The obsession to ‘complete the single market’

Originally appeared in Social Europe

The pandemic has shown just how important public institutions are for societal wellbeing—particularly properly-funded healthcare and a welfare state that protects against economic shocks and hardship. It is no longer accepted, as over the last three decades in Europe, that social and environmental challenges should be left to markets and giant corporations; rather, governments must take a powerful leadership role in securing social and environmental outcomes.

Yet announcing the ‘death of neoliberalism’ would be premature: more than just a set of ideas born among ‘Chicago school’ economists it has become deeply embedded in Europe’s political establishment, firmly anchored in European Union treaties and key legislation. Powerful forces, notably the European Round Table of Industrialists (ERT) corporate lobby, not only continue to defend neoliberal doctrines but seek to tighten their stranglehold on European societies.

A key instance is the obsession with ‘completing the single market’, launched in 1993 and allowing the unrestricted movement of goods and services across the EU member states. The European Commission (notably its DG GROW department) constantly seeks to expand single-market rules to all areas of society while tightening their enforcement. The logical endpoint would be a Europe where even water, healthcare and education would be opened up for privatisation and corporate expansion, while public authorities enjoyed ever-decreasing room to regulate the economy in the public interest.

Services directive

Exemplary is the ‘reform of services notification procedure’ which the commission proposed in 2017. Its innocuous-sounding name belied major potential social impacts. It would have enforced much more strongly the 2006 directive on services in the internal market (the ‘Bolkestein directive’), which had aimed at big-bang marketisation, outlawing obstacles to ‘freedom of establishment’ and to the ‘freedom to provide services’ across the EU.

The commission and the Court of Justice of the EU work continuously to expand the scope of the directive and undermine the public-services exemptions introduced 15 years ago. The commission does this via infringement procedures, ‘reasoned opinions’ and other steps against rules and regulations it considers—in a maximalist neoliberal interpretation—to violate the directive. Recent rulings by the court have likewise expanded the purview of the directive to include eldercare, urban planning and fire services.

Cities such as Amsterdam, Berlin, Madrid, Barcelona, Budapest and Riga were up in arms over the proposed reform, as it would have forced local, as well as regional and national, authorities to notify the commission of any envisaged regulations affecting the services directive three months in advance (rather than afterwards). Their mayors wrote a strongly-worded letter to EU negotiators, claiming it would curb their ability to act and regulate in the public interest.

The provision would not only have meant delays: it would have given the commission sweeping powers to impose its corporate-friendly interpretation of single-market legislation and tocontrol what public authorities were allowed to do. And this across a vast range of services, including childcare, water, education and training, health, gas and electricity supply.

Amsterdam described it in a 2018 resolution as ‘a threat to local democracy’. It would, for example, have empowered the commission to stop Amsterdam, Paris and other cities from introducing ambitious measures to regulate AirBnB and other platform corporations whose expansion endangers affordable housing.

An open letter opposing the proposal had accumulated by early 2019 more than 160 signatures from civil-society groups, trade unions, mayors and progressive municipal parties and the commission withdrew it in October 2020. This was an important victory but the neoliberal core of the directive remains untouched. It hinders the public, non-profit companies needed to provide universally accessible services and inhibits specifications for services companies, such as minimum staffing requirements for private care. Many regulations are only allowed if they can be justified by an ‘overriding reason in the general interest’ and an alternative is lacking.

Even though its ‘reform’ was ultimately defeated, the commission implemented one of the key demands of the business lobby: give ‘stakeholders’ the right to see and comment on new measures notified by public authorities. It launched a website where it posts all notifications of services regulations received from member states. In November 2019 it advised the retail lobby EuroCommerce that interest groups ‘are invited to provide comments’.

Corporate groups present many of their demands as removing ‘regulatory barriers’ from the single market or preventing new ones. Most politicians meanwhile parrot the mantra of ‘completing the single market’, seemingly convinced this is the cornerstone of the EU which has brought wealth and prosperity for all—unaware of or ignoring the considerable downsides and risks.

Multinational corporations

In December a high-profile campaign was launched by ERT, which consists of the chief executives of some 50 multinational corporations. With its unparalleled access to governments and the commission, the ERT has been a major agenda-setter, accelerating market-driven integration in the 1980s and 90s, including the single market and the single currency.

