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The Bluffer’s Guide to… the Bolkestein directive on services

Preying on your apathy and sunny personalities, free-market lunatics embedded in Brussels are trying to sneak through reforms of the services sector that would effectively steamroller national regulatory systems out of existence. By Graham Copp

April 1, 2005
4 min read

What’s all this about the Bolkestein directive on services? Why the big hoo-ha about a piece of Euro-legislation?

The directive on services, as boring as it may sound, could have a profound impact on public services and on working conditions across the EU. The European TUC has said it ‘could speed up deregulation, seriously erode workers’ rights and protection, and damage the supply of essential services to European citizens’. Derek Simpson, general secretary of Amicus, 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.’

Frits Bolkestein was the Dutch free-marketeer, who, as Europe’s internal market commissioner, launched the directive. He’s off the scene since the appointment of a new European Commission late last year, but his replacement, Charlie McCreevy, is just as much of a neo-liberal. One Irish Labour MEP said his appointment as the republic’s commissioner was ‘a kick in the arse for the working class’.

Ouch. Okay, so the directive’s important. But what does it do exactly?

Well, it’s supposed to ensure a single market in services. The commission wants to sweep away in one go systems of national and industry regulation. It argues that different regulations are a barrier for service providers moving from one country to another. To make that easier it wants to implement several changes.

So under the directive service providers can move around. What’s the problem with that?

The directive sets up what it calls ‘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 easily in any other country in the union. So, after filling in one form, it should be possible for a dentist, vet, or any individual or company that provides a service, to set up anywhere in the EU. The danger here is that there is no uniformity of standards in Europe, so standards in public services could decline. Then there’s the country of origin principle…

The country of origin principle?

Yeah. This is an EU rule that means if a product is OK to produce in one member country, it’s OK to sell anywhere around the EU. The European Commission wants to apply this idea to services.

That would mean that if a company were established in one country in the union it could provide a service in a second EU country according to the laws of the first country. So 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.

You’re kidding me. Someone’s got to see sense, haven’t they?

Well, there’s a change in the air, but it’s more to do with political machinations than seeing sense. The directive is very unpopular in France, where the left and even parts of the right see it as a danger to their social welfare. A big part of France’s left also wants to campaign for a ‘no’ vote in the EU constitution referendum. The commission is, of course, desperate to ensure a ‘yes’ vote. So, all of a sudden, it is bending over backwards to say it’ll change the directive. McCreevy said: ‘As drafted, it simply was not going to fly.’

So everything’s OK, then?

Not quite. First off, the commission can’t amend the directive at the moment, and the right in the European Parliament, the largest group, says it wants the directive to go through un-amended. The commission could withdraw the directive, but has so far refused to do so. And as the French referendum will be on 29 May and the directive won’t be considered in the European Parliament until June, the original incentive to back down won’t exist by then.

Some of the most important governments, in particular Germany, have said that they would be happy with exceptions from the country of origin principle for a few areas such as health. But that would still leave freedom of establishment, and the country of origin principle would probably still apply to most industries.Graham Copp is head of research at the think-tank the Centre for a Social Europe.

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