Report Influence

  • The first research to set out the economic benefits of a vanguard of EU countries properly opening up their services markets to cross-border trade.
  • With the idea of ‘enhanced cooperation’ Open Europe was the first to put forward a bold proposal for ‘more Europe’ in an area that could boost jobs and growth, while still offering a flexible model of integration.
  • All UK mainstream parties back further strengthening the EU’s single market in services.

8 May 2013

€295 bn

Value of full services liberalisation to EU GDP

If Open Europe proposals for full liberalisation of the EU services market were adopted, EU GDP could be boosted by €295 bn. Partial services liberation has already boosted the EU economy by €101 bn - but it is clear that this an area where the EU should concentrate its efforts to introduce much-needed growth into the EU's economy.Source: Open Europe

Why the EU can’t afford to resist further services liberalisation

Trade liberalisation within the EU is far more developed for goods than for services; services are a large proportion of the EU economy, but they remain a small proportion of EU trade. Services account for over 70% of Europe’s output but only account for around a fifth of the EU’s internal trade.

In the EU, services are regulated by a complex mix of national and EU regulation. Nevertheless, a large variety of services sectors are covered by the EU’s Services Directive, which together represent over 40% of EU GDP, such as retail and wholesale trade, construction and crafts, professional services, tourism, leisure sectors, etc.

The Services Directive was subject to fierce political negotiation and the European Commission’s proposal was heavily amended in the legislative process. As a result, the liberalising “country of origin principle” contained in the original proposal tabled by the European Commission, was removed. The result is that, although what is left of the original Directive obliges member states to liberalise their services sectors and has provided some economic benefits, there remains a great deal of ambiguity with regard to what barriers member states can keep in place. This ambiguity has often resulted in poor implementation across the EU, and requires constant policing by the European Commission and the European Court of Justice.

70%

The EU cannot afford to resist liberalisation of the single market in services

Trade liberalisation within the EU is far more developed for goods than for services. This means that, while services account for over 70% of the EU's output, they only make up 20% of the EU's internal trade. Open Europe's proposal to fully liberalise the EU's service sector will make up for this gap, boosting the EU economy by billions.
Source: Open Europe

Why is this the right time for ‘enhanced cooperation’?

For various political reasons, the implementation of existing rules and an EU-wide agreement to further services liberalisation has proved difficult to achieve. However, under ‘enhanced cooperation’, a smaller group of EU countries should now press ahead with greater integration in services – this mechanism has been used three times before, including for the proposed Financial Transaction Tax (FTT). This was an idea first floated by Mark Rutte, the Dutch Prime Minister, in 2011.

In a “pro-growth” letter in February 2012, twelve member states – the UK, the Netherlands, Italy, Estonia, Latvia, Finland, Ireland, Czech Republic, Slovakia, Spain, Sweden and Poland – all committed themselves to “open up services markets”.

In addition, there are currently around 800 regulated professions across the EU – 25% of which are regulated in only one member state – that create barriers to professionals seeking to provide services outside their own country. Enhanced cooperation could therefore also be used by the participating member states to make a commitment to collectively reduce the number of regulated professions in their economies by at least 15%.

What are the economic benefits of opening the EU’s services markets?

Fully implementing the existing Services Directive across the entire EU and implementing a new “country of origin” principle, a trade-boosting measure that was removed when the Directive was originally negotiated, would boost EU cross-border trade and produce a permanent increase to EU-wide GDP of up to 2.3% or €294bn, in addition to the €101bn already gained under the Services Directive (0.8% of EU GDP).

We estimate that if this group of countries were to further open up their services markets under enhanced cooperation, it would still produce a lasting boost to EU GDP of up to 1.17% or €147.8bn in addition to the economic gains already realised under the Directive. If other countries, such as Germany, were persuaded to join, the economic benefits would be increased further. Ultimately, this measure should serve as a springboard to achieve services liberalisation for the EU as a whole.

What are the political benefits?

  •  It would be a positive, constructive, and pro-European means by which to secure continued engagement in the EU from non-euro countries, particularly the UK.
  • It would provide a new legally enforceable framework to improve competitiveness and growth in the Southern euro member states and therefore boost the economic prospects of the eurozone, but without costing an extra cent of Northern countries’ taxpayers’ money.
  • It would improve EU-wide growth, competitiveness and employment at a time when Europe is at risk of global economic decline.

 

Dr Marshall of the British Chambers of Commerce teamed up with Open Europe to produce this video endorsement.

The single market in services, which would benefit Britain, has barely started – in contrast to the single market in goods, which has benefited Germany for years now. Open Europe has made a strong and robust case for action in Brussels and national capitals across Europe.

Dr Adam Marshall, Director of Policy and External Affairs, British Chambers of Commerce.

 

I am attracted to Open Europe’s thoughts on using enhanced cooperation to allow a smaller group of Member States to move forward toward trade liberalisation in areas like services among themselves if not all EU member states can agree.

George Osborne, Chancellor of the Exchequer, 15 January 2014.

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