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Note from Gary Titley:

Dear Colleague,

This month, in addition to Strasbourg Round-Up, I am attaching two Brussels Briefings on issues that have been getting a great deal of attention in the media during the last few weeks and which I thought might be worth explaining in more detail. These are:

Brussels Briefing No 27 - The Services Directive

Brussels Briefing No 28 - Energy

I do hope you will find the attached material of interest.

With best wishes

Gary Titley MEP

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Euro Office:
16 Spring Lane
Radcliffe
Manchester M26 2TQ
Tel: 0161 724 4008
Fax: 0161 724 4009
E-mail:gary@garytitley.com

Plumbers, hairdressers, architects and builders will soon be free to set up shop anywhere in the EU after MEPs overwhelmingly gave a first reading to a hotly debated measure to liberalise the provision of services across Europe (see Brussels Briefing attached). If it eventually reaches the statute book, the new Services Directive will remove some of the obstacles that have long prevented UK companies from doing business abroad.

Companies based on the continent don’t face the same problems doing business in the UK because our markets are already liberalised and therefore free for them to come in and start trading. The Services Directive will make sure this arrangement becomes reciprocal. “If the French can do business in the UK, then we want to do business in France,” explained Labour’s Leader in Europe, Gary Titley. “That’s only fair.”

Services currently account for over 70% of EU GDP but only 20% of trade between EU member states. By unlocking the sector’s huge growth potential, it is estimated that over half a million new jobs will be created. In addition consumers will get more choice and there will be greater downward pressure on prices. Gary added: “We have brokered the best deal possible for the UK. It lets us take our business across the Channel, but at the same time protects terms and condition for British workers”.

This month the European Parliament condemned the publication of cartoons depicting the Prophet Mohammed and the violent backlashes that have since followed. The cartoons, which initially appeared in Danish newspapers, sparked worldwide outrage and caused great offence to the Muslim community.

Speaking during an emergency debate on the issue in Strasbourg, Gary said: “This whole episode could have been avoided if the Prime Minister of Denmark had agreed to meet the ambassadors of Arab and other Muslim states to hear their concerns. The failure to meet with Muslim leaders showed a lack of respect for sensitivity to the Muslim community. This has allowed the whole issue to get out of hand.

“Equally, nobody can defend the violent protests that have lead to numerous deaths around the world and the torching of the Danish embassy in Lebanon. But we must not forget that a large majority of the Muslim community have made their feelings known through peaceful protest. One of my biggest concerns now is that this issue is being deliberately exploited by right wing parties to stir up Islamaphobic feelings on the one hand and fanatical religious fundamentalists on the other,” Gary added.

Chicken breast, legs and drumsticks are set to become healthier and tastier after a vote in the European Parliament laid down better living conditions for broiler chickens. MEPs gave the thumbs up to new laws giving chickens that are reared ‘battery style’ more space. They also want better training for staff looking after the chickens and more regular inspections to make sure that producers abide by the new regulations.

Speaking after the vote, Gary said: “Five billion chickens are slaughtered in the EU every year. It is a sign of a civilised society that we treat animals well. That’s now more important than ever, with all the food scares we’ve had over recent years, on top of the current threat from bird flu. Improved conditions will in turn reduce stress in the birds and improve their flavour when they finally reach the dinner table”.

Gary dismissed fears expressed by some EU chicken farmers that they might lose competitive advantage. “There is no point in getting involved in a race to the bottom,” he warned. “In the longer term, European chicken producers will be unable to compete with countries like Brazil. Instead they need to concentrate on improving quality”.

Just as MEPs were packing their bags ready to leave Strasbourg at the end of the February plenary session, the European Commission announced that it would be taking “decisive” action against European energy companies responsible for soaring gas and electricity bills. It decided to act after an inquiry launched last summer revealed serious problems with the way the EU energy market was functioning.

Certain energy suppliers, based in continental Europe, had been deliberately distorting the market to drive up prices, especially for UK consumers, the inquiry found. One of the big problems is that, unlike in Britain, most of the EU does not have a truly competitive energy market. That effectively creates a monopoly whereby the dominant suppliers can push up prices virtually at will.

Welcoming the announcement, Gary said: “The Commission uncovered clear evidence that certain suppliers were deliberately restricting the amount of energy flowing into the UK from Europe. That has forced up household bills in the UK even higher. What has been happening over recent months is nothing short of scandalous. We’ll be watching closely to make sure the Commission now takes the urgent action it’s promised to crack down hard on those companies responsible for this flagrant abuse of UK consumers.”

