2. Economic Integration as the core of European Integration
3. The Services Directive - an economic legislation and its consequences
3.2 Deciding the Services Directive
3.2.1 The European Commission
3.2.2 The European Parliament
3.2.3 The Council
3.2.4 The hidden power of interest groups
This essay will analyse the question how European Communities’ (EC) legislation on economic integration has shaped policy and decision-making processes as a “motor of political integration”.
Economic legislation, although on the first look restricted to one policy area and one “policy mode”, can influence other areas and policy modes (Wallace, 2005 p. 77 ff.) Mainly focused on the example of the “Services Directive”1 (Directive), the distribu- tion of power between the EC institutions will be analysed. At the same time the limits of economic integration in overcoming other political interests of Member States (MS) or interest groups like Trade Unions will become visible. The Directive is a kind of “model case” of how a legislative act on economic policy can engage other policy fields, like social policy issues, labour market issues etc. At the same time it shows how economic or structural interests shift the political positions of MS as well as of interest groups, with groups which otherwise would form a solid block suddenly pur- suing different goals. Therefore the Directive proves to be a good example of the complex multi-layer decision-making process on EC legislation.
2. Economic Integration as the core of European Integration
Political integration in the European Union (EU) can be defined as the MS voluntarily foregoing their right to independently formulate and execute only national policies and measures to determine common European policies and measures instead, which are determined in a cooperative way of policy and decision making. This definition of EU-integration includes MS’ intergovernmental cooperation, e.g. with the Open Method of Cooperation (OMC) and its not legally binding decisions, as well as the strongest form of EU-integration: the transfer of national sovereignty for certain policy areas to the EC institutions. Based on the transferred sovereignty the EC institutions can pass legislation (“Community Method” or “Regulatory Policy Mode”) which be- comes a supreme part of the MS’ legal order (Wallace, 2005 pp. 79-80).
It is widely acknowledged that economic integration2 “parented” all EU-integration (Bomberg, et al., 2008 pp. 123-124). The then MS of the European Economic Community (EEC) founded the EEC, while empowering its supranational institutions with legislative powers comparable to that of a federal state (Brunn, 2005 p. 119), as a Customs Union with agricultural and economic competences only3. The sovereign competences for all other policy areas stayed with the MS when they signed the Treaties of Rome in 1957.
Successively other policy areas became part of the EU’s agenda but economic inte- gration stayed at the centre, with the “Regulatory Policy Mode” (Wallace, 2005 pp. 80-82) and European legislation mostly targeted at economy:
Table 1 Compendium of the EC’s legislative acts
illustration not visible in this excerpt
Table created by the author; based on (European Union, 2008a)
For some policy fields, e.g. “environment”, “consumer and health protection”, a sepa- ration of economic and non economic issues is, in practice, hardly possible. For ex- ample, the EC-Directives on the ban of tobacco advertisement were based on Art. 95 TEC4, which is the legal basis for legislation to promote the freedom trade and of competition in the Single Market.
However, one of the Directives’ main purpose was the protection of public health, for which in itself the EC has no competence at all (Art. 152 (4) TEC).
Seemingly purely economic issues often “pushed” other policy areas and issues on the EU agenda. Germany, France and other MS, when arguing for a “Social Dimen- sion“ of EU-policy as a counterweight to the predominance of economic integration during the negotiations of the Maastricht Treaty, (Siskos, 2004 p. 1) started the strive for a unified European Social Policy (ESP) which was for a long time rejected by the United Kingdom (UK). Today the ESP is well established, but not as a legislative competence of the EC but as an intergovernmental cooperation of MS on EU-level under the OMC. In fact, the OMC as a policy process was shaped after the European Employment Strategy’s (EES) set of methods, which is a part of the ESP. Thereby a new issue on the agenda, pushed by a functionalist “spill over effect” of the Single Market’s evolution, created a new “Policy Mode”.
3. The Services Directive - an economic legislation and its conse- quences
Until 2003 the free movement of goods and capital was rather well developed in the Single Market, while the freedom of establishment and the free movement of services lagged behind, hindered by many different national systems and regulations (Buchinger, et al., 2007 p. 29). At the same time services provided the most part of GDP in the EU5 with an even higher potential of future additional economic growth by cross-border trade in services (Ardy, et al., 2007). In its “Report on the State of the Internal Market for Services” the European Commission (Commission) identified fun- damental legal obstacles to service providers’ freedom of establishment (Art. 43 TEC) by national “requirements relating to authorization or professional qualifications, restrictions on the use of a certain legal form for the service provider or on the part- nerships between different professions “(European Commission, 2002). For the free trade in services (Art. 49 TEC), the complete “chain” of producing services suffered from a broad variety of extensive national legal obstacles.
This applied for the “use of input”, especially of employees, as well as for the promo- tion, the distribution, the selling and the “after-sale” phase of services The Commission therefore wanted to harmonize national regulations on non financial services in order to open up national markets for free cross-border competition6. The responsible Commissioner for economics at that time, Frits Bolkestein, drafted a general Directive on Services with a unified legal framework for all kinds of non- financial services and brought it before the European Parliament (EP) and the Coun- cil of Ministers (Council) in 2004.
The Directive focused on general principles of new establishments as well as of the delivery of services which were to be implemented by the MS into their national laws (Buchinger, et al., 2007 pp. 29-31). The “Bolkestein Directive”, although directed on what should have been “routine” harmonization in the course of economic integration in the Single Market, touched many other policy areas, enforcing structural and politi- cal integration in sectors which so far had not heard of their being subject to EC legis- lation. In fact, to speak in terms of “functionalism”, this one single legislative act might have caused more “spill over effects” of economic integration to political integration than any other single act of secondary EC legislation.
1 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market
2 „ a state of affairs or a process which involves the amalgamation of separated economies into larger free trading regions” like freed trade areas or customs unions” (El-Agraa, 2007 p. 1)
3 In principle, the EC can only act within the „limited empowerment“ of the competences trans- ferred to it by the treaties
4 Treaty of the European Community (European Union, 2002)
5 “Services accounted for 71.7 % of gross value added in the EU-27 in 2006, and a similar (and rising) proportion of overall employment. The relative importance of services in total value added ranged from almost 56 % of the economy in Romania (2005) to upwards of 75 % in France, Cyprus and the United Kingdom, rising to a high of 85 % in Luxembourg” (EUROSTAT, 2008 p. 299)
6 “The objective of the Services Directive is to eliminate obstacles to trade in services, thus allow- ing the development of cross-border operations. (…) It is hoped that the directive will help real- ize potential economic growth and job creation associated with the services sector in Europe. For this reason, the directive is seen as a central element of the renewed Lisbon strategy for growth and jobs. Moreover, by providing for administrative simplification, it also supports the better regulation agenda” (EUROSTAT, 2008 p. 299)
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