claimed that there were less trade restrictive measures that could ensure the principle of producer responsibility. The case was registered as un-solved in SOLVIT.

Source: SOLVIT Sweden, annual report 2010

Which enforcement barriers are hurting Nordic businesses?

Barriers to exporting clean technology in the Single Market

Figure 2

Figure 2 Trade value of exported wind technology, 99-08,

mil-lion USD

Source: Nordic Energy Technology scoreboard based on UN Comtrade Database

5 000 10 000 15 000 20 000 25 000 Austria France Netherlands United Kingdom Portugal Italy Spain Germany Denmark Exporting country

Trade value in mill. USD

Which enforcement barriers are hurting Nordic businesses?

1.4

Policy suggestion II: Change management

2 _{European Commission (2012), “Communication to the European Parliament and the Council: First Report on}

the application of Regulation (EC) No 764/2008 of the European Parliament and of the Council of 9 July 2008 laying down procedures relating to the application of certain national technical rules to products lawfully mar-keted in another Member State and repealing Decision No 3052/95/EC”, 15.6.2012, COM (2012) 292 final

3 _{Fernandez & Rainey (2006).} 4 _{IBM (2008).}

Which enforcement barriers are hurting Nordic businesses?

Table 2

Table 2 Worlds of Compliance

Criteria World of ob-_servance World of domes-_{tic politics} World of dead _letters Word of transpo-_{sition neglect} 1: Transpostion behaviour Respect of rule of _law Pick and choose Pick and choose Neglect 2: Administrative effectiveness Respect of rule _{of law} Respect of rule _{of law} Neglect Respec of rule of _law/neglect

3: NEW: Change management ? ? ? ?

Countries DNK, FIN, SWE AUT, BEL, DEU, _{NLD, ESP, GBR HUN, SVN, SVK} IRE, ITA, CZE, FRA, GRC, LUX, _PRT Note: Transposition behaviour is our shorthand for the original phrase of 'Process pattern at stage of

trans-position' and Administrative effectiveness is our shorthand for the original phrase of 'process pattern at stage of practical implementation'.

Source: Falkner and Treib (2008) expanded with micro enforcement through change management

1.5

Policy suggestion III: Standardisation

Which enforcement barriers are hurting Nordic businesses?

Chapter 2

2

Nordic comparative advantages

Box

Box 3 Measure of comparative advantage

2.1

Overview

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

2.2

Services

Figure 3 Level of regional trade in services in the EU and among

the Nordic countries

Note: The Nordic countries include Denmark, Finland, Iceland, Norway and Sweden. Source: Copenhagen Economics (2012).

5% 89% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% EU Nordics

Which enforcement barriers are hurting Nordic businesses?

Table 4

Table 4 Transportation, communication and ICT services, 2010

√ √ √ √ √ √ √ √

2.3

Goods

√ √ √ √

√

√ √

√ √

The Nordics are strong in some ICT goods

Figure 4 ICT goods, 2009

√

√ √

Source: OECD trade statistics, data from 2009

Which enforcement barriers are hurting Nordic businesses?

Figure 5 Trade value of exported wind technology, 99-08, mill.

USD

Source: Nordic Energy Technology scoreboard based on UN Comtrade Database

5 000 10 000 15 000 20 000 25 000 Austria France Netherlands United Kingdom Portugal Italy Spain Germany Denmark Exporting country

Trade value in mill. USD

3.1

Areas affected

 Taxation (VAT)

 Services

 Public procurement

 Goods governed by mutual recognition

Table 6

Table 6 Economic impact by areas, EU GDP

Note: *We were not able to come up with an estimate of the potential not reaped from mutual recognition legislation, therefore we have not included the expected gain in the total. (1). Primarily VAT Directive 2006/112/EC; (2). Primarily services Directive 2006/123/EC;(3). Primarily procurement Directive 2004/18/EC; (4) primarily Regulation 764/2008.

Which enforcement barriers are hurting Nordic businesses?

 Provision of services is accompanied by language requirements

 Member States do not allow providers to acquire insurance in other Member States.

