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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 time. "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."