CONSUMER PROTECTION AND THE FREE MOVEMENT OF GOODS IN THE EUROPEAN UNION: THE ABILITY OF MEMBER-STATES TO BLOCK THE ENTRY OF GOODS ACROSS BORDERS.

• Author: Tudor, Jarrod

ABSTRACT

Just recently, the United Kingdom held a referendum whereby the outcome was a slight victory for those wishing to leave the European Union ("Brexit"). Including the United Kingdom, the European Union constitutes a twenty-eight member-state common market that allows for the free movement of goods, services, capital, and labor. Ironically, although the United Kingdom plebiscite favored leaving the European Union's guarantee of free movement of goods, 50 percent of that country's exports go to the other twenty-seven member-states. The United Kingdom's departure also threatens to make trade with Europe more difficult for firms in the United States as 25 percent of American exports headed to Europe move through the United Kingdom. Akin to the referendum held in the United Kingdom, the world is seeing constant political threats to free and open trade among countries despite the aggregate and cumulative benefits of free trade. The goal of this work is to inform the reader and practitioner as to the basic rules that support the free movement of goods pursuant to Article 34 of the Treaty on the Functioning of the European Union. This paper will also cite the various exceptions that member-states can invoke against the free movement of goods on consumer protection grounds thus blocking the entry of goods across member-state borders. Topics associated with the free movement of goods addressed in this paper include product contents, packaging, inspections, prohibitions, goods from non-member-states, country of origin, legal tests applied by the European Court of Justice, product labeling, the role of science, deceptive advertising, selling arrangements, blatant protectionism, and abuse of process.

1. INTRODUCTION A. The Free Movement of Goods, the European Union, and Brexit B. The Threat to Free Movement of Goods Around the World C. The Free Movement of Goods and the TFEU II. PURPOSE OF THIS WORK III. CASE LAW OF THE EUROPEAN COURT OF JUSTICE A. Product Contents B. Packaging C. Inspections D. Prohibitions E. Country of Origin IV. MAJOR CONSIDERATIONS OF THE ECJ REGARDING THE FREE MOVEMENT OF GOODS AND CONSUMER PROTECTION: AN ANALYSIS A. The Use of Tests B. Labeling as Both a Remedy and a Form of Unlawful Protectionism C. The Role of Science for Consumer Protection D. Deceptive Advertising E. Goods Available in Another Member-State F. Article 34 and Selling Arrangements G. Blatant Protectionism and Abuse of Process H. Increased Costs for Manufacturers and Importers V. CONCLUSION I. INTRODUCTION

   1. The Free Movement of Goods, the European Union, and Brexit

      The United Kingdom is about to embark on a two-year period by which it will secede ("Brexit") from the European Union ("EU"). (1) The economic impact of the United Kingdom's exit from the EU is far from clear. (2) There is great concern that the vote in the United Kingdom may lead to a great reduction in cross-border investment. (3) Some of this concern is due to the uncertainly in the regulatory environment that the United Kingdom's decision to leave the EU has caused. (4) Surprisingly, however, one-half of the United Kingdom's exports go to other EU member-states. (5) The free movement of goods and labor seems to be well-developed while other economic sectors, such as finance and energy, have not been integrated as well and there exists a belief by some that services are more difficult to trade freely in comparison to goods despite the fact that 70 percent of the EU economy consists of services. (6) One good that might also be designated a service, data, could cause a significant rift between the United Kingdom and the EU. (7) Even with the departure of the United Kingdom from the EU, there is unlikely to be a separation of the four freedoms to keep the existing member-states in the EU. (8) However, following the United Kingdom's plebiscite to remove itself from the EU, many of the leaders of the "Leave" movement cited a desire to keep access to the single market and believed the United Kingdom could do so without having to succumb to the principle of free movement of workers. (9) In fact, the current United Kingdom Prime Minister, Theresa May, set the ability to remain in the common market as a high priority but has demanded that Brexit require the removal of the jurisdiction of the European Court of Justice ("ECJ") over such matters as the free movement of workers requirement. (10) In order to maintain a position within the common market, the United Kingdom has hinted that it might be willing to pay for that access. (11) Recently, the High Court ruled that the United Kingdom may not leave the EU without consent of Parliament. (12) The issue remains contentious in Parliament as one member has expressed concern that Brexit may lead to higher food costs. (13) As well, the opposition party has called for a separate vote on Brexit unless the United Kingdom can remain within the common market. (14) Additionally, there is discussion among those in the Scottish Parliament that Scotland should hold a second referendum on whether to remain within the United Kingdom so that it can remain in the EU. (15) Firms in the United Kingdom are asking for greater consultation with the government as the government contemplates how to move out of the EU, and these firms have signaled a strong desire to remain within the EU's common market. (16)

