The Single Market - Essay Example

?The Single Market Introduction There are many countries in the world that work in diverse markets. EU did not start in a single economy. The European Union was once working in different currencies. This paper will tackle the Single Market of the European Union including its history and the different key players before it was established. Single Market, also known as the Internal Market, is a very well-known European Union project with an objective to mold Europe into a single economy and create free trade within the union. This influential project encompasses European Customs Union, the single currency and other policies which are proposed to unite the economy of EU into a single unit (“European Single Market”). The Treaty of Rome It was in 1957 when the Treaty of Rome was established to provide the conditions for the economic community which includes progress of internal market, single agricultural policy and the structure of the institutions of European Community. The Treaty of Rome introduced the concept of qualified majority of voting (Cowgill 2010). Known as the treaty that established the EEC or European Economic Community, this Treaty of Rome set out four freedoms in Europe which include freedom of movement of goods, to provide services, of capital and of people (“European Single Market”). It was in 1968 when European Customs Union was created to further establish the provisions of the treaty. The creation of this treaty marked the end of the NTBs or non-tariff barriers. After the creation of this treaty, there was a clash between laissez-faire and interventionist as well as between regulated capitalism and neo-liberalism (“The Single Market”). Harmonisation In order to further take step in creating a single market, the European community created a policy of harmonisation to reconcile the differences in national regulatory practices and to create more common rules. However, this policy did not fully succeed because of complexity of the processes including Non-Tariff Barriers, the decision rule of the majority and lastly, it posted low political interest from the member states (“The Single Market”). This common market or harmonisation was created by the Treaty of Rome in order to eliminate trade barriers and to ensure economic progress among the member states. The achievement of the full implementation of the policy did not succeed largely because of the selection of detailed legislative harmonisation (“European Parliament”). Since the member states wanted to have everything voted unanimously, harmonisation became very difficult to achieve. The European Court of Justice and Mutual Recognition In order to develop the purpose of creating a unified market in Europe, a crucial step was made by the European Court of Justice. The principle of mutual recognition was created to guarantee the free movement of goods and services. However, this principle does not require all members of the union to have a unified legislation. Both goods and services cannot be banned from sale on the territory of another member states except if there overriding of general interest such as health, consumer protection and protection of the environment (“The Mutual Recognition”). Aside from this very simple provision, it must be noted that the rules of the member state of origin of the goods and services must prevail. This is considered a practical and influential tool for an economic integration without sacrificing the local, regional and national tradition ( “The Mutual Recognition”). Though there is a move to integrate the market into a single market, the community still wanted to retain the diversity of the products and services offered by the member states. This crucial step promoted common reciprocity of standards than harmonisation policy. It is said that member states can only call upon national restrictions, traditions, customs and control free trade in areas considered not mutually equivalent (“The Single Market”). Neoliberalism and the European Union According to Hermann (n.d.), neoliberal thinking started to emerge after the war which was fully influenced by the result of the Great Depression. With the influence of the United States, the European Union focused on economic planning and reconstruction. It can be said that the American made their best effort to control Europe’s economic modernization. During these times, traditional methods were changed such that gold standard was discarded. Keynesianism was adopted and provided the groundwork for new economic measures. Keynesianism believes that “total spending in the economy (called aggregate demand) and its effects on output and inflation.  According to Blinder (n.d.), the following are the beliefs of Keynesianism: A Keynesian believes that aggregate demand is influenced by a host of economic decisions—both public and private—and sometimes behaves erratically changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run effect on real output and employment, not on prices. Keynesians believe that prices, and especially wages, respond slowly to changes in supply and demand, resulting in periodic shortages and surpluses, especially of labor. Keynesians do not think that the typical level of unemployment is ideal—partly because unemployment is subject to the caprice of aggregate demand, and partly because they believe that prices adjust only gradually. Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most important of all economic problems. ECC, ECSC and Euratom were united into European Communities (EC) in 1965. Though there were challenges due to reluctance of some members of the community, it was only in 1986 when Single European Act (SEA) was established when the single market project was pushed again. The 1985 White Paper The Internal Market Programme was set out to continue the push for the common market in 1958. This time, the program wanted to totally eradicate the frontier concept and provides freedom for human and material resources. This idea was instantly supported by the member states which affirmed their support in 1982 and the 1985 White Paper served as the go signal. To ensure the implementation of this program, the European Council set the completion date in 1992 and this 1985 White Paper was signed by the commission as response to the council’s order to prepare a program and timetable. According to the European Parliament Fact Sheet, the White Paper was approved in June 1985 includes legislative measures to be taken which embody the three main objectives: the elimination of physical frontiers, by abolishing checks on goods and persons at internal frontiers, the elimination of technical frontiers: breaking down the barriers of national regulations on products and services, by harmonisation or mutual recognition, Elimination of tax frontiers: overcoming the obstacles created by differences in indirect taxes, by harmonisation or approximation of VAT rates and excise duty. Single European Act In July 1987, the Single European Act was established to give formal appreciation to the European Council. This was signed in Luxembourg and The Hague. Both the Treaty of Paris (1951) and Treaty of Rome (1957) were modified upon the signing of this Act to the new economic integration of Europe. This act also gave way to the creation of the Court of First Instance and the “cooperation procedure”. The Parliament now has the power to veto decisions over accession of new member states and conclusion agreements (“Single European Act”). The 1992 Programme was set for the full achievement of the Single Market which involves the removal of barriers to movement of people; the harmonisation of national standards; rules on how governments buy services and goods; the liberalisation of financial institution; the setting of more standard Value Added Tax (VAT) rates, and European business laws (“European Single Market”). EU Single Market Single Market can be described as to the any area where people are free to exchange their goods, invest their money and work without any restrictions. European Union single market is intended to allow members of the union to create economies of scale, trade of businesses with unified set of rules. Single Market comprised almost 380 million consumers which comprised 40% of the world trade. Because of Single Market, consumers among the member states are given more freedom and choices (“Benefits of the Single Market“). However, with this freedom comes the need to regulate the market. EU Commission was given the power to control and regulate areas of economic policies under the Single European Act. If such regulation is approved, this is passed down to the national governments and legislated to become a law. The purpose of regulation is to ensure fair competition between the businesses. The following facts and figures about EU Single Market were gathered by Civitas Organization in 2011: The EU single market has the largest GDP of any economy in the world. In November 2010, the EU Commission had 1091 pending infringement proceedings against the member states in relation to the single market. This was a reduction of 11% on the previous six months. "Almost half of the infringement proceedings launched by the Commission relate to the environment and taxation (470 out of the 1091 in November 2010). In 2010, the 'Eurotariff' limited the cost of making a mobile phone call within the EU to 32 pence, and it limited the cost of sending a text message to 9 pence. Arguments for the Single Market continue today. Those who support such program argue that because of Single Market, it is more feasible to do business in the European Union which is believed to contribute to a faster economic progress by standardising national regulations. Another argument for the continuous program is that these ties of the member states are good for the stability of Europe because it makes conflicts or wars impossible. This Single Market ensures a more open and free Europe. With supporters comes opposition against the implementation of Single Market in the European community. According to the report of Civitas Org in 2011, national governments persist on resisting single market measures to impede the systems. It is noted that the Single Market cannot function in areas with diverse cultures and different levels of economic status or wealth. The regulations were said to have just been escalated to European level but not totally eradicated. Benefits of Single Market One of the benefits of Single Market is that it provides for better consumer protection (“Benefits of the Single Market”). Example of this is the Fourth Insurance Directive which was agreed