EU Services Notification Directive will undermine democracy within cities

In a blog post last week – Financial services agreements – the EU as a neoliberal, corporatist project (November 13, 2018) – I wrote about the way the EU compromised the capacity of elected Member State governments to advance the well-being of their nations by the way they negotiate trade arrangements in services, particularly with respect to the financial services sector. For all those Europhiles that regularly deny the core agenda of the EU is to compromise democratic outcomes in favour of capital, that analysis, alone, should be sufficient to discourage those thoughts. Of course, that isn’t the only manifestation of this neoliberal, corporatist bias in the way the EU has developed over the last decades. I mostly conduct my analysis at the macroeconomic level but I am also interested (as my publication record demonstrates) in urban and regional analysis. At the level of the European city, the EU is behaving in the exactly the same way – to curb that ability of city authorities to render their cities favourable environments for the residents who live there.

Some background – Barcelona

Tourism in Barcelona is massive – in 2016, 32 million visitors were recorded as arriving there, despite a population of just 1.7 million (2016).

While the commercial interests laud this invasion, the fact is that it drives up rental costs and real estate prices for locals and crowds out residential neighbourhoods with all sorts of behaviour that most of us would not tolerate in our own residential areas.

Barcelona is following Venice in becoming a city that is severely compromised by the tourist hordes.

In January 28, 2017, 2000 locals marched down the streets of ‘La Ramblas’ carrying placards “Barcelona no esta en venda”, which brings into relief, the often encountered conflict between commercial exploitation of residential areas and the rights of residents.

I wrote about the concept of the so-called ‘Visitor Economy’ in this blog post – The blight of the visitor economy (February 6, 2018).

This was in relation my own city and local neighbourhood being taken over by the Supercars event once a year, which is a racing franchise that survives on local and state government subsidies and causes massive damage to the local area – all in the name of tourism.

I will write more about that event in due course as the Newcastle Council has just released a so-called independent report that was meant to examine the contribution of the event to the city but excluded most of the costs. It was not a report that should have been published.

In one part, it claims as benefits the fact that the local residents abutting the racetrack were so against the event being run that their common cause brought the community together. That was deemed to be a benefit of the event. Go figure that sort of reasoning.

Anyway, back to Barcelona.

In response to the growing tension between locals and tourists, the local city council started to implement a number of initiatives designed to curb the tourist invasion – prosecuting Airbnb providers for not having licenses, limiting the accommodation licenses that can be issued, charging tourist taxes on hotels, and placing curbs on how many new hotels can be built in the city area, among other restrictions.

In April this year, the Barcelona City Council introduced a new decree to regulate tourism in the city by controlling access to neighbourhoods in order to protect the amenity for local residents.

The new regulations indicated that between April 1 and October 30 tourists groups in excess of 15 people and a guide would be prohibited entry to the Boqueria market area.

The problems of tilting a city towards the ‘visitor economy’ approach for development is summarised by one of the Barcelona residents who told the UK Guardian (Source) that:

One thing we could do is stop spending millions on promoting tourism … We’re subsidising tourism with public money, by exploiting workers in the service economy and exploiting the infrastructure of the city, which we citizens pay for. Furthermore, tourism is distorting the economy and there is little support for anyone who wants to establish non-tourist enterprises.

In Newcastle’s case, the Supercars event would not exist without the millions of public money that is paid both directly to the franchise, but also, indirectly in the form of public infrastructure designed to support a high-speed car race (wider roads, parkland lost to hair-pins etc).

Barcelona’s regulative response to tourism, is, of course, the worst sort of nightmare that the European Commission can imagine.

For it shows that democratic intent in the form of laws and regulations imposed by elected authorities can temper the worst ravages of commercialisation.

That sort of restraint, though, is exactly what the neoliberal Single Market policy aims to eliminate.

Municipalism

One of the many narratives that progressive Europhiles hang on to, in their continued hope that the EU can be reformed to shift its neoliberal, corporatist core, is the concept of municipalism.

In June 2017, the city of Barcelona held a conference – Fearless Cities – which brought together local government officials and activists from all around the world.

This was the first show for the global or international municipalist movement which has the goal of “radicalizing democracy, feminizing politics and standing up to the far right.”

The plan is that:

… these neighbourhood movements, mayors and local councilors have been collaborating to build global networks of solidarity and hope from the bottom up.

