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   Lord Cockfield, Vice-President of the European Commission today
   set out in stark terms the urgent need to complete the internal
   market of the European Community.  Only by abolishing all the
   frontier controls, including the tax barriers, which divide and
   weaken Europe could Britain and its fellow members of the EEC
   survive as a world economic power.
   Speaking at the CBI's conference on the Commission's recent
   radical White Paper on Completing the Internal Market, Lord
   Cockfield said "We in the United Kingdom have a greater
   interest in the successful development of the European economy
   than almost any other Member State.  Europe is a giant, but a
   giant bound hand and foot by the fact that Europe remains
   divided into a dozen separate markets, each very largely with
   its own rules.  Each manufacturing primarily for its home
   market, each facing obstacles and difficulties if it wishes to
   sell into other Member States."
   The results of this fragmentation, Lord Cockfield said, were
   all too clear.  "In terms of output and in terms of the
   application of the new high technologies to new industries and
   old industries alike, we are falling behind the United States
   and Japan: with 13 million unemployed, our record on employment
   is appalling.  The demand for industrial goods in the Community
   has grown by only 2.4% a year since 1982, while the US and
   Japanese markets have grown at about 6.5% per annum during that
   "That is the measure of the wasted opportunity, that is the
   measure of the prize which is there for the taking.  How
   dramatically different the picture would be if trade
   and industry in Europe could
                           - 2 -
   operate on the basis of a single unobstructed market covering
   the whole face of the Community and comprising 320m people.
   That is precisely what was intended when the Treaty of Rome was
   signed nearly 30 years ago.  That is the task to which we have
   now set our hand.  The task in hand is to remove all the
   barriers - physical, technical, and fiscal - which divide
   Europe and prevent it operating as a single economic unit."
   Lord Cockfield told the Conference, which concentrated on the
   fiscal barriers and how they can be removed, that frontier
   controls were at present an integral and indispensable part of
   the tax machinery.  They ensured that tax on goods traded
   across frontiers was duly paid with minimal fraud or evasion
   and went to the right Member State.  But though the existing
   VAT system, to take an example, could not work without frontier
   controls, that did not mean that no VAT system  could work
   without  frontiers, Lord Cockfield said.  "If  frontiers are to
   be eliminated, as they must be to create a single market, we
   need a more  radical approach to the system itself."
   The Commission's White Paper proposes to eliminate the need for
   border tax controls simply by treating trade across frontiers
   in exactly the same way as trade  within a single State.  A
   Clearing House system would ensure that the tax was properly
   allocated among Member States.
   But that would not be the whole answer, said Lord Cockfield.
   Without frontiers, smuggling would become widespread and would
   produce major distortions of competition.  The only way of
   dealing with this, Lord Cockfield stressed, was to go for the
   root  cause, namely the differences in tax rates and coverage
   between the Member States.  Perfect harmonization was not
   necessary, but it was essential to bring the rates and coverage
   close  enough to minimise the opportunities for fraud, evasion
   and deflection of trade.
   The Commission recognised that the process of adjustment would
   pose difficulties for some Member States including the United
   Kingdom.  Its proposals therefore provided for a substantial
   measure of flexibility for example the approximation of rates
   rather than their harmonisation and adequate time for
   adjustment.  The White Paper also acknowledged that derogations
   might be needed to meet particular  cases of political and
   economic sensitivity.
   There are people who talk as though the Commission had invented
   some wild theoretical scheme all on its own" said Lord
   Cockfield.  "The truth of the matter is quite the opposite.
   "The  proposals put forward by the Commission in its White
   Paper were precisely what the Heads of Government had
   repeatedly demanded and twice endorsed: a single, frontier-free
                       - 3 -
   "Industry itself has a crucial role to play", Lord Cockfield
   concluded. "There is  virtually unanimous support in industry
   for the approach in the White Paper.  Industry knows and
   understands the immense cost of the present barriers: and the
   immense opportunities their removal will create.  But we have
   to convince governments of this, and that is where I need your
   help and where I am confident you will give it."

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