 Businesses (when providing services both online and offline) are often confronted with additional requirements to those to which they are subjected to in the Mem-ber State where they are established.

 Directive 2004/18/EC (the so-called Public Sector Directive or Classic Directive). This regulates tender bids and contracts awarded by public bodies, in particular of supplies of goods and services and some public works

 Directive 2004/17/EC (so-called Utilities Directive), which regulates procurement in four specific areas of activity, namely water, energy, transport and postal ser-vice.

3.2

Sectors affected

Which enforcement barriers are hurting Nordic businesses?

Table 7 Share of detailed opinions, industries

Note: Based on the TRIS database

Source: Copenhagen Economics (2012), Delivering a Stronger Single Market, and CEPS (2012), Enforcement in the EU Single Market

Figure 6 Cases in reported to SOVLIT 2011 relating to services

Source: CEPS (2012), Enforcement in the EU Single Market

Which enforcement barriers are hurting Nordic businesses?

3.6

Publicly procured goods and services

Figure 7

Figure 7 Reasons for not bidding cross-border

with barriers

4.1

Overview of strengths and barriers

Figure 8 Nordic sectors with comparative advantages and

en-forcement barriers

4.2

Services

Service directive/mutual recognition Mutual recognition

Public procurement/mutual recognition

None None None Services Transport Food Green technology Sector with advantage Enforcement barrier

Computer and

communications/ICT

Pharmaceutical products Machinery

Which enforcement barriers are hurting Nordic businesses?

Box

Box 4 The case of Falck

 Worldwide revenue (2011): DKK 10.2 billion (approx. €1.3 billion)

 Worldwide Employees: 25,262 employees

 Lack of transparency in procedures

 Unfair competition

 Discriminatory measures favouring national service providers and legislative practices seeking to avoid tendering of EMS

Single Market solutions

 Increased use of e-procurement to make the procurement process more efficient by reducing red tape

 Removing political and administrative barriers to implementing European public procurement procedures in EMS-services by EU authorities

 Mandatory procurement for EMS-services

4.3

Transport

8 _{EU Commission (2011) Roadmap to a Single European Transport Area – Towards a competitive and resource efficient}

Which enforcement barriers are hurting Nordic businesses?

Which enforcement barriers are hurting Nordic businesses?

Figure 9 Limitations to green procurement identified by central

government procurement officials (2010)

Other barriers to exporting clean technology in the Single Market

1. No common approach to enforcement

2. Surveillance of green products is not high priority in Member States 3. Testing results are not recognised across borders

4. Court decisions are not recognised in other jurisdictions No common approach to enforcement

9 _{IEA (2010) page 11} 10 _{IEA (2008b)}

Figure 10 Annual costs incurred by Member States in

monitor-ing retailer compliance with Energy Labellmonitor-ing Directive

Source: Fraunhofer et al (2009)

Surveillance of 'green compliance' is not high priority in most Member States

Figure 10 0 100000 200000 300000 400000 500000 PortugalItaly EstoniaCyprus Romania GermanyFrance SlovakiaAustria Czech Rep.Spain SloveniaBelgium GreeceMalta Bulgaria LuxembourgLatvia Finland LithuaniaHungary IrelandPoland UK Sweden Denmark Netherlands EUR

Which enforcement barriers are hurting Nordic businesses?

Court decisions are not recognised in other jurisdictions

Ta-ble 8 12 _{Fraunhofer et al (2009), page 127.} 13 _{IEA (2010), page 1} 14 _{IEA (2010), page 16}

Source: ATLETE (2010)

Testing results are not recognised across borders

Which enforcement barriers are hurting Nordic businesses?

4.6

Computer, communications services and ICT goods

 legal uncertainty

 non-compliance with requirements

 Reference pricing – takes the price for a ‘basket’ of countries and sets a price

based on the average, or on the lowest price.

 Parallel trade – the core of the Single Market which allows distributors to

pur-chase goods in a Member State where prices are low, and re-sell them in a Mem-ber State where prices are high.

