Law of the European Union – Law 210/310

Seminar 7 – Introduction to Semester 2 / What is the EU ‘Internal Market’?

Seminar Overview

PART A – Introduction to Semester 2

General Preparatory Questions

 This semester, your EU studies will be concerned with the EU’s internal market. What
topics will you be studying?

- What is an Internal Market?

- The free movement of goods: fiscal barriers
- The free movement of goods: non-fiscal barriers
- The free movement of people: workers
- The free movement of people: non-economically active Union citizens e.g. non-working
students or retired persons
- + a revision session that will help you to tackle problem questions that raise issues across all
of these topics

You do not need to understand these terms – such as ‘non-fiscal barrier’ now. They will become
clearer over the course of the module.

You might also see reference to the other freedoms of your textbook. The free movement of goods
and people are two of the fundamental freedoms of the Internal Market, alongside capital and
services/establishment. However, you do not need to know about these free movement rules for
this course and they will not be assessable topics.

 What is the basic structure of learning and teaching on this module?

- Online Content (Canvas) – The purpose of online content is to provide you with a good
foundation in the subject, which you can build on during your independent reading and in
seminars. You should try, as much as you can, to treat it as a lecture and to try to take notes
‘live’ rather than pausing or re-watching to catch every word otherwise you might quickly
become overloaded with work across modules. Lecturers will generally slow down further
and repeat parts of the lecture where it might be more important to capture specific details
and much of the key information will already be available e.g. on slides.

- Independent reading – this can be found in the Seminar Preparation Guide for each topic on
Canvas and will generally comprise a chapter of the textbook, Treaty provisions, secondary
EU legislation, academic commentary. You should try to complete all of the essential reading
ahead of the seminar so that you can get the most out of the session and be prepared for
your assessment well ahead of the assessment period. Further reading should be attempted
where you have time in advance of the seminar but is also there to assist you with
coursework preparation.

- Synchronous seminars – the purpose of synchronous seminars is for you to consolidate and
test the knowledge that you have gathered through the online content and independent
reading. Remember, there is no such thing as a stupid question or a stupid answer. Any kind

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 of participation can help everyone learn and make it easier for tutors to run sessions for the
benefit of everyone.

- Peer to Peer sessions – Peer-to-peer sessions run the week after seminars. Seminars run in
‘odd weeks’; peer to peer session in ‘even weeks’. Peer to peer sessions provide an
opportunity for you to compare notes on the topic and seek clarification from fellow
students in a less formal setting. Should there be any logistical issues with the peer to peer
sessions, you should contact slsjteach@liverpool.ac.uk or, should you not receive an answer,
the module coordinator, Dr Stephanie Reynolds (s.reynolds@liverpool.ac.uk).

- MCQs – Remember, there is an MCQ test attached to each topic (except the revision
session). You can take each test as many times as you like and you will receive feedback on
your answers. This is, therefore an important formative exercise, allowing you to check your
understanding on each topic ahead of assessment. However, remember that there is also a
formal participation mark attached to the MCQs and so you should make sure that you
complete at least 4 out of 5 of their MCQs in order to gain your 5% participation mark for
this semester.

 What is the recommended textbook?

- The recommended textbook for this semester is either:

D Chalmers, G Davies and G Monti, European Union Law (CUP, 4th ed, 2019)

P Craig and G de Búrca, EU Law: Text, Cases & Materials (OUP, 7th ed, 2020)

- The module handbook also recommends A. Dashwood, M. Dougan, M. Ross, E. Spaventa and
D. Wyatt, Wyatt and Dashwood, European Union Law, (Hart, 6th ed, 2011). However, as
explained in the module handbook, this textbook is out of date as regards important recent
case-law in the area of EU citizenship, one of the topics for this semester. As a result, the
preference is for the Chalmers et al or the Craig and de Búrca. If you have already purchased
Wyatt and Dashwood and are concerned about having to buy another textbook, both
Chalmers et al and Craig and de Búrca are available online via the library home page. You
can contact Lisa Hawksworth, the Law Librarian, should they you any problems accessing
these textbooks online (Lisa.Hawksworth@liverpool.ac.uk).

 How is this module assessed?

The structure of assessment on this module is the same across both semesters but the content is
slightly different:

Semester 1:
- 45% essay-based coursework question
- 5% participation mark for the completion of 4/5 of the MCQs

Semester 2:
- 45% problem-based coursework question
- 5% participation mark for the completion of 4/5 of the MCQs

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This is in response to previous student feedback and also to the need to lessen the assessment
burden as a result of Covid-19.

