Completing the Internal Market in Services |
CHAPTER 1: Introduction
1. The four fundamental freedoms on which the
European Community has been based since its beginnings just under
fifty years ago are the free movement of capital, goods, persons
and services. Therefore, in principle businesses and self-employed
individuals have had since then the freedom to offer their services
in any Member State of the European Union.
2. As a result, one might expect flourishing
European Union cross border trade in services. Yet this is not
the case. Whilst services account for around 54% of European Union
Gross Value Added, in 2001 cross border trade in services amounted
to only 20% of total trade in the Internal Market.
There is a large potential for a functioning Internal Market in
services which would contribute to driving forward the renewed
Lisbon Agenda goals
of greater economic growth and more jobs in the European Union.
3. 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
4. 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."
5. Our Report concentrates on the second objective,
namely the free movement of services between Member States. This
subject has raised the most controversy. In order to eliminate
obstacles to the free movement of services the draft Directive
- The application of the Country
of Origin Principle;
- The rights of recipients to use services from
businesses established in other Member States; and
- In the case of posting of workers, an allocation
of tasks between the Member State of origin and the Member State
6. In order to establish mutual trust between
Member States so that obstacles to trade can be overcome, the
draft Directive provides for harmonisation of legislation to guarantee
protection in certain areas such as consumer protection, stronger
mutual assistance between national authorities, measures to promote
the quality of services and encouragement of codes of business
conduct at Community level.
7. The Commission's Proposal has been criticised.
Opponents argue, for example, that if the new EU Member States
can compete in the market for services on an equal basis without
applying the often higher social rights as well as health and
safety and environmental standards of some of the EU 15, the lowest
level of standards in the European Union will become the norm.
Other opponents of the draft Directive argue that its scope is
too wide and that sector specific legislation would be more suitable.
Others fear that consumer protection rights will be weakened.
8. We analyse these concerns in this report and
conclude that, in the main, they are unfounded. The thrust of
the draft Directive should be supported. The Services Directive
is essential to remove unnecessary and unjustified obstacles to
trade thereby making the European Union more competitive in a
2 Commission Extended Impact Assessment of Proposal
for a Directive on Services in the Internal Market, SEC(2004)21. Back
At the March 2000 Lisbon European Council, Member States agreed
a ten year goal and accompanying strategy to modernise the EU
economy and social model by 2010. This became known as the "Lisbon
Agenda". In 2005, after it had become clear that the original
Lisbon goals would not be achieved by 2010, the programme was
refocused on greater economic growth and more jobs. Back
Proposal for a Directive of the European Parliament and of the
Council on Services in the Internal Market SEC(2004)21 Back