Which enforcement barriers are hurting Nordic businesses?

 Mitigation of parallel trade. For example, pricing policy in Spain supports rebates for domestic consumption but not for re-exporting, thus offering a possibility to charge lower prices domestically without risking the products being sold abroad.

 Using reference pricing with baskets consisting of ‘equal income’ countries.

 Ranking index where companies are rewarded for effort to enhance global access to drugs, such as the Netherland based Access to Medicine Index.

Swedish health care exports

Which enforcement barriers are hurting Nordic businesses?

Copenhagen Economics (2012), Appendix – Delivering a Strong Sin-gle Market, Nordic Innovation, 22 June 2012.

Copenhagen Economics (2012), Delivering a Stronger Single Market, Nordic Innovation, 22June 2012.

Copenhagen Economics (2012), Kvantificering af Grænsehindringer Mellem de Nordiske Lande –Hvor stort stort er potetialet i større integration?, 1November 2012.

Copenhagen Economics (2012), Presentation by Christan Jervelund, Potentialet i et mere integreret Norden, Nordiska ministerråder 1 November 2010.

Deloitte (2011), The Internal Market for assistive ITC Final report, June 2011.

European Commission (2012), “Communication to the European Parliament and the Council: First Report on the application of Regulation (EC) No 764/2008 of the European Parliament and of the Council of 9 July 2008 laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State and repealing Decision No 3052/95/EC”, Brussels, 15.6.2012, COM (2012) 292 final.

Faulkner and Treib (2008), "Three worlds of compliance of four? The EU-15 compared to new member states", JCMS 2008, Volume 46, number 2, pp. 293-313.

Frontier Economics (2008), The competition impact of environmen-tal product standards, Office of Fair Trading October 2008. Kommerskollegium (2008), SOLVIT Sverige 2008, Ett urval av

principiellt intressanta ärenden under året.

Kommerskollegium (2009), SOLVIT Sverige 2009, Ett urval av principiellt intressanta ärenden under året.

Kommerskollegium (2010), Fakta från Kommerskollegium nr 1 oktober 2010, SOLVIT hjälper privatpersoner och företag att röra sig fritt i Europa.

Kommerskollegium (2010), SOLVIT Sverige 2010, Ett urval av principiellt intressanta ärenden under året.

Which enforcement barriers are hurting Nordic businesses?

Kommerskollegium (2011) Cross-border public procurement – an EU perspective, November 2011.

Kommerskollegium (2011), SOLVIT Sverige 2011, Ett urval av principiellt intressanta ärenden under året.

Mustilli, F. & Pelkmans, J. (2012), Securing EU Growth from Ser-vices, CEPS Special Report No. 67/October 2012.

Norden (2010), Nordic Energy Technology Scoreboard, June 2010. Nordic Innovation (2012), Strategic global marketing of Nordic

cleantech clusters and competencies – Lighthouse project: Com-municating Nordic green solutions and competencies, report 2012:04, march 2012.

Nordic Innovation (2012b), A study on services certification linked to service standards at national level in Europe.

OECD (2011), “Detailed Data from the 2010 OECD Survey on Public Procurement”, in Government at a Glance 2011, OECD Publish-ing. http://dx.doi.org/10.1787/gov_glance-2011-73-en

OECD (2011), “E-procurement”, in Government at a Glance 2011, OECD Publishing. http://dx.doi.org/10.1787/gov_glance-2011-48-en

OECD (2011), “Government outsourcing”, in Government at a Glance 2011, OECD Publishing. http://dx.doi.org/10.1787/gov_glance-2011-54-en

OECD (2011), “Size of public procurement market”, in Government at a Glance 2011, OECD Publishing.

http://dx.doi.org/10.1787/gov_glance-2011-46-en´

OECD (2011), “Special feature: Green procurement”, in Government at a Glance 2011, OECD Publishing.

