COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT - An Internal Market Strategy for Services
Date: 2000-12-29
Institutions: European Commission
Subjects: competitiveness, economic policy, freedom to provide services, single market, tertiary sector

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 29.12.2000
COM(2000) 888 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE
EUROPEAN PARLIAMENT

An Internal Market Strategy for Services

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE
EUROPEAN PARLIAMENT

An Internal Market Strategy for Services

1.

EXECUTIVE SUMMARY

The Lisbon European Council invited the Commission to propose a comprehensive Internal
Market strategy to remove barriers to services. This communication is intended as to initiate a
process of adapting the Internal Market to the fundamental changes in the way in which
services are offered and taken up.

The Information Society has sparked a new dynamic in services, by cutting the cost of
transmitting and acquiring information and accelerating the rate of diffusion of innovation
across national borders. There is thus vastly increased potential for cross-border demand and
supply of services in the Internal Market. Improving the conditions for the free movement of
in the Internal Market and so enhance
services should release the dynamism inherent
competitiveness, growth and employment creation in our economy.

Our objective is to allow services to move across national borders as easy as within a Member
State, this communication sets out a two step approach to achieve this objective. First, within
the next 12 months, the Commission will accelerate a number of initiatives in specific
problem areas, whilst,
rigorously analysing the persistent barriers to free
movement of services across national frontiers. It will encourage the Council and Parliament
to come to agreement early in 2001 on initiatives already scheduled.

in parallel,

Second, in 2002, the Commission will bring forward a further package of initiatives, setting a
precise timetable for Member States to dismantle any specific barriers identified from the
analyses carried out in the previous twelve months. This package will also comprise of non-
legislative supporting measures, and specific or horizontal harmonisation instruments,
together with additional legislative measures to dismantle remaining barriers and prevent the
emergence of new ones, whilst ensuring a high level of protection of public interest objectives
is maintained.

The Commission invites the Parliament and the Council to endorse this two step
strategy. The Commission would also welcome comments from all interested parties.

2

2.

THE NEED FOR A NEW SERVICES STRATEGY IN THE INTERNAL MARKET

The European Council in Lisbon set a bold target for Europe: to become the most competitive
and dynamic knowledge-based economy in the world, capable of sustainable economic
growth with more and better jobs and greater social cohesion. To achieve this, the Union must
enhance the quality and competitiveness of its service industries, as these will determine the
continuing success of the European economy. Technological change makes it imperative to
remove any unjustifiable barriers to the free movement of services.

The policy instruments to make this happen already exist, given the concrete achievements in
recent Internal Market policy – in particular following the implementation of the Single
Market Action Plan in 1997 and the Strategy for Europe’s Internal Market1. The present
Communication will feed into all four of the key strategic objectives of that Strategy :
improving the quality of life of citizens, enhancing the efficiency of Community product and
capital markets; improving the business environment and exploiting the achievements of the
Internal Market in a changing world. Moreover, the experience of developing the Internal
Market has underlined the need to strike a balance between legislative and non-legislative
activity and between harmonisation and mutual recognition. The present communication is
presented as the start of a process to adapt the Internal Market to the fundamental changes in
the way services are offered and delivered. The Commission invites the European Parliament
and the Council to endorse this strategy for services and welcome comment from all
interested parties.

Services are the drivers of the new economy

The importance of the services sector scarcely needs to be restated. Companies’ competitive
edge increasingly depends on the successful design, management and integration of services
into their operations and sales. Many manufacturing firms now offer services in addition to
goods, in order to create value-added and distinguish themselves from their competitors.
Efficient provision of services has thus become a major factor driving competition. Given the
importance of services in household budgets,
the availability of high quality, effective
services clearly impacts on the quality of life of European citizens. It is therefore of concern,
if there are unjustifiable and preventable barriers preventing services being bought or sold
across borders.

The consequential effects of failings in the Internal Market for services are wide-reaching.
Every company needs to use the services of other businesses as inputs into its own activities:
for example, accounting, financial services, legal advice, consulting. If these are not provided
efficiently or there are barriers to their use, every company, and ultimately every private
individual, suffers. 2 By improving the conditions for businesses to offer their services across
borders and for customers to take up services, we need to ensure the dynamism inherent in an
Internal Market is spread throughout the EU’s economy.

1

2

Com (1999) 624 final of 24/11/1999, see also 1996 communication to the European Council entitled
“putting services to work”. CSE (96)6 final of 27 November 1996.
The significance of this dependency has been analysed in the Commission’s 1998 communication on
“The contribution of business services to industrial performance” COM(1998) 534 final of 21
September 1998.