      There is comment that the EU may be becoming more protectionist in ideology. (17) Although clearly unofficial, there are two potential forms of Brexit: "soft Brexit" (protectionist, but less so), whereby the United Kingdom is able to leave the EU but maintain access to the common market; and "hard Brexit" (more protectionist), whereby the United Kingdom removes itself completely from the EU. (18) Most economists believe that a hard Brexit will be more costly to the British economy than a soft Brexit. (19) This higher cost associated with a hard Brexit may be reflected in the sharp decline suffered by the British pound since the June 2016 referendum. (20) Regardless, other European countries may find it more difficult to get into the EU, even those considered to be quite "pro-European," because of the United Kingdom's desire to remove itself from the common market's free movement of workers requirement. (21) The anti-integration fervor in Europe threatened to put a proposed trade agreement between the European Union and Canada, the Comprehensive Economic and Trade Agreement ("CETA"), in jeopardy. (22) The CETA trade pact was subject to thirty challenging national and regional legislative approvals and for a brief period was held up by politicians in Wallonia, a Belgian regional government, for fear of Canadian competition in the dairy industry. (23) Additionally, some member-states do not appreciate the fact that their citizens may still need a visa to visit Canada. (24) The EU and Canada, however, recently signed the CETA free trade agreement. (25) Ironically, this agreement could serve as a blueprint for a future agreement between the EU and the United Kingdom when the latter officially leaves the EU. (26)

   2. The Threat to Free Movement of Goods Around the World

      Generally, global trade increases economic growth by moving production where it is most efficient. (27) However, global trade is moving at its slowest pace since the financial crisis in part due to the rising anti-globalization sentiment. (28) Politicians around the world are erecting barriers to trade in an attempt to boost short-term domestic growth. (29) Those running for office in the United States and Europe are hammering international trade while riding the wave of political populism, thus damaging chances at further trade agreements. (30) Even in emerging markets, governments are proffering localization rules binding firms to hire domestic workers and invest within their polities. (31) Both trade in goods and cross-border lending are in decline. (32) One estimate is that if global free trade ended, the purchasing power of the wealthy would decline by 28 percent but the purchasing power of the truly poor would drop by 63 percent. (33)

      Likewise, in the United States there is a political wave of anti-globalism threatening the ratification of the Trans-Pacific Partnership ("TPP"). (34) Ironically, most Americans favor free trade but have a particular problem with the TPP due to the false yet popular belief that the trade pact includes China. (35) What is true is that trade between the United States and China has increased significantly since 2000 and only 12 million workers in the United States are employed in manufacturing. (36) The United Kingdom's decision to leave the EU has also made a trade agreement between the United States and the EU quite fragile. (37) The United States sends approximately 25 percent of its exported products to the EU through the United Kingdom. (38)

   3. The Free Movement of Goods and the TFEU

      Article 34 (ex 28, 30) of the Treaty on the Functioning of the European Union ("TFEU") is a relatively short article and reads succinctly, "[quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States." (39) The purpose of Article 34 is to liberalize and promote trade between member-states without restrictions yet also attempt to strike a balance between market liberalization and national sovereignty. (40) The focus of Article 34 has been to combat non-fiscal limitations that member-states may place on goods coming into that member-state from another member-state. (41) The Framers of the Treaty of Rome (1957) did not believe that the removal of customs duties and taxation hurdles would have been enough to create a common market for goods, and thus barriers of a non-economic nature would have to be prohibited-which is the function of Articles 34 and 35 (ex 29, 34). (42) For the most part, according to the ECJ, "[a] quantitative restriction is a limit on the amount of imports" coming into a...