A critique of the EC green paper on Services of General Interest
David Hall, PSIRU, University of Greenwich d.j.hall@gre.ac.uk
September 2003
This paper was commissioned by EPSU
1.Introduction
1.1.General
The relationship between public services (or services of general interest - SGI ) and the treaty of the European Union (EU) has become an increasingly important issue. There are two general issues, both of which also concern the role of democratic politics in the EU:
whether public services, provided through national and local democratic mechanisms, have equal or greater priority within their sectors than the competition principles of the EU internal market
the issue of subsidiarity: whether EU law and policies should override or supplement national or local decision-making on public services.
The green paper is the contribution of the European Commission (EC - or Commission) on these issues. Despite making a number of important points, the Green Paper fails to deal with the fundamental questions at stake. This is partly due to its unwillingness to recognise conflicts between the internal market and competition on the one hand, and the delivery of public services on the other. It is also partly due to deliberate self-limitation, because the Commission has chosen not to draft a new directive as requested, but to offer a paper which asks a series of questions.
This paper offers a critical review of how the green paper deals with the issues. In conclusion, it suggests that the paper, together with other recent initiatives, indicate that the Commission wishes to extend the liberalisation of the internal market further into public services, and that it is willing to use both the internal market and competition rules of the EU, and the GATS negotiations of the WTO, in order to do so, even where these cause conflicts with states’ preferred policies on public services.
1.2.Inconclusive structure
The paper is 29 pages long, with five main parts plus an introduction and an “operational conclusion” (part 6, para 107), which consists of nothing except an invitation to all interested parties to submit comments and answers to questions. The paper has an annex, “Public service obligations and instruments of Community policy in the area of services of general economic interest”, also covering 29 pages. The function of the annex is not at all clear. The paper says that it (para 13): “sets out public service obligations in more detail, as derived from existing sector-specific legislation and the policy instruments available to ensure compliance with these obligation”. But the first section of the Annex, on obligations, merely covers the same ground as the paper itself, both referring to general issues and to specific elements in the with identical subheads to the main elements (universal service, continuity, quality of service, affordability, user and consumer protection - all covered in 3.1, and again in the Annex A I.1). The second section of the Annex covers policy instruments which it says ensure ‘compliance’ with these general obligations - regulation, financing, evaluation and ‘trade policy’ (which is in effect a discussion of the impact of GATS). However, ‘financing’ and ‘trade policy’ cannot really be described as instruments to ensure compliance with general obligations of SGI - their role in the annex is to constrain the operation of SGI within the limitations on state aid and the framework of the internal market and GATS.
1.3.“Inherent conflicts” between public services and the internal market
The failure of the paper to recognise conflicts between the internal market rules and public services is its most striking omission. These conflicts have arisen because of the continued development of the internal market and competition policies of the EU. These have had increasingly significant impact on the structure of SGI in member states, through four main mechanisms:
liberalisation directives prohibiting integrated public sector monopolies - for example in energy, postal services, and rail;
legal challenges to the funding of public services, for example public transport, based on the treaty’s restrictions on state aid;
legal challenges to direct provision of services by public authorities, or to restriction on provision of services within a country (for example healthcare), based on competition rules;
liberalisation of trade in services (GATS) at the WTO, where the EC may enter negotiations which can lead to services, for example water, being opened to private competition on behalf of member states.
These conflicts have caused widespread concern and debate, in the European Parliament, in the meetings of the EU council of ministers, at national level, amongst interest groups, researchers, the general public - and in the debates on the proposed new constitution.
Healthcare, for example, have been affected in unforeseen ways by court rulings under EU competition law. Although healthcare systems are said in the treaty to be clearly a national responsibility, the EU treaty has created a complex set of relationships. There are specific EU-level responsibilities for occupational health and safety, medical qualifications, and public health - but as complementary to national systems.
