Open Europe Blog

The APPG on European Reform, to which Open Europe acts as the secretariat, has published a new report, following the Group’s inquiry into the EU’s single market in services. The APPG held evidence sessions with a wide range of business groups from the City, retail and small business sector to the creative services sector.

The inquiry concluded that there is no ‘single market in services’ in any meaningful sense of the term. This is due in part to the sheer diversity of service sectors in the EU, and because these sectors are regulated by a complex mix of national and EU regulation.

The diversity of services markets in the EU means that the single market in services cannot be ‘completed’ – a term of often used but little understood – by one harmonised set of rules. However, much more can be done to reduce barriers to trade in services across Europe.

The challenges are different depending on the sector. In financial services, the EU’s passporting rules have provided firms with benefits to trade across borders – the primary concern is how new EU regulation could curb these benefits and how eurozone crisis response could spill over to the wider single market.

Other sectors, such as retail, are covered by the EU’s so-called Services Directive (which regulates sectors that account for around 45% of EU GDP). But a mixture of poor implementation of the ban on some trade protectionism, such as economic needs tests, and the Directive’s legal ambiguity mean a large number of barriers remain in place, with firms having to comply with home and host country regulation in order trade across borders, which adds cost and complexity.

The APPG proposes a package of changes and at the top of the list is adopting the ‘country of origin’ principle to enable service providers to trade across EU borders under their home country regulation – if necessary, through enhanced cooperation among a group of like-minded EU member states. This is an idea we’ve been keen on for a while and set out in detail in a report earlier this year.

Others proposals include:

  • reducing the number of regulated professions;
  • installing a liberalising EU Commissioner;
  • developing the potential of e-commerce;
  • applying “Better Regulation” principles; 
  • and establishing new mechanisms to block unnecessary or discriminatory regulation and rules that hamper trade with non-EU countries.

The EU has held out for far too long on realising the potential of Europe’s services sector. But with the German elections behind us and everyone in Europe talking about competitiveness, there’s now a huge window of opportunity to make this happen.

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