The EU horizontal policies in the frame of AA/DCFTA

1. The EU horizontal policies in the frame of AA/DCFTA Course number: EUI04 Dr. Oksana Krayevska

2. Content - Introduction to the Common policies of the EU; - Five models of policy-making in the EU (by W. Walles) - EU competences; - basic information on the EU horizontal policies; - types of horizontal policies; - connection with AA/DCFTA; - literature (information about horizontal policies).

3. Theoretical basis The theoretical basis for the study of the common policies of the EU is introduced by the theory of European integration, such as: • Integration method (Monnet) • Neo-functionalism, “spillover effect” (Haas, Mitrani) • Neo-institutionalism (March, Olsen)

5. Integration method (Monnet) Crucial for the formation of common policies of the EU and a permanent increase in their number is "integration method" of Monnet who predicted the depth and duration of the process of European integration.

6. Neo-functionalism , “spillover effect” The closest to this method is neo-functionalist theory of E.Haas that functionalism of D.Mitrani moved beyond theoretical research to practical level of the formation of the EU, and has identified the role of the political elite and economic interest groups based on the effect of the overflow (spillover effect) - from economics to political cooperation

8. Neo-institutionalism Fundamentally important is the statement that economic integration would gradually establishing strong relationships between the member states, which in turn will promote the transition to supranational institutional dimension and political integration. In this context, the relevance institutions become important in the formation and implementation of common policies of the EU, represented by the neoinstytutionalist theory of March and Olsen.

9. Theoretical aspects European integration is a process that evolves continuously, covering more areas of cooperation in the EU and improving its institutional structure and decision-making Since European integration based on common policies that develop and multiply thanks to the special procedures of decision-making in the EU, adopting common policies, the participants agreed to delegate some of their sovereign national powers to supranational institutions. Such delegation of sovereign rights within common policies is a major problem, but at the same time - the fundamental characteristic of the European integration.

10. Theoretical aspects The principles of formation of the common policies of the EU laid down in the founding treaties of the EU. In particular, Art. 3 and 4 of the EC Treaty determine the list of activities, which are the EU common policies. Multilevel effect and principle of subordination help to understand the EU policy-making process. This process goes in line with the new challenges and priorities of the EU life.

11. Theoretical aspects The common policy of the EU is the policy that replaces key elements of national policy. Policy that support and complement national one, called "the EU policy", but there is not clear distinction between these two categories. All common policies directly implemented by the agreements or practice of the EU are in the process of development. They appear as goals, which specifically or in general determined by treaties or institutions, and step by step develop by the common law or law of the EU. Thus, the terms "common policy" and "policy of the EU" are equal, since the second means "common policy of the EU" in a particular area.

12. Common policies of the EU Common policies are the rules, measures and codes of activities adopted by common institutions that were founded by a group of states and implemented by joint institutions and the Member States. Common policy is the instrument of transfer the part of sovereign national powers to supranational institutions.

13. Common policies of the EU Four main types of common policies: • basic and secondary, • horizontal and sectorial. The basic policy can also be called a framework common policy because its main task and the scale are recorded directly in the agreement, and therefore should be coordinated with all parties. Secondary common policies are developed by common legislative institutions within the basic common policies in accordance with the procedure of policy-making in the EU.

14. Common policies of the EU Horizontal common policies are covering the overall economic and social foundations in the EU and its Member States (social policy, competition policy, environment) Common sectorial policies relating to individual industries (energy, transport, agriculture and fishing etc.).

15. Common policies of the EU During the development of the EU, the common policies of the EU have covered the areas that were considered necessary for the proper functioning of the internal market, but have wider social dimension (regional and structural policy, monetary policy, policy in the field of environmental protection, policy in the field of research and development, policy in the sphere of tourism, industrial policy, etc.). Common actions were also conducted throughout the education and cultural policy, health care and policy in the field of consumer protection.

16. Common policies of the EU The result of continuing efforts to deepen cooperation in the political field have become the Treaty on the European Union signed in Maastricht in 1992, where the creation of the second pillar of the EU, which includes common foreign and security policy, were foreseen. It also created the third pillar of the EU, which covers cooperation in justice and home affairs. Instead, the Amsterdam Treaty in 1997 emphasized the strengthening of the common social policy, particularly to revive efforts aimed at employment growth and fight unemployment.

