Service sector key to Europe’s wealth

Date: 03/02/05

The main business of the spring EU summit, in Brussels on 22-23 March, will be the discussion on how to put the fading Lisbon process back on track, in the light of the report by former Dutch premier Wim Kok. But even more important than any decisions taken at the summit will be the debates held in the European Parliament in the coming months over the long delayed directive on services in the internal market, hitherto widely known as 'the Bolkestein directive'.

For it is the substantial failure to extend the internal market in goods to the provision of services which has been the main inhibitor of economic growth within the EU. The services sector is by far the dominant element in the European economy. In 2002 it accounted for 116 million jobs, representing 68.1% of the active workforce.

Services represent an ever growing proportion of Europe's gross domestic product, but the growth has been far slower than it might otherwise have been because of the myriad of barriers and obstacles preventing service employers and workers from offering their skills in countries other than their own.

Instead of trying to remove these barriers by a series of sectional interventions, the European Commission proposed a general directive covering all services apart from transport, e-commerce and financial services. Its aim is to promote the free movement across borders of all other services, with some limited exceptions and laying down rules for the provision of information.

The 'country of origin' principle derives from the famous Cassis de Dijon ruling by the European Court of Justice, in 1979, that any product legally manufactured and marketed in one member state may be sold in another. It formed the basis of the EU's 1992 programme, which successfully removed most national barriers to trade in goods.

The Commission published its draft directive over a year ago. It got off to a poor start, largely because of the aggressively free market advocacy of Frits Bolkestein, the former internal market commissioner. And it was rapidly seen as a frontal attack on social rights sorely won by the unions who feared it would give a green light for widespread privatisation.

The more the unions criticised the directive, the more fervently it was supported by business interests and the way seemed open for a bitter Left-Right division in the Parliament.

But the election of a new Parliament last June, followed by the appointment of a new Commission, enabled a fresh start to be made. The prospects for the adoption of the directive now look distinctly better, though substantial amendments are likely to be made, both by the Parliament and the Council of Ministers.

The internal market and consumer protection committee has the task of drafting the Parliament's opinion on the directive. It is a lucky chance that its newly elected chairman is the veteran British Labour MEP, Phillip Whitehead, who cut his legislative teeth as a rapporteur on the European Food Safety Agency a few years ago. Whitehead regards the directive as the over-riding priority for the Parliament during 2005. He is pushing ahead with the draft opinion, which the rapporteur, German Social Democrat Evelyne Gebhardt, hopes to present to the plenary session in March, with a view to its final adoption before the summer recess.

Another positive factor is the replacement of Bolkestein by former Irish finance minister Charlie McCreevy. He has shown himself to be far more sensitive than his predecessor and went a long way to disarm critics when he answered questions in the Parliament earlier this month.

The prospects for the directive emerging from the Parliament in a healthy state now look reasonably good, though success is far from certain. Then its fate will be in the hands of the Council, with the UK government, which is broadly in favour of the measure, having the responsibility for shepherding it through during its presidency in the second half of this year.

• Dick Leonard is a freelance journalist based in Brussels.

Article discusses the importance of the service sector for the EU's economy and the prospects for the negotiations on the Directive on services in the internal market, which may enter a decisive stage in the spring of 2005.

European Commission: DG Internal Market: Services and Establishment: The Internal Market for Services http://ec.europa.eu/comm/internal_market/services/index_en.htm

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