So there is a sort of pincer movement going on in this progressive dream sequence.

On the one hand (flank) we have the Progressive International proposals stemming out of DiEM25 handling the big picture, and on the other hand, we have the globalist municipalist movement looking out for cities.

But these are pipedreams within the existing institutional structures governing Europe’s geographical spread.

The municipalist movement believes that cities can take back control of basic local service delivery from the neoliberals and reversing austerity imposed by national governments, following the Brussels line.

They believe they can stop the so-called ‘transnational speculation’ in local real estate markets, stop multinational exploitation of local urban environments and counter corporate power in all their ambits.

Good luck.

As we will see, the European Commission has these ‘movements’ in its sights and is pushing ahead with policies and legislation that will thwart the capacity of local groups to maintain democratic decision-making.

I will write more about the reality facing the globalist municipalist movement in later blog posts.

The EU Services Directive

The EU Services Directive is the application of the ‘single market’ to the services sector and attempts to remove “legal and administrative barriers to trade” and make “it easier for businesses and consumers to provide and use services in the Single Market”.

While the rhetoric is glowing about “strengthened rights of consumers” and “higher quality of services” the reality is that the Directive is another plank in the EU’s core neoliberal agenda to wipe out discretion by democratically-elected governments at all levels and force a one-size fits all technocracy on citizens no matter what their cultures, traditions and local needs might be.

European Commission’s push for ‘deeper’ markets to kill the discretion of cities

The so-called – Legislative Train Schedule – of the European Parliament, allows one “to check on the progress of European legislation at any time.” (Source).

Policy priorities are constructed as ‘trains’ moving to ‘destinations’, with ‘carriages’ being the specific elements of the overall priority area.

The schedule lists departure and arrival dates and considers the ‘costs of non Europe’, which:

… refers to the economic, social and political costs linked to the absence of action at European level in a given area.

This concept seeks to estimate the potential efficiency gains for the European economy and for society in general from pursing common policies and pooling efforts within the European Union.

One of the ‘destinations’ you will find is the so-called – Deeper and fairer internal market with a strengthened industrial base – initiative.

We read the usual spin:

The Single Market is one of Europe’s major achievements and its best asset in times of increasing globalisation. It is an engine for building a stronger and fairer EU economy. By allowing people, goods, services and capital to move more freely it opens up new opportunities for citizens, workers, businesses and consumers – creating the jobs and growth Europe so urgently needs.

More integrated and deeper capital markets will channel more funding to companies, especially SMEs, and infrastructure projects. Better worker mobility will let people move more freely where their skills are needed. And combatting tax evasion and tax fraud will ensure that all contribute their fair share.

The evidence doesn’t match the neoliberal rhetoric though. The Single Market has created ghettos of high unemployment, massive disparities in wealth and income, trampled the rights of citizens receiving income support and cut wages for those working.

It has destroyed rather than created jobs.

And it has allowed banksters to pocket (privatise) massive gains, while socialising losses when their greed gets ahead of reality and they face insolvency.

All of that and more.

This particular initiative aims to increase the penetration of the ‘Single Market’ to reduce “fragmentation and barriers” etc.

Initiative 4B under this ‘destination’ is the – Services including transport up to €338bn.

As part of this initiative, there was a – Services Notification Procedure – which ‘departed’ in March 2016.

You can see a PDF file of this overall ‘destination’ and its progress towards implementation – HERE.

It is an amazingly shameless document.

Under the “Services Package”, we read:

To ensure that all new regulatory measures imposed by Member States are non-discriminatory, justified by public interest objectives, and proportionate, the Services Directive obliges Member States to notify the Commission of new regulatory measures affecting services …

… a series of options which could be included in a forthcoming initiative, in particular: an obligation to notify draft legislation, increased transparency of the notification procedure vis-à-vis non-institutional stakeholders, improvements to the proportionality test undertaken by Member States and clearer legal consequences of non-notification …

Member States will be obliged to notify measures via Internal Market Information System before the final adoption when adjustments can still be made … the new procedure will allow better access to the notifications for external stakeholders. After notification, a 3 months consultation period will allow the Member States and the Commission to engage in a dialogue. If after that period the Commission has substantive concerns over the compatibility of a proposed measure with the Services Directive, it may issue an alert followed by a decision on the legality of a given measure. The Decision to bring a measure in line with the Services Directive is binding on the Member State and may only be challenged in the EU Court.

