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Monday, October 28, 2013

We can't 'complete' the EU single market in services but we can do a lot better

The APPG on European Reform, to which Open Europe acts as the secretariat, has published a new report, following the Group's inquiry into the EU's single market in services. The APPG held evidence sessions with a wide range of business groups from the City, retail and small business sector to the creative services sector.

The inquiry concluded that there is no ‘single market in services’ in any meaningful sense of the term. This is due in part to the sheer diversity of service sectors in the EU, and because these sectors are regulated by a complex mix of national and EU regulation.

The diversity of services markets in the EU means that the single market in services cannot be ‘completed’ - a term of often used but little understood - by one harmonised set of rules. However, much more can be done to reduce barriers to trade in services across Europe.

The challenges are different depending on the sector. In financial services, the EU's passporting rules have provided firms with benefits to trade across borders - the primary concern is how new EU regulation could curb these benefits and how eurozone crisis response could spill over to the wider single market.

Other sectors, such as retail, are covered by the EU's so-called Services Directive (which regulates sectors that account for around 45% of EU GDP). But a mixture of poor implementation of the ban on some trade protectionism, such as economic needs tests, and the Directive's legal ambiguity mean a large number of barriers remain in place, with firms having to comply with home and host country regulation in order trade across borders, which adds cost and complexity.

The APPG proposes a package of changes and at the top of the list is adopting the ‘country of origin’ principle to enable service providers to trade across EU borders under their home country regulation – if necessary, through enhanced cooperation among a group of like-minded EU member states. This is an idea we've been keen on for a while and set out in detail in a report earlier this year.

Others proposals include:
  • reducing the number of regulated professions;
  • installing a liberalising EU Commissioner;
  • developing the potential of e-commerce;
  • applying “Better Regulation” principles; 
  • and establishing new mechanisms to block unnecessary or discriminatory regulation and rules that hamper trade with non-EU countries.
The EU has held out for far too long on realising the potential of Europe's services sector. But with the German elections behind us and everyone in Europe talking about competitiveness, there’s now a huge window of opportunity to make this happen.


Jesper said...

Financial services used as an example of successful liberalisation?
The losses that has been incurred by the financial services sector should be sufficient to make even the most ideologically blind 'liberaliser' (anarchist with better PR) take a step back and re-evaluate the policy.

How much has UK banks lost so far in Ireland, US, Spain etc?
How much has German, UK, Dutch and Italian banks lost due to loose regulation setups in the IFSC in Dublin?

A company that does not have the brainpower to be able to follow local legislation or VAT rules isn't a fit company. I'm amazed that there are companies who publicly state they have those problems. Read the report and find out which companies are having problems with such basic things.

Oh, and a quote from the report about the professions holding the European economy back:
"Examples cited by the Commission are the services of photographers, barmen, corsetmakers or chambermaids."
I'd have thought that a serious report would have serious examples but maybe the examples given were the best to be found.

Denis Cooper said...

Looking at the report I see on page 4:

"Open Europe, the secretariat to the APPG for European Reform, estimates that the benefits of greater liberalisation of only those sectors covered by the Services Directive could boost EU GDP by up to between 1.8% and 2.3% of EU GDP."

And on page 14:

"The European Commission estimates that the EU's Service Directive has already led to benefits of €101bn (0.8% of EU GDP). But previous economic studies estimate that the benefits of further liberalisation under the Services Directive for the EU as a whole could be a boost to EU GDP of between 0.55% (€69.5bn) and 1.81% (€228.8bn)."

Followed by a repeated reference to Open Europe believing that it could be up to 2.3% of EU GDP or €294bn, on top of the €101bn already gained according to the Commission estimate.

I would point out that these are estimates, for both the benefits already achieved and those projected for the future, and in the nature of things EU they are more likely to be overestimates rather than underestimates, and I would point out that there would inevitably be regulatory costs which in the nature of things EU may cancel out a lot of the benefits - although it is one of the absurdities of the GDP statistic that non-productive activities such as unnecessary form-filling actually contribute to GDP - but above all I would point out that whatever the benefits turned out to be they would be relatively small one-off enhancements of GDP, at most equivalent to the natural growth of the UK economy over a couple of years at the trend rate of about 2.5% a year.

Well, would we want these gains equivalent to maybe a couple of extra years natural growth, one-off gains but spread over a number of years so that they might not even be particularly noticeable?

And the answer to that must be: if achieving those small economic gains over a number of years means any further erosion of the power of our Parliament, forever more, we would do better to keep that power over the government of our country and just wait a couple more years to get those gains anyway through natural growth.

There is an easy assumption that the solution to relatively sluggish economic growth in the EU must lie in "more Europe", but even if that was true it is invariably the case that "more Europe" means less power for our national Parliament and therefore further weakening of our national democracy.

Rik said...

There is nothing wrong in having basically the same rules apply in all countries (as long as not accompanied by the usual EU red tape).
Even would make proper regulation much easier and there things went terribly wrong not in having open markets. Failure of proper riskmanagement and the oversight upon that.
2/3 of the Souths bankingsector should be put out of business 19th century incompetent management structures and/or heavily undercapitalised). Apparently via normal regulation that will not happen. So you simply need competition.

2. Have you ever seen Belgian or French reporting requirements. For some things they are completely over the top. Anyway larger companies often will have to make adjustments in their software to cope with that. Simply next to the extra work at local level that really can cost a lot of money.

3. Of course it is not about registering for VAT it is about how long that takes and similar stuff.

4. A lot of the Southeners have simply effectively closed shop in a lot of sectors. Greek and Italian Pharmacies as a recent playing example. Simply nothing to do with protecting quality and standards it is all about protecting powerful groups within your own country. The only ones that benefit are those groups and some politicians.

Jesper said...


thank you for providing an example of an ideologically blind. The liberalisation of financial services was a costly mistake. In an utopia it might have worked but we're not living in an utopia.

As for the rest of your points: You come across as an imperialist that would like to force your views upon other sovereign nations. You don't seem to realise that by using the 'country of origin' principle to force them to do something against their wishes you'll allow for the risk that someone will legally be able to force UK submit to something the people in the UK do not want.

The 'country of origin' principle is a race to the regulatory bottom. The anarchist and liberal utopia.