17. EU policieshttp://ec.europa.eu/policies/index_en.htm Agriculture, fisheries and foods CAP, rural development, Aquaculture, CFP, food safety Business Industry sectors, enterprise policies, SME's, Single Market, free movement, competitiveness, competition Climate action Climate change, Energy for a changing world Cross-cutting policies Financial and economic crisis, Europe 2020 – a new economic strategy, better regulation, sustainable development, multilingualism Culture, education and youth Audiovisual and media, culture, education and training, sport, youth Economy, finance and tax Financial Services, Budget, Competition, Customs, Economy, Fight against fraud, Taxation Employment and social rights Employment, social affairs and equal opportunities

18. EU policies http://ec.europa.eu/policies/index_en.htm Energy and natural resources Energy, Trans-European networks Environment, consumers and health Consumers, Environment, Food safety, Health, Maritime policy, Sustainable development External relations and foreign affairs Common Foreign Security Policy, Development, Enlargement, Cooperation, Foreign policies, Humanitarian aid, Human rights, External trade Justice, home affairs and citizens' rights Freedom, Security and Justice Regions and local development Regional policy, Regional Development Fund Science and technology Ethics, Information Society, Audiovisual and Media, Media, Research EU explained Civil Society, NGOs, EU Institutions, EU Treaties, Future of Europe, Treaty of Lisbon Transport and travel Tourism, Trans-European networks, Transport

20. TREATY ON EUROPEAN UNION The EU 2010 Treaties Title VI Police and Judicial Coope-ration in Criminal Matters EuropeanCommunities Title V Common Foreign and Security Policy Treaty establishing the European Atomic Energy Community (Euratom) Treaty establishing the European Community EC ‘2nd pillar’ ‘3rd pillar’ ‘1st pillar’

21. After Lisbon Common Provisions Democratic Principles Institutions Enhanced Cooperation Euratom TREATY ON EUROPEAN UNION TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION External Action (general) CFSP/ CSDP Title V Area Of Freedom, Security and Justice Ch.1 General Provisions Ch. 2 Policies on Border Checks, Asylum and Immigration Ch.3 Judicial Cooperation in Civil Matters Ch.4 Judicial Cooperation in Criminal Matters Ch.5 Police Cooperation

22. Five models of policy-making in the EU (by W.Walles) 1) special method of the Community, 2) regulatory model, 3) multi-level system of state governing, 4) trans-governmental model 5) policy coordination.

23. Special method of the Community is a classic example of the common agricultural policy and is the oldest model. This model was laid during the formation of the European Communities and is a form of supranational policy-making system, which powers transferred from the national to the EU level, the significant role in the formation, negotiation and implementation played by the European institutions, including the European Commission.

24. Since the mid of the 1980 th the EU began to actively use two other model of policy-making : EU regulatory model and the multi-level system of state governing.

25. The regulatory model The regulatory model is rooted in the idea of the initiators of the Treaty of Rome to eliminate the barriers between the national economies of the Member States, and was implemented with the development of the Common Market. With this model such policies as the EU competition policy, policy in the field of environmental protection, trade policy with third countries are formed.

26. Multi-level system of state governing Establishment of direct contacts between the European and sub-national levels of governance It is based on the fact that the national central governments no longer have a monopoly in the area of ​​contact between the national and the European levels of policy-making (regional policy).

27. Trans-governmental model W. Wallace emphasizes that preference should be given to “transgovermantal cooperation" (transgovernmentalism) instead of intergovermental, which reflects the increased intensity of cooperation when governments of national states join their efforts trying to encourage each other to participate and intense cooperation (2nd and 3rd pillars).

28. Policy coordination Policy coordination mechanism serves as a transition from a nationally oriented policy-making to the collective system of its formation. Policy coordination can be a convenient starting point for supporters of the strong EU, despite the fact that it is traditionally considered a minor model (education, tourism, culture etc.)

30. THE THREE MAIN TYPES OF COMPETENCE The Treaty on the Functioning of the EU (TFEU) distinguishes between three types of competence and draws up a non-exhaustive list of the fields concerned in each case: - exclusive competences (Article 3 of the TFEU): the EU alone is able to legislate and adopt binding acts in these fields. The Member States’ role is therefore limited to applying these acts, unless the Union authorises them to adopt certain acts themselves; - shared competences (Article 4 of the TFEU): the EU and Member States are authorised to adopt binding acts in these fields. However, Member States may exercise their competence only in so far as the EU has not exercised, or has decided not to exercise, its own competence; - supporting competences (Article 6 of the TFEU): the EU can only intervene to support, coordinate or complement the action of Member States. Consequently, it has no legislative power in these fields and may not interfere in the exercise of these competences reserved for Member States.

