CHAPTER 2
Its expected benefits were subjected to a number of assessments. Because of the wide scope of the Directive, particularly in its draft (not the final) form, these assessments serve as illustrative estimates of the potential gains of deeper integration of services. How big are the likely gains from homogenizing regulations and reducing regulatory barriers? Researchers have used two approaches to answering this question: evaluate the effects of proposed legislative reforms, and compare the single market with the internal market of benchmark countries. Both suggest that deeper integration through dismantling the regulatory barriers can yield significant trade gains. Kox and Lejour (2006) focus on other commercial services, excluding transportation and travel, to be close to the scope of the Services Directive. The assumption is that the Services Directive will be fully implemented. Explicit barriers to trade and direct investment are expected to be reduced substantially, while barriers to competition are only moderately reduced. Their results indicate that cross-border trade in commercial services in the European Union could increase by 30–60 percent, while the foreign direct investment stock in services might rise by 20–35 percent. Copenhagen Economics (2005) evaluates the effects of the Services Directive on trade in regulated professional and business services and distributive trade. The analysis indicates that the Services Directive will reduce the existing barriers to service provision by more than 50 percent. The direct policy impact—intra-EU trade enhancement—is between 1.0 and 9.4 percent for cross-border trade and between 1.3 and 2.7 percent for foreign direct investment, for the three sectors included. The analysis also predicts gains in employment and well-being. As highlighted by Monti (2010), however, poor implementation and poor enforcement of EU directives regulating the single market continue to hamper the realization of these gains. Improve the services trade among candidate and partner countries For the non-EU economies in Europe, the problems are more severe. Services exporters have trouble accessing the EU markets. They also have difficulties accessing other nearby markets, as a recent World Bank report documents (box 2.10). Even the services traders in the former Yugoslavia—who have shared language and legislation for decades—now have trouble accessing regional markets. The typical barriers that exporters face relate to movement of natural persons (such as work permits for professionals and unskilled labor), licensing procedures (licenses issued in the home country are not recognized by the importing country), and recognition of professional skills and diplomas (qualifications obtained in the home country are not recognized). The difficulty of such barriers differs by activity: they present a significant obstacle to firms and individuals in construction, transport, legal, and health sectors, but not for ICT firms, banks, or telecommunications companies. For them, the agenda includes facilitation of trade in traditional services (construction, transportation, and travel) as well as attempts to revive trade in modern services with the economies of the European Union.
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