3

The Information Society has sparked a new dynamic in services…

The technology revolution: By cutting the cost of transmitting and acquiring information,
accelerating the rate of diffusion of innovation, removing the need for proximity and altering
cost and revenue structures for many service activities, the Information Society has created
the potential for more growth and jobs in the entire European economy. For the first time
many consumers and smaller firms can now participate in the Internal Market directly.
Developments are not limited to the on-line world. There are many new opportunities for
firms to innovate in the field of service provision, whether they use on-line or off-line
business models or a combination of the two. In the dynamic environment of the new
economy, most firms will actually do both: they will use “bricks and clicks”. A firm may
conclude contracts on-line, but physically deliver its goods and/or services. A small or
medium-sized enterprise may start with investment in physical assets for production and
retail, but then move on-line to save costs.

Impact on innovation: It is a misapprehension to think that services are characterised by low
productivity and a low level of innovation. The transition to a service-based economy in
Europe has been characterised by strong growth rates and high levels of technological
progress, suggesting that the traditional perspectives on services need updating. Innovation is
a critically important competitive factor for service enterprises. Knowledge intensive services
in particular (such as software development, professional training and consultancy) are
dynamic sources of innovation for other sectors. Insufficient attention has been given to
innovation in the service sector, as recently outlined in the Commission communication on
innovation policy3. There is a new dimension to innovation which poses new challenges:
faster diffusion of information require firms to innovate rapidly, cut costs and improve their
reaction speeds. Successful firms need faster access to larger geographical markets, in order to
earn higher returns on innovation over the shorter periods available to them to turn a profit. If
EU firms cannot access larger markets, in particular the Internal Market, they will have less
incentive to invest and compete.

Impact on market functioning: Innovation is driving higher standards of service and more
tailor-made services, due to the spread of information technology in the provision and take-up
of services. For example, the Internet makes it much easier for consumers to find the best
deals – on and off-line - in a larger geographical market. Even services that can only be
delivered locally and off-line will still be affected by the changes in technology, simply
because information about their price, quality and availability will diffuse more rapidly and
further than in the past. This will induce more intense competition, pushing companies to
offer higher levels of service and/or customisation. New services will emerge, including those
which would not have been viable on a limited local, or even national market. If firms do not,
or cannot, innovate by aggregating demand in larger geographical markets, the drive to
compete on the basis of quality will be stopped dead in its tracks. Our citizens will not get the
quality of service they deserve. Equally, if customers face barriers taking up the services , or
have misgivings about cross-border trade, the potential gains from an Internal Market in
services will be squandered.

Impact on global competitive pressures: the rapid development of the Information Society ,
notably the United States, has created new competitors for European firms which face
increasingly low barriers of entry into Europe’s domestic markets. A quarter of revenue of
major US web sites is said to come from selling to customers in other countries (many of

3

COM (2000) 567 final of 20.09.2000 Innovation Policy in a Knowledge based economy

4

them European). European companies, operating efficiently within the European Internal
Market, should thus avoid being at a permanent disadvantage in taking on this new
competition.

… thus creating the potential to improve the quality of life for European
citizens.

Facilitating cross-border services is not only an economic imperative for the Union. Growth
in cross-border services will give citizens and our enterprises more choice and a better deal in
terms of prices, choice and quality. By removing obstacles, by stimulating competitive
suppliers and by addressing consumer misgivings, we can transform the quality of service.
This should permanently improve the competitive environment by providing a continual spur
to more innovation and efficiency. A services strategy is thus a key ingredient of the Union’s
future economic success. An improved Internal Market in services will play its part
in
removing the barriers which divide European people, and will enable all our citizens a share
in the best the Union has to offer.

But the new dynamic needs an efficient Internal Market in services

European businesses and consumers tend to explore opportunities at national level first and
move on to cross-border purchasing/provision or consumption as a second choice. If in part,
this reflects cultural and linguistic differences in Europe, they also reflect differences and
perceptions of regulatory or administrative nature.

European policy has traditionally focussed on key strategic sectors, often characterised by
traditionally high levels of regulation to achieve specific public policy objectives (for example
in telecommunications and financial services). Such policies have already yielded substantial
benefits in terms of increased customer choice, cost efficiency and introducing dynamism
within these sectors, including services of general interest which have been the subject of a
recent Commission Communication. 4

Business models are rarely exported: Successful companies with winning formulas which
satisfy consumers and achieve high levels of productivity, should be free to try to use their
business approach (or business model) across the European Union. Today few can. The
reason for this is already clear. Table 1 identifies the six stages of the business process and
indicates the obstacles that can exist at each stage.

