Revitalising the single market for services

The services sector plays a central role for productivity, competitiveness, and inclusive growth in the modern economy. Services account for three-quarters of the EU's GDP, create 9 out of 10 new jobs, and are crucial for the success of the green and digital transition.

Vanessa Zanetti, Trade Policy Analyst

Services are also crucial for the manufacturing industry, which increasingly relies on services as inputs in production processes and sells products alongside services.

However, statistics show that cross-border trade in services in the internal market lags far behind trade in goods. This can be attributed partly to the fact that services – at least traditional services – rely on people, meaning that challenges like language, culture, and geography are inherently part of the equation.

But there are other obstacles that make it harder for businesses to sell services abroad: disproportionate requirements on service activities, lengthy procedures to post personnel abroad, difficulty in finding information on local regulations, and challenges getting qualifications recognised by authorities in other Member States, to name a few.

No new ambitious initiative or measure can be effective without a broad political commitment by the Member States.

To tackle these problems, several initiatives have been adopted or discussed over the years, with the Services Directive and the Professional Qualifications Directive being among the most notable, but a functioning single market for services has never really been achieved. There is indeed no quick fix that, by itself, can solve the many glitches affecting the free movement of services. At the same time, no new ambitious initiative or measure can be effective without a broad political commitment by the Member States.

With this in mind, in a recent report by the National Board of Trade, we have identified 20 proposals that could help enhance the cross-border provision of services within the internal market.

  • One of the main shortcomings that we have looked at is the compliance deficit of the Services Directive, particularly in relation to its notification mechanism. This could be improved through screenings of national legislation in prioritised sectors with the aim of identifying and assessing non-notified requirements on service activities. Compliance with the Services Directive could also be strengthened by setting up national single market offices or bodies for decentralised enforcement in all Member States.

  • Another obstacle that services providers often report is the high administrative burden generated by national and EU legislation. Here we are happy to see that broader simplification programmes are being launched at both EU and national level. Such programmes should be aimed at reducing redundant or overly complex regulations that hinder service providers and prevent market integration.

    When it comes to the digital economy, it is also particularly important to ensure that new EU legislation does not generate obstacles and an even higher administrative burden for service providers. This may occur due to the overlap of different EU legal acts and inconsistent transposition at national level. Finally, improvement of the national Points of Single Contact, and their coordination with the Single Digital Gateway, could facilitate access to e-government services, thus making it easier for businesses to complete administrative procedures online.

  • A third category of obstacles that needs to be addressed is linked to the recognition of professional qualifications. To facilitate competence mobility, we propose, in particular, extending the automatic recognition system to more professions, among other things, by introducing common training frameworks. The digitalisation of recognition procedures could also help cut costs and reduce time for recognition.

  • Finally, a greater focus should be placed on reducing the number of regulated professions, particularly by deregulating those that are limited to a few countries and have low qualification requirements.

Vanessa Zanetti
Trade Policy Analyst

More information

A complete list of our recommendations is available in Swedish on our website: Fri rörlighet för tjänster inom EU

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