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Mr Erkki Liikanen Member of the European Commission, responsible for Enterprise and the Information Society "Better Regulation in Europe" Orgalime meeting Brussels, 25 October 2002

Commission Européenne - SPEECH/02/520   28/10/2002

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SPEECH/02/520

Mr Erkki Liikanen

Member of the European Commission, responsible for Enterprise and the Information Society

"Better Regulation in Europe"

Orgalime meeting

Brussels, 25 October 2002

Ladies and Gentlemen

Regulation is often necessary to protect the health and safety of our citizens and the environment, as well as to create even and competitive framework conditions for European businesses to operate in.

However, regulation also has a cost. This most often falls upon our economic operators, affecting their ability to compete, to innovate and to create jobs.

It is, therefore, important that policy-makers find the right balance between the need to protect the public interest and the need to avoid ineffective and excessively burdensome regulation. This means that we should limit our regulatory activities to those areas and cases where they are really necessary and ensure that the regulation we actually produce is of high quality.

The Better Regulation Package

In June this year, the Commission presented its so-called Better Regulation Package, which confirms our strong commitment to simplify and improve the regulatory environment.

The package responds to the Lisbon mandate and represents a first concrete follow-up to the White Paper on European Governance. It takes on board many of the recommendations made by Member States in the so-called Mandelkern group.

In the main document - the Better Regulation Action Plan - we have set out a number of concrete actions for our own internal procedures, with set timetables and objectives.

However, addressing the Commission only will not be enough to really make a change. To ensure that the whole legislative life-cycle is covered, we have also proposed a number of actions for the European Parliament, the Council and the Member States. They have formed the basis for the ongoing discussions on an inter-institutional agreement, which is foreseen for the end of the year.

As for the Commission, we are now moving into the next phase, which is implementation. Let me briefly elaborate on some of the challenges ahead of us.

Principles and tools for Better Regulation

To achieve better regulation, we have identified four priority areas for action:

    Simplifying and improving the acquis communautaire;

    Well prepared and more appropriate legislation;

    Better transposition and application of Community law; and

    A new culture within the institutions.

The Action Plan sets out the processes and tools needed to reach these objectives. I will just briefly elaborate on some of these, which I consider to be of particular importance.

First, Impact assessment

As you are aware, impact assessment is nothing new to the Commission. Single-sector type of assessments, such as Business Impact Assessments, have been carried out since the late 80s.

So, why do we need a new impact assessment procedure in the Commission?

  • The existing, "single sector" assessments have failed to provide a coherent picture of all likely positive and negative impacts of a proposal, across sectors.

  • Practices have not been consistent across services.

  • We have not always been transparent towards the outside world about the underlying analysis on which we are basing our proposals.

  • The existing procedures have also had other shortcomings. For example, it is widely acknowledged that the Business Impact Assessment system has not always worked in an optimal way. Its key components and current practices were reviewed in a pilot project conducted by the Enterprise DG between September 2000 and February this year, in order to identify major weaknesses and make recommendations for improvements.

During this exercise, we discovered, for example, that Business Impact Assessments were often seen as an administrative 'paper requirement'. Sometimes, they were carried out on nearly finalised proposals, whereas they should have intervened already during the early drafting process. Moreover, the costs of the proposals for business were rarely quantified.

The Business Impact Assessment pilot project included an examination of a selected number of proposals for which "test case" analyses and consultations were carried out. These included the revision of the electromagnetic compatibility (EMC) directive and the proposed electrical and electronical equipment (EEE) directive.

As regards the electromagnetic compatibility proposal, a cost-benefit analysis has been carried out, which has been presented and discussed with stakeholders. In general, it has achieved its objectives. It estimates a net loss for EU society stemming from the implementation of the amended directive of only € 2.4 billion spread over the 8 years it is expected to remain in force. The net loss accrued to manufacturers is € 2.1 billion. This amounts to less than 0.1% of the EU production of electromagnetic compatibility products in the same period. Qualitative benefits and costs are forecasted too.

The draft amendment has been substantially improved taking account of the study's findings and recommendations. These improvements will further increase the proposed directive's regulatory quality and reduce its cost.

An Impact Assessment study has also been launched on the draft electrical and electronical equipment directive. However, compared to the electromagnetic compatibility study, this exercise has met a lot of challenges. To my knowledge, a cost benefit analysis of this scope has never been attempted before by the Commission and is, in this sense, very ambitious. A major difficulty so far has been the complexity involved in assessing the costs and benefits of environmental improvements of products. Another reason has been a low response rate from companies and a low content in quantified information in the received responses. This shows that for impact assessment to succeed businesses and their representative organisations need to assist the Commission by providing the necessary information.

As correctly pointed out by Orgalime in its position paper on the Better Regulation Package, these exercises should be seen as part of the learning curve in the search to improve the quality of our proposals. We will use the experience gained to better shape the targets pursued and methods used for our impact assessment studies.

The final conclusions and recommendations of the pilot project have been fed into the development of the new impact assessment system, as outlined in the Action Plan.

So, what are the challenges ahead?

To tackle the shortcomings of our existing practices:

  • We need to move away from a single-sector approach to impact assessment and look at problems and solutions in their wider context. This means taking into account all relevant positive and negative impacts of our proposals, as well as synergies and trade-offs between competing objectives.

  • We need to consider and analyse alternative policy options, including the possibility for voluntary action by the private sector and more flexible regulatory approaches.