Once a firm has established itself in one Member State, in order to be able to compete and
provide its own services most effectively, it has to use inputs (such as labour services,
financial services, business services), be able to promote its own services, distribute them, and
price and sell them - all as efficiently as possible. That firm also needs to use after-sales
support services to ensure repeat business and learn about its market to improve its services.

4

Services of general interest in Europe COM(2000) 580 final of 20 September 2000

5

Table 1: Types of rules that may affect a service provider.

Stages of the business process:

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

Stage 6

the

up

Setting
business
(Establishment)

Use of inputs

(labour, business
funding
and
services

Promotional
activities

Distributional
activities

Sales activities

After-sales
support
activities

Examples of the rules that may come into play at each stage:

Rules
authorisation
planning

on
or

on

Rules
employment
conditions
or
access to capital
market

Rules on TV
advertising or
sales
promotion

Rules on road
transport
or
opening hours

Rules on sales
periods or fixed
pricing

Rules
guarantees
returns

on
and

Six stages of the business process are common to all service companies across all economic
sectors. At each different obstacles may be encountered . Divergent rules leave the Internal
Market for services badly fragmented with service providers unable to compete as efficiently
in the market of other Member States as they can on their home market. Instead of being able
to pass on cost advantages from operating the same business model on a larger scale in the
Union, the service provider has to operate two (or more) systems. The cost of this is borne by
customers through higher costs Instead of benefiting from a more tailored, more targeted
service, consumers are offered a service of lower quality

Example: Restrictions on certain promotions, such as last minute special offers or special
arrangements for business travellers, which only exist
in a few Member States, may
discourage a travel agent from exporting his business model to other countries.

The increasingly interrelated nature of the services economy multiplies the damage: To be
able to provide any given service, the use of another is likely to be needed as an input. A
barrier in one service sector can skew a service provider’s entire business model towards a
national orientation. Barriers have knock-on effects from one sector to another. Not only are
direct users of a service affected by barriers, all users of other services who are connected by
this “web” of service activities are adversely affected.

The role of international trade in services for the Community

European services industries are fully integrated in world trade and depend on it. The
Community is the world's biggest exporter of services and the most important investor in
services industries. It accounts for 26 per cent of world exports in services (excluding intra-
Community exports), compared with 24 per cent for the United States and 6 per cent for
Japan. A more integrated internal market for services will help to improve the international
competitiveness of European industries and further develop its
leading position in
international trade. The Community is also the world's biggest importer of services and also
provides important market opportunities for other countries supplying competitive services.

6

3.

A STRATEGY TO TACKLE THE BARRIERS

The opportunities provided by the new service-driven economy must be exploited to the full.
The Internal Market must come to be seen as the natural domestic market for all services
providers, especially SMEs, and for their customers. The tendency to think and act at a
national
level first and consider the Union’s wider market as an afterthought must be
redressed. This Strategy for Services seeks to begin that process by building on five basic
principles:

1) It should be comprehensive: The new strategy should encompass all service sectors and
their inter-linkages. We need to ensure that the sectoral initiatives currently under way (e.g.
financial services) are completed as urgently as possible whilst
telecommunications,
maintaining their coherence and ensuring their consistency with the overall strategy towards
services. The approach should go beyond addressing specific problems in specific services
sectors at isolated points in the business process: piecemeal efforts will not deliver the
dynamic economy we need.

2) It should make cross-border activities as easy as acting within a Member State: A true
Internal Market based on the efficient application of the fundamental freedoms of the Treaty,
the use of mutual recognition and the proportionality test, strips away unnecessary, and often
conflicting, layers of regulation that act as cross-border roadblocks, and stifle innovation.
Services should be available throughout the Union regardless of frontiers. There should be no
need to adapt the service to unjustifiably different legal and administrative requirements.
Service provision from Amsterdam to Athens should be as straightforward as from
Amsterdam to Rotterdam.

3) It should ensure business and consumers secure benefit from the new opportunities open to
them: An Internal Market in services must not remain a paper creation that customers do not
use. In order to breathe life into the new reality, customers need to be aware of the new
opportunities in the Internal Market and have confidence in cross-border service provision.
This requires that a high level of health and consumer protection is assured throughout the
Internal Market and that care is taken that effective systems of to treat cross-border complaint,
dispute resolution, redress and enforcement are in place.

