Mutual recognition in goods. On promises and disillusions

Abstract

Mutual recognition (MR) is rightly applauded as an ingenious innovation. Nevertheless, it is very demanding in actual practice. The article addresses the pros and cons of MR in EU goods markets and seeks to find effective remedies to be applied by the authorities and, to some extent, by business. MR is a demanding form of 'governance'. Not only should judicial MR be distinguished from regulatory MR, but MR is best understood when placed in a context of alternative ways of accomplishing free movement in the internal market. A critical distinction in the regime consists in the way existing barriers to free movement are tackled as against potential barriers caused by new legislation in member states. At the same time MR is associated with many substantial benefits and costs, in particular for judicial MR. The article explores several routes which would result in more and better MR.

Why no mutual recognition of VAT? Regulation, taxation and the integration of the EU's internal market for goods

“…Since national administrations are politically responsible for all cases of regulatory failure within their national territory, they tend to take a very cautious attitude towards functional equivalence. Before taking a risk with foreign regulations they do not know, they often insist that imports conform to national rules they do know (Pelkmans 2007). Companies, of course, can challenge this attitude in court.…”

“…Surprisingly, however, both types of barriers are dealt with under different rules. While mutual recognition is the standard approach to removing regulatory barriers (see Pelkmans 2007), national treatment applies to indirect taxation. Usually it is the country of origin which regulates (origin principle) but the country of destination which collects the value added tax (VAT) (destination principle).…”

When Efficiency Results in Redistribution: The Conflict over the Single Services Market

“…Governance based on mutual recognition requires equivalent rules and administrative cooperation. While in the EU-15 mutual recognition was already ridden with prerequisites (Pelkmans 2007), in the EU-25 (27 to be) it could only become harder. Redistributive effects arise on the one hand due to the labourintensive nature of most services.…”

“…However, compared to harmonised rules, mutual recognition is much more difficult to implement. Companies may believe that their goods and services are regulated in an equivalent way and therefore qualify for mutual recognition -it may also happen, however, that national authorities are of a different opinion (Pelkmans 2007). As the 850 S. K. Schmidt authorities responsible for the control of market regulations have to decide whether the rules of the 26 other member states are equivalent or not, mutual recognition entails significant transaction costs.…”

Squaring the circle with mutual recognition?Demoi-cratic governance in practice

“…This allowed deciding early on whether a European approach was needed. As Pelkmans (2007) shows, this directive was central in supporting mutual recognition, and in dealing with the significant transaction costs associated with it. It was also used to ensure that member states included mutual recognition clauses into all national regulations, giving foreign producers a national legal position (Pelkmans 2007: 706).…”