Classic single market

• Author: Directorate-General for Parliamentary Research Services (European Parliament)
• Pages: 29-54

Europe’s two trillion euro dividend: Mapping the Cost of Non-Europe, 2019-24

29

CLASSIC SINGLE MARKET

1. Completing the single market for goods

Potential efficiency gain: €183 billion per year

Key proposition

The European single market for goods is one of the greatest achievements of the European

integration process to date, benefitting millions of businesses and consumers on a daily basis in

what is now the largest combined market-place in the world. Estimates suggest that the single

market has added between about 6 and 8 per cent to EU GDP over the third of a century since the

programme for its completion was launched in 19852. Nevertheless, there are still delays in the

adoption of harmonised rules in Member States’ national legal frameworks and infringements

sometimes hamper further integration. Moreover, there is a need both to continue improving the

application of the principle of mutual recognition for areas where there are no harmonised product

rules3 and to further prevent unfair competition generated by non-compliant products. If remaining

barriers were eliminated and exiting European laws were applied effectively, the single market for

goods could still yield substantial additional benefits for the EU economy.

Research carried out by the European Added Value Unit of DG EPRS for the European Parliament's

Committee on the Internal Market and Consumer Protection (IMCO)4 concluded that, completing

the single market for goods could generate €183 billion per annum in additional gains for the EU

economy, representing 1.2 per cent of EU GDP.

More detailed analysis of potential benefits

Within the single market, free movement of goods is the most developed of all four fundamental

freedoms. While the ranges of estimates vary, studies agree that the relationship between increased

free movement of goods and economic benefits for Member States is strong and positive. Trade in

goods currently generates around 25 per cent of EU GDP and 75 per cent of intra-EU trade5. The

OECD has estimated that it is around 60 per cent higher than it would be, were it based on World

2 Jan in ‘t Veld, Quantifying the economic effects of the single market in a structural macromodel, Discussion Paper 94,

European Economy, European Commission, February 2019.

3 Enterprises operating within non-harmonised sectors contribute around 20 per cent of the total value of market sales

in manufacturing.

4 Z Pataki, 'Cecchini Revisited' An overview of the potential economic gains from further completion of the European

Single Market, EPRS, September 2014.

5 Staff Working Document accompanying the Communication from the Commission to the European Parliament, the

Council and the Committee of the regions. Upgrading the Single Market: more opportunities for people and business,

SWD (2015) 202, October 2015.

EPRS | European Parliamentary Research Service

30

Trade Organization (WTO) rules.6 A Commission study7 has concluded that, from 1990, the

progressive deepening of the European single market has increased EU GDP and employment by

1.7 and 1.3 per cent, representing figures of €260 billion and 3.6 million jobs respectively.

A recent study, using advanced sectoral gravity models, shed further light on the potential benefit

of the single market8. It concluded that trade of goods between EU Member States increases 109 %

on average compared to a counterfactual scenario where the EU would be replaced by a standard

regional trade agreement. In the same vein, a study9 carried out a series of simulations to assess the

economic benefits arising from various steps of European integration. The results showed potential

output losses of 2.9 per cent in the agricultural sector and up to 5 per cent in the manufacturing

sector had the single market been reversed between 2000 and 2014. Finally, a study by the European

Commission looked at the potential effects that would occur under a scenario of WTO-rules based

intra-EU trade. The total macroeconomic impact amounts to a loss of 8.7 per cent of GDP on average,

with reduced trade representing a loss of 6.6 per cent and with reduced market size and less

competition accounting for the remaining 2.1 per cent.

Indeed, thanks to the implementation of the single market for goods, 80 per cent of regulatory

barriers have been addressed10 through the adoption of common rules which focus on

harmonisation of the Member States’ legislation. In areas where no EU legislation exists, the

principle of mutual recognition permits goods lawfully marketed in one Member Sta te to be sold in

other Member States without adaptation.11

However, despite the already high level of integration, borders still seem to have a negative effect

on trade as, for instance, intra-EU trade in goods (at 25 per cent of GDP) remains below that of intra-

US (at 40 per cent of GDP).12 Indeed, despite the decrease in EU average transposition deficit over

the year, there are wide differences in the implementation of single market legislation between

Member States13 and infringement cases can be very lengthy. Additional administrative burdens are

also caused by the tendency of some Member States to combine the transposition of the EU

legislation with the revision of related domestic legislation.14 Moreover, in practice, many businesses

are not fully aware of the principle of mutual recognition and thus do not take advantage of all the

possibilities at their disposal. Legal uncertainty, technical barriers and lack of administrative

cooperation further prevent the principle of mutual recognition from reaching its full potential. As

6 J Fournier et al., Implicit Regulatory Barriers in the EU Single Market: New Empirical Evidence from Gravity Models,

OECD Economics Department Working Papers 2015.

7 London Economics, The EU Single Market: Impact on Member States. Study for the American Chamber of Commerce,

2017.

8 T Mayer, V Vicard, S Zignago, The Cost on Non-Europe, Revisited, Mimeo, September 2018.

9 G Felbermayr, J Groschl, L Heiland, Undoing Europe in a New Quantitative Trade Model, IFO Working papers 250-2018,

January 2018.

10 European Commission, Communication on Upgrading the Single Market: more opportunities for people and business,

COM(2015) 550, October 2015.

11 Unless national rules are deemed necessary and proportionate to protect the public interest.

12 S Vetter, The Single Market 20 years on: Achievements, unfulfilled expectations and further potential, EU Monitor –

European Integration, DB Research, 2013.

13 European Commission, The European Single market Scoreboard, July 2018.

14 The so called “gold plating”. For more details see: The Cost of Non-Europe in the Single Market – I Single Market for

Goods, EPRS, September 2014.