4) It should keep pace with change: The services economy is constantly changing and
reacting to new impulses. National legislative and administrative requirements are constantly
adapted. Governments must keep laws and regulations up to date, but not at the expense of
establishing new Internal Market barriers. The dynamic nature of the new services economy
precludes a static approach.

5) It should be coherent with other policies: Community policies must mutually reinforce
each other. The services strategy needs to be accompanied by a vigorous application of
Community competition policy. In addition, the Commission has already committed itself to a
general and thorough review of the rules for taxation of all services. 5Other EU measures (for
example, the restructuring, modernisation and harmonisation of customs practices, and the
proposals for a new regulatory framework for electronic communications networks and
services) underline that the EU has a comprehensive approach that will deliver a world class
services economy . A clear synergy exists between the Community’s Internal Market policy

5

A strategy to improve the operation of the VAT system within the context of the Internal Market
COM(2000)348 final of 07.06.2000

7

toward services and its external trade policy. The Community continues to pursue its overall
objective of launching a comprehensive trade round encompassing trade liberalisation, new
rule making, a development agenda and issues of concern to the broader public. The expected
GATS 2000 round of negotiations should be comprehensive and bring about a deeper and
broader package of improved commitments from all WTO Members to provide market access
and national treatment. We should aim at strengthening of GATS disciplines with the
objective of ensuring a transparent and predictable regulatory environment.

4.

PUTTING THE STRATEGY INTO ACTION

This communication sets out a two stage strategy

Stage 1 Actions for 2001

First, within the next 12 months, the Commission will launch a first wave of initiatives of
both a legislative and non-legislative nature targeted at particular problem areas. These
include initiatives in the field of: commercial communications (especially sales promotion);
regulated professions; financial services and electronic commerce.

Secondly, the Commission will also review the existing directives that relate to the free
movement of services.

Thirdly, a number of non-legislative flanking measures will also be brought forward. These
will be targeted at improving statistical information on services, raising the skill levels of ICT
in service industries and enhancing the innovative capacities in companies that provide
services to other businesses.

initiatives that

Fourthly, the Council and the Parliament are called upon to agree a number of major Internal
impact on services. They include the directive on the distance
Market
marketing of financial services, the telecommunications package6, the two public procurement
directives, the postal services directive, the directive on copyright in the Information Society,
the legislative follow-up on the EU accounting strategy, the directive on takeover bids, and a
directive on VAT for on-line services.

Despite these four targeted actions, this will not be sufficient to create a true Internal Market
for services, given the complex web of inter-linkages which exist between different sectors in
the economy. The Commission needs to pave the way for a horizontal approach to free
movement of services with a view to its implementation in 2002. For the first time since
19627, the Commission will undertake an all-embracing and systematic analysis of the

6

7

This package consists of proposed directives on: a common regulatory framework for electronic
communications networks and services Com(2000)393; universal service and users' rights relating to
electronic communications networks and services Com(2000)392; access to, and interconnection of,
electronic communications networks and associated facilities Com(2000)384;
the processing of
personal data and the protection of privacy in the electronic communications sector Com(2000)385; the
authorisation of electronic communications networks and services; Com(2000)386. This is also a
proposed decision on a regulatory framework for radio spectrum policy Com(2000)407
The General Programme for the suppression of restrictions to the freedom of establishment and free
provision of services, Official Journal number 2 of 15 January 1962

8

persistent barriers to free movement of services and their spill-over effects across economic
sectors.

This will be carried out by means of a comprehensive analysis of the rules and practices that
come into play at each of the six stages of the business process. The analysis will also involve
an assessment of how differences in regulation and administrative practice create barriers to
cross-border provision of services and inhibit the export of successful business models across
the Union . This analysis will be based on the 6 stage business process outlined earlier (see
also table 2). The results of this comprehensive survey, (itself complemented by additional
studies), will be presented in a report to the Parliament and the Council early in 2002. The
Commission will then be able to identify key areas where infringement procedures may need
to be initiated or where existing mechanisms, that help companies and private individuals to
take advantage of the Internal Market (such as the internet-based “Dialogue with Citizens and
Business”8) need to be improved.

8

The Dialogue with Business is an internet-based system managed by the Commission, which allows
businesses wanting to operate in a cross-border context to obtain information on various elements of the
Internal market (public procurement, how to find a business partner, how to bid for public contracts,
etc.) and to give a feed-back on the nature of problems they have encountered.

