Select Committee on European Union Sixth Report



    The European Union has long accepted that a single market in manufactured goods is fundamental to the EU, creating a market of 450 million people, bringing greater competition and increased choice for consumers. But trade in services across the EU remains subject to a large number of restrictions, limiting choice for consumers and businesses, holding back growth, output and employment. The Council of Ministers says that this must change if the Lisbon goals of improved growth in output and employment are to be realised.

    The Commission has therefore proposed a Directive which seeks to encourage greater cross-border trade in services by providing a legal framework that will eliminate obstacles to:

    • The freedom for service providers to establish their business in any Member State; and

    • The free movement of services between Member States.

    It seeks to give "both providers and recipients of services the legal certainty they need in order to exercise these two fundamental freedoms enshrined in the Treaty."[1]

    Our Report concentrates on the second objective, namely the free movement of services between Member States. This subject has raised the most controversy, much of which arises from the Country of Origin Principle. Under this, a business which provides services in the Member State in which it is established is qualified to provide services on a temporary basis in any other Member State according to the regulations of its home Member State. The draft Directive proposes a substantial number of exceptions to the application of the Principle and of derogations from the draft Directive which meet many of the concerns that might arise.

    Even so the Commission's proposal has been criticised. Our Report considers these criticisms. In our view, the draft Services Directive does not pose a threat to the health and safety of employees or consumers. It does not pose a threat to environmental standards, nor does it pose a threat to consumer protection. Services of general economic interest should not be excluded from the Directive. Many of the arguments raised against the draft Directive appear to be either based upon misunderstanding or seek to obstruct change and the effective operation of the free movement of services in the EU. The effect of such obstructions will be to hold back the dynamic contribution of a single market in services which would bring with it greater competition and innovation, increased choice and lower prices for consumers and business.

    The draft Directive offers opportunities for small businesses in all 25 Member States of the European Union. The thrust of the draft Directive should be supported. The Services Directive is essential to remove unnecessary and unjustified obstacles to trade and to flexible markets thereby making the European Union more competitive in a global economy.

    1   Proposal for a Directive of the European Parliament and of the Council on Services in the Internal Market SEC (2004) 21 Back

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