  • We need to consult stakeholders and experts, for example, to gather information and data about the problem, alternative policy options, their practical feasibility and their likely impacts. Transparency and consultation in the impact assessment process will also be key to the acceptability of the results.

  • From a business and competitiveness point of view, we need to ensure continued attention to business impacts of proposed initiatives. Indeed, proper assessment of compliance costs and administrative burdens of proposed legislation is of high importance to ensure a business environment that is conducive to competitiveness, innovation and growth. This particularly applies to small and medium-sized enterprises, which are disproportionately affected by regulatory burdens. Policies need, therefore, to be developed having the smallest entities in mind ("think small first").

  • Finally, we need to ensure that we have a well-functioning support structure in place to provide guidance and training. Exchange of good practice and internal monitoring of the final quality of the assessments are other important functions. The Secretariat General will co-ordinate such a basic support structure for the new impact assessment procedure and internal guidelines are just being finalised.

In sum, what do we expect from the new impact assessment system?

In meeting the challenges and shortcomings already mentioned, we expect the new impact assessment system to:

  • Contribute to a high quality regulatory framework that is efficient and effective, favouring the competitiveness of European enterprises while providing adequate protection for our citizens and the environment.

  • Be an essential tool to deliver on the EU Sustainable Development Strategy by ensuring a more coherent, integrated policy-making, taking account of impacts in all three dimensions of sustainable development: economic, environmental and social.

  • Increase the transparency, accountability and perceived legitimacy of our policy-making.

The new impact assessment system will be gradually introduced as of the end of this year. While we will strive for an effective implementation, we need to recognise that this will be a process of "learning-by-doing" and that the system should not be expected to function perfectly as of day one.

In order to ensure a high quality of the final legislative act, we also believe that the European Parliament and the Council should assess the impact of substantial modifications introduced to Commission proposals.

In addition to this, we feel that Member States should analyse the impacts of any essential supplementary provisions added to Community acts in the transposition phase. This should also be the case for draft national laws that they notify to the Commission.

Secondly, Consultation

Openness and external consultation helps to improve the quality of our proposals and increases the transparency and involvement of stakeholders and the public at large. As already mentioned, consultation is an important part of carrying out impact assessment.

Also in this field the Commission has much experience - both good and bad.

The telecoms package, which was adopted by the Commission two years ago, is an example of how a wide and transparent consultation process can contribute to the simplification and improvement of regulatory quality. All in all, our proposal was subject to thorough consultation and impact analysis. Apart from preparatory documents that were widely put to public consultation, the draft legislation was also put on the Web in the form of working documents. The time used for this exercise proved well spent in the subsequent decision-making process, since the legislation was adopted by the Council and the European Parliament in only 4 months.

However, the Commission has also been criticised - including by Orgalime - for not having been co-ordinated and consistent in its consultation exercises, or for not having been transparent enough.

The Commission's upcoming general principles and minimum standards for consultation, as announced in the Action Plan, will help to streamline and improve our current practices as well as to make them more transparent to the outside world. For example, they will ensure that our consultations:

  • have a clear content;

  • are made widely known - apart from publicity campaigns, a "single access point" will be established for this purpose;

  • provide sufficient time for responding - the Commission has set out 6 weeks as minimum time limit in its initial proposal; and

  • provide appropriate feed-back to the responding parties.

We are also working on improving our tools for consultation. The intention to set up a representative Standing European Business Test Panel is one example of work underway. As a complement to other consultation tools, this Panel should play a role in the assessment of possible (business) impacts of new legislative proposals as well as of existing legislation.

However, while we are looking at new innovative ways to consult, traditional face-to-face consultations with representative European organisations - such as Orgalime - will continue to be of high importance.

Thirdly, Choosing the appropriate instrument

In order to ensure a regulatory environment that favours competitiveness and innovation, policy-makers should use the least disruptive and most effective policy instrument.

A thorough analysis of alternative policy options - ranging from non-regulatory alternatives, to self-regulation, to co-regulatory approaches, to more traditional command and control regulation - should therefore be done in the impact assessment process. The respective advantages and disadvantages of each option should be weighed and compared, before determining the most appropriate solution.

Especially in new areas of interest, such as the integrated approach on environmental aspects of products, we should try to be innovative and not only supply the analysis of alternatives, but also provide the possibility of coexistence of various instruments for achieving a common declared goal.

Conclusion

To conclude, the better regulation objectives set out in the Package are not revolutionary. However, they are ambitious as they imply a fundamental change in culture towards co-operation, evaluation, consultation and transparency of the regulatory process.

The Commission will continue to push this agenda forward this autumn.

  • First of all, we will work towards a timely and effective implementation of the actions outlined in the Better Regulation package aimed at the Commission itself.

  • Secondly, we will present additional proposals, focussing on the quality of policy execution, including issues such as comitology, regulatory agencies and infringement proceedings.

  • Thirdly, we will be involved in - and drive - the ongoing discussions on an inter-institutional agreement on better lawmaking.

However, this is a shared responsibility between all EU institutions and Member States. I was, therefore, very pleased with the commitment shown by Member States at the recent informal Competitiveness Council in Nyborg, which placed better regulation high on its agenda.

From the background documents provided by Orgalime for this meeting, I am also pleased to see that we have a lot of common ground and that you back us in this exercise.

This support should help ensure the necessary momentum for the challenges that lie ahead.

Thank you.


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