The principle of mutual recognition in relation with the free movement of goods

Introduction
The principle of free movement of goods is one of the cornerstones of the internal market. This principle implies that national barriers to the free movement of goods within the EU be removed. Articles 28 to 30 of the EC Treaty forbid Member States to maintain or impose barriers to intra-Community trade of goods, except in special circumstances.
These provisions are the basis of the mutual recognition principle. Mutual recognition is a remarkable innovation facilitating economic intercourse across borders. In the EU's internal goods market it has been helpful in tackling or avoiding the remaining obstacles, namely, regulatory barriers between member states.
The purpose of the present paper is to provide arguments for the principle of mutual recognition and application for free movement of goods in the European Union internal market.

Section I. Definition and Evolution
Mutual Recognition means that, in any sectors that have not been subject to harmonization measures at Community level or which are covered by minimal or optional harmonization measures, every Member State is obliged to accept on its territory products which are legally produced and marketed in another Community Member State .
The principle of mutual recognition plays an important part in the functioning of the internal market. Thanks to it, the free movement of products is possible in the absence of any Community harmonizing legislation .
The principle of mutual recognition emerged out of the Court of Justice's famous Cassis de Dijon and subsequent judgments, and was discussed in a Commission interpretative communication of 3 October 1980 .
In its Action Plan for the Single Market, adopted on 4 June 1997, the Commission identified the proper application of the principle of mutual recognition as crucial to improving the performance of the internal market .
In 1999, the Commission adopted a communication on the application of the mutual recognition principle. The Commission based its communication on a detailed analysis of the cases of incorrect application of mutual recognition handled by the Commission in recent years .
In 2003, the European Commission published a Communication clarifying the mutual recognition principle. This communication aims to improve the application of mutual recognition by providing a summary of how it should work and the rights which it gives to economic operators .
On 14 February 2007, the Commission adopted a Regulation intended to make the Mutual Recognition of goods work better in the EU. The proposed Regulation only applies to the "non-harmonised" field of goods, and does not apply to goods that are already subject to EU harmonising legislation .

Section II. MR’s place in the internal goods market
The essential requirements for free movement of goods are eliminating trade barriers between Member States. Trade barriers can both result from physically and different technical standards. As the physical barriers to trade (such as border controls and customs formalities) have been removed since 1993 in the EU, the focus has shifted from the physical barriers to the removal of technical barriers to trade. Technical barriers are the chief remaining obstacle to complete freedom of movement.
The principle of mutual recognition is the first line of defense against technical barriers in the regulated non-harmonized sphere.
The result of Casis de Dijon, case 120/78, is to replace dual regulation of a product (by both the home and the host States) with single regulation (home Sate) which, under the principle of mutual recognition, the host State is required to respect. This principle became the basis of later Community internal market legislation.
According to the commission communication, mutual recognition facilitates three essential developments of European economic integration. The application of mutual recognition is fully consistent with the Single Market philosophy according to which the rules of the Member State of origin normally prevail; it is also consonant with the idea of a dynamic approach to the application of subsidiary; by avoiding the systematic creation of detailed rules at Community level, mutual recognition ensures greater observance of local, regional and national traditions and makes it possible to maintain the diversity of products which come onto the markets . It is thus a flexible, pragmatic and powerful tool for economic integration.
To analyze importance of mutual recognition in goods markets in details, we can conclude there are the following economic advantages: First, the internal goods market can be established far more easily and more quickly; Second, the propensity to over-regulate for vested interests or bureaucratic reasons is severely constrained both as to EC directives and at the national level; Third, it creates prerequisites for regulatory competition to be pursued actively in the EU; Fourth, the MR forces member states to rethink their national regulatory solutions and focus on what is essential and what can usefully be subject to common standards .