9

Table 2: carrying out the analysis stage by stage

Stage 1

Stage 2

Stage 3

Establishment
the
provider

of
service

Use
inputs

of

Promotion
services

Stage 4

of

Distribution

Stage 5

Selling
output

Stage 6

of

After-sales
support

Examples: Differences in practices and requirements for establishing a company, requirements for
authorisation to provide services within a national territory, requirements concerning a physical outlet for
service provision, requirements regarding professional qualifications

Stage 1

Stage 2

Stage 3

Stage 4

Establishment
of
the service provider

Use
inputs

of

Promotion
services

of

Distribution

Stage 5

Selling
output

Stage 6

of

After-sales
support

Examples: Differences in practices and requirements for
labour services recruitment, cross-border
information on local skills availability; use of financial services by companies, provision of funding
services, differences in access to business and professional services; purchasing of inputs by public
authorities of services across borders.

Stage 1

Stage 2

Stage 3

Stage 4

Establishment
of
the service provider

Use
inputs

of

Promotion of
services

Distribution

Stage 5

Selling
output

Stage 6

of

After-sales
support

Examples: Differences in how companies can use services to raise awareness of their output (commercial
communications – advertising, sales promotion, PR, sponsorship); and differences in the provision of
independent comparative information on goods and services and mandatory disclosures requirements .

Stage 1

Stage 2

Stage 3

Stage 4

Establishment
of
the service provider

Use
inputs

of

Promotion
services

of

Distribution

Stage 5

Selling
output

Stage 6

of

After-sales
support

Examples: Differences in logistics, warehousing, conditions for the retail trade, postal services, home
delivery. Differences governing creation of and access to infrastructure allowing the reception of services.
Barriers arising from lack of confidence in delivery systems.

Stage 1

Stage 2

Stage 3

Stage 4

Establishment
of
the service provider

Use
inputs

of

Promotion
services

of

Distribution

Stage 5

Selling
output

Stage 6

of

After-sales
support

Examples: Differences in practices and requirements for national pricing regimes, indirect taxation regimes,
payment systems, contracting and invoicing systems. Health, safety and security concerns.

Stage 1

Stage 2

Stage 3

Stage 4

Establishment
of
the service provider

Use
inputs

of

Promotion
services

of

Distribution

Stage 5

Selling
output

Stage 6

of

After-sales
support

Examples: Differences in in-house customer services and customer complaint handling, extra-judicial
redress mechanisms outside the firm and cross-border judicial redress systems. Liability issues. Enforcement
by public authorities.

10

Stage 2 – Actions for 2002

2001 is a year for action and analysis. The following year will be a further package of
initiatives undertaken on the basis of this analysis. These initiatives will take three basic
forms: actions to tackle barriers which can be removed by direct application of Treaty
principles; actions of a non-legislative nature; and, thirdly, actions that make use of targeted
harmonisation to remove barriers.

(i) Barriers which can be removed by direct application of Treaty principles - Where
possible, the principles of freedom of establishment and freedom to provide services should
be directly applied to remove barriers. The Commission will carefully assess the general
interest objectives pursued by national measures and strictly apply the proportionality test, on
the basis of the case-law of the Court of Justice. Such barriers include any measure which is
either discriminatory in law or in fact; those not justified by general interest objectives; or
those which are found to be disproportionate. Where infringement cases have not already be
opened, Member States will be requested to remove barriers in accordance with a strict
timetable.

Example of potential barriers: Requirements which impose on operators established in one
Member State the need to be established in another Member State if they wish to provide their
services there; obligations for operators that offer services across borders which duplicate
requirements already fulfilled in their home Member State; rules which preclude a company
from taking all its staff across borders to provide services; less favourable treatment in tax
matters for recipients of services, when the service provider is established in another Member
State.

(ii) Mechanisms to resolve non-regulatory barriers – Some non-regulatory barriers may, in
practice, constitute significant obstacles to the functioning of the Internal Market. They
should, where possible, be tackled by non-legislative mechanisms. If appropriate,
the
Commission may propose a set of non-legislative measures. The Commission could also
invite the interested parties to further develop these mechanisms.

Examples: there may be low awareness of the opportunities in the Internal Market for service
providers; a lack of consumer confidence in cross-border services or inadequate structures for
redress, especially for out of court dispute settlement; or there could be a lack of information
on demand for services across frontiers.

