A Single Market for Services
are crucial to the European Internal Market. They are everywhere, accounting for
between 60 and 70% of economic activity in the European Union of 25 Member
States, and a similar (and rising) proportion of overall employment. This
underlines the economic importance of services in the European Union.
central principles governing the internal market for services are set out in
the EC Treaty. This guarantees to EU companies the freedom to establish
themselves in other Member States, and the freedom to provide services on the
territory of another EU Member State other than the one in which they are
established. The principles of freedom of establishment and free movement of
services are two of the so-called "fundamental freedoms" which are central to
the EU internal market.
Overall, the Internal Market has resulted in real benefits. For instance, in
the 10 years since the completion of the first Single Market programme in 1993,
at least 2.5 million extra jobs have been created as a result of the removal of
barriers. The increase in wealth attributable to the Internal Market in those
10 years is nearly € 900 billion; on average about € 6000 per family in the EU.
Competition has increased as companies find new markets abroad. Prices have
converged (in many cased downwards) and the range and quality of products
available to consumers have increased.
The principles of freedom of establishment and free movement of services have
been clarified and developed over the years through the case law of the European
Court of Justice. In addition, important developments and progress in the field
of services have been brought about through specific legislation in fields such
as financial services,
broadcasting and the
recognition of professional qualifications
However, despite progress in some specific service sectors, the overall
Internal Market for services is not yet working as well as it should. Most of
the benefits seen so far from the Internal Market have occurred in goods markets,
and the need to make a serious effort to improve the functioning of the Internal
Market in services has been clear for some time. Most notably, the Lisbon summit
of EU leaders in March 2000 asked for a strategy to remove cross-border barriers
As the reasons why services are not frequently traded between Member States
were complex and not well documented, the Commission spent some time on the
legal and economic analysis of the issues including a consultation with Member
States, other European institutions and stakeholders. This resulted in the
publication of a
Report on the State of the Internal Market for Services in July 2002. This
report set out, in detail, the legal, administrative and practical obstacles to
the free movement of services across borders in the EU. It concluded that there
was still a huge gap between the vision of an integrated EU economy and the
reality as experienced by European citizens and European service providers.
It is clear from the work done by the Commission that these barriers have a
serious negative effect on the cost and quality of the final service to users of
services whether they are other service providers, manufacturers or consumers.
Barriers to trade in services penalise in particular small and medium sized
enterprises (SMEs), which are disproportionately affected by complex
administrative and legal requirements and therefore more likely than larger
firms to turn down cross-border opportunities because of them. Given the
predominance of SMEs in service operations, this has clearly acted as a
considerable hindrance the development of the Internal Market for Services.
Following the report, the reactions of stakeholders to it and further legal
analysis, in January 2004 the Commission made a
proposal for a
Directive on services in the Internal Market. The
Services Directive was finally adopted by the European Parliament and the
Council in December 2006 and will have to be transposed by the Member States by
the end of 2009. This directive is aimed at eliminating obstacles to
trade in services, thus
allowing the development of cross-border operations. It is intended to improve
the competitiveness not just of service enterprises, but also of European
industry as a whole. It will remove discriminatory barriers, cut red tape,
modernise and simplify the legal and administrative framework - also by use of
information technology – and make Member State administrations co-operate much
more systematically. It will also strengthen the rights of users of services.