A Paradigm Shift: Services Trade Reform in the European Union

This chapter asks why and how services that were not previously thought of as tradable have increasingly been opened up to international competition in EU member states including even in Germany. The chapter contrasts an explanation that focuses on the impact of economic interests with an explanation that focuses on the impact of EU membership. The chapter argues that lobbying by producers or users of services cannot fully explain reform nor does EU membership simply constrain reluctant member state governments to adopt new legislation. Instead the chapter argues that in important service sectors the German government has promoted trade reform even sometimes in the face of strong opposition from providers, consumers, and unions. The chapter maintains that a crucial key to liberalisation is the emergence of a break in government opposition. In particular, the ability of the government to re-interpret services as regular tradable products combined with new regulation to “shelter” exposed groups such as consumers and workers against potential harm. Implications of this claim for future service sector liberalisation are subsequently discussed.