The final round of the duty-free saga is signalled by yesterday's report from the European Commission recommending that it be abolished on schedule in June. The Commission was asked by the European Council at Vienna to examine the effects of abolition and to consider an extension of the scheme for up to five years following a change of view by the German, French and British governments. They were worried by the loss of employment and the likely popular perception that this is a gratuitous blow to travellers at a time when the EU's democratic legitimacy is once more being put in question.
The furious reaction from interest groups and lobbyists yesterday was couched very much in these terms as "unelected bureaucrats" were blamed for arrogance and intransigence and vows were made to reopen the question with finance ministers and the heads of state or government at the next European Council. Such charges pay scant attention to the important independent role of the Commission, which has so often been deployed in defence of small state interests, Ireland's included.
The Commission has a crucial role in policing the single market and it deploys powerful arguments against extending duty-free arrangements. Its objections revolve around two main propositions: that duty-free sales distort the operation of the single market and represent a subsidy to better-off travellers; and that the release of resources consequent on abolition, including extra taxes and alternative jobs, will compensate for short-term employment losses, which anyway can be targeted by reallocated structural funds.
In principle, it is not possible to dispute the Commission's case. But the Vienna Council's call for a review of the effects of abolition revolved around the need for more time to consider the practical consequences, as well as a political response to populist pressure. The Commission's case does not stand up so well to these considerations. It will therefore fall to the finance ministers and probably to the forthcoming Berlin summit, to make the final decisions.
Everyone agrees that the original 1991 decision to abolish duty-free sales can only be reversed unanimously. It will be extremely difficult to convince the Belgian, Luxembourg and Danish governments to vote for an extension. The Danish government could fall on the matter, since the Liberal party there has threatened to pull out if the Social Democrat prime minister goes along with it. The Danes were the only member-state to quantify the positive, as well as negative, effects on employment and their research shows a surprisingly marginal net change. Many commentators have pointed out that price factors alone cannot explain the attractiveness of retail behaviour for consumers trapped in airport shopping malls, as evidenced in a growing US trend.
It remains the case, however, that abolition has not been well prepared for either organisationally or in terms of public understanding, despite the long period of transition allowed for in 1991. The popular image of arrogant bureaucracy painted by its opponents should give the politicians pause before they finally decide.