In previous years, semester 2 was assessed by an exam, with a problem question on the free
movement of goods and an essay question on the free movement of people. This year’s assessment
will be a coursework as a result of Covid-19 and will only be assessed via problem-question.

Each seminar this semester will work on building problem-question answering skills incrementally so
that you will be fully prepared to answer the problem question coursework.

The problem question could cover any of the topics covered on this course and will definitely
concern both the free movement of goods and the free movement of people. You will have a choice
of question between a number of problem scenarios.

Although Brexit might be discussed as part of each topic because it is interesting to know how things
will work between the UK and the EU now that the UK has left the EU, the focus of the module is on
EU law and so Brexit and the new trade deal is not an assessable topic.

 What should you do if you have further questions about this module?

- Consult the module handbook in the first instance, or the slides on Canvas ‘Topic 7:
Introduction to Semester 2 #Presentation 1 – (SLIDES)’. Most of the information you require
will be available here.

- Any additional queries, not answered by the module handbook and/or the introductory
slides can be directed to Dr Stephanie Reynolds as module coordinator
(s.reynolds@liverpool.ac.uk). Her office hours will run from 09:00 – 11:00 Mondays and
13:00 – 15:00 Thursdays.

As regards other issues:

- Questions about online content should be directed towards the lecturer of that specific topic
i.e. free movement of goods (Dr Stephanie Reynolds – s.reynolds@liverpool.ac.uk ); free
movement of people: workers (Dr Auke Willems A.Willems@liverpool.ac.uk ); free
movement of people: non-economically active Union citizens (Dr Andrea Gideon –
A.K.Gideon@liverpool.ac.uk ).

- Questions related to seminars e.g. absences or discussions that took place in seminars
should be directed to your seminar tutor.

 How do you access the EU Treaties?

- https://eur-lex.europa.eu/homepage.html - EURlex landing page

- https://eur-lex.europa.eu/collection/eu-law/treaties/treaties-force.html – EURlex Treaties

page

- Scroll down to the relevant Treaty and ‘click’.

 How do you access EU secondary legislation?

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 - Try out to find the following piece of legislation:

- Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the
right of citizens of the Union and their family members to move and reside freely within the
territory of the Member States OJ L 158, 30.4.2004, p. 77–123

- Visithttps://eur-lex.europa.eu/advanced-search-form.html?
action=update&qid=1608547439591

- Scroll down to ‘document reference’ and enter the year of the legislation e.g. 2004 and the
legislation number ‘38’ before clicking the magnifying glass.

 How do you access EU case-law?

- Try to find the following case:

Case 8/74 Dassonville ECLI:EU:C: 1974:82

- The link is: https://eur-lex.europa.eu/collection/eu-law/eu-case-law.html

- The ‘C’ in the ECLI number indicates ‘Court of Justice’ so you should select ‘Court of Justice’
from the drop-down list
- Usually you should select ‘Judgment’ from the next drop-down list, though you might at
times need to access an Opinion of an Advocate General. Here we need the Dassonville
judgment
- Case number: 8
- Year (of registration not that the judgment was delivered): 1974

Do you also feel able to access academic commentary? Try finding:

- E. White, “In Search of the Limits to Article 30 of the EEC Treaty” (1989) 26 CMLRev 235
- The easiest way to do this is to visit: www.liverpool.ac.uk/library/
- Type the name of the article into the ‘Discover’ search bar at the top of the screen
- For some articles, this might not work. Instead, you can click on ‘library catalogue’ and
search for the journal name e.g. Common Market Law Review.
- You will then need to select the year of publication: 1989 and then locate the specific article
within the articles published in that journal in that year.
- Should you need further support, you can contact Lisa Hawksworth, the Law Librarian (email
address above).

 Why is it still important for UK law graduates to have an understanding of the EU’s
Internal Market?

- EU law remains a mandatory module for the Qualifying Law Degree for the time being.

But studying EU Law remains important beyond reasons of box-ticking for professional purposes.

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 - The EU’s Internal Market is an important example of economic integration: Whether or not
the UK participates in the EU’s internal market, it remains an important example of
economic integration. The EU remains a major economic player globally and so it is
important that we understand how it works because it remains relevant even to those not
operating within it.

- The UK will continue to trade with the EU Internal Market from the outside: Understanding
the different levels and types of economic integration and understanding how the Internal
Market has developed in order to overcome barriers to trade, helps us to understand the
types of trading relationship that were theoretically available to the UK as a country now
trading with EU member states as a third country rather than as a Member, and the
implications of these options.