(iii) A targeted harmonisation to tackle the remaining barriers – Harmonisation will be
needed to remove any residual barriers. This must be coherent with other Community policies
and achieve a high level of protection of the general interest objectives concerned. If the
barriers identified are horizontal in nature (common to several sectors or having consequential
effect on the provision of other service activities), a horizontal legislative instrument and
specific harmonisation measures will be needed.

11

Conclusion

The proposed two stage approach is set out in more detail in Annex 1. The Commission
invites the Parliament and the Council
to endorse this two step strategy. The
Commission would also welcome comments from all interested parties by 1 June 2001,
to be sent to:

DG Internal Market
European Commission
200 rue de la loi
1049 Brussels

or e-mailed to: markt-services@cec.eu.int

12

Annex: The two stage approach

2001

The Commission urges the Council and the Parliament to come to rapid agreement in
2001 on the major legislative proposals before them, which impact on service activities
in the Internal Market:
- the proposal for a directive on the co-ordination of procedures for the award of public supply
contracts, public service contracts and public works contracts (COM/2000/0275 final)
- the proposal for a directive on the distance marketing of consumer financial services and amending
Directives 97/7/EC and 98/27/EC (COM/99/0385 final)
- With the aim of creating a fully integrated and liberalised telecommunications markets by the end of
2001, all proposals resulting from the Commission’s 1999 review of the telecoms regulatory
framework
- Proposal for a directive on the further opening to competition of Community postal services
(COM/2000/0319 final)
- Proposal for a directive on the harmonisation of certain aspects of copyright and related rights in the
Information Society (SEC/2000/1734 final)
Legislative follow-up to the Commission Communication updating the EU accounting strategy
(COM/2000/359 final).
- Proposal for the takeover bids directive (Com /97/0565 final)
- Proposal for a directive amending directive 77/338/EEC as regards the value added taxes
arrangements applicable to services supplied by electronic means
The Commission will also initiate the following actions:

Action 1 Launch new initiatives to remove Internal Market barriers and increase the
competitiveness of EU service markets, in particular on:
- Commercial Communications (sales promotions),
- Regulated professions (recognition of qualifications),
- Financial services and electronic commerce
- Counterfeiting and piracy

Action 2 Present a report reviewing individual directives, to enhance their contribution
to the functioning of the Internal Market in services, with particular emphasis on:
- Directive 98/48/EC on provision of information in the field of technical standards and regulations
- Directive 98/84/EC on the legal protection of services based on, or consisting of, conditional access
- Directive 93/83/EEC on rights related to copyright applicable to satellite broadcasting and cable
retransmission
- Directive 96/9/EC on the legal protection of databases

Action 3 Launch flanking measures to support the competitiveness of the EU service
industry:
– improve the Community's statistical data on services by accelerating implementation of existing

statistical legislation and, where necessary, undertaking complementary surveys;

– launch a benchmarking project to develop a reliable methodology for the delivery of indicators on

and reporting of intangible assets held by service companies;

– analyse how training of ICT skills could focus on the specific needs of service enterprises;
– focus on improving the process of innovation in the context of the sixth Framework Programme for

R&D.

Action 4 Launch a systematic survey of barriers to services in the Internal Market to
identify specific problem areas. The results of this survey will be:

- analysed to identify key areas in which to accelerate infringement procedures
- used to further improve the Commission’s “Dialogue with Business and Citizens” internet site.
- presented to forum of high level experts from the Member States and interested parties to discuss and
solve, where possible, identified problems

13

- complied in a report to the European Parliament and the Council on the functioning of the Internal
Market for Services as the basis for the actions in 2002.

14

2002

On the basis of the analysis conducted in 2001, which will have identified barriers to the free
movement of services, the following actions will be taken:

Action 1 – Draw up a list of obstacles which can be removed by Treaty principles The
Commission will compile a systematic and comprehensive list of all barriers, which could be
removed by the direct application of the Treaty, but where infringement cases are not already
underway. This list, together with a request to remove all of these barriers within tight
deadlines, will be presented to the Member States. In those cases where infringement
proceeding have already been opened in 2001 or before, these will continue to be pursued.

Action 2 – Launch a package of non-legislative measures For non-legislative barriers that
can be tackled by the use of alternative non-legislative instruments, the Commission will
present specific initiatives,
including Community codes of conduct, alternative dispute
settlement mechanisms, and awareness actions designed to improve the flow of information.