Other parts of EU law affect healthcare systems, however. The availability of cross-border care, regulated under most national health systems, has been the subject of court cases under the ‘free movement of goods and services’; health care providers may be subject to competition law; the pharmaceutical industry is subject to the internal market, while the price of pharmaceuticals is a key element in national health systems; the role of health insurance schemes is affected by the EU insurance directive.
The impact of these overlaps was the subject of a research project, funded by the EC itself. It concluded that there was a contradiction between EU internal market and healthcare provisions, but that the two were inextricably intertwined: “in political terms, there appears to be a contradiction between the purpose of the single European Market (SEM) and the manner in which statements in article 152 are widely interpreted...” [the principle of subsidiarity of health services]. “the relationships between health services ....and the SEM are intertwined in such a complex manner that it is virtually impossible to separate them”. It concludes: “the basic policy choice at European level concerns how best to resolve the inherent conflicts between the SEM and health policy”.
The green paper, by contrast, cannot even start to discuss how these “inherent conflicts” might be resolved, since it is not prepared to acknowledge the existence of such contradictions. The nearest it gets to doing so is when it acknowledges that the EC has not given priority to securing public services for citizens, because it is taking “specific direct measures to enforce Community rules in the areas of competition and State aid. This could give the impression of an imbalance in Community action that could ultimately affect its credibility” (para 33). This is correct in identifying an imbalance, but it is more than a problem of image - it is a real imbalance in the treaty, the directives concerning services of general economic interest (SGEI), and, now, in the Commission’s approach to the question of a draft directive.
The Commission’s wish to avoid recognising conflict perhaps underlies one of the questions the paper says it raises: “any measures that could contribute to increasing legal certainty and to ensuring a coherent and harmonious link between the objective of maintaining high-quality services of general interest and rigorous application of competition and internal market rules” (para 13) . This search for a ‘coherent and harmonious link’ may be doomed to failure if there are fundamental contradictions between the objectives of public services and internal market rules.
1.4. Part of wider series of initiatives
This green paper should not be seen in isolation. Since the end of 2002, various directorates of the European Commission have produced initiatives which are intended to extend the use the role of the private sector in public services, especially water. In addition to the green paper, the initiatives include:
A report on the scope for introducing competition into water services was commissioned by the European Commission (EC) and published at the end of 2002, by DG Competition. It finds little evidence of how competition could benefit the sector, but nevertheless encourages more PPPs.
An EC Guide to Successful Public-Private Partnerships was produced by DG Regio in March 2003 specifically in the context of the ISPA programme, to make its funds more easily available to private sector projects. In is in effect a guide on how to push through PPPs, and in the process collect ISPA grant money, not a guide on how to make best decisions on infrastructure projects.
The EC’s DG Markt published the EU “Internal Market Strategy Priorities 2003 - 2006”, in May 2003 . The paper identified services of general interest, and water in particular, as sectors where the DG wants to open more of the market to private sector operators. Commissioner Bolkestein had already said in a November 2002 speech that he wants to open the water sector to competition.
The EC’s trade section, DG Trade, handles the EU’s negotiations in the World Trade Organisation’s (WTO) general agreement on trade in services (GATS ). DG Trade has made two sets of proposals concerning water: first, to redefine environmental services, so that water is covered by GATS; and second, requests to many countries to open their water services. These requests were unofficially leaked, and have been published along with a critique.
An ‘EU Water Initiative’ (EUWI), a combined initiative from DGs Development, Research, Environment and External Relations, was launched in 2002 at the WSSD in Johannesburg, as an EU contribution to the objectives of sustainable water management, water security, and the millennium goal targets for extending water supply and sanitation. EUWI partly aims to support the business activities of EU multinational companies by providing aid and subsidies to reduce or remove the risks they have experienced in developing countries. This was developed in close consultation with the companies .
The EC has promised to issue a paper on PPPs in Europe before the end of 2003. This is expected to set out EC thinking on the question of tendering of activities assigned to companies owned by public authorities. It will also concern the rules on concessions: a previous "draft Commission interpretative Communication on concessions under Community law on public contracts" was issued in 2001.
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