Mr Erkki Liikanen Member of the European Commission, responsible for Enterprise and the Information Society "Regulating for Competitiveness and Growth The regulators experience" IBEC EU Presidency Conference Dublin, 19 April 2004

Prime Minister, Ladies and Gentlemen,

I am pleased to be here today to speak to you about better regulation.

The Irish Business and Employers Confederation is to be congratulated for seizing the initiative to organise this conference, building upon the momentum created by the recent call for a joint initiative on Regulatory Reform launched by the Irish presidency along with the next three successive EU Presidencies.

This highlights the political importance attached at the highest level, to the pursuit of regulatory reform.

How we design our regulation and how we go about doing so are key elements to ensure competitiveness and growth in Europe.

The topic for this conference is therefore a very good and timely one coming just a few weeks after the Spring European Council in Brussels.

I fully agree with what was said there, namely that it is time industrial policy, competitiveness, innovation and entrepreneurship are placed firmly in centre stage as key to the achievement of the Lisbon objectives.

The Commission's Better Regulation Package

Regulation is a challenge. This is the area where the regulator or policy-maker is in direct contact with and influencing - the environment in which businesses are operating.

It is a challenge for different reasons. First, it is in the interest of businesses to have a stable and predictable environment in which they can operate.

Businesses need clarity.

For this reason, the Internal Market, and its homogeneity of rules and standards is very important and has been one of the key success stories of Europe.

Second, there are often areas where the regulator has a responsibility to take into account certain public policy concerns, such as for example, environmental values or consumer protection.

In this case, the question is to how arrive at clear rules which safeguard these public policy values, whilst doing so at a minimum of cost and burden to businesses so as to not unduly hamper their competitiveness and capability to innovate in the future.

If the costs are too high this affects the ability of businesses to compete, to grow and to create jobs.

On the other hand, effective good quality regulation can be a key means of pursuing efficiency and correcting market failures, improving economic performance and helping structure the operation of markets.

The crucial test is to get the balance right. When we speak about sustainable development, it is important to keep in mind the definition of this concept: namely that it comprises three pillars an economic, a social and an environmental one and that there needs to be balance between these three pillars. All three pillars are important, but unless you have a competitive industry there is no engine to generate the economic resources and growth we need to achieve the two other objectives.

To get this balance right, the European Commission has adopted a "better regulation" package, aiming at streamlining the EU's regulatory frameworks

Four issues are important.

First, openness;

Second, thorough assessments of the impact of a regulatory initiative;

Third, consideration of whether or not regulation is needed at all or whether there are other more viable and less intrusive alternatives; and

Fourth, simplification.

Transparency especially "up-stream"

First of all, it is crucial to have full openness when the regulator prepares a legislative initiative.

This does not only apply during the legislative process, but especially before that at the early preparatory stage. It is vital that all stake-holders participate early on in order to ensure the quality of the end-product and to avoid any surprises down-stream.

We have therefore set ourselves the rule that all major legislative proposals must be posted on the internet before finalisation for everyone to see and submit comments. Industry and other stakeholders need to be involved "up-stream" in the legislative process to ensure that the regulators get it right and produce cost-effective legislation which does not hamper innovation and competitiveness.

This openness has also worked very well in ensuring that our relations with major trading partners such as the United States run more smoothly. Indeed, under the Transatlantic Business Dialogue co-chaired by Niall FitzGerald we have applied guidelines for regulatory co-operation which very much reflect these principles of greater openness up-stream. This has allowed us to avoid a series of trade-spats in the past and will surely continue to do so in the future.

One good example of this was our recent proposals for new chemicals legislation.

When we launched our initial ideas on the internet, we got more than six thousand replies.

Following these contributions, we were able to modify our original proposal and fine-tune the impact assessment. The changes resulting from this consultation have been estimated to generate savings of about 80% (more than 10 billion €) of the direct costs originally envisaged for the industry.

Impact Assessment

Regarding the second pillar of our better regulation package impact assessment, we have worked hard to ensure a comprehensive and integrated approach to impact assessment. Of course, a good impact assessment is a key element of the decision-making process.

It is crucial for the regulator to know as much as possible about how much an initiative will cost both directly and indirectly. Only then can the exercise of balancing the various objectives truly begin on a solid basis. Often, also the responses from the internet consultation can serve as valuable input for the impact assessment as one can never rule out the possibility that something has been missed in the calculation.

Viable alternatives

The third element of our better regulation package is that the regulator asks itself whether there is a need to regulate or legislate at all to achieve the desired objective. Sometimes, voluntary schemes by industry will do the trick if the regulator can be sure of compliance and if the coverage is sufficiently wide. Another alternative is co-regulation where a voluntary scheme is combined with some sort of legislative control of compliance mechanism.