Section III. Drawbacks of MR
In the past two decades, many instances of silly and de facto protectionist import bans have been removed. However, there are drawbacks that should not be overviewed.
One is that mutual recognition turns out to have fairly high information, transaction and compliance costs. The possible reasons are as that: MR is not ‘visible’, for a particular tradable good in markets, MR is a distant abstraction; there is no rule book for MR, indeed, if anything, MR applies the negative of a rule book; the costs of monitoring are very high, which is out of the question to monitor each and every individual case of MR; judicial review in the EU is slow because of the overload of the ECJ and the huge increase in the requested ‘preliminary rulings’; and the application of MR has turned out to be much more complex than originally envisaged .
The other is that mutual recognition is still a flexible principle which may be applied in different ways and generate different legal results. Mutual recognition is not always automatically applicable. As the known Foie Gras Case showed where a prior authorization requirement is shown to be justified there is no room for the mandatory inclusion of a mutual recognition clause.

Section IV. Comparison and comprehension
The EU policy for elimination of technical barriers to trade has two main approaches: Mutual Recognition of national rules and harmonization of technical regulations.
Mutual Recognition is presented as a form of negative integration in that it consists of an obligation which restricts the freedom of member states, keeps the diversity of national rules and does not involve the transfer of power to a supranational level.
On the other side, technical harmonization, considered as positive economic integration in the EU policies, gradually reduces different standards in different member states and establish unified standards at the European Union level.
The harmonization involves the transfer of powers to the Community, but mutual recognition reserves more self-determination rights to member states. Furthermore, this emphasis on mutual recognition avoids the difficulties linked to the necessity of drafting directives so as to suit the substantive concerns of the different member states or specific requirements of their legal system.
Though from the traditional view of negative and positive economic integration, the two approaches are applied in different fields and exert confront influences. To comprehensively speaking, they facilitate and make up for each other to eliminate remaining technical barriers between member states, which play a decisive role in the European Union economic integration process.

Section V. Conclusion
As a conclusion of what we discuss in the above lines, in the Cassis de Dijon case, the ECJ began to establish the principle of mutual recognition. After that the EU commission released a series of communication related to application and interpretation of this principle.
The mutual recognition played an essential role of eliminating technical barriers which restrict free movement of goods within the EU. This means that exceptionally a Member State may be able to show why products made in different States according with different standards do not meet its own requirements.
L. Woods remarked that the principle of mutual recognition is a flexible tool which the differences between Member States have been reconciled, as the mutual recognition is not an absolute principle. As development of the internal market and deepening of economic integration, it appeared shortcomings in its excessive costs of information, transaction, compliance and its lacks of stable codification in the EU legal system.
For these reasons, the Commission proposed a communication to suggest Member States in fostering the proper application of the principle of mutual recognition, in particular including a mutual recognition clause in the laws of Member States.
At the same time, technical harmonization, as a positive approach, makes up for this negative approach, mutual recognition.
As the Economic Union is established successfully in the EU and the accomplishment of economic integration comes true, the importance of the principle of mutual recognition will become weaker and weaker within the EU. However, it does not mean to underestimate its contributions to the EU economic integration or to abolish it in the future, because the experience accumulated from the integration progress about this principle will surely be used to smooth and improve the trade relations between the EU and rest of the world.

Reference:

1. Stepthen Weatherill, Cases and materials on EU Law, OXFORD university press 2006, 7th edition.
2. Le principe de la reconnaissance mutuelle au-dela du marche interiuer, Alberto Alemanno, Reveu du Droit de L’Union Europeene 2/2006;
3. Commission interpretative communication on facilitating the access of products to the markets of other Member States: the practical application of mutual recognition (2003/C 265/02).
4. Case 120/78, Rewe-Zentrale AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649.
5. Communication from the Commission concerning the consequences of the judgment given by the Court of Justice on 20 February 1979 in Case 120/78 ('Cassis de Dijon'), Official Journal of the European Communities, 3 October 1980, p2-3.
6. Action plan for the single market，Communication of the Commission to the European Council, CSE (97)1 final, 4 June 1997.
7. Communication from the Commission to the Council and the European Parliament: Mutual recognition in the context of the follow-up to the Action Plan for the Single Market. COM(1999)299 final
8. Commission interpretative communication on facilitating the access of products to the markets of other Member States: the practical application of mutual recognition (2003/C 265/02). Official Journal of the European Union, 4 November 2003. P2-15
9. Jacques Pelkmans, Mutual recognition in goods and services: an economic perspective, European Network of Economic Policy research Institutes, Working Paper no. 16/march 2003.
10. Proposal for a Regulation of the European Parliament and of the Council laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State and repealing Decision.3052/95/EC.