This helps us become critical observers of the debates around what is and what is not
possible in the area of UK/EU trade. You might have heard e.g. the reference to key issues
around a trade deal being ‘tariffs’ or a ‘level-playing-field’ but it would be useful to know
what this means and how easy or difficult such issues are to overcome in practice (Tariffs =
fairly surmountable; creating a level-playing field to avoid non-fiscal barriers to trade caused
by the divergence in different rules for e.g. pharmaceuticals, toy safety, food composition =
much more complicated). The UK/EU New Year deal managed to incorporate zero tariffs but
has not managed to eradicate non-fiscal barriers to trade caused by regulatory divergence.
The trade deal foresees various systems of certification, inspections, information exchange,
equivalence agreements and cooperation mechanisms between the UK and EU Member
States that simply were not required when the UK was a Member State.

PART B – Introduction to the Internal Market

General Preparatory Questions

 Describe a free trade area

- A free trade area is established when its Member States agree not to impose customs duties
on each other’s products at their border. In other words, all products are duty free. They
also do not impose quotas on each other’s products.

There are various potential impacts of this:

- Member States’ ability to engage in deliberately protectionist activity i.e. activity that
protects or shields domestic goods from competition from foreign goods is effectively
eliminated as regards goods coming from within the free trade area. Member State A’s
wheat no longer enjoys an advantage on Member State A’s market by virtue of the fact that
it is cheaper than Member State B’s wheat because customs duties were applied to Member
State B’s wheat at the border. Customs duties are prohibited. (no more competition
between foreign and domestic goods as in the price of them, since there is no more custom
duties)

- Similarly, Member State A’s wheat is no longer protected by the fact that it has unlimited
access to the domestic market whereas quotas are applied to wheat from Member State B
at the border with the result that only so much wheat from Member State B can enter
Member State A’s territory at all. Quotas are prohibited. (no more quotas set for goods of
foreign country to enter domestic market)

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 - But potentially there is a wider market for producers to sell to and more choice for
consumers.

There are also some limits to the operation of a free trade area:
- Member States can still negotiate their own terms of trading with third countries who are
not in the free trade area e.g. they can still determine which third countries pay customs
duties at their borders and how much on which products.

- The ability to ‘negotiate our own trade deals’ was advanced by the Leave campaign as a
major ‘pro’ of Brexit. However, it has disadvantages in terms of economic integration and for
the free trade area itself…

- Producers in third countries might seek to export to those Member States of the free trade
area that have the lowest tariffs, knowing that these products can then move freely within
the wider free trade area. In short, third country producers can access a larger market but
pay the lowest customs at the entry point with the lowest customs duties. This deprives
those Member States with higher customs duties of a source of revenue and the ability to
adopt protectionist policies (such as customs duties) in favour of their own domestic
products against products from third countries should they so wish.

- The only way to stop this from happening would be to re-introduce customs borders
between the Member States of the free trade area in order to check whether the products
moving across the borders between Member States were really produced in a Member State
or, in fact, originated from a third country. That would undermine the whole idea of a free
trade area in which goods can move freely between Member States without the delays etc
caused by frontiers. Norway – which is not in the customs union - has a system in place to do
such country of origin checks at the border with the EU as quickly as possible but some sort
of frontier still has to operate in practice.

 Describe a customs union

- This issue can be resolved by also forming a ‘customs union’.

- In a customs union, all Member States agree to have a single external customs border as
well as to eliminate customs duties between themselves. They have the same policies as
regards customs. The same level of tariff is applied to products from a third country
regardless of which Member State those products enter the customs union via. The revenue
collected from these taxes goes into policing this external border and into a common fund.

- As a result, there is no longer any need to worry about certain Member States missing out
on tax revenue because producers in third countries are sending their products only via
those Member States with lower customs duties.

- It is also no longer necessary to worry about determining which products are genuinely
produced from within a Member State and which have come from elsewhere when they
move between countries internally. Both types can move freely within the free trade area
and the customs union since they have either a) been produced in a Member State or b)
been made in a third country but paid a commonly agreed tariff at a single external border

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 that goes into a collective pot. This removes the need for physical borders between Member
States.

However, the creation of free trade area and customs union does not eliminate all barriers to trade.

 Describe an internal market

- internal market is simply the rules and institutions relating to trade within a state, including
trade between sub-state territories if they have the autonomy to set their own rules and
standards

- Barriers to trade can also result from e.g. regulatory divergence.

- If Member State A requires all toys to meet specific standards set in its national law before
those toys can be sold on its market then it can be difficult for Member State B to sell its toys
in Member State A. Producers in Member State B will have met the rules laid down in
national law within Member State B in order to sell their toys there but will have to comply
with a whole new set of rules in order to sell them within Member State A. (the different
specific standard required to meet in order for the goods to enter the market is different in
each MS and this causes difficulty)

- Member State A might also have a shortage of qualified toy-makers, while Member State B
has a surplus. Although the toys can move between Member State A and Member State B
free of tariffs or quotas, we cannot talk of an internal or a single market if those workers
cannot move within that space to where their expertise is needed. Further barriers might
also arise such as what qualifications those toy-makers need in any given Member State.
(there is no internal or single market when workers cant move freely between states).

