The EU Single Market Services Directive

The Directive on Services in the Internal Market (the Services Directive 2006/123/EC) was adopted in December 2006. The Directive liberalises the internal EC services market in that it requires Member States to abolish discriminatory requirements, such as nationality or residence requirements, and particularly restrictive requirements, such as “economic needs” tests (requiring businesses to prove to the authorities that there is a demand for their services). It also requires the review of other burdensome requirements which may not always be justified (such as territorial restrictions or minimum number of employees).

The EU member States were provided a three-year transitional period to transpose the Directive into national legislation. However, several member States missed the end-2009 deadline, and work to implement the Directive continued throughout 2010. The Directive requires the Member States to simplify procedures and formalities that service providers need to comply with. In particular, it requires Member States to remove unjustified and disproportionate burdens and to substantially facilitate: the establishment of a business, i.e. cases in which a natural or legal person wants to set up a permanent establishment in a Member State, and the cross-border provision of services, i.e. cases in which a business wants to supply services across borders in another Member State, without setting up an establishment there. 

During 2010, the Commission was monitoring the implementation by the member States, of both the new legal frameworks adopted in order to implement the Services Directive as well as their efforts to establish operational "Points of Single Contact" (PSCs), notably the online portals providing businesses with information about the requirements and procedures to be complied with, and the "Internal Market Information Systems" facilitating administrative cooperation between the authorities of the member States. The PSCs are certainly the most visible benefit of the Services Directive for businesses. They are meant to become fully fledged e-government portals allowing future entrepreneurs and existing businesses to easily obtain online all relevant information relating to their activities (applicable regulations, procedures to be completed, deadlines, etc.) with the ability to apply online and across borders. 

Although the vast majority of the member States have chosen to implement the general principles and obligations of the Directive through a single act, implementation of the general principles has been carried out through several acts in France and Germany. In addition, all member States have had to amend or abrogate existing legislation to ensure conformity with the provisions of the Directive.

The Services Directive does not harmonize national legislation applicable to the services sector, but obliges member States to screen their authorization schemes to ensure that they are maintained only if non-discriminatory, justified by an overriding reason relating to public interest, and proportionate.

The Services Directive applies to the provision of a wide range of services – to private individuals and businesses – barring a few specific exceptions. For example, it covers: 

distributive trades (including retail and wholesale of goods and services) 

the activities of most regulated professions (such as legal and tax advisers, architects, engineers, accountants, surveyors) 

construction services and crafts 

business-related services (such as office maintenance, management consultancy, event organisation, debt recovery, advertising and recruitment services) 

tourism services (e.g. travel agents) 

leisure services (e.g. sports centres and amusement parks) 

installation and maintenance of equipment 

information society services (e.g. publishing – print and web, news agencies, computer programming) 

accommodation and food services (hotels, restaurants and caterers) 

training and education services 

rentals and leasing services (including car rental) 

real estate services 

household support services (e.g. cleaning, gardening and private nannies). 

The Services Directive does not apply to the following services, which are explicitly excluded:

financial services 

electronic communications services with respect to matters covered by other community instruments 

transport services falling into Title V of the EC Treaty 

healthcare services provided by health professionals to patients to assess, maintain or restore their state of health where those activities are reserved to a regulated health profession 

temporary work agencies' services 

private security services 

audiovisual services 

gambling 

certain social services provided by the State, by providers mandated by the State or by charities recognised as such by the State 

services provided by notaries and bailiffs (appointed by an official act of government). 

The Commission has not drawn up concrete plans to cover the other excluded services. Services activities are in any event always subject to the EC Treaty provisions, notably the fundamental freedoms of establishment (Article 43) and free movement of services (Article 49). The Services Directive applies only to EU (EEA) citizens and legal entities established in the EU (EEA), and does not oblige member States to consider changes applicable to non-EU services suppliers. 

Need for Capacity for Value Addition in Natural Resources

We need to build capacity in Africa in order to add value to natural resources. 

