Opening services sector would ‘unleash economy’

By Anna McLauchlin

Date: 14/10/04

THE battle over proposals to liberalize Europe's services market will intensify next week when EU governments meet to discuss one of the most controversial legislative legacies of the Romano Prodi Commission.

The proposed services law would increase EU trade and foreign direct investment by up to 35%, the Council of Ministers working group will be told.

The group, which meets on Tuesday (19 October), will discuss a study from the Netherlands' Bureau for Economic Policy Analysis (CPB).

"We derive firm indications that the EU service sector might benefit from the proposed EU directive through a substantial increase in international trade and investment," CPB's Henk Kox said. "Assuming full implementation of the proposals, we estimate that bilateral commercial service trade could increase by about 15% to 35%."

The claim is certain to provoke counter-arguments from opponents of the plan to liberalize services, who fear an assault on social protection.

The CPB study will be presented to members of the European Parliament at a public hearing on 11 November. Parliament's rapporteur in charge of drawing up MEPs' response, Evelyne Gebhardt, a German Socialist, told European Voice that she was sceptical of the CPB study. "Competitiveness is a good thing, but it's not the only thing that is important," she said. "It's also important that the social impact on occupations is considered and that we maintain a high level of consumer protection. We need to strike a balance."

But shadow rapporteur Malcolm Harbour, a British Conservative, welcomed the findings. "It's a very important piece of work, which proves how crucial this legislation will be," he said. "It is a fundamental part of economic reform and the success of the Lisbon Strategy."

The services directive, dubbed "the Bolkestein directive" by Belgian trade unions, has become a highly politically charged proposal. To supporters, the directive is essential if the EU is to realize its aim of reviving the European economy. It covers about half of all economic activity in the EU. The Commissioner for the Internal Market, Frits Bolkestein, has described the proposal as "potentially the biggest boost to the internal market since its launch in 1993". To his opponents, it is a threat to "the European social model".

Bolkestein's designated successor, Charlie McCreevy, has described the proposal as "a visionary piece of legislation". The designated commissioner for employment and social affairs, Vladimir Spidla, said that more consideration was needed to reach "more acceptable and more mature conclusions".

Under the proposal, any service which is legally permitted in one member state could be provided in any other without further red tape. It would also prevent member states from demanding prior authorization before workers are posted from another member state and from forcing companies to have administrative representation in the destination country. Opponents of the law fear that this will lead to an influx of cheap labour in countries with a high level of social protection, but the Commission has insisted companies posting workers will have to comply fully with the 'host' country's employment laws.

Jozef Niemiec, of the European trade union association ETUC, said: "Our main fear concerns the directive's country of origin principle. The fact that certain countries and sectors do not have collective agreements protecting workers' rights means we will see high quality employment replaced by cheaper, less secure jobs with poorer health care. We say to the Commission, 'prove to us in which sector there will be an increase in employment as a result of this directive'."

Preview of Council meeting on proposed Services Directive on 19 October 2004.