Action 3 – Bring forward harmonisation measures For barriers which are horizontal in
nature, an instrument will be proposed containing the following elements:

– Targeted harmonisation of requirements affecting several sectors or with knock-on effects
across sectors, on the basis of a high level of protection for general interest objectives.
– A mechanism to ensure that the Internal Market can be used by all European service
providers as their domestic market, notably through the efficient application of the
principle of mutual recognition.

– Procedures to cope with new market developments and the evolution of the law, so as to
avoid the risk of re-fragmentation of the Internal Market and to identify at an early stage
the need for new Community legislation.

Where regulatory barriers which cannot be addressed by such a horizontal instrument, they
will be tackled through additional harmonisation measures. In the light of past experience,
these additional harmonisation measures are likely to be appropriate in areas with significant
health and consumer protection considerations.

15

FINANCIAL STATEMENT

1.

TITLE OF OPERATION

Communication from the European Commission to the European Parliament and the Council
– an Internal Market Strategy for Services.

2.

BUDGET HEADING(S) INVOLVED

B5-3001 – Strategic programme for the Internal Market

B5-3002B - Fonctionnement et développement du marché intérieur

3.

LEGAL BASIS

Communication from the European Commission to the European Parliament and the Council
– an Internal Market Strategy for Services (Articles 47, 49, 55, 95 and 157 of the Treaty
establishing the European Community)

4.

4.1

DESCRIPTION OF OPERATION

General objective

Services are increasingly the drivers of the European economy. As such, the European
Council in Lisbon requested that the Commission presents a new Internal Market Strategy for
the removal of barriers to services, as a key plank of its policy to turn Europe into “the most
competitive and dynamic knowledge-based economy in the world, capable of sustainable
economic growth with more and better jobs and greater social cohesion”.

Technological change makes it imperative to remove all unjustifiable barriers to the free
movement of services. Companies’ competitive edge increasingly depends on the successful
design, management and integration of services into their operations and sales. Many
manufacturing firms are now offering services in addition to goods, in order to create value-
added and differentiate themselves from their competitors. Efficient provision of services has
thus become a major factor driving competition. Access to high quality and effective services
clearly affects the quality of life of European citizens. It is therefore of universal concern, if
there are unjustifiable and preventable barriers which force service activities to be carried out
at national, rather than Internal Market level.

In response to the Lisbon European Council’s request to both the Commission and Member
States to initiate a comprehensive Internal Market strategy to remove barriers to services, the
Commission will present communication as the start of a process to adapt the Internal Market
to the fundamental changes in how services are offered and delivered.

The policy approach to remove barriers to services will build on the concrete achievements in
recent Internal Market policy – using techniques refined through the implementation of the
Single Market Action Plan in 1997 and the Strategy for Europe’s Internal Market. These
experiences have underlined the need to strike a balance between legislative and non-

16

legislative activity and between harmonisation and mutual recognition, and to involve all
stakeholders at an early stage.

The Commission will examine whether the regulatory framework for services activities has
become outdated due to technological and market change, as well as if there are any other
barriers which result in companies and private individuals failing to take up the cross-border
services available to them. This will be carried out through the use of externally acquired data
(a survey and a follow-up study),
the involvement of an expert group made up of
representatives from the Member States, as well as in-house analysis.

The six main areas that the Commission will examine:

1. Barriers arising in the area of establishment of companies
2. Barriers to the take up of services by companies and private consumers
3. Barriers to the promotional activities of companies
4. Barriers to the distribution activities of companies (including retail)
5. Barriers to arising at the selling/ contracting stage of a commercial transaction
6. Barriers arising from shortcomings in the framework allowing efficient after-sales services

On the basis of a thorough assessment of these barriers, the Commission will propose a
variety of legislative and non-legislative actions.

4.2

Period covered and arrangements for renewal

2001 - 2002

5.

6.

CLASSIFICATION OF EXPENDITURE OR REVENUE

TYPE OF EXPENDITURE OR REVENUE

The principle impact will be in the area of human resources. There will also be the need for
quantitative and qualitative data to establish the exact nature of barriers for providers and
users of services, and their spill-over effects into other areas of the economy. The total
requirements for operational studies and surveys are estimated at +/- 0.85 million Euro.

17

7.

FINANCIAL IMPACT

DG MARKT

study

B5-3001
general
on
One
assessment of barriers for service
providers and service users
Total

a

DG ENTR

B5-3002B
One study on statistical data on
services
One study on measurement of
intangible assets
One
standards
One study on skills training for
ICT
Total

accounting

study

on

€
(in K

)

2001
300

2002
-

Total
300

300

-

300

2001
100

2002
-

Total
100

250

100

100

550

-

-

-

-

250

100

100

550

Overall total

B5-3001 + B5-3002B
Total

2001
850

2002
-

Total
850

8.