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Disputes and Solutions for Protection on Intellectual Property Rights

___A challenge and new moment for relations between China and the EU

I. IntroductionThe economic relationship between China and the EU has been considerably reinforced since China’s Reform and opening in 1980s, especially after the entrance of China into WTO in 2001. The two world-influencing entities have more and more incorporated as an economic interest community.
However, the conflicts from protection of Intellectual Property Rights between them play as an unharmonious tone, which has slowed down the pace to a higher degree of cooperation and common prosperity.
There are criticisms to China’s legal protection system of IPR from the EU and complains on exorbitantly high technical standards of the EU from China, which result in IPR problems more and more complex and difficult to resolved.
The objective of this article is to find out what are essential reasons for conflicts and try to propose some doable means to eliminate these conflicts.
II. Economic relationship and IPR conflictsChina has developed more and more influentially important economically and politically in the world and the EU offers the largest market in the world, which enjoys world leadership in key technologies and skills[1].
The EU and China benefit from globalization and share common interests in its success. On the other side, it presents challenges to both and brings further responsibilities, in which, IPR protection disputes shows a headache for both presently.
A position paper[2] edited and published by European Union Chamber of Commerce in China states that 70% of EU enterprises investigated thought that in the past year there had not been any improvement of China’s performance of IPR law. At the end of June 2004, the EU wrote in the Accession Position Paper about market status of China that there existed leaks in the system of protection of IPR and related products, which means that the EU has linked IPR of China protection system with the market status. EU trade Chief Peter Mandelson noted that even CCTV of China trenched IPR when using materials without paying anything[3].
III. Underlying reasons for conflictsDisputes between China and the EU in respect of IPR originats superficially from different level of protection, but we should never overlook the essence of IPR and the potential crisis and threats that, which are underlying reasons, it may bring to the balance of economic powers, common economic prosperity in between.
1. IPR: new technical barriers to trade(TBT)A new trend of combination with IPR is the main feature of TBT China is confronted presently from the EU.
IPR related TBT has brought a great deal of restrictions to development of firms and national economy of China. For example, on 31 April 2002, A Child-Resistant Bill (CR Bill) was passed by the EU Parliament, which provided that cigarette lighters at price of less than 2 Euro should not be permitted to enter into the EU market without child-resistant equipments[4]. As the same, Chinese companies had to pay a great sum of fees to use the relevant patents. What’s more, on 13 February 2003, the EU passed two Directives, the WEEE[5] and the RoHS[6], of which the implementation brought an extremely negative influence to the exportation of such products of China.
The EU find a new approach to get maximum interest by transforming technology to patent, patent to standard, and standard to monopoly.
2. IPR and antitrust lawFrom the perspective of economics, IPR is a temporary monopoly on the use or exploitation of that good from invention and innovation[7]. However, competition is a basic mechanism of the market economy and needs suppliers to be independent of each other, each subject to the competitive pressure exerted by the others. In area of international trade, emphasizing IPR monopoly rights too much will restrict free competition.
At present, there has not been an intact antitrust law yet in China. It is not turgidly speaking that IPR related antitrust law which is suitable for requirements of development of Socialist Market Economy and future era of knowledge economy is at the bud stage, or is nearly blank.
Comparatively, there has been an effective and completed antitrust legal system in the EU. The antitrust area covers two prohibition rules set out in the EC Treaty. First, agreements between two or more firms which restrict competition are prohibited by Article 81 of the Treaty. Second, firms in a dominant position may not abuse that position[8]. The EU antitrust provisions are applied in more and more ECJ cases and Commission decisions related with IPR in recent years. For example, on June 15, 2005, the European Commission ended its long-running investigation of AstraZeneca's behavior on the "proton pump inhibitor" market by imposing fines of €60 million ($72 million), which is a major step in the development of the way the antitrust rules are applied to IPR in the EU[9].