- An internal or single market aims to overcome these barriers caused by such differences.
The goal is to ensure that all producers are playing by the same rules – or operating in a
system where different rules are recognised as equivalent to each other – so that they can
sell the same product anywhere in the single market. They do not have to make different
products for different markets that operate under different rules. (play by same rules and
where different rules are considered equivalent so that they can sell the same product in all
MS(single market) and no different standard for different MS)

- Furthermore, all factors of production within this single market should also be able to move
freely i.e. goods, workers, services/establishments and capital. If Member State B has a
surplus of toy-makers and Member State A has a shortage, workers in Member State B
should be able to move to Member State A freely to meet the demands of this single market
space.

 Describe an economic and monetary union

- EU has taken steps beyond an internal market also towards economic and monetary union.

- Monetary union involves a single currency. This aims to make trade between Member States
even easier because they are all operating with the same currency and the difference in
value between different currencies can no longer be exploited. The EU of course now has a

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 common currency, the Euro, between many of its Member States. For this to function, some
form of economic union is also needed. (trade easier by using the same currency)

- Economic union is, however, more complex and less precise. It involves merging various tax
policies and budgets. The EU has taken some steps towards achieving this form of
integration but it is politically contentious, especially as it touches upon national spending
across various areas, so it is much harder to achieve.

Although the above generally outlines four stages of economic integration, they are not necessarily
linear e.g. Norway participates in the EU Internal Market via the European Economic Area as a non-
member but is not a member of the EU customs union. This in practice creates some form of
customs border between Norway and the EU.

 What is the legal definition of the EU’s internal market and where is it found?

Article 26 TFEU:

(1) The Union shall adopt measures with the aim of establishing or ensuring the functioning of
the internal market, in accordance with the relevant provisions of the Treaties

(2) The internal market shall comprise an area without frontiers in which the free movement of
goods, persons, services and capital is ensured in accordance with the provisions of the
Treaties…

In practice, this means…

- An area without internal frontiers i.e. borders as regards goods, persons, services and capital

- In addition, the Internal Market should seek to remove distortions to competition between
e.g. products on the market place. This requirement is now sited within Protocol 27 on the
Internal Market and Competition.

- Some of this is fairly straightforward involving physical barriers e.g. goods cannot move
freely across barriers if there are quotas on how many goods can enter one Member State
from another Member State or if customs duties are applied to goods moving from one
Member State to another. People cannot move freely between one Member State and
another if immigration quotas apply. Indeed, tariffs and quotas necessitate a border in order
for revenue to be collected and for numbers to be counted. (custom duty and quota restricts
the free movement of goods entering one MS and also immigration quota restricts free
movement of people)

- Tariffs and quotas also distort competition between domestic goods and goods from other
Member States. Since domestic goods do not face quotas on how many can reach the
domestic market and customs duties are not applied to them, more domestic products can
reach the shelves than can goods from other Member States and can be sold more cheaply.
This puts domestic products at a competitive advantage. (since there is no quota and
custom duties for domestic goods it can reach the domestic market in higher quantity and
cheaper and easily compared to foreign products)

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- But barriers to free movement and distortions to competition can involve barriers other than
physical barriers. There are also non-physical regulatory barriers to trade . Regulatory
barriers arise because different Member States have different national rules on e.g. product
composition, packaging, the safety testing of products, the qualifications or methods of
registration for various professions etc. Thus, goods and workers have to meet a different
set of rules for each Member State market they want to sell into. This, for example,
increases the production costs of goods.

- Thus, while Article 26(2) TFEU outlines what the EU internal market is, Article 26(1) TFEU
also tasks the Union’s legislative institutions with establishing and ensuring the functioning
of the internal market.

- How this is achieved depends on the type of barrier to movement and, in any case, has
changed over time.

 Give some examples of blatant obstacles to free movement.

- ‘Blatant obstacles’ to free movement generally comprise deliberately protectionist or

directly discriminatory conduct from a Member State e.g. customs duties/tariffs, goods and
immigration quotas, internal taxes that seem clearly targeted at foreign goods and
discriminatory employment practices such as a requirement to prioritise Member State
nationals in recruitment.

- ‘Protectionist’ conduct involves protecting the position of domestic goods/workers on the

market place in some way e.g. by making foreign goods more expensive through tariffs,
internal taxes, or shortage of supply via quotas.