After a bitterly disappointing by-election defeat in Dunfermline, Gary’s good friend and Deputy Leader, Catherine Stihler, returned to work in the European Parliament shaken but not stirred. And she soon got back to winning ways by successfully steering a report through the Parliament aimed at protecting Scottish fishing waters.

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Few pieces of European legislation have provoked more heated debate over the last decade, than the Services Directive. In essence, this proposal has become the battleground for two competing visions of Europe’s future. Do we continue with a very rigid social model or do we change direction and move further towards market liberalisation? The directive passed its first reading stage at the European Parliament’s February plenary session in Strasbourg. But MEPs only gave it the green light after the original proposals by the European Commission had been heavily amended to take on board widespread concerns, not least those expressed by the labour movement.

The services sector accounts for over 70% of EU GDP but only 20% of trade between EU member states. Non-public services account for 54% of EU economic output and 68% of employment in the EU. Over 90% of service providers are small or medium sized firms that simply do not have the resources to comply with multiple sets of rules in different countries. They also often find that extra red tape and administrative obstacles are put in their way, which often do not apply to domestic companies. That means they are effectively restricted to working in one country only.

The Services Directive requires member states to streamline their regulatory systems to make sure that businesses do not face unjustified, discriminatory and disproportionate regulation. Research conducted by Danish academics found that the UK would be one of the biggest beneficiaries of an open market in services. An estimated 600,000 new jobs would be created across the EU and real wages would rise by 0.4%.

The legislation covers a wide range of different services provided to consumers or businesses or both. Examples include management consultancy, advertising, recruitment, legal or fiscal advice, estate agencies, construction including architects, travel agencies, sports centres and amusement parks. There are, though, many exclusions including services of general interest – what we know as public services - like public education, public administration, defence and police, which are of a non-economic nature and are provided by member states in fulfilment of their public duties. Amongst other excluded categories are healthcare, taxation, financial services and transport.

Those public services, which are provided on a business basis, are known as services of general economic interest (SGEI). Many of these will be covered by the directive, but the European Parliament voted to exclude social services, public housing and child care. Member states will also be free to define what they consider to be SEGI, which may be treated differently to other business services. Moreover, for vital services like the public utilities that have already been opened up to competition, member states would still be able to impose obligations or regulations for reasons of public policy, public security or public health.

In the run-up to first reading stage in Strasbourg, a great deal of misinformation was circulating about how this legislation would undermine workplace pay and conditions. That is categorically not the case. Amendments approved by MEPs will make doubly sure that employment laws, including the minimum wage and health and safety provision, fall outside the scope of the new legislation. Moreover, the Posting of Workers Directive will continue to apply in full. This requires that workers sent to work in another country, including those in temporary positions, enjoy the same terms and conditions as those that apply in the member state where the worker is posted.

More than any other aspect of the proposed legislation, it is the CoOP that has generated the greatest controversy. But as a result of amendments approved by the European Parliament, labour and health and safety provision is now explicitly excluded from the legislation (see above). Moreover, further amendments have effectively killed off the CoOP as laid down by the Commission in its original proposals. In its place, new provisions have been included under which any service will be allowed unless specifically excluded on grounds public policy, public security or public health.

What this means is that one member state will not be able to restrict cross-border services from a provider based in another by applying its own administrative and legal regime over and above the requirements the service provider is already subject to in its home country. In other words, if a service provider is authorised in the member state where the firm is based, it will not need to get a new authorisation in another member state.

The UK government and the labour movement as a whole reacted positively to the legislation’s first reading. The ETUC issued a press statement, declaring that the majority of its demands had been met and that the vote was a “real victory for European workers”. In the UK, the Acting General Secretary of the GMB, Paul Kenny, wrote to all Labour MEPs to say that “significant progress” had been made in “putting right the wrongs” of the original proposal. “We are particularly pleased to see a clear exclusion of labour law, the assertion of fundamental rights…. and the removal of the threat of country of origin from eroding employment conditions and collective agreements.”

It is no exaggeration to say that this has been one of the most difficult and complex pieces of EU legislation to ever come before the European Parliament. The text that MEPs approved at first reading is vastly different from the original proposal brought forward by the European Commission a couple of years ago. We were given a pig’s ear of a directive. We have tried to make it into a silk purse. We have brokered the best deal possible for Britain that lets us take our business across the Channel and builds in protection and standards for workers. But the legislation is still at early stage. It now goes back to the Commission and then the Council of Ministers for further consideration. The final outcome, then, is still very much work in progress. But the main pillars of the directive have been put in place and the days of certain other countries putting up artificial barriers to British business are numbered.

