10 Facts About The Single European Market

10 facts about the Single European Market The Single European Market (SM) is the core of Europe's economic integration architecture and the world's largest common market Milestones on the road to the Single European Market EU 22.7 Share of global GDP by region ( in %, 2012) USA 21.9 The Gross domestic product (GDP) is the CN 11.5 monetary value of all finished goods and services JP 8.3 produced in one market ROW* 36.6 Source: IMF * Rest of world The main objective of the internal European market is to guarantee free movement within the European Union (EU) member states 1957 EU'S FOUR Signing of the Treaty of Rome and founding of the European Economic Community (EEC) FUNDAMENTAL FREEDOMS € €€ people capital goods services The SM is at the heart of the European Economic Area (EEA) 1968 Founding of the European Customs Union 28 member states of the European Union Switzerland via numerous agreements Iceland, Liechtenstein and Norway via EEA membership 1985 European Commission's White Paper proposes 300 measures for reducing internal trade barriers, including the principle of mutual recognition The creation of a common market - such as the SM - has positive economic effects Economies of scale Access to a bigger allow companies to reduce production costs market increases the sales potential of companies Stiffer competition due to lower entry Direct cost reductions by abolishing border formalities and barriers reduces prices for consumers national regulations 1987 Single European Act (SEA) paves the way for the creation of a Single European Market and the Simplification of cross-border mobility Lower transaction costs realisation of the and an increase in four fundamental freedoms by the end of 1992 workforce potential Two important elements of the SM are the harmonisation of standards and the principle of mutual recognition THE PRINCIPLE OF MUTUAL RECOGNITION THE HARMONISATION OF STANDARDS 1988 Cecchini Report provides a much-read assessment of the SM's economic impact A product that satisfies all the necessary requirements in one EU country can also Agreements on the requirements that products must fulfil in order to facilitate their be sold in all other EU states trade in the EU BOTH PRINCIPLES COMBINED PROVIDE A FRAMEWORK TO FACILITATE CROSS-BORDER TRADE 1993 Over 90% of the objectives agreed in the SEA have National regulations are replaced by harmonised single market rules that eliminate many border formalities and entry barriers been achieved 21 years after its inception, the SM is a success story that benefits all member states. It has... ..helped dismantle trade barriers, thereby creating cost advantages .increased EU GDP and had positive growth effects 1995 .significantly boosted exports and foreign investments ..intensified competition within Europe and made companies more competitive in the global arena First enlargement of the SM with the admission of Finland, Austria and Sweden And years after the economic integration of Europe, the benefits are also quantifiable GDP Number of jobs +1.35% GDP +2-3% FDI Foreign Direct Investment Non-EU firms invest +14% more in the ŚM than in other industrialised countries FDI stock of countries within the EU boosted by 28% TRADE VOLUMES Exports/Imports +8-9% 25m jobs (10.3% of all jobs in the EU) were directly dependent on exports to non-EU countries 2004 8.5m in services EU-25 8 Eastern European states and the islands of Malta and Cyprus join the European Union 15.7m in manufacturing COMPETITION & MARK-UPS Goods market liberalisation has led to a decline in mark-ups in the manufacturing and construction sectors Stiffer competition has led to greater innovation activity and stronger productivity growth in most industries LABOUR MOBILITY 3% of the EU labour force work in a different member state More than 250 000 Erasmus students have spent an exchange semester in another European country (2001/2012)* * Source European Comission 2006 Adoption of the Services Directive facilitates trade in services Although already successful, there is still potential for growth in the trading relations between EU countries trade between EU countries is 7.5 times lower than trade within a single EU country services generate 70% of value created in the EU but account for only 20% of intra-EU trade The creation of a truly coherent SM still faces obstacles that need to be solved National borders, over-regulation and red tape still constitute unnecessary obstacles 2007 Growth potential in expanding sector for tradeable services is yet untapped EU 27 Romania and Bulgaria join the European Union Language barriers and cultural difference make the marketing of products, the process of business deals and labour mobility more difficult A,B,C Public procurement is still nationally dominated Cross-border mobility needs to be improved TAKE AWAY: 10 We all benefit from the Single European Market 2013• EU 28 Croatia joins the European Union The SM allows for travel, study and FREEDOM OF MOVEMENT work within the EU without major obstacles or restrictions The SM allows the trade of good and services without tariff and FREEDOM OF GOODS AND SERVICES non-tariff barriers and enables providers of services to do business in all member states The SM facilitates capital movement and allows companies and consumers to utilise the offers of foreign financial service providers without additional restrictions FREEDOM OF CAPITAL The transition from national markets to an integrated economic area cannot be achieved overnight. However, the Single European Market is on the right track LONG-TERM EFFECTS MORE INFORMATION: wwW.DBRESEARCH.COM Deutsche Bank Research