 Give some examples of other barriers to free movement e.g. those that might not arise from
openly protectionist activity from a Member State

- Barriers to trade can arise other than as a result of protectionist activity. For example, the
difference between rules across Member States can make it difficult for producers to sell
their products in different Member States as they will need to comply with different rules
depending on they want to sell them. (different rules in different MS can cause difficulty to
sell since they need to comply with different rules for each MS)

- Such rules do not exist deliberately to protect domestic products but to pursue other,
legitimate, non-economic aims e.g. consumer protection, health and safety, public health,
environmental protection. The barrier to trade arises because each Member State pursues
these aims in slightly different ways. While these endeavours might be legitimate they
nonetheless impede free movement because e.g. manufacturers will have to have separate
production lines to meet the different rules of different countries. In effect, there are
multiple markets. (other non-economic aims do not exist to protect domestic goods but

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 causes barriers to trade as they are pursued differently which eventually impede free
movement and create a multiple market)

- Examples might include: product requirements including product composition, packaging,

labelling or safety testing; differences in qualification requirements for workers; restricted
access to public services e.g. if a worker’s children cannot attend State school, the worker
might be less likely to move to a new Member State to work there.

 What is meant by the term ‘positive integration’

- Article 115 TFEU empowers the Union to issue directives for the approximation of such laws,
regulations, administrative provisions of the Member States as directly affect the
establishment or functioning of the Internal Market.

- Article 114 TFEU also empowers the Union to adopt measures by qualified majority voting
for the approximation of Member State laws, regulations, and administrative measures as
directly affect the establishment or functioning of the Internal Market.

- Other provisions within the Treaty also permit harmonisation within specific areas. Articles
114 and 115 are general, residual provisions.

- These Treaty provisions seek to address barriers to trade other than blatant obstacles to
trade through a process of positive integration/harmonisation.

- If barriers to trade are created by different Member States having different rules to meet
certain aims e.g. consumer protection, public health, environmental protection, then such
barriers can be removed by replacing disparate national rules with EU legislation. If the same
rules apply across the Member States then manufacturers need only comply with this single
set of rules in order to sell their goods in any Member State without impediment.

- A single, internal market can be created, goods can be traded freely within this space, but
important aims such as health and safety, consumer protection, or environmental protection
can still be catered for, by means of European rather than national legislation.

 What is meant by the term ‘negative integration’?

- Negative integration does not require positive action to harmonise and introduce a single set
of rules in the form of EU legislation.

- Instead the focus is on the Treaty prohibitions, which are extended beyond blatant obstacles
to trade also to include other barriers to trade.

- This became possible after the Cassis de Dijon case and the introduction of the principle of
mutual recognition. Cassis de Dijon extended the Article 34 TFEU prohibition on quantitative
restrictions (quotas) and measures of equivalent effect to other types of barriers beyond

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 blatant obstacles, namely those that arise because different Member States have different
domestic rules to pursue the same goal e.g. consumer protection or public health.

- Cassis de Dijon concerned a French liqueur containing between 15 and 20% alcohol.
Germany required that such liqueurs contain at least 25% alcohol for reasons, they argued,
of public health (lower alcohol levels could build up tolerance and encourage heavier
drinking) and consumer protection (alcohol was by far the most expensive ingredient and so
drinks with a lower alcohol level would be cheaper and therefore enjoy a competitive
advantage in attracting consumers who might not be aware of why this product was
cheaper).

- The Court of Justice disagreed. The application of the difference between German and
French rules on minimum alcohol levels in this type of liqueur caused a barrier to trade that
was prohibited by the Treaty (Article 34 TFEU). The German rules were not protectionist but
sought to pursue other legitimate, non-economic endeavours: public health and consumer
protection. However, French rules also pursued such aims, simply in a different way. The
liqueur Cassis de Dijon had been made in accordance with these French rules and the drink
was considered perfectly safe in France. As a result, Germany was required to recognise
French rules as equivalent to its own and allow the product to be sold in Germany even
though the liqueur did not meet German rules. This is the principle of mutual recognition.
What is good enough for French drinkers is good enough for German drinkers.

- It is still open to Member States to justify the continued application of their domestic rules
to products coming from other Member States but the presumption is that they should be
allowed to enter because they comply with the rules of their Member State of production.

- Thus with negative integration there is no need for the Union’s legislative institutions to
agree a single EU-wide rule on any given product to harmonise rules across the Member
States. Instead, different, domestic rules can continue to exist but, in practice, Member
States have to recognise all of those different rules as equivalent to one another and let
each other’s goods into their countries.

 How has the EU’s approach to these types of integration evolved over time?

