Beneficial changes in the EU single market

The draft directive laying down rules on notification for authorizations in the services sector was adopted by the Council of the EU in May 2017, among others, thanks to Poland's efforts.

It will mean that Polish companies temporarily operating in other EU Member States will have greater certainty that the governments of those countries will not adopt discriminatory regulations. Issues concerning the single market are nowadays frequently marginalized in the European Union in light of problems relating, among others, to foreign policy. But we should keep in mind that without the single market, developed since 1968, the European Union would not exist. That is why this segment of the European Union’s policy should be treated with the utmost care. All the more so since it is still full of imperfections resulting both from the tardiness of the Brussels officials, as well as the diverging interests of the individual Member States.

The famous four freedoms underpinning the single market of the European Union – the free movement of persons, goods, services and capital – are in reality quite limited. For example, the implementation of these freedoms was greatly advanced by the elimination of a significant part of the so-called non-tariff barriers in the 1980s and 1990s. These included, among others, different requirements concerning the quality of a given product in the individual Member States. However, EU citizens still do not have full freedom to purchase books, music or videos in an online store operated in another Member State, among others, due to geo-blocking and doubt as to the applicable consumer protection laws.

Problems with the free flow of services

The free flow of services is the least free of the four freedoms, and as such it needs improvements the most. This is important because the services sector accounts for 70 per cent of the value of the economy in the European Union as a whole. As the European Commission estimated in 2012, the ambitious development of the single market for services, resulting in the elimination of almost all restrictions, would provide growth of 2.6 per cent for the European economy, which would have a significant positive impact on the well-being of citizens thanks to new jobs and higher earnings.

The introduction of essential measures to facilitate the free movement of services adopted by the Council of the European Union in May is a step forward towards that prosperity. This was also achieved, among others, thanks to Poland, and especially Deputy Prime Minister Mateusz Morawiecki, but also thanks to Commissioner Elżbieta Bieńkowska who, despite the opposition of Germany and France, and after turbulent attempts to convince the President of the European Commission Jean-Claude Juncker, earlier prepared the service package presented in January 2017, which is also beneficial to the new member states.

What lies behind the changes that the Polish delegation successfully supported at the meeting of the Council of the EU? It consists in the adoption of a draft directive on the improvement of the notification procedures in the services sector, which is included in the service package. If the directive is ultimately adopted during votes in the Council and the European Parliament, enterprises providing cross-border services within the EU, e.g. Polish companies temporarily operating in Germany or Portugal, will have more certainty that the governments of these countries will not adopt regulations discriminating the provision of services by companies from other EU Member States. The draft formally eliminates the shortcomings of the comprehensive Services Directive of 2006.

Response to discrimination

“The Services Directive was supposed to eliminate barriers in the establishment of the place of business, but also in the temporary cross-border provision of services,” explains the Council of the EU. However, the discrimination of entrepreneurs from other Member States of the European Union continued to take place: “The Commission has received an increasing number of notifications from Member States regarding newly introduced requirements under Directive 2006/123/EC. However, not all of those national requirements are non-discriminatory with regard to nationality or residence, justified and proportionate, thus resulting in a significant number of structural dialogues launched by the Commission and the Member States. This shows that the existing notification procedure is not sufficient to avoid discrimination on the grounds of nationality or residence,” reads the justification to the draft directive on notifications adopted in May.

For example, in 2015 the Polish Chamber of Commerce informed that “there is an intensification of the process of discrimination and harassment of Polish employment agencies and service companies posting workers to France.” This was because a belief became widespread in French society that employees of service companies from other EU countries, e.g. builders from Poland, are taking away jobs from the local population and, according to the statement of Prime Minister Manuel Valls from 2015, “are destroying social cohesion”.

Due to this hostile public sentiment, in August 2015 a new law entered into force, known as “La Loi Macron” (from the name of Emmanuel Macron, then Minister of Economy, and the current President of France). Its objective was to promote the employment of the French and to eliminate workers from other EU Member States through the imposition of a number of burdensome requirements on companies from other EU countries that provided services in France. One such requirement involved reporting – under a penalty of EUR2,000 – posted employees working for a period longer than seven days, along with a confirmation of payment of social security contributions. What’s more, any errors in the reporting of a single employee could result in a penalty of up to EUR500,000.

In order to prevent such irrational discrimination, which contradicts the idea of the single EU market by solely favoring native workers and their services, the draft directive adopted in May not only requires the Member States to notify the European Union of any changes in the national regulations relating to authorizations for the provision of services, but also to explain whether such changes will indeed serve the public interest (exceeding beyond the welfare of the native employees). As indicated in the draft, such notifications will have to, “clarify the public interest objective pursued, set out how the notified authorization scheme or requirement is necessary and justified to meet this objective and explain how it is proportionate in doing so.”

The draft directive contains provisions that constitute a blockade against excessive restrictions hampering economic freedom, limiting the free flow of services and workers in the single market. One example of such measures is the following provision: “The notification [that the Member States will have to submit] should provide an explanation as to why the authorization scheme or requirement is suitable for securing the attainment of the objective pursued; does not go beyond what is necessary to attain its objective and why it is not possible to replace the authorization scheme or requirements with other, less restrictive measures which attain the same result.”

