As EU finance ministers meet today in Brussels to discuss the economic agenda for 2006, a very old argument about the role of the EU has once again been rumbling through both the continent’s cobbled streets and through the shiny glass and steel corridors of its Parliament. Over the weekend protestors and trade unionists marched in Strasbourg and Berlin against what they see as a grave threat to the social market model which remains so totemic across much of continental Europe. The current threat comes in the form of the EU Services Directive, a piece of EU legislation which has been grinding through interminable redrafting for the past five years. Its original aim was to provide greater freedom to service providers to sell their services with the same freedom across the EU. According to last weekend’s protestors, this would lead to ‘social dumping’ as service jobs in western European member states were undermined by cheap competition from the dreaded East. Sadly, it looks likely that these arguments may have won the day, with the current EU President, Wolfgang Schussel, expressing sympathy with the social dumping argument.
Last week the European Parliament looked set to allow an amendment to the Services Directive that would have gone some way to pander to the concerns of the protectionists. In a much vaunted compromise between the Christian Democrats and the Socialists, the principle that any company could operate in any member state according to the laws laid down in its home state looked set to be scrapped. Instead, companies would have been bound by whatever rules on social policy, health, safety and the environment the host state chose to set down. While concern to maintain basic standards of health, safety and environmental protection is understandable, the idea that member states’ governments should be able to stifle competition through expensive and restrictive social policies would not meet the single market test.
Some of you may feel a little baffled at this point. Surely the whole point of the EU is that it encourages competition across national borders? And surely this should be extended to all members? Isn’t one of the four freedoms expressed in the original Treaty of Rome that there should be free movement for the sale of services? Certainly this is what today’s Ecofin meeting appears to advocate. So what is going on? Granted, we do today live in an age of European revisionism (only last week Europe’s intelligentsia gathered in Salzburg to re-imagine European identity), but surely no-one is suggesting that we tear up the very basis upon which the European project was founded almost fifty years ago and move back to a Europe where each country’s economy stops at its geographical border and where economic aspiration is limited by blind fear of our neighbours? I, for one, certainly hope not.
Thankfully, this proposal has now been drawn into doubt because German MEPs have withdrawn their support for the compromise. Sadly, this may mean no result at all, rather than the more open, economically liberal solution that the European service sector desperately needs. This would be very frustrating and a condemnation of the lack of political vision amongst Europe’s political leaders. The EU has been waiting fifty years for this reform and, unlike ‘reforms’ such as the European Constitution, this is one that will actually be of material benefit to the people of Europe.
If the Services Directive does fail, the question we should really be asking is why has the European bureaucracy allowed a policy which was endorsed back in 2000 as part of the Lisbon Agenda, to be batted around for so long that it is in danger of losing all resemblance to the original. This has been a result of the multiple layers of EU paper shuffling that all policies have to go through before they are approved. If the EU could cut out some of these layers, perhaps policies that would clearly benefit EU citizens would have a better chance of being enacted.
Comments (2)
The EU has never been about free competition. The single market has been used to drive political integration, but in so far as it has been effected it is an internal market. The barriers still remain to outsiders. The CAP, for example, exists to enable some, notably France, to milk others, notably Britain, while keeping the rest of the world at bay (and more recently, the EU's new members).
If the EU believed in the virtues of free trade there would be no external or internal barriers to trade. But if its members believed in free trade they would not be members, because the trading and regulatory freedom allowed by being outside the EU far outweigh any 'advantages' of conforming to the rules of the sclerotic statist EU club.
So there is a contradiction between the integrationist impulse of the single market represented by the Services Directive and resistance to it by member states? Well, perhaps it's a sign that the EU as a free and streamlined superstate does not really have the consent of the people, and never did, since the freedom to live and work anywhere in the EU was anyway supposed to be implicit in it from the outset: Old Europe's enthusiasm has really been for the subsidies and protectionism all along.
Posted by Tim | February 14, 2006 8:52 PM
Posted on February 14, 2006 20:52
You'd think the EU would be about open competition across Europe, but then since the expansion to 25 Member States the labour laws seem to have been ridiculously tightened to supposedly prevent the EU-15 states from being swamped by migrant workers from the new EU-10 countries.
The three states (UK, Ireland, Sweden) that haven't put such strong worker immigration controls in place have been the ones to have had the greatest economic success over the past couple of years, so if nothing else it proves that it hasn't harmed the economy.
So why should we really expect any different from the likes of Germany and Austria? They continually push the EU to recognise their interests and allow them derogations from the supposed common market of Europe, so this latest attempt at restricting the economic liberalism within the EU is hardly surprising.
In the end though, it is their own short-sightedness that will lead to their economies remaining stagnant rather than being impelled by competition to improve and compete ruthlessly against the threats.
In the face of globalisation, the EU seems to be doing as much to control its internal markets as to address the prospect of competing with other industrialising nations and allowing competition to set the market price.
Is this really an EU that we want to belong to? As you note above, doesn't it defeat the point of having a common market?
Posted by Dave Harris | February 14, 2006 1:05 PM
Posted on February 14, 2006 13:05