- Old Approach:

 Treaty prohibitions for blatant obstacles to trade e.g. Article 30 TFEU ban on
customs duties; Article 110 TFEU ban on discriminatory internal taxes; Article 34
TFEU ban on quotas and MEQRs; Article 45 TFEU ban on nationality-based
discrimination as regards employment, remuneration and conditions related to work
or employment.
 Positive integration for other barriers to free movement e.g. those caused by
regulatory differences between the Member States. Single, EU-wide rules to address
disparities between Member State rules on e.g. consumer protection and public
health in relation to alcoholic beverages.
 Goods, for example, could then move freely through the EU.

- Problems with the Old Approach:

 National regulation in different fields was so diverse that it was a monumental task
to try to come up with single rules that could be applied to everyone in the first

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 place. Where to start when every individual Member State tackled the same
problem differently? How to come up with a clear, accessible text that
comprehensively addressed all of these individual concerns and approaches
 This practical challenge was compounded by a political one. During the operation of
the Old Approach the only general harmonising provision available to the Union’s
legislative institutions was Article 115 TFEU, which required unanimity in Council. If
the Commission actually managed to come up with a single legal text in a given
area, it still had to secure the agreement of every single Member State before it was
passed. Much of the time, political agreement on a draft text to convert it into law
could not be reached.
 Finally, even if legislation did get through, by the time it had, products had often
moved on. The pace of the political and legislative process could not keep up with
the pace of technological innovation. Often the rules imposed by the legislation
were no longer relevant to the products actually on the market

- New Approach:

 The judicial intervention in Cassis and its extension of the Treaty prohibitions
beyond blatant obstacles to free movement paved the way for a New Approach
 There had also been a political shift i.e. a recognition that the current approach was
not working and something needed to change
 European Council tasked the Commission with coming up with a new strategy for
completing the Internal Market by 1992
 Commission White Paper, ‘Completing the Internal Market’ built on the Court’s
work in Cassis. It emphasised the need to distinguish between those areas where
positive integration through EU legislation was essential and those areas that could
now be left to the principle of mutual recognition between the EU Member States.

The Commission considered that in the vast majority of areas, positive integration
was no longer needed. Member States could continue having different rules but be
required to cohere to the principle of mutual recognition i.e. recognise the rules in
other Member States as equivalent to their own.

Positive integration would be limited to those rarer instances where Member States
had been able to justify the continued application of their domestic rules to
products coming from other Member States and therefore a barrier to trade
remained. A single EU approach that sought to deal with these concerns would then
be needed.

More generally, the Commission’s programme of positive integration would be

limited to essential health and safety requirements. These would be obligatory in all
Member States and conformity with these rules would entitle products to free
movement throughout the EU.

To deal with the fact that EU legislation often struggled to keep pace with the speed
of technological innovation, the EU would no longer seek to issue individual pieces
of detailed legislation on specific products.

Instead, the aim was to introduce Directives on broad product categories, such as
toys, that laid down the general health and safety requirements that goods in these
categories should meet. This allowed manufacturers to innovate above this basic

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 floor and meant that legislation did not have to constantly try to catch up with ever
changing products.

The more detailed, technical specifics were moved away from the legislative realm
into specialist standardisation agencies who did not face the same political
obstacles as the EU’s legislative institutions. These created more specific, detailed
voluntary guidelines on products though they were still less detailed than the
Directives that the Commission had sought to introduce under the Old Approach.
Member States then authorised ‘notified bodies’ to carry out product testing and
issue a European safety certificate that stated that the product complied with EU
law and so could circulate throughout the Internal Market.

Assessing the New Approach:

 The New Approach is significantly more efficient than the Old Approach and the
Internal Market now functions more effectively as a result of this shift.

 But there also some potential criticisms of the New Approach such as:

That by shifting the detail from the legislative institutions to standard-setting

agencies, the process has become overly technocratic and suffers from a democratic
deficit. Consider the Austrian GMOs case (see online content). The focus on scientific
evidence might treat issues as a-political that warrant political debate. In this case, a
region in Austria had argued that it should be allowed to derogate from EU
legislation on GMOs not because of new scientific evidence but because of the
focus, in that region, on small, organic farming. This was not permitted by the Court.

That standard-setting agencies will inevitable favour the interests of business over
e.g. consumer protection bodies because the former can dedicate more resources to
participation in these agencies.

