U.S. and EU Single Markets in Services: Constructing Markets in Construction

• In Event: Comparative Federalism of Single Markets in the US and the EU

Abstract

Proponents of the European Single Market frequently lament its “incompleteness” in services. Services constitute roughly 70% of EU GDP, but cross-border services amount to roughly 5%. In order to achieve flows more like in the United States—-where some estimates suggest interstate services trade as three times greater—-they argue for further removal of regulatory barriers to complete the market. The European Commission has pushed this agenda for two decades, including recent studies and legislative initiatives in sectors like construction services. But if this agenda seems plausible when looking just at Europe, where regulatory barriers to cross-border services trade certainly persist, it looks more complicated by a deeper comparison to U.S. services regulation. In terms of the regulation of interstate market access, the EU market for services is more “complete” than that in the U.S., not less. American interstate exchange confronts duplicative licensing, heterogeneity in standards and codes, varying state regimes in areas like insurance, workplace safety and benefits, or environmental review, and outright protectionism in public contracts, subsidies, and union-based constraints on worker mobility. In other words, the U.S. has higher flows in cross-border services than Europe despite “incomplete” regulatory governance, not because it has more “complete” rules to facilitate such flows. This paper considers the dynamics of both on-the-ground flows and regulatory politics in the construction sector, presenting evidence from over 100 interviews with businesspeople and public officials on both continents. We show that businesspeople perceive (and, when asked, will complain about) interstate regulatory barriers in both arenas, but attitudes about what to do about them differ more the “higher” we move from society into governance. American firms tend to portray such barriers as legitimate and largely unchangeable. They often suggest it is the responsibility of a firm or citizen to respect the rules in any particular jurisdiction. U.S. construction associations pay practically no attention to interstate impediments, and both state and federal officials are generally perplexed when asked if they should address them. European businesses, meanwhile, perceive such barriers somewhat more as public problems. Their associations are substantially mobilized around them, their national administrations are involved in working on single-market priorities, and—-at the highest level, in the EU—-policy actors constantly push these lower levels to support “completing” the market. The overall contrast amounts to a powerful display of institutionalist dynamics in political economy. Constructing a single market in construction is no one’s job in the U.S., but organizationally empowered in the EU.

Authors

• Craig A. Parsons, University of Oregon

• Susanne Schmidt, Universität Bielefeld

• Andy Smith