31. SPECIAL COMPETENCES The EU has special competences in certain fields: - the coordination of economic and employment policies (Article 5 of the TFEU): the EU is responsible for ensuring the coordination of these policies. It is required to define the broad direction and guidelines to be followed by Member States; - the CFSP (Article 24 of the Treaty on EU): the EU has competence in all fields connected with the CFSP. It defines and implements this policy via, among others, the President of the European Council and the High Representative of the Union for Foreign Affairs and Security Policy, whose roles and status have been recognised by the Treaty of Lisbon. However, the EU may not adopt legislative acts in this field. In addition, the Court of Justice of the EU does not have competence to give judgment in this area; - the “flexibility clause” (Article 352 of the TFEU): this clause enables the EU to act beyond the power of action conferred upon it by the Treaties if the objective pursued so requires. However, this clause is framed by a strict procedure and by certain restrictions in terms of its application.

32. THE EXERCISE OF COMPETENCES The exercise of Union competences is subject to three fundamental principles which appear in Article 5 of the Treaty on EU. The definition of EU competences greatly facilitates the proper application of these principles: - the principle of conferral: the Union has only the competences conferred upon it by the Treaties; - the principle of proportionality: the exercise of EU competences may not exceed what is necessary to achieve the objectives of the Treaties; - the principle of subsidiarity: for shared competences, the EU may intervene only if it is capable of acting more effectively than the Member States; TRANSFER OF COMPETENCES The current division of competences between the EU and Member States is not set in stone. However, the reduction or extension of EU competences is a delicate matter which requires the consent of all Member States and necessitates a revision of the Treaties.

33. Transfer of five models of policy-making in to the EU competences 1) special method of the Community • exclusive competences, 2) regulatory model • special competences, 3) multi-level system of state governing and 4) trans-governmental model • shared competences, 5) policy coordination • supporting competences • .

34. Article 3 1.   The Union shall have exclusive competence in the following areas: (a) customs union; (b) the establishing of the competition rules necessary for the functioning of the internal market; (c) monetary policy for the Member States whose currency is the euro; (d) the conservation of marine biological resources under the common fisheries policy; (e) common commercial policy. 2.   The Union shall also have exclusive competence for the conclusion of an international agreement when its conclusion is provided for in a legislative act of the Union or is necessary to enable the Union to exercise its internal competence, or in so far as its conclusion may affect common rules or alter their scope.

35. Article 4 1.   The Union shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6. 2.   Shared competence between the Union and the Member States applies in the following principal areas: (a) internal market; (b) social policy, for the aspects defined in this Treaty; (c) economic, social and territorial cohesion; (d) agriculture and fisheries, excluding the conservation of marine biological resources; (e) environment; (f) consumer protection; (g) transport; (h )trans-European networks; (i) energy; (j) area of freedom, security and justice; (k) common safety concerns in public health matters, for the aspects defined in this Treaty. 3.   In the areas of research, technological development and space, the Union shall have competence to carry out activities, in particular to define and implement programmes; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs. 4.   In the areas of development cooperation and humanitarian aid, the Union shall have competence to carry out activities and conduct a common policy; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.

36. Article 5 1.   The Member States shall coordinate their economic policies within the Union. To this end, the Council shall adopt measures, in particular broad guidelines for these policies. Specific provisions shall apply to those Member States whose currency is the euro. 2.   The Union shall take measures to ensure coordination of the employment policies of the Member States, in particular by defining guidelines for these policies. 3.   The Union may take initiatives to ensure coordination of Member States’ social policies.

37. Article 6 The Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States. The areas of such action shall, at European level, be: (a) protection and improvement of human health; (b) industry; (c) culture; (d) tourism; (e) education, vocational training, youth and sport; (f) civil protection; (g) administrative cooperation.