The structure of CJEU adjudication favours free movement over other interests. A
breach of a Treaty prohibition is now fairly easily established post-Cassis. This is
treated as a prima facie wrong and justifications for the ongoing application of
domestic rules to products from other Member States are interpreted ‘strictly’
(Omega) and must overcome various hurdles i.e. not be arbitrary, be suitable and
effective, be necessary i.e. there must not be measures less restrictive of free
movement available (Gebhard). This means that the focus is on the effectiveness of
achieving free movement rather than the effectiveness of methods for pursuing
other legitimate endeavours. There can be an under-appreciation of issues specific
to a Member State e.g. in Clinique in which Germany argued that Clinique beauty
products had to be renamed ‘Linique’ in Germany because the word ‘Clinique’ was
very similar to the German word for hospital ‘Klinik’. The idiosyncrasies of the
German language were arguably overlooked by the Court in its rejection of this
argument. There can also be an under-appreciation of the practical requirements of
other interests e.g. in Pétiallnt de Raisin, a French sparkling grape juice was sold in
champagne-style bottles. Germany required that the drink be packaged in different
shaped bottles for sale in Germany since consumers would presume that the bottles
contained champagne. The Court concluded that consumer protection could still be
achieved in a way less restrictive of free movement, by making sure that the bottle
was labelled as containing ‘sparkling fermented grape juice’ rather than champagne.

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 However, this is less effective in ensuring consumer protection since a German
survey indicated that 50% of consumers would still assume that the bottle contained
champagne despite the label.

Finally, the New Approach might encourage a ‘race to the bottom’. Since Member
States can continue to apply their own rules to domestic products but have to
recognise the different rules operating in other Member States, their own products
might actually be at a competitive disadvantage. This will particularly be the case if
the regulatory standards in other Member States are lower, making production
cheaper. This might encourage Member States to lower their own standards to the
lowest common denominator to ensure a level playing field for domestic products
against goods from other Member States. Similarly, they might lower their
regulatory standards to encourage businesses to set up their factories in their
territories, knowing that their products can then be sold throughout the EU.
However, the actual existence of a ‘race to the bottom’ is contested and certainly
higher regulation states continue to exist in the EU and even to view this as securing
them a competitive advantage e.g. because they are associated with quality.

- We can reflect on all of this in the context of Brexit.

On the one hand, it is important to evaluate critically the internal market and how it has
been achieved, as we have done above.

On the other hand, it is clear from our study of the evolution of the internal market that pro-
Brexit arguments such as: ‘The present-day EU is not what we signed up for’; ‘we only
agreed to a Common Market’; ‘we can enjoy access to the Internal Market whilst securing
our own trade deals with the wider world’ were overly simplistic. Owing to the existence of
barriers to trade beyond blatant obstacles, it is inevitable that a successfully functioning
internal market will interact with non-economic endeavours. And separate trade deals with
the third countries would create barriers at the borders between Member States of the
internal market.

Applying your Knowledge to a Problem Question

The year is 1956. Axel is a German toy-maker, specialising in wooden cars. His products are
extremely popular in Germany and he now feels he is in a position to expand his business. Axel
wants to export his toy cars to Belgium and France. Axel finds a number of stores in each country
who are keen to sell his products. To do so, however, a customs duty of 10% must be paid on all toys
entering France from abroad. Belgium imposes a quota of 1500 toy cars entering its territory from
abroad each year.

In addition, in both countries there is a ‘toy tax’. Although this applies to all toys on the French and
Belgian markets – whether the toys are of domestic or foreign origin – in practice the tax applied to
domestic goods is 2.5% less than that applicable to imported toys.

Axel’s cars are painted different colours using a paint containing the chemical C-3ST. Following
scientific testing, C-3ST is considered safe for all products made and sold in Germany. However,
France requires all products targeted at children to be painted with natural, plant-based paints only.

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Belgium requires the wheels on all toy cars to be stress-tested 35 times. German law imposes similar
stress-tests but only requires 30 tests.

Axel’s sister, Carla, helped Axel to build his toy business but now feels it is time to move on. She
would like to experience living and working abroad. Carla knows that Italy has a shortage of toy-
makers and so begins to look for work there. She sees an advertisement for a toy designer at
‘Giocare’, a toy manufacturer based in Italy and applies for the position.

Giocare is keen to take applications from both inside and outside Italy due to the shortage of Italian
toy makers but is aware that under Italian law only 3000 foreign workers may enter the Italian work
force as a whole per year. This law also states the Italian applicants should be given first refusal
before other applicants are considered for the post.

In addition, in accordance with Italian law, the advert states that the applicant must have a diploma
in toy-making recognised by the Italian Union of Toy-Makers. Carla has a diploma in toy-making from
the renowned German School of Artisans but this institution does not feature on the Italian Union of
Toy-Makers list of recognised educational establishments. In fact, all recognised educational
establishments on this list are located within Italy.