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One of the most important issues facing Europe today is energy. The effects of climate change, highly priced oil imported from unstable or potentially hostile states and the ongoing “gas row” between Russia and her neighbours, all combine to make improving energy efficiency and energy management top priorities. Four-fifths of Europe’s total energy consumption and almost 75% of imported energy is based on fossil fuels (oil, coal and natural gas). Moreover, the EU’s own energy production meets barely half its needs. If nothing is done by 2030, energy imports will amount to 70% of total needs and 90% of our oil is likely to be imported. This is a Europe-wide problem, which demands a Europe-wide response.

On 1^st January 2006, new legislation covering the energy performance of buildings came into force. Buildings currently account for about 40% of all energy used in the EU – with private households the biggest consumers. The measures introduced establish a common method for calculating energy performance across the EU, set minimum standards for energy efficiency and establish a system allowing people to measure domestic energy use. These all have the potential to reduce EU energy consumption by a fifth.

Another piece of legislation on electricity production from renewables was adopted in 2001. Under it, member states agreed to comply with national targets for renewable energy sources. They also pledged to set up a system to guarantee the origin of green electricity and to introduce additional measures to boost the use of green electricity. This greater emphasis on green energy means that more than 20% of the electricity consumed in the EU by 2010 should come from renewable energy sources.

Signed in Athens in October 2005, the Energy Community Treaty (ECT) brought into being the largest internal market for electricity and gas in the world. There are 34 participating countries – the EU-25 together with Croatia, Bosnia and Herzegovina, Serbia, Montenegro, Albania, the former Yugoslav Republic of Macedonia, Romania, Bulgaria and UNMIK Kosovo.

The Treaty falls into three parts. The first extends the application of EU laws on energy, renewables, the environment and competition to all ECT signatory countries. This should in time create a level playing field, provided there are credible, effective and properly policed transition dates.

The second part of the treaty will create regional mechanisms to deepen the integration of local energy markets. This could take the form of arrangements to accelerate the development, for example, of gas pipelines (connections to the Caspian Sea and the Middle East), as well as other crucial infrastructure. The final part of the treaty codifies an agreement to work toward common policies for external trade, mutual assistance and the removal of internal energy market barriers.

To ensure security of supplies, a wide range of policy initiatives will be required, aimed at diversifying energy sources and technologies, but at the same time paying heed to geopolitical realities. On gas, the European Commission has placed on public record its belief that that “there is a mutual dependence between Russia as key supplier, Ukraine as key transit country and EU as key consumer.” With global demand for gas set to grow by up to 3% a year for the next 15 years, the recent Russia-Ukraine crisis has underlined how much is at stake. The EU relies on Russia for 25% of its gas and 30% of its oil supplies. Some EU members, such as Slovakia and Finland, are totally reliant on Russian gas. Meanwhile others like Poland and Hungary are heavily dependent on Russian gas, 90% of which passes through Ukraine.

Unlike oil, which is traded globally and easy to ship, making it difficult to cut off supplies, gas is delivered though pipelines crossing several countries that can be closed down at will. Good relations are therefore vital for producers and consumers alike. Since the sixth EU-Russia Summit in October 2000, a regular energy dialogue has been taking place between the EU and Russia with groups of experts working on areas of common interest.

The UK is a strong supporter of a truly open and competitive single energy market. That is certainly not the position at present, according to a European Commission inquiry that reported earlier this month. It revealed that certain energy suppliers, based in continental Europe were deliberately distorting the market to drive up prices, especially for UK consumers. They could do this because, unlike in Britain, most of continental Europe does not have a competitive energy market. As a result these companies enjoyed an effective monopoly and were able to manipulate the market to push up prices virtually at will.

In response to these findings, the Commission has pledged to crack down hard on the suppliers abusing UK consumers. Labour MEPs will be monitoring developments closely over the coming weeks and months to make sure the Commission is true to its word. In the longer term, the EU needs to focus on setting an overarching framework that, not only ensures the development of a well functioning single market, but also develops a common negotiating strategy with external energy partners, such as the dialogue agreed with Russia. Running in parallel with this, through clusters of member states, the aim should be to create competitive regional markets that allow regulatory barriers to be broken down. Currently differences in the regulatory frameworks between member states often pose insurmountable barriers.

Meeting Europe’s energy needs will be one of the biggest challenges we face over the next few decades. Recent events demonstrate only too clearly that one country cannot achieve that alone. Only by working together can we ensure we develop a safe, secure and affordable energy supply that does not accelerate climate change and cause further untold damage to our planet.