Couched in all the usual EU blather, it effectively means that the European Commission can ultimately make decisions “on the legality of a given measure” if it is not satisfied that interventions of a Member State (or institutions within the state) are acting in accordance with the Single Market.

The proposed “Services Notification Procedure forces governments at all levels to provide business lobbies with full disclosure in advance of any new decision.

While the current EU law requires national governments to report new legislation and regulations regarding the services sector to the European Commission, this new “Services Package” will extend that obligation to local and provincial authorities.

And rather than an ex post notification being required, these local authorities will have to provide such intelligence to the Commission in advance and wait for at least 3 months before the Commission determines whether it can become law.

If there are objections to the proposed new laws or regulations after the 3 month period, then a further 3 month period of negotiations are specified.

If no agreement is then reached the Commission can issue an “infringement procedure” which may take years to resolve.

This is no trifling matter.

The Court of Justice of the European Union has recently ruled that zoning responsibilities held by local governments come under the jurisdiction of the Services Directive.

In its Judgement on January 30, 2018, the CJEU determined that all retail zoning and planning decisions are bound by the Services Directive.

It means that a commercial interest can challenge any zoning rules that restrict what they consider to be their most profitable location. Zoning can no longer be “discriminatory”, for example.

The European Council pushed the initiative to the European Parliament’s Committee on Internal Market and Consumer Protection (IMCO).

The European Economic and Social Committee (EESC) of the European Parliament questioned the bias towards “enforcement measures” that dominates the European Commission’s approach.

The – Opinion of the European Economic and Social Committee (August 31, 2017) concluded that:

… in the current political situation in many Member States – any kind of EU ‘interventions’ relating to the strict remit of Member States’ competencies can lead to political controversies …

Both legislative powers – which might seem to be affected by the new notification procedure and the obligatory proportionality test – and longstanding traditional systems of national professional regulation are often regarded as foundations of national systems and must therefore be treated as sensitive issues. Even if it is legally possible to apply stricter compliance enforcement measures it might not be sensitive in the current situation. A positive approach enforcing best practice or following a consultant approach could prove to be more effective …

The EESC notes that the growth of the service sector should not entail social dumping and fraud … Therefore, the EESC underlines the lack of sufficient safeguards to keep workers’ rights and consumer protection at a high level in all Member States and the risk of introducing the country of origin principle that would violate the fundamental rules according to which enterprises’ and workers’ activities are regulated by the law of the country where they are performed …

Unfortunately, the proposed internal market package does not address real life issues faced by some of the sectors targeted by the proposals …

The EESC would like to stress that differences between regulatory concepts do not in themselves indicate a need for reform. Many regulations are based on traditions and experience. They are important to customer protection and must be preserved. The principle of ‘equivalence’ is based on the fact that these different systems exist. The EESC takes into consideration the fact that national professional systems are based on long traditions. The research project shows quite different results in regard to the benefits of deregulation measures.

The EESC thus considered that the “proposal may restrict national legislators’ freedom and expressed doubt on its appropriateness.”

It considered the ‘one-size-fits-all’ punitive approach that is the hallmark of European Commission strategies would violate the rights of citizens and undermine tradition and culture.

It noted that the research literature on “deregulation” did not support the claims made by neoliberal politicians and the technocrats that everybody wins.

The Corporate Europe Observatory (which is a group that serves to expose “the power of corporate lobbying in the EU”) issued a statement on November 14, 2018 concerning the “EU’s Services Notification Procedure” which is outlined in the directive:

Such a notifications procedure would give the European Commission sweeping new powers to make binding decisions on whether municipal rules violate the EU Services Directive.

Business lobbies in Brussels have been heavily promoting this undemocratic proposal, which could lead to new obstancles for a wide range of legitimate and much-needed municipal initiatives by cities across Europe.

The Corporate Europe Observatory notes that this:

… controversial proposed EU directive … has been pushed by business lobbies and would create major new obstacles for progressive municipal policies and initiatives.

Apart from creating “unnecessary delays” in decision-making and “harming the autonomy of local governments”, the directive would impede cities from providing “affordable housing” and designing solutions to other social and environmental problems.