Change of trends

The draft directive puts emphasis on ensuring that the Member States are not able to use false excuses, i.e. the existence of an emergency situation of some sort in order to limit the freedoms of the single market. According to the draft “Member States should not be precluded from acting in a very short space of time for urgent reasons occasioned by serious and unforeseeable circumstances, relating to the protection of public policy, public security, public health or the protection of the environment. [However,] this derogation from the notification procedure due to urgent reasons shall not be used to circumvent the application of the notification procedure established under this Directive.”

In other words, the European Commission will closely observe whether the given state really introduces restrictions on the free movement of services in the name of higher goals, such as the protection of the environment. In light of the above, it seems that minor environmental problems other than genuine disasters cannot serve as a justification in order to limit the single market. This indicates a tendency going against the idea of making the fight against global warming the overarching objective of the EU, even at the expense of economic prosperity. The latter trend was expressed in the European Union’s slogan presented in November 2016: “The cheapest, cleanest and safest energy is the energy we don’t use”.

In addition, the concern regarding the lack of excessive regulations contained in the draft directive on notifications goes against the trends visible in the EU to choose socialist instead of liberal solutions. One could claim that thanks to such wording of the draft, the EU protects the principles of subsidiarity and proportionality at the local level. The key to solving the mystery of the appearance of such a “breath of freedom” is possibly the fact the draft directive was adopted thanks to the efforts of the Poles, whose interest – consistent with the original intention of the single market of the EU – the directive is supposed to realize. The draft was prepared by the Commissioner from Poland, and the document was approved at the meeting of the Council of the EU thanks to the involvement of the representatives of the Polish government.

Difference of interests

As reported by the Polish Press Agency, the Deputy Prime Minister and Minister of Finance and Development Mateusz Morawiecki informed that Council meeting concerned the freedom of the provision of services, both in the area of certificates and diplomas for various professions, as well as in the field of the type-approval of the certification of various products and services. A so-called general approach was adopted, which – as the Deputy Prime Minister stressed – was negotiated during lengthy and arduous talks. “It’s a good solution, because it reduces the barriers of the single market, especially for small and medium-sized enterprises. Big companies have their own legal departments and they will always cope. But for small entrepreneurs it will now be easier to operate in another Member State,” he said.

Meanwhile, the countries that have interests different than Poland and other countries of Central and Southeast Europe are preparing entirely different directives. For example, despite the protests of countries from our region, the European Commission decided to continue work on a draft amendment to the directive on the posting of workers. The project is supposed to implement one of the key slogans of President Jean-Claude Juncker “Equal pay for equal work in the same place”. It mandates that workers who are posted abroad are not only – which would be understandable – paid the minimum wage in the destination country, but that they receive remuneration at the same level as the workers of the local companies in the country to which they are posted.

It is easy to imagine that the entry into force of such a provision – which would have an impact on about 2 million posted workers in the EU – could result in the introduction of detailed requirements in order for the local authorities, national governments and EU authorities to be able to control the implementation of the directive. In addition, on May 31st, the European Commission adopted an analogous project concerning truck drivers performing their service in various EU countries.

We can therefore say that there is a considerable risk that Western countries – and above all Germany and France – will seek to fight the directive prohibiting discrimination in relation to the free flow of services. This problem is no secret in Brussels. Nevertheless, it is ironic that the Member States of Western Europe – which pursued transnational economic liberalization, seeing it as a synonym of European communality – are now ruthlessly standing up against such liberalization.

Single market – the common good of all Europeans

Objections concerning the directive were also raised in February at the French Senate, during a meeting of the Committee for European Affairs. “The directive sets out that the new rules can be introduced due to general public interest, in particular for reasons of public safety, public health or consumer protection. The project excludes purely economic reasons,” lamented senator Didier Marie.

In all fairness, it should be added that he also raised an interesting argument of the possible risk of limitation of sovereignty: “The European Commission’s idea to notify changes [in relation to the services sector] before their adoption, should raise serious concerns. The stage at which the notification of changes should be reported directly opens the way for the European Commission’s intervention in the work of the national legislature, which seems to be difficult to accept,” said the senator.

On the other hand, the Commission does not demand that the national parliaments and governments inform it of all the planned changes – that would indeed be pretty scary – but only those modifications in the regulations that are relevant to the single market for services. The single market is a transnational good beneficial for all the European citizens, in favor of which the Member States voluntarily ceded their competencies to the European Union.

Morawiecki remains optimistic when it comes to the adoption of a directive prohibiting discriminating and selfish activities of the member states on the single EU market for services: “[Entrepreneurs] will be certain that any change in regulations will have to be notified, if this directive is ultimately adopted. This is also a very positive step from the point of view of the economic challenges that we are currently facing. Because today we should be talking more about the strengthening of economic ties in the single market, instead of topics such as the allocation of immigrants,” he told the Polish Press Agency.

Indeed, regardless of the divergent opinions on the admission of immigrants, it’s worth remembering that in European politics we should never lose sight of the most important priority, i.e. caring for the single market of the European Union. Because it is precisely thanks to this market that we have achieved the European peace and prosperity, which is now attracting newcomers from other continents.