Content

Joaquim Nunes de Almeida, II.2 in:

Oliver Holtemöller (Ed.)

How Can We Boost Competition in the Services Sector?, page 30 - 35

1. Edition 2017, ISBN print: 978-3-8487-4676-7, ISBN online: 978-3-8452-8902-1, https://doi.org/10.5771/9783845289021-29

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Joaquim Nunes de Almeida Joaquim Nunes de Almeida, Director DG Internal, Market, Industry, En‐ trepreneurship and SMEs (GROW), European Commission State Secretary, Ladies and Gentlemen, thank you for the invitation and for organising this event on this very relevant topic: competition in ser‐ vices and the way forward to make this sector more competitive. It is a pleasure for me to be here this morning and to share with you some thoughts on how we can together tackle this challenge. Germany’s economy relies mainly on a strong manufacturing sector, which exports its products throughout Europe and the rest of the World. Why should we therefore worry about services? First of all because the services sectors are becoming an increasingly large part of all advanced economies. Secondly because services still offer untapped growth poten‐ tial. Let’s examine the situation. The share of value added from services keeps on growing. It is approaching 75% of the total value added of the EU economy. But it is not just the growing size. Services matter because of their increasing integration with the rest of the economy. The frontiers between services and manufacturing and industry are becoming blurred. Most manufacturing companies are providing services with the products they are offering: 80% of German manufacturers offer services in addition to their products. And these range from basic services like after-sales ser‐ vice to fully integrated solutions for their customers. Manufacturers also rely heavily on service providers to develop products and related services. Digitisation also plays a key role in this integration and is now every‐ where. In fact, 40% of the value added of a good manufactured in the EU stems from services. Some service providers are also manufacturers, pro‐ ducing sensors and connected devices to deliver their services. There are partnerships between manufacturers and service providers right along the value chain. Because of these links, any underperformance in the services sector drags down the entire economy, including the competitiveness of manufacturers operating on global markets. And ladies and gentlemen, frankly we could do much better on services in Europe and in Germany right now. The productivity of the EU economy is just 70% of the productivity of the US economy. This gap has been growing for almost 20 years. In Germany, labour productivity has grown II.2 II The Practical View 30 more than in the Euro area since 2000. However, within sectors, labour productivity growth has been particularly weak in business services, retail and in financial and insurance activities. In business services and retail the German labour productivity growth has been negative or close to zero for more than a decade which ranks Germany amongst the worst performers. And we are not seizing the full potential from cross-border service provi‐ sion. Intra-EU trade in services accounts for approximately 6% of GDP while it is over 21% for manufactured products. In some services, such as construction services, cross-border trade in the EU is extremely low and it accounts for less than 1% of the turnover of the sector. In some business services such as architects, engineers and accountants, very few com‐ panies are using the Single Market. And these are mainly large companies. We also believe that much more can be done to increase the integration of the retail sector at the EU level. This is a sector that accounts for almost 10% of the EU economy and 13% of employment. A key reason is that there are still too many restrictions to trade and cross-border in services. The level of restrictions within the EU remains considerably above the OECD average. These restrictions are particularly important in business services. On the basis of a Commission in-depth as‐ sessment from 2015 Germany ranks fourth amongst the EU countries with the most restrictive regulation in business services. Not fourth best. Fourth worst. These regulatory restrictions refer notably to restrictive authorisa‐ tion requirements, restrictions on legal form, shareholding and multidisci‐ plinary activities, insurance requirements and tariff restrictions. These bar‐ riers are particularly prevalent in business services such as architects, lawyers, accountants, tax advisers, and engineers. But also in regulated professions more widely. Regulated professions are present throughout the economy. When we think of construction, we have craft professions and specialised engineers. And the health sector is composed of doctors, nurs‐ es and all sort of medical specialists. They account for 22% of those em‐ ployed in the EU. That means almost 50 million people. In Germany, a third of all employed work in regulated profession, the highest of all Member States. An EU-wide survey carried out last year showed that wage premiums between regulated and unregulated professions are 4% on average but can be as high as 19% in some occupation groups. There are too many internal and cross-border barriers to the access to certain profes‐ sional activities. Academics estimate that, there could be between 3 and 9 per cent more people working in a given profession if those access re‐ quirements were made less stringent. They also conclude that regulation is II.2 Joaquim Nunes de Almeida 31 associated with about one third less foreign-born workers (EU and non- EU) in the occupation. Ladies and gentlemen, why do I say all of this? Why does the European Commission focus so much on services policy and the need for reform, e.g. in the European Semester and in the Country-Specific reform Recom‐ mendations that we issue every year, not least to the German government? Because removing regulatory barriers in services would lead to cheaper services and more choice for consumers, without undermining services quality. Because removing regulatory barriers in services would create more opportunities for new services firms to be set up. Assessments show that where regulatory barriers are lower, more new firms are set up. Be‐ cause removing regulatory barriers in services would increase the compet‐ itiveness of the services sector since productivity would go up as a result of a more efficient allocation of resources. And because this would in‐ crease the competitiveness of globally operating manufacturing businesses with it. A number of restrictions are also present in the retail sector. Retailers face persisting barriers to market entry created by certain retail establish‐ ment conditions such as rules regulating the location and size of shops as well as burdensome and complex authorisation processes. Sometimes, these restrictions are not appropriate and proportionate to the public policy objectives pursued. They may have the effect of unduly protecting incum‐ bent retailers or the current under-performing market structure. Our as‐ sessment of the effects of restrictions on establishment of new shops shows that higher levels of