What is a single market?
A single market can describe any area where people are free to trade goods, invest money and move for work without facing legal, technical or physical barriers. Single markets are designed to reduce business costs and increase productivity by removing tariffs and setting the same rules across a region. They should also increase the choice of goods and services available to consumers, stimulating competition, increasing quality and cutting prices.
The single market in European Union
The single market (sometimes call the internal market) is the project to create a single EU economy with free trade across all EU member states. It has been central to the formation of the EU and covers many of the EU’s most important policy areas including the European Customs Union and the single currency.
In 1957, the Treaty of Rome created the European Economic Community with a common market, which later developed into the EU. The treaty set out four economic freedoms that it wanted to create in Europe:
- Free movement of goods
- Free movement to provide services
- Free movement of capital (money)
- Free movement of people
Creation of the single market
Between 1958 and 1968 the European Economic Community created a customs union, removing tariffs on goods traded between members. It introduced common external tariffs on goods traded with countries outside the common market. The creation of the common market and the commitment to the four freedoms led to the gradual creation of a single market. In 1986 the Single European Act made way for common laws regulating the markets across the EU.
These laws introduced harmonised standards and regulations across the EU for a number of sectors to ensure products manufactured across the EU meet the same standards. They focus mainly on health, safety, and environmental protection requirements. Not all sectors are subject to harmonisation. The principle of mutual recognition ensures market access for products that are not subject to EU harmonisation, meaning that products lawfully sold in one EU country can be sold legally in all other EU countries. This means the single market allows the free movement of goods while allowing some difference in the way national governments regulate their own industries.
On 1 January 1993 import and export controls for goods being traded between EU countries were abolished and the European Single Market was created. The European Commission has authority over the single market economic policy. Its regulations are most often passed down to national governments via directives that are adopted into national law.
The EU does not have a fully integrated single market as it does not have a unified tax or welfare system and the single currency is not used by all members. Some countries, including the UK, have opt-outs from certain rules. The UK and Denmark opted out of joining the Economic and Monetary Union (EMU) and as a result they have not adopted the euro as their currency and their central banks retain full control.
Facts and figures
- The EU single market has the largest GDP of any economy in the world, with a GDP of €13.96trillion (£11.25trillion) in 2014.
- This amounts to a GDP per head of €27,400 (£22,088) in 2014.
- Initially open to 345 million people in 1992, it now encompasses 508 million people in 28 EU member states.