Archive: Single Market

Archive: Single Market Between UK and EU

Historical development of the Single Market

Since the inception of the Single Market in 1958 with the Treaty of Rome. The Single European Act, which came into force in 1987, committed the EU to creating a functioning single market allowing for the free movement of goods, persons, services and capital (the so-called Four Freedoms). Subsequent Treaties have seen the addition of other areas, such as environmental, social and employment policy, to the original core. The jurisprudence relating to the Single Market has also developed in parallel through a number of important European Court of Justice (CJEU) judgments. Although the completion of the Single Market was celebrated in 1992, in reality it was far from complete at that point. Subsequent liberalisation over the past twenty years has created a deeply integrated, but not perfect, Single Market. Much further liberalisation remains possible and many barriers, both formal and informal, still remain.

Legal framework which makes the Single Market work

The legal framework defines the Treaty structure, the Four Freedoms (goods, services, people, and capital), and how the EU legislates. It sets out the scope of competence within each of the Four Freedoms and the debates that surround each of them. It considers the pros and cons of harmonisation and mutual recognition as ways of encouraging market integration. It explores the debate surrounding the powers given to the EU by Article 114 in the Treaty on the Functioning of the European Union (TFEU). It concludes that it is not possible to establish a clear division between Member State and EU competence in the Single Market area, but that any situation where there is a restriction of movement on people, goods, services, or financial flows is potentially unlawful, susceptible to legal challenge, and must be shown to be objectively justified in the public interest.

The impact of the Single Market on the UK’s national interest

• The economic benefits of the Single Market. It notes that most studies suggest that the GDP of both the EU and the UK are appreciably greater than they otherwise would be, thanks to economic integration through the Single Market. There is a fuller discussion of the studies in Appendix 1 of this report, including a summary table on page 72;
• The effect of the legal regime on economic actors, noting that businesses value the additional access to EU markets that the Single Market brings and recognise this will bring a regulatory burden. Views vary about the nature of that burden, the direction of it, and whether the UK “gold plates” it. The evidence also indicates that the standard of implementation and enforcement of legislation varies greatly across the EU and that this forms a significant barrier to UK firms’ ability to take advantage of the Single Market’s opportunities in practice;
• The impact of the Single Market on policy development. It highlights the strong influence the UK has had on the development of the Single Market, driving it in a broadly liberalising direction. It looks at whether the Single Market necessarily generates the need for EU-level policy-making in other areas, for either economic or political reasons, and concludes that it inevitably does in areas such as state aids, competition and network industries; potentially does in areas such as environment or regional policy; and that views vary about whether it necessarily requires EU-level employment and social policy-making, with large corporations and business trade associations being broadly sceptical.

Future direction of the Single Market

• How the economic crisis has caused many to look for ways to deepen the Single Market further to generate new growth across Europe. It highlights that the evidence submitted to the Review shows very strongly how important it is that the Single Market remains open to the wider world economy. It considers the impact upon the Single Market of possible further euro area integration.
• Areas where the EU doing more might be in the UK’s interest, and suggests that the EU could strengthen its own enforcement efforts, focus on network and services liberalisation, and maybe make some small institutional changes.
• It also considers where the EU doing less would be in the UK’s interest. It suggests less and better legislation, with more reliance on the mutual recognition principle.

Single Market Between UK and EU

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