38. The EU horizontal policies The horizontal policies of the European Union, that is to say the objectives set, the means employed and the measures taken in common by the Member States of the Union in order to support and supplement their policies in five broad areas of their economic and socio-political activities: - regional development, - social progress, - taxation, - competition - environmental protection. All these common policies were launched during the stages of the customs union and the common market and are being continuously developed in order to further the higher goals set for the stages of economic and monetary union and political integration

39. The EU horizontal policies EU regional development policy EU social progress policies EU taxation policy EU competition policy EU environmental policy Moussis N. Access to European Union: law, economics, policies // 19th updated edition, Rixensart, 2011. – http://europedia.moussis.eu/about/?book=B0001

40. The common regional policy The common regional policy by means of the Structural Funds aims to help the poorer regions of the European Union to face the increased trade and competition from the more developed regions imposed by the single market and the economic and monetary. Such a union, implying abandonment of the use of exchange rate adjustment as a means of balance of the national economy, would be to the detriment of the poorer Member States without an efficient common regional policy revolving around sufficient capital transfers from the richer to the poorer regions of the EU. The common regional policy aims, therefore, at the economic and social cohesion of the Union.

41. The common regional policy The main objective of the common regional policy is the reduction of existing regional disparities and the prevention of further regional imbalances in the EU by transferring European resources to problem regions using the financial instruments of the European Union known as the Structural Funds. The common regional policy of the EU does not seek to supersede national regional policies. In accordance with the principle of subsidiarity, the Member States, through their own regional policies, are the first ones who must solve the problems in their regions by promoting infrastructures and financially supporting job-creation investments. However, the common regional policy coordinates national regional policies by formulating guidelines and establishing certain principles in order to avoid competition for regional aid between Member States. It coordinates also the various policies and financial instruments of the EU to give them a "regional dimension" and thus more impact on regions most in need of care.

42. The common regional policy The Committee of the Regions set up by the Treaty of Maastricht in order to enhance the role of regional authorities in the institutional system of the Union, plays an important role in the forecasting of regional tendencies and in the management of structural interventions of the EU. In the enlarged Union, where the unequal distribution of wealth among regions would be greatly increased, the democratic legitimacy and the role of the Committee of the Regions should also be increased. The common regional policy keeps step with the overall multinational integration process. Although a stated objective of the Treaty of Rome was to reduce the development gap between the different regions of the Community, it did not endow the common institutions with any instruments to this end, other than the loans of the European Investment Bank and the assessment by the Commission of regional aid granted by the Member States, with the aim notably of preventing the States outbidding one another in an attempt to attract foreign investment.With the prospect of completion of the single market by 1992, the Single European Act  acknowledged the major contribution that a common regional policy could make to improve the economic and social cohesion of the European Community. This was the starting point for the Community's new regional policy based notably on the coordination of its financial instruments and the coordination of national and common policies to help regions which need an extra push towards economic prosperity. The 1988 reform of the Structural Funds, in the context of a package of measures including the reform of the common agricultural policy and the equilibrium of the Community budget, known as "Delors package I“, has led to better integration of the various actions conducted under the banner of structural policies and contributed to the concept of an all-round, consistent strategy for economic and social cohesion in the Community/Union. The Structural Funds have been reformed again in 1999 and again in 2006.

43. Common social policy The acceleration in the process of European integration since the middle of the 1980s has resulted in major progress in the common social policy, spanning fields such as vocational training, social protection and worker health and safety. This process is stepped up in the economic and monetary union, which takes out of governments' hands many economic and monetary instruments and hence their ability to tackle their social problems alone. Therefore, the Amsterdam Treaty identified the promotion of a high level of employment as a Union objective and introduced a coordinated strategy for employment.

44. Common social policy One of the objectives of the European Union is to promote economic, social and territorial cohesion and solidarity among Member States (Articles 3 TEU and 174 TFEU). Whereas the common regional policy deals mainly with economic and territorial cohesion, the common social policy tries to strengthen social cohesion. Article 151 of the Treaty on the functioning of the EU (ex Article 136 TEC) declares that the Union and the Member States, having in mind fundamental social rights, have as their objectives the promotion of employment, improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained, proper social protection, dialogue between management and labour and the development of human resources. This last goal entails effectual education and training policies. Article 151 states also that the objectives of social progress and cohesion that it sets should ensue not only from the functioning of the internal market, which will favour the harmonisation of social systems, but also from the procedures provided for in the Treaties and from the approximation of provisions laid down by law, regulation or administrative action. However, the measures taken by the Union and the Member States to attain the objectives of Article 151 must take account of the diverse forms of national practices, in particular in the field of contractual relations, and the need to maintain the competitiveness of the Union economy. To attain social cohesion in the Union minimum social standards are needed, having regard to differing national systems and needs, and to the relative economic strengths of the Member States. The establishment of a framework of basic minimum standards guarantees acceptable social and physical security conditions to all the workers in the Union. At the same time, it provides a bulwark against reducing social standards to increase the competitiveness of the businesses of one Member State and, hence, against using low social standards as an instrument of unfair economic competition. These basic standards should not over-stretch the economically weaker Member States, but they should not prevent the more developed Member States from implementing higher standards.

