The Internal-External Policy Equation: Welfare Services, the Internal Market and Trade Policy

The EU's Long-Standing Commitment to the Global Liberalization Agenda

Since the rise of multilateral negotiations in the 1990s, the EU has been a driving force behind a rising agenda promoting trade liberalization in general, and services liberalization in particular. In 1994, the Uruguay round of negotiations was closed by the creation of the WTO. The concomitant extension of the General Agreement on Trade and Tariffs (GATT; Maatsch and Gattig) from 1947 to services—with the signing of the GATS—was a result of European activism going back to the 1980s. On the one hand, networks of experts, notably via the Organisation for Economic Cooperation and Development (OECD), were promoting the opening of national services markets as the new driver of international trade and growth. These new epistemic communities across Europe were made of government personnel, international agencies, firms as well as journalists or academics who had ideological or economic motivations for extending free trade to the new realm of services (Nicolaidis and Drake 1992). On the other hand, private corporate interest groups close to the European Commission were emphasizing the competitiveness of European firms in this context. In 2001, the Doha round was launched with a strong emphasis on services. For the USA, EU countries and increasingly emerging economies like India, the significant importance of services in their economy means that this is a domain where they can compete globally and gain market shares abroad (Hoekman et al. 2007). Besides financial and business services, the EU has large competitive firms in a number of sectors which touch upon welfare services, including telecommunications, energy, environmental services (water distribution, air pollution), and increasingly human-resource intensive services such as health services. In these sectors, the EU has consistently claimed strong so-called offensive interests, that is, seeking market openings in other regions of the world, developing countries in particular (2011b ). Throughout the 1990s and 2000s, the important potential gains involved with services trade were seen by powerful economies as a means to offset potential losses due to further liberalization in agriculture (Young 2007).

More broadly, market liberalism—as a policy practice and as a discourse—is a key instrument for the EU to exercise its influence on the global stage (Rosamond 2013). More than any other policy realm, however, the issue of welfare services in international trade negotiations epitomizes the tension at the heart of the EU’s ‘embedded liberalism’ compromise. Fundamentally, this compromise involves a fundamental dilemma between the promotion of market liberalization abroad and the resentment of liberalization’s social impact in the European domestic arenas (Meunier and Nicolai'dis 2006) or even a desire to promote the ‘European social model’ abroad. In fact, the EU has pursued an instrumental strategy, trying to prompt developing countries to open their markets to European firms while protecting its own welfare services through legal provisions. Thus, on the one hand, globalization is at the centre of the narrative-driving liberalization in Europe. Liberalization of public utilities has been advocated by interest groups within the technology-oriented industries, which have gained influence on the European institutions by organizing transnationally (Bartle 2005). This is reflected in the relationship of the DG Trade of the European Commission with various interest groups. Traditionally, DG Trade has been close to large corporations, which provide significant input to the EU trade policy (Woll 2006). In 1999, the creation of a Brussels- based lobbying platform specifically dedicated to services, the European Services Forum, was promoted by the EU Commission, notably through Leon Brittan who was successively Commissioner for competition (1989— 1993), for trade (1993-1995) and for external relations (1995-1999). In contrast, relations with NGOs dealing with global issues (trade, poverty, development, etc.) are mostly limited to formal consultation procedures (Kohler-Koch and Finke 2007).

Globalization has therefore been used discursively to construct an imperative of competitiveness where liberalization within the internal market is seen as a means to make EU firms stronger. Negotiations in the WTO and the need to offer concessions to trade partners have also been invoked to create pressure for market opening. On the other hand, a number of welfare services have been protected from far-reaching liberalization by EU rules (as it will be explained in the following section).

Due to various disagreements between the Western trade powers and the so-called BRIC countries (Brazil, Russia, India and China), the Doha round remained largely unfruitful. Neither did the agenda for services liberalization make a spectacular step forward. Against this backdrop, the EU has nevertheless continued to actively promote services liberalization. Its comparative advantage in this domain is at the core of the European narrative about competitiveness. In times of slow growth and high unemployment in the mid-2000s, the further liberalization of trade was presented as the main engine of Europe’s competitiveness. This was the main theme of the ‘Gobal Europe’ agenda promoted by the British Commissioner for trade policy, Peter Mandelson, in 2006. Here again, the internal and external liberalization of services have been mutually reinforcing. When analysing ‘Global Europe’ in relationship with the debate over the EU Services Directive, a circular reasoning appears, whereby access to markets abroad can stimulate the EU’s competitiveness while, at the same time, it is the completion of the internal market which would make European firms more competitive on global markets (Hay 2007). Beyond the ideological and discursive commitment to the global liberalization agenda, the next section examines the institutional and legal devices which have served the promotion of this agenda.

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