Finally, perhaps the envisaged legislation does not need to be all that detailed, but merely outlines the objectives leaving it to industry to figure out how such objectives can best be achieved. This latter model has been used with success in most of the internal market legislation under the label of new approach legislation. Here, the legislator simply fixes the objective and leaves it to industry to comply herewith through EU-wide agreed standards.

To conclude, the regulator needs to be aware of such alternatives and not always necessarily resort to legislation as a Pavlovian reaction to societal needs.

Simplification

The final element of our better regulation package is of course simplification. We need to make our rules clearer and root out all unnecessary red-tape that no longer serves any purpose.

The way Forward

In spite of our efforts the question remains as to whether we are doing enough to identify the competitiveness impact of regulatory proposals.

Is enough attention being paid to the trade offs between the protection of public interests such as the environment and the burdens of regulations on our businesses? Also, the cumulative effect of rules on the capacity of our businesses to enhance their competitive performance is an important element.

In fact, tomorrow, the Commission will adopt a Communication on Industrial Policy on my initiative which will address many of these issues.

These questions are similar to those raised by the recent Joint Initiative, which proposed a more selective focus on competitiveness and, specifically, on the administrative burdens of EU legislation for operators.

We have provided an answer to the Joint Initiative, underlining that the next challenge is to enhance the quality of the Commission's impact assessments by reinforcing the analytical tools, to build upon the experience the Commission has acquired over recent months in applying this new impact assessment system and to learn from that experience.

The ultimate aim is to improve the quality and structure of the impact assessment system so that we can make our decisions in full knowledge of the facts such as the costs, the benefits, and whatever trade-offs may be necessary.

Some decisions will, inevitably, be taken in spite of what could be high identified costs (e.g. to industries) because the identified benefits will be considered to be worth the costs.

A balanced and responsible judgement is only possible on the basis of the simultaneous assessment of economic, social and environmental impacts, in particular as the EU's legislation increasingly addresses issues of a horizontal nature.

Inter-Institutional Co-operation

I have outlined what the Commission is doing to ensure better quality, more focussed and well considered legislation. I would like to say that this means that every piece of legislation which leaves the Commission will be perfect. But I cannot, because the quality of legislation is also affected by how that proposal is discussed, amended and adopted by the Council of Ministers and the European Parliament.

It is for this reason that the Inter-Institutional Agreement on Better Law Making has been agreed. All the European institutions involved in law-making must constructively work together if we are to succeed in our shared stated aim of becoming the world's most competitive economy.

This collaboration is essential if we want to achieve progress in improving the EU's regulatory frameworks, in particular considering the complex EU institutional process.

I am pleased to see that both the Joint Initiative of the Presidencies and Spring Council conclusions have put great emphasis on this point and, in particular, on a full and rapid implementation of the agreement.

And here, the newly created Competitiveness Council has a crucial role to play as an arbiter to get the balance right and to ensure that competitiveness and innovation remain in focus.

The Role of the Member States

One should not forget that Member States need to assume their own share of responsibility for regulatory reform.

Indeed, EU legislation only covers a very small part of policy areas that are often referred to by businesses as burdensome such as company law, taxation and social security, where the bulk of rules are of national origin.

In other sensitive areas, such as on labour market, safety in the work place and pollution control, the existing rules are a mixture of national and EU requirements.

Product regulations are, in reality, the one area where EU rules play an important role for obvious Internal Market reasons.

Roughly half of all products circulating in Europe are subject to technical specifications laid down in legislation - ranging from labelling to more sophisticated conformity approval procedures destined to ensure product safety.

Yet, even in this area, there are far more national than EU rules.

No real progress will be achieved if the improvement in better regulation at the European level is not matched by a parallel effort by Member States at national level.

But Member States have been active in this area and many have launched specific programmes aimed at tackling these issues.

Conclusion

As a final word, I would say that our task, as regulator, is to deliver a predictable and efficient legal environment, to ensure legal frameworks which are conceptually clear and easy to comply with so that businesses may make critical investments in a stable and level playing field.

This is what the European Commission has committed itself to do and why the "better regulation" package was needed.

Because it implies a fundamental change in culture towards consultation, planning, co-operation, evaluation, consultation and communication of results, it is ambitious but an ambitious approach is needed if we, the European Union, are to realise our own Lisbon stated ambitions.

Furthermore, the Commission is convinced that by reforming its own practices in this area, it will positively contribute to launching the required cultural changes in the EU's institutional order and assist the work on-going in the Member States.

The Joint Initiative on Regulatory Reform and the recent messages delivered by the Spring European Council are all important contributions showing that we already have a lot of common ground.

Here, I would like, in particular, to thank the Irish Presidency for its very active role in promoting these ideas and in ensuring political support to our efforts.

Thank you.