Select Committee on European Union Thirty-Eighth Report

FOREWORD—What this Report is about


In 2004, the European Commission published a draft Services Directive aimed at creating a single market in services industries. We reported on the proposal in 2005, when we concluded that the Directive was essential to the removal of unnecessary and unjustified obstacles to trade and to flexible markets thereby making the EU more competitive in a global economy.

The original draft Directive provoked vocal opposition in a number of Member States. In some countries with higher per capita incomes, concerns about the impact of liberalising services were encapsulated in the phrase "a race to the bottom", implying concerns that in some important senses, liberalisation would lead to a lowering of standards. This opposition struck a chord in the European Parliament, where the text of the Directive was extensively revised, and the Commission's revised draft Directive appears to accept the bulk of these changes.

This follow-up report compares the Commission's revised draft Services Directive to the original Directive in the light of the findings of our previous report. The Committee heard evidence from a number of key stakeholders, who also contributed to our original inquiry, on how they viewed the revised Directive.

Our report focuses largely on those parts of the revised Directive that deal with the provision of services on a "temporary basis." We are pleased that the Directive remains horizontal in nature, covering a wide range of service sectors although there remain too many derogations and exclusions from the scope of the Directive.

The basis on which services may be provided temporarily or occasionally without establishment in another Member State has changed from a Country of Origin Principle, in the original draft, to a Country of Destination Principle, in the revised draft. We regret this change which is a backward step, but understand the reasons behind it.

The new basis of the freedom to provide services is accompanied by a framework that aims to set limits to host country regulatory requirements. There is a risk that this may still provide barriers to small and medium size firms wanting to enter new markets across the EU for the first time.

Much emphasis is placed upon the provision of single points of contact in each Member State to help ease the way for businesses entering new markets. Much depends upon the effectiveness of such a service in all 25 Member States. Finally, as in all single market regulation, implementation lies at the heart of success. The Commission must be supported in its efforts to ensure a robust implementation of the directive, leading to a vigorous and competitive market in services across the EU.

Overall, we believe that the revised draft Directive should be supported. We regret some of the changes but we also recognise that many of them have helped to meet real concerns about issues wider than the single market and helped to achieve what is a workable compromise for all parties.

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