3. IPR versus State economic securityThe IPR system takes effect of almost every area for a State at different level as a kind of legal system, which is able to facilitate or conflict with State interest and economic security in great deal, especially for the more vulnerable developing countries.
It is proved practically that multinational corporations have played a positive part in development of China, and made extrusive contribution for economic prosperity and cultivation of persons with ability[10]. Obviously the influence of the battle of IPR to the State security is unbearable to be ignored, which deals with more all-win and common prosperity than counterwork. In particular for China, the greatest developing country with considerable capability of innovation, IPR protection should be considered as a means to boost up state economy and enrich technical strength.
IV. Cooperation and dialogs between China and the EUThe EU has been holding a more relatively kindly attitude than others such as the US and Japan. Cooperation and dialogs have been launched from the end of 1990s and are working comparatively favorably nowadays.
China-EU Cooperation program on IPR was signed by Chinese government and the EU Commission on 7 May 1996, in which the EU would invest 4.8 million Euro to provide necessary funds for IPR related institutions of China, for example, universities, academies, governmental offices and other relevant institutions.
Yi Xiaozhun, Vice Minister of Commerce of China, met Benita Ferrero-Waldner, European Commissioner for External Relations and European Neighborhood Policy, in Beijing on Jan. 17, 2007, and signed the agreement on finance for 3 cooperation projects: China-EU law school, Second Stage of China-EU IPR Protection, which will emphasize on improvement of effectiveness of IPR protection in China, and the China-EU Business Management Training[11].
In recent years, there have been a number of important economic dialogues covering IPR, market access, and general product and food safety, etc, established between the EU Commission and China. Especially, on 30 October 2003, both sides reached an agreement on a structured dialogue related with IPR, where all-encompassing issues, bilateral and multilateral, related to the protection and the enforcement of IPR can be discussed.
Dialog mechanism helps to promote regulatory cooperation and convergence and is important in managing an increasingly complex relationship.
V. Further essential measures for cooperationTo solve IPR problems thoroughly and essentially, reforms and constructions , under the dialog regime, in the following areas should be paid more attention to.
First, Elimination of IPR technical barriers. IPR related technical barriers are being utilized by the EU as a favorable trade weapon to defend its economic interest. A crucial measure to be adopted by China and the EU for harmonizing conflicts caused by IPR related TBT has been put on the desks of the two economies, as not only China will be suffered by such trade obstacles, the EU will be encountered the same question along with technical development of China and gradually deepened relation between China and the EU.
Second, perfect antitrust law. Antitrust law, namely a flawless antitrust code, is crucial and indispensable for China in which all rules should be applicable to IPR and there should be a suit of effective administrative structure for management and implementation. Antitrust law, as closely related with economy, will be challenged by knowledge economy and enriched by IPR, which pressurizes every developing country to perfect domestic antitrust law to maintain internal market order.
Third, Establishment of IPR security system under WTO. Article 73 of TRIPS Agreement regulates exceptional clauses of security, which is initially established for developed countries to blockade technologies towards developing countries[12], but, on the other side, they can also assistant developing countries like China to establish security system of IPR and resolve specific problems in the specific period. A flawless security system is the premise of fair trade between China and the EU.
VI. ConclusionIPR has become the central issue for economic and trade relations between China and the EU, which is a challenge to relationship between China and the EU. However, a fair and effective resolution will bring this partnership into a new stage.
Taking long views, on basis of continuing deepening full-scope strategic partnership, both China and the EU should, obeying the legal framework of TRIPS, by dialogs, negotiation, consultation and further understanding and trust, examine strictly behaviors of IPR tort and abuse, take material steps to eliminate IPR related TBT, put an end to monopolies on technical trade, and protect respective state interest and economic security, especially emphasizing on interest of China as a developing country to realize a balance between the two economies, accordingly, bringing along co-prosperity of China and the EU.