Finally, should she be successful in getting the job, Carla will be paid the same salary as she received
for her job at Axel’s factory in Germany. However, she will have to pay additional taxes including a
healthcare surcharge. This is intended to fund her use of the Italian healthcare system should she
need it while living and working in Italy. However, Italian citizens do not have to pay this surcharge.
Their care is funded from general taxation.

a) Identifying barriers to free movement

 Identify any blatant obstacles to the free movement of goods or workers arising in the
scenario outlined above

- 10% customs duty applied to Axel’s cars at the French border

- Belgian quota of 1500 toy cars entering its territory from abroad each year
- Practical application of ‘toy tax’ in both France and Belgium makes Axel’s toy cars less
expensive than domestic toys and so less able to compete with them on the market.
- Immigration quota: only 3000 foreign workers may enter Italy a year
- Prioritisation of domestic applicants under Italian law through a ‘first-refusal’ approach

 Identify any other obstacles to the free movement of goods or workers arising in the
scenario outlined above

- Disparity between French and German rules on paint used for products targeted at children.
Germany allows paint containing the chemical C-3ST to be used for all products. France
requires products targeted at children to be painted with natural, plant-based paints only.
Axel will have to use a different paint in order to sell his cars in France.
- Disparities in product safety testing. Belgium requires the wheels on all toy cars to be tested
35 times. Germany only requires 30 tests. Axel will have to subject the toys cars to be sent to
the Belgian market to additional testing.
- Qualification requirements: Toy-makers must have a qualification recognised by the Italian
Union of Toy-Makers and only educational establishments located in Italian feature on the
list. Carla’s is qualified but from a renowned educational establishment in Germany. She will

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 have to wait until she is qualified with an Italian educational establishment before she can
start work. In practice, this makes it unlikely that Giocare will consider her for the post at all.
- Carla has to pay a surcharge to access the Italian healthcare system and so will have less take
home pay than she would in Germany.

All of these rules cause impediments to free movement and distort competition because the various
rules make the products more costly and fewer goods can get to the shelves; workers from other
Member States will not be able to compete equally against domestic applicants or might be
discouraged from applying because of e.g. the health surcharge.

b) Overcoming barriers to free movement

A short time later, the European Union is formed. Its Member States include, amongst others,
Germany, France, Belgium and Italy. Its intention is to form an Internal Market that will overcome
the barriers to trade you have identified.

 How might the European Union overcome both types of obstacles to free movement that
you have identified above?

- Treaty prohibition of customs duties (Article 30 TFEU). This would address the issue of the
10% customs duty applied to Axel’s cars at the French border.
- Treaty prohibition of quotas/quantitative restrictions (Article 34 TFEU). This would deal with
the fact that only 1500 toy cars are permitted to enter Belgium per year.
- Treaty prohibition of discriminatory internal taxes (Article 110 TFEU). This would address the
fact that both France and Belgium apply a discriminatory ‘toy tax’ that makes toys from
other Member States 2.5% more expensive in practice.
- Treaty prohibition on the immigration quota as regards workers coming from other Member
States (Article 45 TFEU). This would address the fact that Italian law states that only 3000
workers may enter Italy a year
- Treaty prohibition on a ‘first-refusals’ approach that favours Italian applicants over
applicants from other Member States (Article 45 TFEU).

- Treaty prohibition on the application of French rules requiring the use of plant-based organic
paints for toys targeted at children (extension of Article 34 TFEU following Cassis de Dijon
and the introduction of the principle of mutual recognition). Open to France to try to justify
the continued application of these domestic rules to products coming from other Member
States. If this were accepted, EU-wide legislation on paints might be introduced / EU wide
legislation on toys + voluntary standard setting as regards paints to be used.

- Treaty prohibition on the application of Belgian rules requiring 35 tests on the wheels of the
toy to products coming from Germany. Requirement that Belgian recognises the German
requirement of 30 tests as equivalent to its own rules (Extension of Article 34 TFEU following
Cassis de Dijon and principle of mutual recognition). Again, we might also see general EU-
wide legislation on toys + the opportunity for safety certification through national ‘notified
agencies’.

- Mutual recognition of qualifications in toy-making across the Member States

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 - Extension of Article 45 TFEU prohibition on nationality-based discrimination to cover access
to healthcare. Don’t worry if you did not identify this point. You will study this in much more
detail in Dr Willem’s lectures on the free movement of workers.

Some of you may be aware of real EU legislation concerning issues such as Toy Safety or the Mutual
Recognition of Qualifications. You do not need to do know about this in any detail or worry about
how it fits in with the question above. The purpose of this problem question was simply to
encourage you to consider the various barriers to free movement that can arise and broad
approaches to how they might be overcome.

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