45. Common social policy The effort to complete the single market at the end of the 1980s was to mean a fresh start for the Community's social policy and its financial instrument, the European Social Fund (ESF). The Single European Actand, later on, the Maastricht Treaty stated that "in order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion" [Article 158 TEC]. The Structural Funds, and especially the European Social Fund, represent the main instruments for promoting social cohesion within the Union. As we saw under the heading of coordination of financial instruments in the chapter on regional development, the ESF contributes to the attainment of the Objectives set out set out in the context of the Community structural policy.

46. Common social policy The social policy agenda, proposed by the Commission and approved by the Nice European Council in December 2000, provides the roadmap for employment and social policy, translating the policy objectives of the Lisbon strategy for economic and social renewal into concrete measures. A high level of social cohesion is central to the Lisbon agenda. Strategies which strive for gender equality, for the eradication of poverty and social exclusion and for the modernisation of social protection systems, in particular pension and healthcare systems, play a key role in this agenda. The Union aims at social progress and cohesion through the specific policies for employment, education and professional training, as well as through the promotion and improvement of living and working conditions, including social protection and social inclusion.

47. Common taxation policy The common taxation policy has gone beyond the EEC Treaty requirements of fiscal neutrality. The Member States succeeded in replacing their various cumulative multi-stage turnover taxes with a uniform valued added tax, the structures of which have been closely harmonised. The abolition of tax frontiers, made possible by the approximation of VAT rates and excise duties, made a vital contribution to the final completion of the single market. As economic and monetary union advances, approximation is also required for company and savings taxes.

48. Common taxation policy The EEC Treaty was very cautious as regards tax harmonisation. What it wanted above all was the introduction and observance of the rule of fiscal neutrality in Community trade, i.e. equal tax treatment for domestic production and imports from other member countries. Beyond that, the Treaty merely invited the Commission to examine how turnover taxes could be harmonised. The Treaty did not call for any harmonisation or other Community action with regard to direct taxes. The fiscal objectives of the Treaty were attained rapidly. Cumulative multi-stage taxes, which did not guarantee fiscal neutrality, were replaced by a new turnover tax, the value added tax (VAT), and the structures of that tax were harmonised in all Community Member States, old and new. The principle of fiscal neutrality was thus guaranteed, but at the price of maintaining tax barriers, which were necessary for the collection of VAT and excise duties in the country of destination of goods. However, in the single market goods must be able to move completely freely, and to achieve this, tax has to be imposed on them either in the country of origin or in that of destination. This led, at the end of the 1980s, to the alignment of VAT and excise duties. At the same time the harmonisation of direct taxes has begun, especially concerning those on companies and savings, in order to make the growth of companies and capital movement independent of tax considerations. Inside the economic and monetary union, tax harmonisation should progress at the same pace as economic integration.

49. Common taxation policy The activities under the programme Fiscalis 2020, namely the European information systems, the joint actions for officials of tax authorities and the common training initiatives, are expected to contribute to the realisation of the ''Europe 2020 Strategy'' for smart, sustainable and inclusive growth  by strengthening the functioning of the internal market, providing a framework within which to support activities enhancing the administrative capacity of tax authorities and advancing technical progress and innovation [Regulation 1286/2013]. More particularly, the Fiscalis 2020 programme is expected to strengthen the functioning of the taxation systems in the internal market, while contributing to the gradual elimination of existing barriers and distortions within the internal market. The tax policy of the European Union has two wings: indirect taxation, which has to be regulated at European level, in order to guarantee fiscal neutrality between domestically produced and imported goods and services and, thus. secure the free movement of goods and the freedom to provide services, two freedoms indispensable for the functioning of the common market; and direct taxation, which does not affect the commerce between the Member States and needs only coordination of company taxation and of the fight against tax evasion, in order to prevent distortions of competition in the internal market and in capital movements.

50. Common competition policy The common competition policy plays the role of economic regulator in the common market. It prevents market compartmentalisation, abolished in the single market, from being restored by means of agreements between large companies. It also prevents multinational companies from exploiting their dominant position or monopolising a market by acquisition of independent firms. As regards State interventionism, the role of the common competition policy is to confine it to aid which fits in with the common objective of adjusting the structures of the European Union's production mechanism to internal and external changes.