Fortress Europe or open door Europe? The external impact of the EU's single market in financial services

Abstract

I argue that the intra-European integration of services trade, even if it threatens to impose costs on third countries in the short run, on average makes the European Union (EU) more open to foreign service providers. The reasoning is that third countries are likely to respond to discrimination in ways that ensure continued openness of the EU. This may be achieved by (a combination of) concessions that entice a change in the EU's policies, unilateral policy changes, or threats that force EU policy adjustments. Regional integration in the service sector thus does not result in Fortress Europe but in Open Door Europe. I show the plausibility of this argument by analysing the external consequences of three steps towards completing the Single Market in the area of financial services.