single european market
The Single European Market is a customs union– which comprises a free trade area with a common external tariff on goods and services coming into the European Union.
The Single Market was created by the Internal Market Programme which was supposed to be completed by January 1993. In reality the market is still in a process of construction. Indeed – like the Forth Road Bridge in Scotland – it might be in a semi-permanent state of change and repair!
The essence of the single market is the free movement of Goods Services Capital Labour
BENEFITS OF THE SINGLE MARKET
The market is an attempt to generate structural changes in the EU by reducing barriers to market access throughout member countries.
- Reduced frontier formalities lead to lower transport costs and more intensive competition within member nations will bring an improvement in consumer welfare from lower prices.
- Competition also helps to avoid some of the production X-inefficiencies associated with domestic monopolies.
- The development of a single market with hundreds of millions of consumers is also designed for Pan-European plc's to exploit economies of scale.
- A faster growth of trade should also lead to higher investment in capital goods and a faster pace of technological development within the European Union. T
- There are also potential welfare gains from the free movement of labour within the EU although the geographical mobility of labour remains limited.
The overall aim is to increase long-run average economic growth and increase employment inside the European Union
THE ECONOMIC IMPACT OF THE SINGLE EUROPEAN MARKET
It is too early to make substantive judgements about the effect of the Single Market, not least because an important complement to it – The Euro – is only a year old!
However we can already identify certain economic effects:
- Rising intra-EU trade and cross-border shopping (particularly in border areas where price differences are transparent)
- More cross frontier mergers & acquisitions – the EU share of global M&A activity increased from 10% in 1985-87 to 29% in 1993. Barely a day passes without news of consolidation in industries such as pharmaceuticals; aerospace; financial services (including insurance and banking), energy utilities, food processing and retailing.
- Increased Japanese & US foreign direct investment into the EU – much of which has come into the UK.
- Increased employment - the Monti Report (1997) estimated that the SEM has created 300 - 900,000 new jobs since its inception. However these findings have been challenged. Mergers and take-overs have caused rationalisation and job losses in some sectors.
The SEM is not yet fully complete. There are still barriers to the free movement of factors of production and the impact of the Euro will undoubtedly affect the overall assessment of the Single Market project.
What is clear is that the UK economy remains an important part of the SEM despite her opt-out from the first wave of EMU countries
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