The resilient state: the case of the liberalization of services in the European Union

Loder, Jeff. (2006) The resilient state: the case of the liberalization of services in the European Union. Masters thesis, Memorial University of Newfoundland.

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Abstract

This thesis tests the validity of the 'constrained-state thesis' through an examination of the attempted liberalization of services in the European Union (EU).The 'constrained-state thesis' (also known as the 'straightjacket thesis'), which emerged out of the "globalization-as-constraint school", claims that the state is no longer capable of effectively determining economic developmental strategies or economic policies. Viewed from this perspective, the state is no longer the locus of socio-economic power. -- The empirical evidence presented in this thesis does not support the argument that states are losing the ability to control the direction of national economic development. In the EU, Member States have largely retained the power to regulate the operation of services within their territory. Despite what seemed like an unstoppable movement towards liberalization ten years ago, little progress has been made towards achieving a truly open internal market for services. The Services Directive which will likely receive enough votes in Parliament this coming fall (2006), only provides legal certainty that service providers can temporarily operate outside their country of origin. It will not dramatically change the ability of Member States to control the delivery of services on their territory. -- In the case of services, Member States have largely retained their regulatory power. For sure, EU institutions will play a role in some service sectors that Member States have agreed are better regulated on an EU wide scale. However, states are still the dominant source of regulatory power when it comes to services in the EU. Domestic political and economic realities will ultimately determine the degree to which Member States give up power to EU institutions with respect to services. Member States have retained the ability to work with domestic stakeholders in the service sector to coordinate economic growth. Considering that service oriented jobs contribute more to GDP in developed countries than any other type of employment, Member States will continue to play a important role in determining 'who gets what'. -- The empirical evidence presented in this thesis also contradicts conventional wisdom that states will eventually be replaced by regional supranational economic institutions that pull member states towards a single economic model. We may see more regional economic supranational institutions. However, the evidence presented in this thesis suggests that if supranational organizations develop into types of confederal economic organizations that include democratic institutions (such as Parliament in the EU), institutional avenues are created through which the economic power of Member States can be protected. This is exactly what happened in the EU. Because Parliament has co-decision legislative power over the internal market, stakeholders lobbied Parliament to protect Member State's authority over services.

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