In its December report the ERT claimed there was a major problem with old and new ‘regulatory barriers’ in the single market and that a far stronger EU governance system was needed to remove such ‘obstacles’. Although there is often a case for EU harmonisation, many of the latter are legitimate, progressive rules. Examples of what might be targeted include affordable-housing measures, clean-air initiatives, city-zoning laws and climate regulations.

The report demanded, for instance, removal of ‘protectionist retail restrictions, at the regional and local levels’. Yet municipal rules to limit the expansion of hypermarkets on the outskirts of cities are essential to protect healthy urban centres and local economies.

The ERT refers to recovery from the pandemic and the green and digital transitions as a smokescreen for what is really an attempt to weaken social and environmental initiatives at the EU, national and local levels, whenever these are not aligned with the corporate agenda. It advocates more power for the commission (given its corporate-friendly interpretation of single-market legislation) and far stricter enforcement of the services directive—a revival of the deregulatory agenda behind the failed services-notification reform.

Particularly problematic is the ERT’s demand that the European Semester and its associated country-specific recommendations should be used to force governments and other public authorities to address ‘the obstacles for companies which they need to remove’. The commission can fine governments if they do not follow these recommendations.

Far more complete

There is already a comprehensive, tight-knit system to enforce the single market: the SOLVIT procedure, the complaints-handling arrangement CHAP, the EU Pilot project, the Single Market Scoreboard and the Technical Regulation Information System. The overwhelming majority of complaints about perceived ‘barriers’ are tackled early on. Official infringement cases have therefore become rare and cases at the Court of Justice of the EU even rarer. On top of that, an action plan for single-market enforcement was launched in March 2020, leading to a Single Market Task Force.

Indeed, a 2021 study shows that the EU’s single market is far more complete than that of the United States. The authors point out that the EU has ‘removed or mitigated a lengthening list of interstate barriers that Americans retain’ and that ‘the EU unambiguously claims and actively exercises more authority to require interstate openness than the US has ever contemplated’. The regulatory space available to states and cities in the US is far greater than in the EU, yet the ‘“incompleteness” discourse rationalizes an ongoing EU agenda’.

The complaints-based enforcement system for the EU single market is far from a paper tiger. Corporate lobbies use it to pre-empt new environment and social-protection rules emerging at the national level. A recent example is the complaint submitted by French and EU-level airport groups against the French government’s ban on domestic flights of less than 250 kilometres (journeys easily made by train).

The ban was part of the French ‘Climate and Resilience’ law adopted in July 2021, in partial response to the Citizen Climate Convention. Airport lobbies claimed that it violated ‘one of the founding principles of Europe, that is to say the freedom to provide services’.

In December the commission launched an examination procedure, which means the ban is suspended until it decides if it is ‘proportionate’ and ‘non-discriminatory’. The verdict will be an important indication of whether the commission interprets single-market law in a way that prevents much-needed climate initiatives.

The French ban is just one of many examples of initiatives, large and small, to accelerate the transition to carbon-free societies with a better quality of life, which are emerging at the national and local level. In recent years, and especially with the pandemic, hundreds of European cities have introduced strong measures to reduce pollution from car traffic and create more space for cyclists and pedestrians.

One might assume that such policies to avoid hundreds of thousands of premature deaths due to bad air quality would be uncontroversial. But the ERT considers these municipal initiatives a problem and calls for ‘a harmonised and coordinated approach towards the implementation of zero-emission city zones’.

Initiatives from cities, regions and governments are crucial for the ecological transition, securing genuine change on the ground and providing inspiring examples. This dynamic should not be hindered by heavy-handed enforcement of single-market rules or by giving corporations even more power to challenge local regulations.

Democratic legitimacy

The ERT’s campaign is the lobby group’s contribution to the Conference on the Future of Europe. The CoFoE, with a closing conference scheduled for May, includes EU citizens randomly selected and aims to boost the EU’s democratic legitimacy: ‘EU citizens [must] see and feel that they can influence EU policies,’ the commission vice-president for democracy and demography, Dubravka Šuica, said at the end of January. Against this background, the ERT’s self-serving proposals are an embarrassing corporate attempt to gatecrash a citizens’ party.

Tightening single-market constraints further would not only harm democracy but stifle the ecological transition Europe desperately needs. Rather than being too weak, single-market governance is too rigid and gives excessive power to corporations. A Europe that turns its back on neoliberalism should modernise this governance to revitalise democracy, firmly protect public services and enable the explosion of the strong national and local measures needed for social justice and a radical ecological transition.