In a recent post, we discussed a proposal from African countries to ban exports of natural resources. Tanzania reportedly has in place a ban on the export of raw gemstones. However, in a recent news piece, the Tanzania Government Ministry of Minerals and Energy has proposed to lift the ban on exports of gem stones with a weight of over one gram, due to lack of local capacity to cut stones, stating "as there is no point of people staying with uncut stones while there is no capacity."

The Ministry's Commissioner for Minerals, Dr Peter Kafumu, also stated that the government move was propelled by the fact that the lapidary is still at infant stage and exporters need additional time. He also added "In actual fact we were not ready when we imposed the ban. I think politicians pushed us a bit harder."

It is interesting to note that investors such as TanzaniteOne are pushing for exemption from the export ban while the labour market opposes lifting of the ban, which could reduce employment opportunities locally. What is Government to do?

Discouraging Exports of Raw Materials

Delegates at a recent meeting proposed that Africa should ban or discourage exports of raw materials to developed countries. Instead these resources should be developed and added value locally. The AU commission may be requesting Presidents to put their political weight behind such a proposal ahead of the 3rd Africa-Europe Summit in November in Libya.

Indeed such an approach would put local content and value addition policy at the heart of Africa's development plans. Local content is where foreign companies are obliged to procure a percentage of labour, goods and services from the host country. Norway pioneered it. See related post on the Norwegian case study. Brazil, a rising oil giant, is using it.

Two questions to ask are: how many African countries currently have the regulatory, investment and governance environment necessary to efficiently manage and add value to natural resources?  Additionally are there legal agreements- regional or bilateral including other barriers that would prohibit such an approach at a national level?

The WTO dimension.

Tariff escalation in developed countries e.g. in fuels, forestry and mining sectors would continue to be a concern. Non tariff barriers e.g. technical regulations, import licensing and prohibitions in value added products would also be prohibitive.

WTO rules (e.g. GATT Articles I, III, XI, XIII) would ordinarily not permit a WTO Member to undertake a legal measure to ban or discourage exports, even for reasons of poverty. It may be possible to use export taxes especially where natural resources dominate an economy. However there are proposals and/or disputes in the WTO and EPAs seeking to phase them out. There could also be possibilities for developmental flexibility for the economic development of LDCs. GATT Article XI:2 also provides an exception to the ban of export restrictions to prevent critical shortages. In addition, general exceptional measures found in GATT Article XX, could be relevant. These include measures:

XX (g) for the conservation of exhaustible natural resources. However measures taken pursuant to this provision, would need to be implemented in conjunction with restrictions on domestic production or consumption. This is therefore a two part legal requirement- a need to show conservation of exhaustible resources such as fossil fuels and metallic ores and restrictions on domestic production. However even renewable resources can be exhausted if over-traded or mismanaged hence export restrictions may be necessary.

XX (i) involving restrictions of exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing plant during periods when the domestic price of such materials is held below world price as part of a government stabilisation programme. This is a periodic measure applicable specifically to export restrictions undertaken to ensure sufficient quantities for domestic processing, specifically when domestic price is below world price and as part of an internal price stabilisation scheme. Given the extreme price volatility of certain natural resources, this provision maybe relevant however the precise requirements require dual pricing mechanisms. 

XX (j) essential to the acquisition of products in general or local short supply. However such measures must be consistent with the principle that all members are entitled to an equitable share of the international supply of such products.

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Daily Monitor Uganda

Participants at a meeting of the African Union’s Trade and Industry Commission yesterday proposed that the continent adopts policies to discourage the export of raw materials to the developed world.

During a media briefing at Munyonyo, Kampala, Ms Elizabeth Tankeu, the Trade and Industry Commissioner, said: “We have been exporting our raw materials to Europe since the colonial times when the Europeans came to Africa. They still come here for our resources but we have remained the poorest continent”.

“The European Union through its Economic Partnership Agreements wants Africa to trade with them at zero per cent tariffs. They say they want reciprocal trade. But we are saying Africa still needs a lot in place for reciprocation to begin. We’re telling them we are not going to continue exporting raw materials.”

More here.