Thousands of dock workers have gathered in Strasbourg at the weekend to march on 16 January against a draft EU directive to liberalise port services. A march that turned out fruitful since MEPs rejected the so-called 2nd ports package. This is the second time the proposal to foster port competition has been rejected by the European Parliament, the first one being in November 2003. The bill’s aim was to end monopolies on cargo-handling and piloting services and enhance competition in an otherwise typically state-owned sector.
The fears of excessive economic liberalisation, initially reflected on the
“no” votes of the French and the Dutch, continue to create controversy and spread criticism of the EU & its institutions. And the real battle is yet to begin, if one considers that the highly controversial Services Directive is expected to be put to vote once more next month in Parliament, followed by the Council of Ministers’ deliberation on the issue. So why do so many people oppose it? It is claimed that higher labour mobility will bring about more competition. Existing firms will then experience job losses. Needless to argue that this way of viewing things is far from a dynamic one. It rules out the dynamic potential of the services sector for the European economy: the new entrants will contribute to an enormous overall job creation.
Let me better illustrate this using figures. The services sector accounts for 60% of the Union’s GDP and 70% of the Union’s employment. An OECD study has forecast that should the Services Directive be properly implemented, GDP growth will reach 1.8% and 2.5 million new jobs will be created. The same study suggests that the more liberalised a sector, the lower the unemployment in the economy. Negative redistribution effects feared by many are entirely unjustifiable and do not occur. It is the rise of growth rates and efficiency stemming from these changes that strengthens competitiveness and gives birth to new jobs. Moreover, dynamic economic models have showed that moving from an economy populated by monopolists to one with five competitors per industry leads to a decrease in unemployment of more than 30%, accompanied by a doubling of real wages. This is to confirm that job losses caused by incumbent firms’ decline are nothing but benign short-term repercussions.
My approach to the issue is as follows: when compared to industry and agriculture, services are levels higher in terms of scale economies and efficiency concentration. Thus there is certainly much more to be gained from further liberalisation in services. Job creation will increase coherence and raise income levels; prices will fall after the opening up of competition. Protectionism cannot be the answer to the problems Europe is facing. Incumbent businesses, corrupt bureaucrats, protected workers and beneficiaries of government subsidies join powers to oppose the degree of competition required to force economic changes. Of course for everyone to enjoy it, competition must be fair and free, a task not easy to achieve given that it will always upset anti-market intellectuals, bureaucrats who promote government programmes and in short all those who gain directly or indirectly from distortions.
It is also worth noting that the Internal Market Committee of the European Parliament, through its amendments to the initial Commission proposal, managed to take into account trade unions’ claims and promote equality of interests for all. The services directive should therefore be the common basis towards making Europe the most competitive economy of the world. Competitiveness is closely linked to productivity; increased productivity means more choices for consumers, enterprises and workers, more freedom for everybody. The services directive can be the response to the competitiveness problem of Europe and the stepping stone to the completion of the Single Market, an idea envisaged by one of the fathers of European Integration, Jacques Delors. A borderless market for goods, services & capital together with the free movement of people, as enshrined in the European Union treaty, will then become reality for the first time, a superb achievement in European history. Let’s stop worrying and embrace reform if we want to provide a better living to future generations.