http://dx.doi.org/10.1787/gov_glance-2011-49-en

OECD (2011), “Special feature: Partnering with citizens in service de-livery”, in Government at a Glance 2011, OECD Publishing. http://dx.doi.org/10.1787/gov_glance-2011-56-en

OECD (2011), “Transparency in public procurement”, in Government at a Glance 2011, OECD Publishing.

http://dx.doi.org/10.1787/gov_glance-2011-47-en

OECD (2011), “Uptake of e-government services”, in Government at a Glance 2011, OECD Publishing.

http://dx.doi.org/10.1787/gov_glance-2011-55-en

Pelkmans, J. & Correia de Brito, A. (2012), Enforcement in the Eu Single Market, Centre for European Policy Studies (CEPS) Brus-sels.

Vårdföretagarna (2009), Det spirar i vårdföretagen, En skrift om de privata vårdföretagens historia och framtid.

Table of Abstract

Series title, number and report code of publication: Nordic innovation publication 2013:03

Author(s):

christian Jervelund, amanda stefansdotter Organisation(s):

Nordic innovation & the danish business authority Title (Full title of the report):

Which enforcement barriers are hurting Nordic businesses?

this study summarizes the main findings from a previous Nordic innovation study, delivering a stronger single Market (2012) and identifies the areas which have the largest impact upon Nordic business. the areas identified is the service directive, mutual recognition and public procurement. this is especially harmful for Nordic service providers, food exporters and green technology producers. the study points on four areas for action: a stronger soLvit mechanism; a mechanism which should check against parallel national legislation when new eu laws is implemented; increased focus upon common european standardization and certification within services; and finally strengthen focus upon micro level implementation in the member states.

ISBN: isbN 978-82-8277-053-8 (print) isbN 978-82-8277-054-5 (digital) (urL: http://www.nordicinnovation.org/publications) Language: english

Name of Nordic Innovation funding program (if relevant): Commissioned by (if relevant): Name of project:

Which enforcement barriers are hurting Nordic businesses? Project acronym (if relevant): Nordic Innovation project number:

p 11100 Pages:50 Date:october 2013

Keywords:

single market, enforcement, market barriers, services, public procurement, Nordic region Publisher:

Nordic innovation

stensberggata 25, No-0170 oslo, Norway phone: +47 47 61 44 00

info@nordicinnovation.org www.nordicinnovation.org

Main contact person:

rasmus Wendt, senior innovation adviser Nordi innovation

stensberggata 25, No-0170 oslo, Norway r.wendt@nordicinnovation.org

The Nordic region is particularly competitive in services, transport, food, green technolo-gy, communication services and equipment, machinery and health care services includ-ing pharmaceuticals. This leads to high exports in these industries which generates jobs and brings wealth to the region. Barriers to exports in these industries are thus particularly harmful for growth and wealth creation. We find evidence that a subset of these industries namely services, transport, food and green technology are facing barriers due to EU legislation that is not being applied as intended. For example, the existing public procurement directives ought to pave the way for non-discrimination between domestic and Foreign Service providers. Yet, it is not always the case, which an example of emergency service provider Falck demonstrates.

By taking the lead and push for better enforcement of existing EU legislation within these targeted industries in the other EU countries, the Nordic countries will directly strengthen the competitiveness of its businesses eventually leading to higher economic wealth. However, what is at least as interesting, but often overlooked, is that pushing for better enforcement within the Nordic region may indirectly increase economic wealth creation. The reason is that a level playing field in the Nordic countries provides a ‘training’ ground for Nordic businesses sharpening their offerings and production processes, stimulating innovation and supporting the build-up of larger businesses to name a few. This allows them to better compete in the EU – barriers or not – and even more importantly, to compete globally.

Nordic Innovation is an institution under Nordic Council of Ministers that facilitates sustainable growth in

the Nordic region. Our mission is to orchestrate increased value creation through international cooperation.

We stimulate innovation, remove barriers and build relations through Nordic cooperation

Sign up for our newsletter!

scan the Qr-code or visit: www.nordicinnovation.org/subscribe

Which enforcement barriers are hurting

Nordic businesses?