restrictions are coupled with lower levels of competition in the sector. Ladies and gentlemen, the question remains: how can we turn around this situation and improve the competitiveness of services? I believe ac‐ tion is needed on two levels. At Member State level. And at EU level. Let me cover each of these in turn. Member States have a major responsibility to remove unjustified barri‐ ers and cut the red tape. And many Member States have already done so. For example, in Greece, there was a major liberalisation of a number of professions in 2011. This led to lower prices for consumers, and more start-ups. But more can be done across Europe. In this year’s Country- Specific Recommendations adopted in May as part of the European Semester the Commission has again targeted the lack of structural reforms and competition-friendly measures in services as an area for improvement for Member States. In our recommendations specifically addressed to Ger‐ II The Practical View 32 many, we call upon the German government to 'step up measures to stimu‐ late competition in the services sector, in particular in business services and regulated professions'. This recommendation is based on detailed legal and economic analyses of the German services sector. Some of this work will be presented by my Commission colleague this afternoon. Important‐ ly, the German government agreed with this Recommendation when it was discussed and formally approved by Member States in the EU Council. In some cases, action at national level is not enough. We need to take EU action. In last year's Single Market Strategy, we issued a limited list of targeted and practical actions. I will highlight a few of those directed to‐ wards services. On regulated professions, a key action is to provide guid‐ ance for Member States on their reform needs, what we also call “profes‐ sion specific recommendations”. The purpose is to recommend to Member States to review those regulatory aspects in their internal frameworks which we consider as too burdensome, inefficient or outdated. The ulti‐ mate objective is for Member States to have regulation in place which is fit for purpose, protects but also serves consumers. And this can be achieved through a close cooperation and exchange of views, ideas, expe‐ riences and recommendations between the Commission and the Member States concerned. These recommendations will be based on a factual ana‐ lysis of regulation in specific professions based on information provided by Member States themselves. In order to assist in the discussions, an in‐ dicator measuring the intensity of regulation of specific professions is cur‐ rently in development by the Commission for that purpose. The recom‐ mendations will take account of specific national contexts. This is there‐ fore a real bottom up approach. It is also a differentiated approach. We are not aiming at a "one size, fits all" regulatory model nor at promoting a copy of one model throughout the EU. National and professional differ‐ ences are part of our regulatory heritage and constitute, to a great extent, our common richness. Nonetheless, drawing the lessons from our respec‐ tive experiences and adopting what is best and at the same time more ad‐ justable to what the others are doing, is not only good practice but also reaping the benefits of our path together. We expect to publish our first guidance by the end of this year. A second action on regulated professions is about an initiative to estab‐ lish an analytical framework or "Proportionality Test" to help Member States to review existing regulations or when proposing additional regu‐ lation of professions. We want to put in place minimum common criteria to evaluate the regulatory requirements on professions. The proportionali‐ II.2 Joaquim Nunes de Almeida 33 ty test will be based on existing case law. It will take into account econo‐ mic considerations. And it will ensure comparability across the EU in the way that proportionality assessments are conducted. It will not impose any new reporting obligations for Member States. We will deliver this propor‐ tionality test by the end of this year. An online public consultation is run‐ ning until mid-August. A third action announced in the Single Market Strategy is the "Services Passport". We intend to put in place an electronic procedure helping ser‐ vice providers in their expansion into another Member State. This should clarify the information requirements, as well as procedural steps the com‐ pany has to comply with when going abroad. The idea is to define a clear process, whereby an authority in the home Member State acts as a contact point for the service provider and interacts with a coordinating authority in the host Member State. In this way we also aim to build a relation between home and host Member States, based on more trust and increased commu‐ nication between the two. In addition, the Single Market Strategy also announced action to ad‐ dress regulatory obstacles. We will focus on regulatory obstacles in key business services and the construction sector including requirements on in‐ surance for companies going cross-border. An online public consultation on these actions is running until end-July. For the retail sector, we will de‐ liver best practices for facilitating retail establishment and reducing opera‐ tional restrictions in the single market. They will show how it is possible to pursue legitimate public policy objectives such as urban planning with‐ out disproportionate restrictions on market access. And in order to make existing rules established under the Services Directive work better in prac‐ tice, we will reform the procedure whereby Member States share informa‐ tion on changes to national legislation. We want to establish a true consul‐ tation process whereby Member States, the Commission and stakeholders can exchange views and best practices on draft national measures. As you can see, these actions are not about Europe introducing new regulation. This is about better regulation. It is about making an intelligent use of existing tools. It is about all of us reviewing whether we need regu‐ lation and whether the best suited means have been chosen in order to pro‐ tect legitimate public interest objectives while giving entrepreneurs and services providers the space and freedom they need to do what they are best at: get on with their job. We can only succeed if the Member States agree to these goals and take the necessary steps to address the outstand‐ ing issues. And we can only succeed in partnership. What we are doing at II The Practical View 34 EU level is designed to stimulate greater reform in Member States. It is about seeing the potential of more productive, more integrated, more effi‐ cient services market as our mutual gain. Today’s conference is a great op‐ portunity to raise the awareness of the need to act in favour of more com‐ petitive services markets. Academic research brings quality and facts to the political debate. This is very much needed. This is not about emotions. This is about securing the right conditions to deliver jobs and economic growth for the single market, for Germany. This is why your perspective and input are so valuable. II.2 Joaquim Nunes de Almeida 35

