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Department for Business, Enterprise & Regulatory Reform

20 years after Cecchini What have policy makers & business learned about European Integration from Economic Analysis. Department for Business, Enterprise & Regulatory Reform. Several Questions. What have policy makers learnt about European integration from Econ analysis

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Department for Business, Enterprise & Regulatory Reform

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  1. 20 years after CecchiniWhat have policy makers & business learned about European Integration from Economic Analysis Department for Business, Enterprise & Regulatory Reform

  2. Several Questions • What have policy makers learnt about European integration from Econ analysis • What have business learnt about European integration from Econ analysis • What have they learnt from other sources ?

  3. Reminder What Cecchini said • Uncontroversial Removal of border barriers • Scale economies • Frontier delays • Public procurement • Supply side effects ,changes to corporate behaviour in more competitive markets • Liberalise & integrate financial mkts

  4. Underlying economics is simple, assessing the prize isnt • Fundamental economic concept behind Single market always well known Size of barriers and therefore benefits of getting rid of them was not in some cases still isnt. Assumptions that lie behind benefit calculations

  5. Whats it worth ? • 4.25-6.5% of EU GDP a massive prize • Was that right or not? • How much actually captured

  6. Large potential gains from EU reform… Long run effects of more competition-friendly policies in the Euro area (percentage deviations from baseline)

  7. Microeconomic indicators: Entrepreneurial culture

  8. Extent of intervention in product and labour markets, 1985 and 2003 (synthetic indicators).

  9. The EU Directive on Services in the Internal Market • Response to 2002 report “The State of the Internal Market for Services” • Aims to increase trade by reducing the regulatory burden on service providers • Copenhagen Economics (2005) suggests significant economic benefits to be made

  10. the 2005 study Impact of EU15 market opening 1990-2000: • Welfare: +1.9%, +€98bn; jobs: +500,000 • Main gains in: telecoms and electricity Methodology: • Quantified measure of market opening • Model to link MO, productivity and prices • CGE simulation for sector impacts

  11. Further market opening potential

  12. the Market Opening Index • 5 - 12 Market Opening Milestones per sector • Score & weight for Index: sector/year/country • 2003: telecom 0.7, postal 0.35 (scale: 0 – 1) • OECD’s REGREF: fewer inds, similar results • New research updated MOI to 2006, and modelled the benefits of EU15 full opening (i.e. scores of 1)

  13. methodology: CGE model etc • parameters from 2005 study to see how full market opening affects sector productivity and price for 2 scenarios • apply price and productivity scenarios to CGE model for give economy wide impacts • multi-regional CGE model representing EU-25 • >275,000 firms in 19 Member States from Amadeus database

  14. Linear vs pessimistic assumptions

  15. What govts have learnt (1of 2) • Big benefits • Hard to remove barriers • Consumers don’t value benefits as much as firms value losses • Legislation is not enough • Need to battle using regulators

  16. What governments have learnt (2 of 2).Removing tariffs is a tiny part of the reform process • Lisbon Agenda • Services Directive • EU Energy policy

  17. UK view • continue leading role for competition • outward facing to maximise benefits • future EU action based on specific policy points, not Directives

  18. What Cecchini didn’t cover • Enlargement • Globalisation • Dis-aggregation of production

  19. What business has learnt • Single market links to other issues • Euro • Accession • Disaggregation of production

  20. Why most business & consumers aren’t engaged enough • Slow • Cumbersome and legalistic • Don’t need to be • Fixes continue

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