upon by the member states in 1998 to ensure that those victims in motor accidents in other states can claim their insurance in time they get back to their state of residence. Second noted advantage of the Single Market is that the citizens can enjoy the right to work, study or retire in other states that are member of the EU (“Benefits of the Single Market”). Because of Single Market, the residents can acquire better knowledge in their chosen career without the fear of facing any legal consequences or any other restrictions. The EU single market can also be very beneficial to business such that the principle of mutual recognition of standards ensures that all trades or products are of good quality. This means that the member states don’t need to recheck all products exported in their respective countries. Thus, Single Market can be said to be a domestic market for European business (“Benefits of the Single Market”). Single Market and Globalization Both globalization and Single Market have socio-economic impacts which deliver economic benefits. However, more citizens are reluctant to accept globalization unlike Single Market. According to Zuleeg (2008), the benefits brought by Single Market are more visible than that of globalization such as being able to study abroad and protection on vehicular accidents in other countries. The Single Market was made feasible because of the shared economic objectives of the member states. Unlike Single Market, globalization was viewed by the citizens with a sense of helplessness (Zuleeg 2008). This took place faster than that of Single Market. It is said that there is still hope for a positive interaction with globalization since governance can still be enhanced. The progress of globalization can only be possible in some areas such as accounting (Zuleeg 2008). In Zuleeg’s article, he mentioned that leadership and communication were crucial in creating the Single Market but not in globalization (2008). Leaders only need to promote a more positive and optimistic vision of globalization to help the residents fully understand what is the risk if the economy weakens. Thus a positive leadership is very vital in order for globalization to become a success. Short-term solutions are known to result into more barriers which will eventually lead to lower European growth and high unemployment because of fewer jobs offered. Reforms are therefore needed for the member states to benefit from globalization (Zuleeg 2008). Europe is known to be the world’s leader in regional economic integration and has proven to have surpassed economic crisis and created real benefits to the citizens. If this powerful leader will oppose to globalization, it will surely incur significant costs and will become counter-productive. Globalization has been very widespread and cannot be stopped. No country can isolate itself and close its doors to globalization. Globalization has already spread it wings to influence trade and investments worldwide, and if EU will remain hesitant to this change, it will become uncompetitive sooner (Zuleeg 2008). Conclusion The creation of Single Market did not take place smoothly. It has encountered some very difficult times when the member states chose to give more priority to other economic factors. But because it was able to surpass and adopt very important theories and programs such as the principle of mutual recognition and the SEA (Single European Act), the Single Market that has taken off since the 1957 efforts continues to develop today. It has embodied the different policies intended to unite the diverse economies of the European Union such as the single currency and Schengen Convention. With globalization on its way to spread its process, it can be said that it has a subsidiary effect on Single market. According to Zuleeg (2008), there were some EU member states that have already begun questioning the objectives of Single Market such as free and accurate competition. Because of globalization, there might be a possibility that the Single Market which has already delivered real opportunities and benefits to citizens might be lost. Nevertheless, it is not impossible for Single Market and globalization to work hand-in-hand. Single Market can act as the best proof on how economic integration can be made to work with globalization if only it is sustained with adequate governance, communication and incisive domestic reforms (Zuleeg 2008). Consistency on efforts and decisions should be created to ensure the fair and controlled economic integration process. References: “Benefits of the Single Market.” BERR. 2007. Web. 3 April 2012. Blinder, Allan. “Keynesian Economics.” n.d. Web. 2 April 2012. Cowgill, Andrew. “Texts of the European Treaties.” 2010. Web. 2 April 2012. “European Single Market.” Civitas.org . 2011. Web. 3 April 2012. “European Parliament Fact Sheets.” Europe Parliament. 2000. Web. 3 April 2012. Hermann, Christoph. “Neoliberalism in the European Union.” n.d. Web. 2 April 2012. “Single European Act.” Eurofound.eu. 2007. Web. 2 April 2012. “The Mutual Recognition Principle in the Single Market.” europa.eu. n.d. Web. 2 April 2012. “The Single Market.” Oxford University Press. n.d. Web. 2 April 2012. Zuleeg, Fabian. “Europe, globalization and the Single Market: lessons and comparison.” 2008. Web. 3 April 2012. Read More