History Of The Eu Single Market Economics Essay

In this paper I intend to look at the two communications presented by the European Commission, to the European Parliament, the European Council, the European Economic and Social Committee and the Committee of the Regions. These two communications, Single Market Act I & Single Market Act II, both talk about proposals that if implemented, should make the Single Market of the European Union much better by eliminating any obstacles which were found in the systems at the time of writing. To understand better the Single Market, one should look at the history of this on-going process and then, take a look at what the Commission proposed through these two communications. This should lead to a better understanding of how these proposed set of actions would strengthen the EU’s internal market.

History of the EU Single Market

Moving freely within the European Union (EU) today seems to be a very common activity and very often it is taken for granted. Looking back in time and seeking the beginning of this concept, one can better understand why this was necessary and important for the EU, what were the steps needed and what it took to achieve this goal. It is important to mark the landmark political decisions and historical facts that brought us to live this dream, which is also considered as one of the EU’s greatest achievements. The need of a common market has been long discussed from 1957, since the Treaty of Rome which created the European Community. The main objective of this proposal was to give Europe a new push, to take integration to an upper level and to have free movement of goods, services, capital and persons, therefore a common market. Of course, this was a vital step since one cannot build a common Europe without having a common market. These four fundamental freedoms were the basis of the real European Economic Community (EEC). This common market became a reality with the removal of barriers and internal borders within the European Union. Although on 1st July 1968 the customs duties on goods going around in the EU member states were completely removed, there remained “non-tariff barriers” like differences in the requirements of safety and packaging of different member states or between national administrative procedures. Consequently, these barriers did not allow the manufacturers to market the same goods in different European countries. [] After this step, it took until 1985 for the leaders to decide to come back to the realisation of this single market. The single market was a response for a long-standing crisis in the EEC especially created in the 1970s; the things that mostly effected the economy were the oil crisis of 1973 & 1979 (which caused a lot of inflation with rising prices and which therefore created unemployment), the rapid advancements in technology, the changes occurring in the economy world and also the emergence of new strong competitors such as Japan and newly industrialising countries from South East Asia. [] The European Commission led by Jacques Delors, in 1985 presented a common response to that of the leaders themselves. The Community decided to complete the construction of the great internal market in stages which was to be finalised at the start of 1993, and therefore, the ambitious date and goal were written into the Single European Act signed in February 1986. This led to the gradual removal of internal barriers and borders within the European Community, national standards were getting harmonised, and rules determining the way governments should buy services and goods were created. There was also the liberalisation of financial institutions, the Value Added Tax (VAT) rates were being set to a standard level and there was also the setting of European business laws. All these measures were taken to create the single market. [] Until 1992, the national regulations of the 12 member states were replaced by one rule which was common to all of them and regulated all the countries in the same manner after the EU adopted nearly 280 pieces of legislation. The monetary union was also planned and the Maastricht Treaty was the first step of the creation of the Euro, which came into use on 1st January 2002. After all these steps and hard work towards this dream, on 1 January 1993 the physical borders between EU countries vanished completely and the European Single Market was officially a reality for the member states of the EU. [] 

12 levers of the EU Single Market

After all the work done to create the Single Market of the EU, there were still some things which were not functioning as they were meant to be and according to their original purpose of creation. Although one of the main benefits of the Single Market was that of bringing economic growth in the member states of the EU as was predicted and argued in the Cecchini Report [] , it has been proven by many studies and statistics that this mission was not fully accomplished and the targets were not fully reached. The ‘faults’ present in this system were addressed both by the Italian Prime Minister Mario Monti and the Maltese MEP Louis Grech in their reports A New Strategy for the Single Market & Delivering a single market to consumers and citizens, respectively.

Taken from the original Cecchini Report

Therefore, the only thing that could help to get the expected results was to refine the policies and develop “a proactive and cross-cutting strategy” [] to “give the single market the opportunity to develop its full potential” [] . This was done through the Single Market Act I which was presented on 13th April 2011. In this communication, the Commission expressed its proposals which should help to eliminate any obstacles which are not allowing full movement of services, innovation and creativity across the member states. The Single Market Act and the actions which were proposed in this communication are aimed at giving all the citizens and businesses of the EU the ability to have full access and full beneficial that can come out of this Internal Market and strengthen their confidence in this system. All in all, the end result should be a “smart, sustainable and inclusive growth” [] and also the creation of more jobs for the citizens. This was all presented in the so called “Twelve levers” which the Commission has come up with. Each one of them is aimed at strengthening the Single Market in different ways. Here are some of the most important levers.

Levers related to free movement of capital

The first lever talks about the Access to finance for SMEs – since the world has gone through financial crises, businesses in the EU have become more restricted and limited and cannot get the loans they need from the banks to advance in their industry by manufacturing innovative products and market them. Through a change in legislation, this lever proposes to make funds more accessible to SMEs so they can invest more and provide a better, smarter, innovative and more advanced technology. This should also be an incentive for SMEs to operate across borders and raise capital abroad. [] 

Levers Related to free movement of persons

The second lever which is about Mobility for citizens, talks about creating “a European professional card” that will make mobility for workers across the EU easier while building a better level of trust and cooperation between different countries of the EU. Another proposal was the creation of the “European skills passport” which is a record of the skills possessed by a person who can travel across the EU and find different jobs. This way, the citizens can always have a proof of their skills. [] 

Another lever aimed at facilitating the free movement of persons is the seventh lever proposed which talks about The digital single market. This lever proposes that there should be a mutual electronic identification and authentication throughout the EU. This will be beneficial not only for people moving from one country to another, but also to businesses and public authorities, therefore it can also help in “increasing the effectiveness of public services and procurement, service provision and electronic commerce (including the cross-border dimension).”

Levers Related to free movement of goods & services

The fifth lever talking about Services highlights the importance of standardisation as a tool used in the free movement of goods. This tool’s importance is growing bigger also in the services sector. This will help in improving cross-border services mainly between businesses and combat unfairness, by developing “a more effective, efficient and inclusive system.” [] This system will work to see that standards are adopted quickly and adapted to new technologies. This will enable SMEs & other similar groups to become more involved while standards remain available to everyone. [] 

Levers Related to Law Enforcement

Strengthening the EU Single Market

Concluding Remarks