There is massive push back against the proposal from “civil society groups, unions, mayors and progressive parties running major European cities”.

But this is the EU – and democratic intent comes second always.

The Corporate Europe Observatory article (October 28, 2018) – The EU’s obstacle course for municipalism – elaborates further.

It says that “Progressive municipalist city governments from Barcelona, to Naples, to Grenoble have introduced important policies to promote citizen participation, public ownership of services, expanded affordable housing, urban ecology and sustainable energy, better transparency and accountability, and many more.”

But the new Services Directive procedure will “create major obstacles to progressive municipal policies that challenge neoliberalism, such as limits on AirBnB aimed at protecting affordable housing, or the public provision of renewable energy.”

It argues that “a range of EU legislation which could pose barriers to progressive municipal policies, such as austerity measures, and restrictions via the EU’s single market law, including on questions of public procurement and state aid law (which restricts subsidies for local renewable energy initiatives).”

The global municipalist movement cannot escape austerity inflicted at the national levels. Cities cannot prosper in nations that are crippled by austerity.

When austerity is imposed cities do not have the resources to invest in infrastructure and are compromised into ‘selling’ their local spaces to the highest bidders – hence the Supercars mentality.

Just think about what has been happening in Britain to local government authorities as a result of the spending cuts imposed on them by the British government.

The Corporate Europe Observatory article provides ample examples of the austerity constraints on local cities – “Southern European countries like Spain and Italy … (together with Austria, the Netherlands, and Luxembourg) have implemented the EU’s economic governance rules in a way that limits the allowed deficit of public budgets at the regional and municipal level. For example, in Italy the transfer of funds from national to local level has dropped 75 per cent as a result of austerity.”

They also highlight the “trade agenda promoted by the European Commission and most EU governments” as preventing the renationalisation of services and the vulnerability of local cities to investor-to-state dispute settlement mechanisms, which allow corporations “to sue municipalities in special private courts, and demand financial compensation (including loss of future profits) for policy measures they consider ‘discriminatory’.”

There are many more examples.

The Dutch newspaper Het Parool discussed the new ‘EU Services Notification Directive’ in its article (August 9, 2018) – ‘Brussel moet niet de baas spelen in Amsterdam’ (“Brussels should not be the boss in Amsterdam”).

It noted that the Commission’s requirement that all “new laws and regulations” had to be reported to Brussels was a “threat to local government”.

Its opening stanza says it all really: “Amsterdam is van Amsterdammers, niet van Brusselse bureau­craten” – Amsterdam is for Amsterdammers not the Brussels bureaucrats!

It asked the question (I am now just providing my Dutch translation):

Who is in charge of Amsterdam. For example, when it comes to stricter rules for holiday rentals, or when addressing the problems with Amsterdam’s taxis? Most people will say: the city council or the mayor and the alderman.

The European Commission thinks otherwise: it wants to assess every arrangement that has something to do with services before the city council or the mayor decides on it …

This proposal … is a direct violation of local democracy. It won’t be the residents but corporate lobbyists in Brussels who determine policy in the future …

Conclusion

So the Europhile Left has another challenge.

They have been dreaming of reform at the ‘macro’ level and have been banking on the globalist municipalist movement to fix things up at the local level.

Neither hope has a chance of being realised under the current neoliberal bias of the European Union and its Single Market obsession.

And, this discussion has massive implications for the current Brexit imbroglio.

Britain would be as bound by these Directives as the rest of the EU if it stays.

Local governments will be forced to open their cities to ‘competition’ and will be exposed to all sorts of threats from corporations seeking profits.

The capacity of cities to plan via zoning will be severely compromised if business thinks the zoning inhibits its business to make money.

My blog post – Financial services agreements – the EU as a neoliberal, corporatist project (November 13, 2018) – argued that these agreements were sufficient reasons for progressives to reject the Remain argument for Britain.

But then add in the ‘EU Services Notification Directive’ which will take away democratic control of cities and their local governments to this mix.

Then it is remarkable that anyone on the progressive side of the debate would not support Brexit and ensure that the terms of that exit were such that these anti-democratic rules (which are really the Single Market core) are excised in total.

Anything to do with the Single Market is neoliberal to the core. No progressive should aspire to be part of it.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.