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EU single market: Boosting growth and jobs in the EU

Written by Elodie Thirion,
Graphics: Giulio Sabbati,

The progressive abolition of trade barriers

© Billion Photos / Shutterstock.com

The EU single market (also known as the internal market and, originally, the common market) prescribes free movement from one EU Member State to another of goods, people, services and capital (known as the ‘four freedoms’). This is implemented by eliminating barriers so that citizens and companies in the EU can benefit from direct access to 28 countries and over 500 million people.

Intra-EU tariffs and trade quotas were progressively abolished from the 1960s onwards with the creation of the customs union. While intra-EU tariff barriers were completely eliminated by 1968, non-tariff barriers remained – such as divergences in technical regulations, administrative obligations, currency devaluations, and tax differentials. In 1986, the Single European Act set a deadline to complete the EU single market by the end of 1992. It helped to revitalise the EU economy, as companies were enabled to operate across national boundaries − realising both their ‘comparative advantage’ and economies of scale − and consumers enjoyed widening and cheaper choice in increasingly competitive markets.

This process was given additional impetus by the parallel broadening of the market, with its enlargement: from a Community initially encompassing 170 million people in six Member States in the late 1950s, the number of EU citizens grew from 345 million in 12 Member States in 1992, to just over 500 million in 28 Member States by 2013. Since the creation of the European Economic Area (EEA) in 1994, the single market has also included Iceland, Norway and Liechtenstein. The number of companies located within the single market has risen from 12 million in 1999 to 22 million in 2014, adding up to an increase of 10 million companies in 15 years.

The European Parliament believes that free movement of goods, capital, services and people still offers untapped potential for citizens and business, in terms of efficiency, growth and job creation. Regarding the free movement of goods alone, the untapped potential would represent as much as €183 billion per year – 1.3 % of EU GDP. And the long-term potential gains from completing the single market in services would be of the order of €338 billion, or 2.4 % of EU GDP. Finally, the detriment to the consumer resulting from an incomplete single market in the consumer acquis – the body of EU consumer law – would be around €58 billion per year, or 0.42 % of EU GDP. European Parliament has repeatedly called on the Commission to submit proposals to bring the single market to its full potential.


See, for example, European Parliament resolution of 15 February 2017 on single market governance, European Parliament resolution of 26 May 2016 on non-tariff barriers in the single market, European Parliament resolution of 12 April 2016 on towards improved single market regulation, European Parliament resolution of 7 February 2013 on better governance for the single market, European Parliament resolution 20 May 2010 on delivering a single market to consumers and citizens.


Main benefits of the single market

The single market, with its 500 million consumers, is larger in size than the United States or Japan. It enables businesses to achieve economies of scale and productivity gains (for example, by eliminating technical inefficiencies) and allows for better employment and lower prices for citizens. The overall effect of the single market is a higher GDP, greater employment, expanded internal and external trade, and stronger inward investment into the EU economy than would otherwise have been the case

Benefits of the single market in specific sectors

Free movement of goods

Free movement of people

Free movement of services

Free movement of capital

The deepening of the single market

The Single European Act set a deadline for completing the internal market by 31 December 1992. Although a lot was achieved between 1986 and 1992, the single market was never completed as such. Some of the 3 500 single-market measures so far adopted, mainly to establish common or minimum standards, still need to be implemented or effectively enforced. Although the Commission says that the formal rate of non- or incorrect transposition in Member States has fallen to only around 1 %, the Monti Report of 2010 suggested that half of the single market directives faced implementation difficulties of some kind. At any given time, around 800 infringement complaints are pending.

In 2014, it was estimated that there were also still significant ‘missing links’ in the single market. Action on four fronts – full implementation of the Services Directive, further integration of the energy and financial services sectors, and further progress in opening up public procurement – could add an additional 3 % to EU GDP by 2020.

The economic cost of market fragmentation and of the gaps and deficits is huge. Completing the single market would trigger economic gains ranging from €651 billion to €1.1 trillion per year, equivalent to a range of 5 % – 8.63 % of EU GDP. It would also create at least 7.5 million jobs by 2030, in the digital single market (223 000 jobs by 2020) and research (7.2 million jobs by 2030) areas alone.

The magnitude of the estimates vary across studies, depending on the methodology used and the assumptions about the extent to which internal market barriers are further reduced. However, they all show that such a further deepening of the single market would have substantial benefits for EU citizens and business in terms of higher incomes and employment and greater choice and business opportunities. Noticeably, the estimated effects of reducing trade barriers are not uniform across Member States.

It is worth noting that in existing studies, a large part of the direct and indirect impacts of single market integration are of an economic nature. Nevertheless, the EU single market also serves other purposes, such as supporting inclusive and sustainable growth and protecting European consumer rights. Further research should show that potential gains could be evidenced by a holistic analysis, namely by taking into consideration all macroeconomic, social and environmental aspects of further dynamic effects on welfare, employment, income, and the environmental footprint.

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