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Abstract

‘How Can We Boost Competition in the Services Sector?’ is a key question in the process of creating a more effi-cient economic environment in Germany. This book contains a collection of conference contributions on service sector reforms from members of academic institutions, ministries, the EU Commission and other organisations. The conference consisted of a keynote on the importance and implementation of structural reforms in Europe and two panels that dealt with the evaluation of past reforms in the services sector and the potential scope and effects of further reforms.

Since the 1990s, productivity growth in Germany and other Member States of the European Union has been significantly lower than in the US. The development of productivity growth in the services sector is estimated to account for two thirds of this widening gap. The European Commission advocated reforms in the services sector in its country-specific recommendations for Germany. At a conference in Berlin in July 2016, experts from various fields presented and discussed studies on service sector reforms.

With contributions by

Oliver Holtemöller, Brigitte Zypries, Joaquim Nunes de Almeida, Dirk Palige, Henrik Enderlein, Stefan Profit, Davud Rostam-Afschar, Paolo Mengano, Oliver Arentz, Erik Canton, Jochen Andritzky

Zusammenfassung

„Wie können wir den Wettbewerb im Dienstleistungssektor stärken?“ Dies ist eine Schlüsselfrage für eine größere Leistungsfähigkeit des ökonomischen Umfelds in Deutschland. Dieses Buch versammelt Konferenzbeiträge von Mitgliedern wissenschaftlicher Einrichtungen, von Ministerien, der EU-Kommission und anderen Organisationen zu Reformen im Dienstleistungssektor. Die Konferenz umfasste einen Eröffnungsvortrag zur Bedeutung und Durchführung von Strukturreformen in Europa und zwei Gesprächsforen zur Bewertung vergangener Reformen im Dienstleistungssektor und zur möglichen Reichweite sowie zu den möglichen Auswirkungen weiterer Reformen.

Die Zunahme der Produktivität ist seit den 1990er Jahren sowohl in Deutschland als auch in anderen Ländern der Europäischen Union deutlich geringer als in den USA. Es wird geschätzt, dass die Entwicklung des Produktivitätszuwachses im Dienstleistungssektor für zwei Drittel dieses zunehmenden Abstandes verantwortlich ist. Die Europäische Kommission spricht sich in ihren länderspezifischen Empfehlungen zu Deutschland für Reformen in diesem Sektor aus. Auf einer Konferenz im Juli 2016 in Berlin stellten Experten aus unterschiedlichen Bereichen Studien zu solchen Reformen vor und diskutierten deren Ergebnisse.

Mit Beiträgen von

Oliver Holtemöller, Brigitte Zypries, Joaquim Nunes de Almeida, Dirk Palige, Henrik Enderlein, Stefan Profit, Davud Rostam-Afschar, Paolo Mengano, Oliver Arentz, Erik Canton, Jochen Andritzky