1. What does the European Commission want the directive to do?

  Remove obstacles to service providers from one EU Member State establishing themselves in another EU Member State, especially regarding authorisation schemes and other potentially restrictive requirements;

  Remove obstacles for cross-border provision of services , introducing a ‘country of origin’ principle whereby service providers would only be governed by the rules and regulations of the country where they are established;Encourage administrative simplification and better information;

 Promote administrative cooperation and supervision.

2. Why is the ETUC is opposed to this draft directive?

In 1988 the Commission declared: “The social dimension of the internal market is a fundamental component of the completion of the internal market project, for it is not only a matter of strengthening economic growth and stepping up the external competitiveness of European undertakings”. [1] Economic and social development must go hand in hand, with the objective of harmonising living and working conditions upwards, with full respect for national industrial relations systems. On this condition, the ETUC has supported the construction of the European internal market. A strong social dimension, with the promotion of social dialogue, social policy and respect for fundamental rights, lies at the heart of the European project. When the social dimension is under pressure, and social progress in danger, European citizens lose interest and withdraw their support for the EU.

The ETUC supports the need for administrative simplification, better information for enterprises and workers when supplying services across borders, and better cooperation and supervision by Member States.
However, it finds the key proposals of the draft directive, especially regarding the removal of obstacles and the establishment of a ‘country of origin’ principle (COP) for cross-border service provision, unacceptable, and questions their economic and legal validity.

3. Is the ETUC opposed to free movement of services?

No, absolutely not. The ETUC is in favour of all the freedoms enshrined in the European Treaties. It recognises the importance of the services sector for the European economy and welcomes steps to boost employment and create a more competitive and dynamic EU economy. But the provisions in the draft directive as it now stands will not achieve this. So the question is not if there will be free movement of services, but how it will be achieved.

4. Does this directive create a risk of social dumping ?

The existing proposals carry a great risk of downward competition, to the detriment of social and environmental standards in the EU. Risk-taking may be justified when there are important potential economic gains, but not in this case, where the economic benefits are very doubtful.
Enterprises will face direct competition on their home turf from service providers adhering to weaker rules on workers’ rights and protection. Inevitably, they will come under pressure to cut costs and lower standards to retain their place in the market.

5. Has the European Commission made a strong economic case for the directive?

No. It has been claimed that the draft directive would increase competition, drive down prices and encourage innovation and productivity, creating more employment. But the assumption that reducing regulation would significantly increase growth and jobs is a one-sided view. Experience in the more competitive European countries shows that consistent high standards can encourage competition through innovation and productivity, rather than by cost-cutting and poor quality provision. Member States have good economic and social grounds for imposing many of the existing conditions on the provision of services.

The Commission argues that the Services Directive is essential to achieving the Lisbon Strategy goal of making Europe the most competitive economy in the world by 2010. However, figures show that Europe already has no problem being competitive in the global services market: it is the biggest provider of services in the world, increasing its share to 25.8% in 2003.

6. What is the country of origin principle (COP)?

It means that when a service provider - say a construction company - from one country accepts work in another state, it would be subject to the rules of its home country, which would be responsible for monitoring and enforcing regulations.
So apparently the host Member State would not have the same opportunity to apply its own rules designed to protect the quality of the service, the health and safety of workers or clients, the environment, or the public interest. This would lead to unfair competition between different countries, because the cheapest service provider would invariably be the one bound by the lowest levels of regulation and standards, engendering a race to the bottom.

7. Why should services of general interest (SGIs) be treated differently?

The draft directive covers a very wide range of activities, from purely commercial services to others like gas and water distribution (network services), education, health care, social, cultural and local services. Known as services of general interest (SGIs) or general economic interest (SGEIs), services in this second category depend on public funding and regulation to ensure equal access and social cohesion. SGIs are different from commercial services where the market alone determines who gets them and at what price.
Articles 16 and 86(2) of the EC Treaty clearly recognise this difference. The Commission states in its White Paper on SGIs that fulfilling a general interest mission takes precedence over the application of the Treaty rules - particularly governing competition - and recognises that the personal nature of many social and health services leads to requirements that are significantly different from the network industries.
The European Parliament’s Internal Market Committee (IMCO) has excluded SGIs and health services from the scope of the draft directive and network services from the country of origin principle, but this is not enough. The distinction between economic and non-economic SGIs is complex (in fact, all services have an economic aspect) and in practice is defined case by case in the European Court of Justice. In the absence of a clear legal framework, SGEIs should also be excluded from the scope. If not, they will be subject to pressure to deregulate.

Indeed, the ETUC does not believe that the essential point is how the service is paid for. SGIs and SGEIs exist for the essential welfare of all members of society, and are particularly important in providing safety nets for the most vulnerable. For this reason, the management of public services and setting appropriate quality standards, including conditions for establishment, is one of the most important roles of government. The directive should not undermine such quality standards. Upholding existing national establishment rules is crucial to maintaining consistent high-quality public services.
The ETUC believes that all SGIs, including SGEIs, should be excluded from the scope of the directive and covered by a specific legal framework to guarantee their quality and resolve conflicts with EU competition law.

The Internal Market Committee went some way to meet trade union concerns, but not far enough.
The ETUC demands that MEPs make further changes, to safeguard workers’ protection and guarantee high-quality services for Europe’s citizens:

 Labour law must be clearly and unambiguously excluded from the scope of the directive, which must recognise workers’ fundamental right to collective bargaining and industrial action;

 Sensitive services including temporary agencies, private security and services of general economic interest must be excluded from the draft and covered by specific EU rules;

 The country of origin principle must be removed, certainly with respect to social provisions, unless subject to minimum harmonisation.


9. What are the key demands of the ETUC?

The ETUC is demanding:

 fair competition and a level playing field for companies;

 fair working conditions and equal treatment for workers.