The Development of the Single Market week 4

### The Single Market: A Deep Dive into Europe’s Economic Integration

#### What is the Single Market?

The Single Market (also called the Internal Market) is the EU’s system of free trade and movement across member states. It ensures that goods, services, capital, and workers can move as freely within Europe as they would within a single country.

The goal? To boost economic growth, create jobs, and improve efficiency by removing trade barriers and encouraging competition.

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### How Economic Integration Works: From Basic Trade to Full Union

The EU didn’t become a Single Market overnight. It evolved through stages of economic integration:

1. Free Trade Area

- Countries remove tariffs (import taxes) but keep their own trade rules with outsiders.

- Example: EFTA (European Free Trade Association).

2. Customs Union

- No tariffs between members AND a common trade policy with non-EU countries.

- Example: The EU Customs Union (since 1968).

3. Single Market

- Goes beyond just goods—also includes services, workers, and money.

- Removes non-tariff barriers (like different safety laws).

4. Economic & Monetary Union (EMU)

- Single currency (Euro) and coordinated economic policies.

5. Political Union

- Full political integration (not yet achieved in the EU).

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### Why the Single Market Matters: The Economic Impact

#### 1. Trade Creation vs. Trade Diversion

- Trade Creation: Businesses buy from more efficient EU suppliers instead of expensive local ones.

- Trade Diversion: Sometimes, trade shifts from cheaper non-EU suppliers to pricier EU ones due to tariffs on outsiders.

#### 2. Economies of Scale

- Companies can produce more at lower costs because they sell across 450 million consumers.

- Example: A German carmaker can sell freely in France, Italy, Spain without extra costs.

#### 3. More Competition = Better Prices & Innovation

- No monopolies: Firms must improve quality and lower prices to compete.

- Example: Airlines like Ryanair expanded because of open EU skies.

#### 4. Downsides? Yes, Some...

- Job losses in weaker industries (some factories close due to competition).

- Big firms dominate (small businesses may struggle).

- Not all rules are fully harmonized (some countries still have different taxes or regulations).

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### How the EU Built the Single Market

#### 1. Treaty of Rome (1957)

- The founding document of the EU (then EEC).

- Promised free movement of goods, services, workers, and capital.

- By 1968, tariffs were gone, but non-tariff barriers remained.

#### 2. Single European Act (1986)

- Set a 1992 deadline to remove all remaining barriers.

- Introduced "mutual recognition" (if a product is legal in one EU country, others must accept it).

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Barriers stopping trade

🛑 Physical Barriers*

- What? Border checks, paperwork, and customs delays.

- Example: A truck carrying German beer to France got stuck at the border for hours.

#### 🛑 Technical Barriers

- What? Different rules for products in each country.

- Example: A toaster legal in Italy might be banned in Sweden because of different safety rules.

#### 🛑 Fiscal Barriers

- What? Different taxes and VAT rates across countries.

- Example: A book costs €10 in Spain but €12 in Finland because of tax differences.

#### 3. The Cecchini Report (1988)

- Predicted huge gains from completing the Single

Market:

- 4.5% GDP growth

- 6% lower prices

- 1.8 million new jobs

- Identified four key non trade barriers in the way of the single market

1. Quotas (limits on imports)

2. Cost-increasing rules (like extra paperwork)

3. Market-entry barriers (hard for new firms to compete)

4. Market-distorting rules (subsidies favoring local companies)

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### Challenges & Unfinished Business

- Services are still fragmented (e.g., banking and healthcare differ by country).

- Labour mobility isn’t perfect (language, qualifications recognition).

- Tax differences remain (VAT rates vary, corporate tax competition).

- Some industries resist competition (like railways in France).

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### What’s Next for the Single Market?

The EU is still working on:

✔ Digital Single Market (same rules for online services).

✔ Capital Markets Union (easier cross-border investing).

✔ Energy Union (cheaper, greener energy across Europe).

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### Final Verdict: Success, But Not Perfect

The Single Market has made Europe richer, more competitive, and better for consumers—but some industries and countries still struggle with full integration.

Would you like even more detail on any part? 😊