EU Opens Door for Cross-Border Service Providers

Source: EU agrees [sic] law liberalising cross-border service provision - FT.com

After three years of debate, the European parliament passed a new law this week that liberalizes cross-border rules for businesses involved in service industries. The new law allows workers in certain professional service occupations to work in any member country without following local laws in their profession, so long as they abide by the laws in their home country. The law would also simplify the process for professional companies to open subsidiaries in other Member states.

As a concession to socialist objections to this legislation, several categories of professional service industries were excluded, including health and financial services: By contrast, accountants, consultants, caterers, and plumbers all fall within the protections of the new law. The Eurpoean parliament gives member states until the end of 2010 to implement the new directive.

Questions

Does this type of liberalization make sense? On the one hand, it reduces cross-border barriers that impede the provision of services. On the other hand, consider the potential enforcement nightmares and competitive advantages that will exist is service providers in the same city are bound by different rules. Will this lead, as critics fear, to “a race to the lowest standards?”