Europe’s common internal market is one of the most important forces behind the European Union’s cohesion. Based on the four pillars of free movement, it allows goods, services, capital and people to move between member states. As one of the world’s biggest single markets with no tariffs between member countries, it makes life easier for over 450 million European consumers and facilitates trade between businesses, including around 22 million small and medium sized enterprises. It also fuels growth, inspires innovation and creates jobs.
The single market also makes the EU a more important trading partner, in a world where individual European nations find it difficult to compete with countries with continent-sized economies, such as the US and China.
Starting with steel and coal
In late March 1957, the six European countries that belonged to the European Coal and Steel Community (ECSC), signed a treaty in Rome, Italy, that would establish the European Economic Community (EEC).
In fact, the ECSC, which was established in 1952 after two world wars, can be considered the real beginning of Europe’s single market. The idea behind it was that if German and French production of two such important products for wartime activities - coal and steel - were under the control of a single authority, then this would prevent further conflicts in Europe. The French government proposed the idea - one that the pro-European French statesman, Jean Monnet, had carefully crafted - and Italy, the Netherlands, West Germany, Belgium and Luxembourg all agreed to it. This initial collaboration on coal and steel was what made the EEC possible five years later.
Over ensuing decades, the EEC evolved to become the internal market we know now. Today, after the recent withdrawal of the United Kingdom from the EU, it is open to the 27 EU member states. A variety of other agreements, including that on the European Economic Area (EEA), give Switzerland, Iceland, Liechtenstein and Norway varying levels of access to the single market too. Until the end of the Brexit transition, which finishes at the end of 2020, the United Kingdom still participates in the single market as well.
Other important milestones include:
Treaties of Rome, 1957
At the same time that the six nations signed the treaty that would establish the EEC, they also signed another treaty to establish the European Atomic Energy Community (EAEC, or EURATOM), which was tasked with the joint development of nuclear energy. The EEC and EURATOM agreements detailed everything from customs regulations to the establishment of a number of committees, councils and tribunals. These would eventually evolve to become the various decision-making organs of today’s EU.
A merger and more members
In 1965, the EEC, EURATOM and the original ECSC merged. The EEC also added members - the United Kingdom, Denmark and Ireland in 1973, Greece in 1981 and Portugal and Spain by 1986.
The Single European Act of 1986
This six-year-plan was the first revision of the original 1957 Treaty of Rome and detailed the four freedoms of movement.
The Maastricht Treaty, 1992
The Treaty on European Union, signed in Maastricht, the Netherlands, in 1992. This agreement expanded the scope of community endeavours into areas like consumer protection, social and economic cohesion and development, among other things. It also introduced a common monetary policy, established new institutions like the European Central Bank and set out a ten-year-plan for the introduction of a common currency, the euro.
The euro was officially introduced in January 1999 and came into regular public use three years later.
The European common market has not just been a driver of European unity, it is also an economic success story.
Economists estimate that in 2015, GDP per capita was 1.7% higher on average, across the EU, than it would have been without the single market. One recent study suggests that, on average, the incomes of citizens in the single market are increased by around 840 euro per person, per year.
European internal trade worth 3 trillion euro
The single market has also driven business inside the European Union. The value of internal trade has increased from 800 billion euro in 1994, to over 3 trillion euro in 2015. Today, around two-thirds of trade done by EU member states is inside their own single market.
Economists say that, as a result of the single market, 3.6 million more jobs were created in the EU. And the free movement of people now sees over 14 million working-age Europeans - or 3.3% of all Europeans - living and working in countries other than their own.
Competition between businesses at the pan-European level is another important aspect of the single market. Promoting it encourages better quality, lower prices and more choice for consumers as well as more innovation. The latter, in particular, also makes European companies more competitive internationally.
The successes of the single market also come from external trade agreements that the EU, which has more power to negotiate as a single market, has signed with other trading nations.
The need to adapt
Currently Europe faces multiple challenges, not the least of which include the global Covid-19 pandemic, the exit of the United Kingdom from the EU and the societal, cultural and political changes wrought by a new digital era.
Past and current proposals, treaties and action plans show that there is a need for constant adaptation and improvement in Europe’s single market. Currently, politicians and decision makers are working on strategies to deal with 21st century challenges such as digitalisation, the green and the energy transition - with projects like the Digital Single Market Strategy, the Capital Markets Union Action Plan and the Energy Union. A better flow of energy resources across the continent, rules for intellectual property, financial services, public procurement processes and standardisation are all focal points of these attempts.
In terms of the digital single market, topics such as artificial intelligence, telecommunications, the sharing economy and start-ups need to be tackled on an EU-wide basis. The fact that digitisation has the potential to reshape many other industries - from manufacturing to banking to retail and new climate technologies - also needs to be considered. At the same time, over-regulation should be avoided, as this has the potential to stifle innovation. Data security, data sovereignty and fair competition must be assured for all EU citizens and businesses.
Perhaps most importantly at the moment, Europe’s single market will play an enormously important role in helping all member states’ economic recoveries from the pandemic. During Germany’s Presidency of the Council of the EU, there is emphasis on making sure the single market is fully functional with the lifting of crisis-related restrictions in cross-border mobility as quickly as possible, as well as the development of mechanisms that make the single market more resilient in crises - for example, exploring possibilities to optimise public procurement, including its legal framework, to allow for fast reaction in future emergencies.
The EU also needs to be more cautious about external forces - for example, by taking care of EU companies that could become targets for takeovers thanks to the pandemic, and by opposing market distortions caused by state-controlled or state-subsidised companies from elsewhere.
Other aspects of the single market that already help to make Europe more competitive and innovative - such as internal supply chains, open markets based on international rules, the balanced development of EU regions and a strong industrial base - also need to be further promoted to ensure the EU’s recovery from this crisis.