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Social dumping and myth

The Norwegian debate on the Services Directive is at stake. We do not discuss real challenges and opportunities of the directive, but problems that are not there. The Services Directive will be adopted in one form or another, so we have to think again.


The Services Directive aims to realize the EU's objective of a single market for services. The proposal prescribes simplification of formalities and the "country of origin principle": that the service provider's home country's rules apply to the approval and performance of the service. The responsibility for controlling the service lies with the home country of the service provider. For this to work, the host country must assist the home country in controlling the operation of the service, but only at the home country's request.

Reactions to the proposal have focused on social dumping. It is alleged that the country of origin principle means that companies can disregard working environment and wage regulations in the host country, and that increased trade in services means increased competition on prices and thus also on wages. None of the parts are right.

If a company from one country performs a service in another country and the workers are not permanently in the country the service is performed, they are posted workers. The proposed directive preserves the rules of Directive 96/71 / EC, which states that the host country's working environment and pay rules must be followed, and that the host country must control the working conditions. Social dumping as a result of companies moving to other countries to provide the same services as before, but with poorer worker protection, will not apply to these rules.

That increased competition means lower wages is an incomplete idea. Many services can only be done where the customers are. Other services are largely performed from another location already today. Should the proposal for a service directive cause any change, it must be because a number of companies suddenly move their administration to countries with poor standards for approval and control of operations, because they can operate there cheaper and underbid and outperform companies with higher quality standards. Since these countries also have lower labor costs, workers' wages and working conditions would be undermined. However, the linguistic, cultural and PR-related costs that need to be overcome are quite large and make moving operations unprofitable. There is little reason to believe that the Services Directive would have led to widespread social dumping.

The proposal for a service directive has other shortcomings than social dumping. A report by the European Parliament's Committee on Labor and Social Affairs points out legal issues that can have major effects, perspectives that have not been raised in the Norwegian debate:

  • The scope of the directive is unclear. It can lead to a rapid deregulation of national markets for what we in Norway see as a public responsibility – such as health services, employment services and home help – with the negative consequences it can have for quality and cost for service users.
  • Harmonization of regulations between EU countries has not come far enough to create enough confidence that the country of origin principle can be implemented without risking poorer quality of service consumers.

Norwegians also misunderstand the processes in the EU. The Services Directive is the subject of the so-called co-determination procedure, in which proposals go back and forth between the Commission, the European Parliament and the Council until the latter two agree. Along the way, the Commission may revise its proposal, or withdraw it. Since January 2004, the proposal for a Services Directive has been in the European Parliament, where the trade committee adopted its recommendation on November 24. The recommendation contained a number of compromise proposals that are likely to be adopted, including:

  • Most public services are exempt from the directive and it is explicitly stated that the directive should not lead to privatization. A number of other services are also excluded.
  • The directive must give way to more sector-specific rules.
  • The control responsibility will lie with the host country, which may also require that the home country perform certain checks. The requirements for simplification have been drastically reduced, and it will be possible to exercise discretion in approving service providers.

The country of origin principle is not yet agreed. There are also ambiguities around the scope, but overall the European Parliament has agreed to avert some of the worst consequences. Finalization of this phase is by plenary session in January / February. Afterwards, the Commission is commenting, and the Commissioner responsible, Charles McCreevy, has all said that the proposal is drastically changed before the Council's first reading, in line with some of the criticism. Then the European Parliament will have its second reading, before any final negotiations between it and the Council. The process will take at least another year. Then it is embarrassing that Norwegian ministers, trade unions and others all now require an EEA reservation against this directive. I have three suggestions for other solutions:

1) Norwegian authorities can contact EU governments and make constructive proposals for good solutions to common national problems with the directive. Playing in Norwegian conditions is a dead end. If we build on common interests and develop good argumentation, other governments will speak our case by arguing for themselves in the Council.

2) Norwegian actors must engage in extensive lobbying with the European Parliament. Letter writing does not hold. When other reading comes, Norwegian actors must contact the relevant parliamentarians and propose solutions to the flocks that have arisen in the Council.

3) Norwegian politicians and organizations should use their networks in European party groups and platforms. The authorities can organize a forum for the Services Directive where the Norwegian players can meet to exchange information and experience and discuss strategy. This forum must be open, and the positions Norway occupies should be well known and debated at home. Wide anchoring can be crucial in providing legitimacy during EEA treatment since.

Battling with the right of reservation meets little understanding in Brussels, and can ultimately lead to confrontation between the EU and Norway or Norway and our EFTA partners. That is what few people want outside the no-core. We can help to develop a well-established service sector, without social dumping or poorer quality of services. If we are to achieve a more sustainable Europe with work for all, we must invest in the service market. It requires a more constructive attitude than the Norwegian debate has been characterized by so far.

Christer Gulbrandsen is project coordinator, Brusselkontoret AS.

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