FRAUD PREVENTION MEASURES

The verification of expenditure comprises checking that tasks have been correctly performed
before payment, taking into account contractual obligations and the principles of economy
and sound financial management. Anti fraud provisions (verification, presentation of reports
etc.) will be included in all contracts concluded between the Commission and the Contractors.

9.

ELEMENTS OF COST-EFFECTIVENESS ANALYSIS

As services represent the lion’s share of the EU economy, any horizontal initiative by the
Commission to remove barriers can be expected to have a non-negligible effect on human
resources. Given the large-scale and original nature of the work set out the in Communication,
as well as its tight timetable, the most effective means to guarantee success is to use a number
of experienced human resources intensively (see point 10), over a relatively brief period of
time (2 years).

The allocation of posts should be attributed to the following tasks:

4 posts - regulatory assessment of barriers,

2 posts - economic analysis of impact of barriers and their knock-on effects in the EU
economy as a whole

18

4 posts – preparation of harmonisation and other proposals to remove barriers

Support 2 C posts

Co-ordination 0.5 A post

Given the highly delicate nature of both the assessment of barriers and proposals to
remove them, as well as the need for close co-operation with other services in the
Commission, other European institutions, and the Member States, it is most efficient
to limit out-sourcing work to the studies set out in point 7.

9.1

Specific and quantified objectives; target population

Adaptation of
regulatory framework to market changes, notably those induced by
technological change, resulting from the policy proposed in the Communication will allow
users and providers of services to operate more effectively in the Internal Market.
Quantitative measurement will be carried out by means of the standard instruments for
assessing Internal Market Policy: the biannual Single Market Scoreboard, the annual Internal
Market Business Survey,
the Commission’s annual Competitiveness Report and the
Commission’s annual report on the functioning of product and capital markets (also known as
the ‘Cardiff’ report).

9.2

Grounds for the operation

The Communication is in response to a request from the European Council in Lisbon to
present a comprehensive Internal Market strategy for the removal of barriers to services. The
Communication takes account of the fact that the Information Society will have a large impact
on how services can be provided, not only on-line but also in the off-line environment. Faster
diffusion of innovation will impact on all aspects of service provision, as it will increase
competition and decrease the timeframe for a return on investments. The need for larger
geographical markets to compensate for this is now more urgent than ever.

9.3

Monitoring and evaluation of the operation

The Commission envisages presenting its interim conclusions on the actions needed at the end
of 2001, as well as any legislative proposal(s) and a final assessment at the end of 2002, to the
European Parliament and the Council.

19

10.

ADMINISTRATIVE EXPENDITURE (SECTION III, PART A OF THE BUDGET)

Requirements in terms of human and administrative resources must be covered within the
allocation granted to the managing DG.

10.1

Effect on the number of posts

Overall impact

Type of post

Staff to be assigned to the
administration of the
operation

Permanent
posts

Temporary
posts

A
B
C

or

Officials
temporary
staff
Other
and auxiliary)
Total

resources (END

5.5
0
2
5

12.5

Of which

Duration

Use of existing
resources
within the DG
or department
concerned
2.5
0
1
1

4.5

of
Use
additional
resources

2 years

2 years

3
0
1
4

8

The majority of staffing will be required in mid 2001.

10.2

Overall financial impact of additional human resources

Type of post

A
B
C

or

Officials
temporary
staff
Other (END)
Other (Auxiliary)
Total

Staff to be assigned to the administration of the
operation

Permanent posts

Temporary posts

€

(in

)

Amount

5.5

* 108,000 *2 years

1

188

000

2

* 108,000*2 years

1 620 000

* 40,704 *2 years
* 86, 974*2 years

4
1
499 580

432 000
499 580

2 119 580

20

10.3 Increase in other administrative expenditure arising from the operation.

€
(in K

)

Budget heading
(No and title)

Amount

Method of calculation

2001

2002

7010

19,5

19,5

–
A
Mission
expenses

7030,

–
A
general
meetings
(accompanying
Expert Group)
Total

35,4

35,4

54,9

54,9

€

9.750 year
€

2 *
one day visits of each EU capital =
9.750 per year.
capitals =

€

650 * 15

(A maximum of) Four meetings a year. 15 Member
35.400
States *

590 *4 =

€

€

Credits will be found within the existing envelope allocated to DG MARKT.

21