REFERENCESl Scholarly Treatise
Zheng Chengsi, To Discuss IPR. Law Press, Beijing. 1988.
Liu Maolin. Economic analysis of IPR, Law Press, December 1996.
David I. Bainbridge. Intellectual property. Harlow : Longman, 2002.
Rationality, Crisis and Future Model of IPR. Edited by Li Yang. Beijing. Law Press. 2003.
TRIPS and fronter issues of IPR protection in China. Edited by Tang Anban. Beijing. Law Press. 2004.
Xue Hong and Zheng Chengsi. Chinese intellectual property law in the 21st century. Hong Kong : Sweet & Maxwell Asia, c2002.
Global intellectual property rights : knowledge, access, and development. Edited by Peter Drahos and Ruth Mayne. England. Oxford, 2002.
Chen Meizhang, Facilitation of Chinese patent system to technical improvement and economic development. Research on Patent Law. IPR Press, December,1999.
l Scholarly Essay
Shahram Shoraka. World Trade Dispute Resolution and Developing Countries: Constructing a Framework for Fair Adjudication in the WTO. MJIEL. Vol. 3. Issue 2 . 2006.
Wesley A. Cann. Creating Standards and Accountability for the Use of WTO Security Exception: Reducing the Role of Power based Relations and Establishing a New Balance between Sovereignty and Multilateralism. Yale Journal of International Law. Vol. 26(2001). No.4. pp413-485.
Zhang Biwu. A comparison of TRIPS with ole and new legal system of IPR in China.China Science and Technology Information. Feb, 2006.
Wang Hong. IPR protection and free competition. Mediation, Arbitration and Litigation. Vol.16. No.93. pp53-55.
Xu Xiangming. Antitrust control to abuses of IPR. Journal of Huaibei Coal Industry Teachers College, Vol.25 No.5, Oct.2004.
Xu XiuXia, Influence and countermeasure of IPR protection of China after entrance into WTO. Min Bai Study. 2001(5).
Xiao Feng. An analysis of actuality and motivated power of technical development in China. Future and Development. 2001(4).
Zhang Zhicheng. Comments on IPR strategy of multinational corporations, IPR Review of Peking University. Col.3. Law Press. August, 2003.
l Reports
Integrating Intellectual Property Rights and Development Policy.Report of the Commission on Intellectual Property Rights of the UK. Published in London. November 2002 (2nd Edition). Available on http://www.iprcommission.org/.
European Antitrust Review. Prepared by Gibson, Dunn & Crutcher’s European antitrust ractice Group april 2005 - april 2006. Published in October 2006.
Competition Law-Antitrust law and policy in a global marketinsight,An effects-based approach to technology transfer agreements.By David Wood and Isabel Davies.published in the May 2004 issue of Competition Law Insight.
Strengthening Protection of Intellectual Property in Developing Countries.World Bank Discussion Paper(sWDP-112). Edited by Wolfgang E. Siebeck. First printed in December 1990. Washington, D.C..
l Website
Ministry of Commerce of PRC: http://www.mofcom.gov.cn/
The EU Chamber of Commerce in China: http://www.europeanchamber.com.cn/
EUR-Lex: http://eur-lex.europa.eu/en/index.htm

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[1] EU – China: Closer partners, growing responsibilities. COM (2006) 632 final.
[2] 2004 European Business In China Position Paper
[3] See http://www.europeanchamber.com.cn/
[4] See Child-resistance for lighters. Safety requirements and test methods, EN 13869:2002
[5] Waste Electrical and Electronic Equipment Directive . Directive 2002/96/EC.
[6] Restriction of Hazardous Substances Directive . Directive 2002/95/EC.
[7] Mark A. Lemley, "Property, Intellectual Property, and Free Riding" (Abstract); see Table 1: 4-5.
[8] See Article 82 of the EC Treaty.
[9] See European Commission Raises Stakes in IP/Antitrust Battle, available on http://www.gibsondunn.com/.
[10] Zhang Zhicheng. Comments on IPR strategy of multinational corporations, IPR Review of Peking University. Col.3. Law Press. August, 2003.
[11] See website of ministry of commerce of the PRC, http://www.mofcom.gov.cn/.
[12] Wesley A. Cann. Creating Standards and Accountability for the Use of WTO Security Exception: Reducing the Role of Power based Relations and Establishing a New Balance between Sovereignty and Multilateralism, Yale Journal of International Law, Vol. 26(2001), No.4,pp413-485.

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