Ruairi Quinn (Dublin South East, Labour)
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Question 6: To ask the Minister for Enterprise, Trade and Employment if he will report on the status of the proposed services directive; if this matter has been raised at a European Council of Ministers meeting since the European Parliament vote earlier in 2006; and if he will make a statement on the matter. [32166/06]

Micheál Martin (Cork South Central, Fianna Fail)
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Subsequent to the European Parliament's vote last February, the Competitiveness Council adopted a Common Position on the draft directive on services in the Internal Market at its meeting on 24 July. The text was adopted as an A item at the council with only two member states abstaining. It was supported by Ireland. This followed intensive discussions on the proposal at the Competitiveness Council on 29 May at which political agreement was reached.

The Common Position was substantially based on the compromise text that was brokered by the European Parliament on 16 February 2006 and carried through in the amended Commission proposal of 4 April. The Commission's amended proposal was supported by Ireland although we secured some technical amendments in areas of concern to us.

Ireland would have preferred a more ambitious proposal, in particular the inclusion of temporary employment agencies in the scope of the proposal. There are about 90 agencies involved in this important sector in Ireland with an annual turnover of €1.3 billion. There is a worldwide shortage of skilled people in the aviation industry as well as in the medical, financial and IT industries and the recruitment industry finds them.

Ireland is the largest provider of personnel to the aviation industry worldwide but much of the business is done outside the EU because of barriers to trade within it. This effectively means that skilled personnel that the EU needs to improve its competitiveness are frequently placed in third countries rather than the EU because of the difficulties the recruitment industry has in operating in the Internal Market.

Total employment in the Irish services sector is approximately 1.3 million, compared with 912,000 in 1997. Forfás estimated that the original Commission proposal would have benefited Ireland to the tune of about €400 million annually. The indications are that the amended proposal would be worth about half that to Ireland. The enterprise policy group report, the O'Driscoll report, identified the services sector as having significant potential for development in a freed-up Internal Market. While traditional industries have been under pressure it should be noted that in the last five or six years 440,000 jobs have been created in the services sector and 150,000 in high end manufacturing. These figures come from Forfás following research on manufacturing and internationally traded services.

The current status of the draft directive is that it is undergoing a Second Reading in the European Parliament.

Ruairi Quinn (Dublin South East, Labour)
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Ireland is becoming a service economy, rather than a manufacturing or primary produce economy. What steps are the Department of Enterprise, Trade and Employment and the agencies under that Department taking to alert small and medium sized Irish companies to the potential benefits of utilising the provisions of the draft directive? This directive is now essentially a done deal and I am told it will be completed by the end of this year. Will the Minister indicate when it is proposed to come into effect? Now that we know the shape of the directive, what communication has been given to the Irish services sector to maximise the potential that it will have?

Micheál Martin (Cork South Central, Fianna Fail)
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Our major thrust in terms of developing enterprise in indigenous enterprise and SMEs has been to develop the services side of the equation, while supporting high end manufacturing underpinned by indigenous research and development within Irish manufacturing companies. There is a significant drive, on the services side, to inform companies of the opportunities worldwide, not just in the European market. We have made rapid progress and Ireland's share of worldwide services has increased to approximately 2.2% from about 0.5% in 1999.

Enterprise Ireland is promoting investment and development in the services sector in the client companies with which it deals. At a micro level the work of the Small Business Forum will inform some of the work of the county and city enterprise boards in terms of developing innovation. Some reports indicate that we are lacking productivity and competitiveness in the domestic services sector. We will try to achieve more innovation in this area through the implementation of aspects of the Small Business Forum's recommendations.

On the European Internal Market, we are not holding our breath in terms of the impact of the new services directive. We think it is a fairly neutered measure at best and its impact will not be fundamental. We will seek to exploit opportunities in the Internal Market. In the region of €200 million could be added, which is significant for SMEs, but our assessment is that it may not represent the Holy Grail that might have been originally suggested. Commissioner McCreevy felt it was important to implement a services directive to begin the journey to a more liberalised EU market. We have supported this outlook and will continue to provide supports in the form of trade missions, soft supports, mentoring supports and research and development supports to companies engaged in exploiting services markets worldwide.

Ruairi Quinn (Dublin South East, Labour)
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I am surprised at the Minister's dismissal of the potential of the services directive beyond the €200 million mentioned, which is not a lot of money at one level. He mentioned that the focus was on the client companies of Enterprise Ireland, rather than those under the county enterprise boards which would be very small in terms of reaching beyond the county, let alone the country.

I am more concerned now, given the tone of the Minister's reply, than I was when I tabled this question. I sense that the Department of Enterprise, Trade and Employment is receiving advice that the services directive's potential has been neutered as far as Ireland is concerned and that it should not register high on the Minister's list of priorities. It seems that the suggestion is that a globalised market for Irish services emanating from this country is as attractive as the EU market, if not more so. Is this a fair interpretation of the Minister's viewpoint?

Micheál Martin (Cork South Central, Fianna Fail)
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It is fair with the exception of the Deputy's suggestion that the services directive does not constitute a high priority. The development of services will always be a high priority as the employment return is huge and it is the direction in which most developed countries are headed. The Deputy is correct that the advice to me is that the services directive is not a huge step forward and this is also my assessment of it. I welcome the opportunity to approach this issue in a calm manner as I felt the debate got out of hand last year.

Ireland needs an informed debate on the positive and negative aspects of the liberalisation of world trade and the EU market. This must include discussion of the protection of fundamental labour laws and workers' rights while at the same time endeavouring to pave the way for our services companies. The issue must be examined from a macro point of view with consideration given to where the economy has gone in the past eight years.

Some of the barriers in Europe facing recruitment agencies are very real in terms of how some countries impose a variety of ——

Ruairi Quinn (Dublin South East, Labour)
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Are these barriers in place at the moment or will they arise after the implementation of the services directive?

Micheál Martin (Cork South Central, Fianna Fail)
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It remains to be seen whether the directive will break these barriers. Some countries impose conditions of establishment on Irish companies that would be anxious to establish bases in other EU countries and require them to deposit substantial sums of money. I am sure those companies would be willing to speak to the Deputy and other Members. They have found the current position quite prohibitive and regard it as a barrier to establishing in other EU countries. I am willing to work as enthusiastically and proactively as I can to honour the spirit of the directive but it remains to be seen whether it will realise its potential.