Directive on services in the internal market

The Directive on services in the internal market (commonly referred to as the Bolkestein Directive) is an initiative of the European Commission aimed at creating a single market for services within the European Union. With the proposed legislation, the Commission wants to do away with the service industry regulations of individual EU member countries. It argues that such regulations pose a barrier to service providers moving from one country to another.

The Directive was drafted under the leadership of the former European Commissioner for the Internal Market Frits Bolkestein, and hence his name has come to be associated with it.

The Bolkestein Directive proposes several important changes in the EU services market. The first is what is referred to as "freedom of establishment". This means that if a company or individual is able to provide a service in one EU country, they should be able to provide it in any other country in the union. The second is the the application of the "the country of origin principle". This is an EU rule which means that if it is acceptable to produce a product in one member country, then it is acceptable to sell it in all the member countries. The Commission wants to apply this to services, and a key aspect of this liberalization is that a company active in other states can do so under the laws of the country in which it is registered.

Both proponents and opponents alike agree that the Directive, if enacted, could have a far-reaching impact in the services sector across the EU, which represents 70% of EU economic activity.

Criticisms

The Bolkestein Directive has provoked intense debate and mass protests various EU countries, including France, Belgium, Sweden and Denmark. On 21 March 2005 nearly one hundred thousand marched in Brussels to protest the Directive. The crowd was primarily working people and trade unionists from Belgium, France, Germany, Italy, and the Netherlands. ¹

Critics argue that the Directive will many of the member state regulations governing industry and the environment, and lead to competition between workers in different parts of Europe, resulting in a downward spiral in income levels. They charge that the Directive is

a sign that US-style big business economics are running rampant over the EU, and they warn that the directive will lead inevitably to "social dumping" — companies and jobs relocating to the low-cost economies of eastern Europe.²

The process of "accelerated liberalization" will shift the burden of proof from the liberalisers to regulators, they argue. Assuming every piece of regulation to be burdensome by default, the Directive requires member states to justify all existing legislation on the grounds that it is non-discriminatory, necessary and proportional.³

Writing in the Guardian of 20 January, David Rowland argued that the Directive posed a threat to the British health care system:

The directive is controversial because it applies the same rules to healthcare and social services as it does to estate agents, fairground providers, advertising companies and private security firms. The commission no longer sees the services provided by doctors to patients as a special public good to be enjoyed by all citizens, but as an "economic activity", a commodity to be traded across the EU much like any other.

He also pointed out the implications for the building trade and environmental protection:

The trade union movement is worried that construction companies will no longer have to abide by UK health and safety laws on building sites, and environmental campaigners fear that local planning rules, which govern where supermarkets can open, will be judged to be an illegal barrier to market entry. Attempts to stem the growth in the number of bars and nightclubs in city centres will also be thwarted by a number of clauses.⁴

Another critic of the Directive, Graham Copp, commented in Red Pepper:

any company in any services industry (be it health, building, advertising or whatever) that was set up in one of the EU’s less regulated economies -– perhaps in one of the new eastern European member states -– could also set up in the UK; and the laws that would govern wages, standards, contracts, etc, for that business in Britain would be those of the eastern European country, for example, not the UK.⁵

The European Trade Union Council argued that the Directive

could speed up deregulation, seriously erode workers’ rights and protection, and damage the supply of essential services to European citizens.³

Derek Simpson, general secretary of Amicus, has said:

UK health and safety standards are hard won, and this directive threatens to dilute those high standards and compromise British workers and public safety without any redress to UK law or regulatory bodies.³

Future

On 22 March, EU leaders, led by France, agreed on a "far reaching" revision the Bolkestein Directive to preserve the European social model. French President Jacques Chirac told an EU summit in Brussels that the changes planned by the Directive were "unacceptable". ⁶. However, modifications to the Directive will be introduced within the normal course of the legislative process, at a later stage. The directive will not disappear from the pipeline because the leaders agreed on the need to open up the EU services sector. "If France wishes to eliminate the risk of social dumping, this will be addressed in the framework of the legislative procedure and of co-decision, which has been initiated," declared Jean-Claude Juncker of Luxembourg. ⁷

The European Parliament is slated to consider the Bolkestein Directive in June.

References

1. "Huge protest against Bolkestein Directive", SpectreZine, (21 March 2005) (retrieved 27 March 2005)

2. "Bolkestein blasts French protest against his services directive", EUbusiness, (20 March 2005) (retrieved 27 March 2005)

3. "Briefing: Commission Framework Directive on Services", Centre for a Social Europe, (November 2004) (retrieved 27 March 2005)

4. "In the health trade", The Guardian, (january 20, 2005) (retrieved 27 March 2005)

5. "The Bluffer’s Guide to the Bolkestein directive on services", Red Pepper, (April 2005) (retrieved 27 March 2005)

6. "EU agrees to reform services plan", BBC, (23 March 2005) (retrieved 27 March 2005)

7. "'Bolkestein directive' to stay, but will be watered down", EurActiv, (November 21 2005) (retrieved 27 March 2005)