Deepening Services Market Integration A Critical Assessment

The greatest asset of the European Union is undoubtedly its internal market. However, the internal market is not completed: it suffers from a giant hole with respect to many services. The present contribution addresses the status of services in the internal market and, in particular, the horizontal liberalisation (or, the lack of it) of services outside the two large sectors which greatly deepened market integration (6 modes of transport and 3 financial services markets). Because a horizontal perspective on services in the EU is still little understood, it is briefly summarized what services really are and how their regulatory logic in the internal market can help to classify them. The (strong) economic case for deepening services market integration is built on recent empirical economic analysis as well as simulation. This is followed by a discussion, with flowchart, of the Bolkestein draft directive, against the backdrop of the frustrating lack of, or at best, selective progress on services for decades. A survey of economic impact studies of the draft directive is provided, too, underpinning its importance even when the infamous origin principle is taken out. Some light is subsequently shed on the tumultuous politicisation of the services debate. Emphasis is laid on the socio-economic context (which, it is submitted, sharpened the discussion at times into polarisation) and a series of other factors such as the diversity of the national regulatory frameworks of services and the labour employed, the complexity of the draft directive, the potentially radical nature of the origin principle (especially for those not aware of the case law of the ECJ), the dominant role of the EP and the opportunism of leading national politicians. Finally, directive 2006/123 - meanwhile in force - is explained and briefly assessed. Apart from the conspicuous manifestation of "Angst" in drafting the directive, the (de) merits are set out. The conclusion is that a badly drafted directive with excessive emphasis on exclusions and derogations, and which lacks a driving principle, nevertheless comprises several functional obligations in general (e.g single window, administrative cooperation in dedicated networks, etc.), significant advantages for free establishment (which imply equally significant economic gains) and a firm discipline for (or prohibition of) bad practices with respect to temporary provision of services.