Has the creation of the Single European Market been a success?

The technical barriers were removed by harmonization of technical standards, the liberalization of public procurement and service provision, the  resolution  of conflicts in business laws and practices together with the removal of impediments to the free movement of labour was another step. It cemented the way for the signature of the Schengen Agreement in which the elimination of all border formalities by all member states with the exception of Britain, Denmark and Republic of Ireland, which opted out citing security reasons. The Amsterdam Treaty incorporated the Schengen Agreement.

The Fiscal barriers which translated into national differences in indirect taxation levels, impacted negatively on proposals to approximate VAT rates when governments realized that they might lose useful sources of income  and might have  to impose or increase tax in certain goods, such as  children clothes or shoes, measures that  produced a backlash from voters and created difficulties. In the meantime, luxury goods were abolished and a standard rate of 15 per cent or more was agreed and an agreement was signed, to the Single Market.  

Over time, many member states became richer and more confident of their own stability and lifted restrictions unilaterally. In the White Paper three directives aimed to complete the process gradually leading to complete liberalization by the end of 1992, which consisted in; liberalised rules on long–term commercial loans, securities transactions, liberalized rules governing cross-border securities transactions,  admission of corporate securities to capital markets in other member states, e.g. stock exchange and in 1988  it obliged member states to lift all restrictions on capital movements except measures intended  to ensure the continuing liquidity of local banks or temporary restrictions in response to major disruptions in foreign exchange markets.

In Agriculture, at the time of the Rome Treaty too many people in the original Six depended of farming; around 25 per cent of the total labour force was employed in agriculture. This was compared to less than 5 per cent in the United Kingdom having to do a lot with the fact that farms in Britain had been restructured by the enclosures of the eighteenth century. These developments had pushed workers out of the British agriculture. But at the same time the process of industrialization attracted rural workers into factories to where they were attracted by higher wages.

In turn, in the continent such factors had not operated to the same degree and the agriculture labour force remained worse off than most groups. Many farms were economically small and the effects of drought, flood or livestock disease very often  resulted in a smaller production than that hoped for by the farmers. In Western Europe  there was a tendency for a relative fall in demand for farm products with farming incomes  behind the incomes of groups engaged  in non-farming occupations.

Under Article 38 of the Treaty, the development of a Common Market for agricultural goods should be accompanied  by the establishment of a Common Agricultural Policy, which  was designed to ensure that a Common Market could extend to agriculture and agricultural products; to ensure, a fair standard of living for the agricultural population, to stabilize markets, to guarantee regular supplies and to ensure reasonable prices for consumers.

According to the Wallaces (H & W), by creating a functionally segmented and politically insulated policy the CAP helped  to take  agricultural  policies out of  divisive domestic distributional conflicts. Agriculture groups retained their representational monopolies in the low politics of agricultural policy-making and find hard to be heard  in the high politics of decision making. 

The Common  Agriculture Policy, as Dennis  Swann pointed out, “its original creation was an outstanding political achievement, and without such a developed common policy the EC would have became less integrated institution” and its existence gave the EC a forum for collective international policy making, and allowed the various agricultural support systems that existed in EC countries to be replaced by a common but slightly more complicated system. The pressure on the farming sector has had implications for business generally.

On business services, Perry K ascertained that through increased demand, more competitive supply, and additional employment, this was expected to have a positive impact. But he warned that at the same time it could not be ruled out some negative  effects through a concentration of supply and distortions of competition.

According to the Report on the Implementation of the 2001 Broad  Economic policy, “progress towards a fully integrated and efficient internal market has been mixed” with EU markets for goods  becoming more and more integrated, even with the continued delay in cross border activities due to differences in standards and regulations. The market for services has advanced slowly. On the other hand,    progress  has been made in transposing internal market directives into national legislation, opening up  public procurement reinforcing the powers of the competition authorities and in reducing State aid. As a result, price reductions started the liberalisation of the telecommunications and electricity market. Only the market in rail transport and postal services remained less advanced.

In terms of achievements, taking into account that the adoption of the legislation is the first step although regulations have automatically the force of law in the member states, by 1997 the member states had transposed more than 90 per cent of the required measures. However, only 60 per cent of the Single Market directives had been transposed by all member states. There are still certain sectors in which a significant amount of  legislation still awaiting full implementation, namely in public procurement and insurance.

The EMU will contribute to the efficient operation of the Single Market eliminating transactions costs of almost 1 per cent of the GDP, and promoting  convergence and a more homogeneous economic  environment the single market will contribute to the right conditions for the EMU success.

According to Ponti M. in ‘The Single Market and Tomorrow Europe, p. 144,  politically, the Single Market still is a key instrument through which the priorities of the Union can be delivered. Jobs  remain a major challenge and signs are that even during a severe recession period the Single Market can make a positive contribution to the overall employment levels in the Union.

In terms of development of the EU  and as a major step in European Integration, the Single Market was  a  major  success, in terms of eliminating barriers to trade and of initiating a process of change  that consisted levelling the playing field in terms of  the rules of the market and equally important,  the attitudes  of economic  operators. The results will build on one  another.

However, in the opinion of analysts such as Buiges and Sheely, it is not easy to attribute  economic  benefit with precision, although according to economic theory, the reduction of barriers to trade  and the factors of production  result in a higher  level of economic activity rather than economic development. Nevertheless, economic development in the EU has been a result  of many factors and not  solely of  the Single Market programme. In any case, positive indications do exist that sharp increases were registered during that period, in direct inward investment and in merger and acquisition activity. The flows of intra-EU trade appear to have been affected  by the reduction of barriers .

An assessment by the Commission in 1996, concluded that the Single Market  Programme had created not a enormous but significant benefit  including  1.1 to 1.5  percent higher  income, more jobs (300.000 to 900.00),  1 to 1.5  percent  lower  inflation, higher investment, intensified  intra-EU trade, greater economic convergence among EU regions and reductions  in road  and other transport costs .  In the opinion of  political commentators,  the single market that was launched through a formal and  broad programme of legislative measures should be seen as a continuing process in economic integration.

   

A major success of the Single Market programme was  the eradication of barriers between national markets. Controls have been removed on the physical movement of goods at EU internal boundaries. By the end of  1992, the EC had adopted  about 95% of the measures  under the Single Market  Programme and an liberalization of capital movements increasing capital flows occurred further integrating financial markets.

A challenge facing the Community is the increasing globalisation trend through which  many of the world’s markets are becoming one huge trading centre. Nonetheless, the Single Market  Programme has been considered  as a successful model in international trade.

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Bibliography;

1.Monti M., (1996), The Single Market & Tomorrow World, Kogan Page.

2.Perry K., (1994), Business and the European Community, Butterworth-Heinemann Ltd.

3. Wallace H. & Wallace W., (2000), Policy-Making in the European Union, Oxford University Press.

4. Archer C., (1996), The European Union Structure and Process, Continuum.

5. European Economy European Commission Journal, Report on the Implementation of the 2001 Broad Economic Policy – Guidelines – No.1 / 2002.

6. European Economy Social Europe, (1993),  Reports and Studies No. 3, Markets, Services and European integration ‘ The challenges for the 1990s.

7. Buiges, Pierre, and John Sheehy, (1995), “The internal Market Program:  The Impact on European Integration, Document II/133/95.

8. Commission 1996a &1996b, The Impact  and  Effectiveness of the Single Market, COM (96) 520m Luxembourg: Office for  Official Publications of the EU.

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