Published:


Christopher Howarth is a senior Political Analyst at the think tank 
Open Europe. Prior to Open Europe he worked as a Conservative Foreign Affairs Adviser and senior researcher to a Shadow Europe Minister. Follow Open Europe on Twitter.

Screen shot 2013-05-08 at 20.11.34We
joined what became the EU for trade. If the EU stopped being beneficial for UK
trade, the reasons to remain inside would evaporate. The EU involves itself in
many things where its added value is marginal or often negative. However, the
one area where the EU can be beneficial is in economic liberalisation and job
creation. Given the tendency of the EU to agglomerate power, its limited
success in forcing economic liberalisation onto the EU’s services industries,
an area fragmented by nationally imposed barriers to entry, is a startling sign
of its current priorities.

The
Coalition is right to prioritise economic reform as the EU’s most urgent task.
The UK’s first priority in this regard should push for a new round of services
liberalisation. Our research published today demonstrates that if the EU
fully implemented the original Services Directive by pursuing a new “country of
origin” principle, it would produce a permanent increase to EU wide GDP of up to
2.3% of GDP.  That would give the EU economy a welcome boost and show that
the EU is focused on the priorities that matter.


What
would services liberalisation mean? Firstly the mutual recognition of services
across EU borders, if a UK service is good enough for a Briton it should be
good enough for a Frenchman. It is also ridiculous that the EU seeks to
harmonise the minutiae of everyday life when they have done nothing about the
800 regulated professions across the EU, each with different standards in each
state – of which 25% are only regulated in one member state. At one end of the
spectrum, we have the UK’s highly competitive financial services and legal
sectors denied full access to potentially lucrative EU markets. But this is a
problem across the board. There are examples of states that would deny a UK
national the right to be a real estate agent (Cyprus and others), a chimney
sweep in (Austria) a ski instructor (Italy and France) as well as being a
photographer, barman, corset maker or chambermaid.
The
gains from liberalising this sector are obvious, but what if states that are
traditionally more interested in political centralisation than economic
liberalisation block a new attempt? This is not an idle threat as last time it
was attempted opposition from France and MEPs, among others, watered it down
out of all recognition.

So
here is the idea. The UK should push for further liberalisation of the EU’s
fragmented services industries for all EU states – but if this fails the UK
should, working with others, sidestep the opposition and go ahead with a
smaller group. In EU speak, this is called
“enhanced co-operation”. There are precedents; the EU patent court went ahead
with only 25 out of 27 member states, due to opposition from Spain and Italy. On
the same principle, though not beneficially, eleven states have agreed to forge
ahead with a Financial Transaction Tax when agreement at the level of 27 was
not possible.

So
there are precedents and obvious economic benefits. This is also a rare chance
for the UK to lead on a subject of benefit for all EU states. The UK would be
in the unfamiliar position of arguing for “more Europe”, and protectionist
centralisers would be on the back foot, an appealing turning of the tables that
could add authority for the UK in other areas. All it needs is political will
among those states that agree. The more the merrier, but at a minimum the UK would
need to assemble eight other like-minded states. This is quite possible.
Already senior figures in the Dutch and Swedish Governments have voiced their
support, and a previous UK “pro-growth” initiative in February 2012 was
supported by 12 member states.

If
this succeeded, the EU could demonstrate a tangible future economic benefit to
states such as the UK that are questioning the EU’s merits.

So
what if the EU, or a member state, manages to block this proposal or the UK
cannot find the requisite nine states? If this proposal fails, a thoroughly
positive proposal from an EU state often caricatured as only ever wishing to
block things will have failed. But its significance would be wider than that.
For the UK, trade is the reason we are in the EU. We do a large, (if declining)
proportion of our trade with the EU. Of that. the more liberalised goods trade
takes up the largest proportion.

However,
the UK’s best future trading opportunities are likely to be outside the EU in
the fast- growing states of the newly emerging economies. Although goods exports
are important, the UK’s real trading strength is as a world leader in exporting
services. And it is in this sector that the EU is least adapted to UK needs.
For the EU to increase its relevance to our future, it must do more to open
itself to the UK’s world class services. It should embrace services
liberalisation as a positive initiative on its own terms and as a way of
proving to the UK and others it is still relevant to the future.  If not
then the trade case for EU membership is made that bit weaker. 

Comments are closed.