2. The Single Market

Question 1

What does the Single Market aim for?

Answer 1

The Single Market is a core element of the European integration process and aims to 1) liberalize internal trade; 2) coordinate economic policies; 3) promote competitiveness (priority in the midst of the eurozone’s sovereign debt crisis); 4) deepen and widen the internal market.

Question 2

What is the difference between Internal Market and Common Commercial Policy?

Answer 2

➔ Internal market: regulates trade between EU member states
➔ Common Commercial Policy: regulates trade with 3rd countries

Question 3

What was the Spaak Report?

Answer 3

. The Spaak Report promoted a new kind of inter-state economic relationship and provided the blueprint for the Single Market.
❖ establishment of normal standards of competition through the elimination of protective barriers
❖ curtailing of state intervention and monopolistic conditions (still prevails)
❖ measures to prevent distortions of competition, including harmonization of legislation at the Eu level

Question 4

Talk a bit about the history of the Single Market! Mention the Treaty of Rome (1957)

Answer 4

• based on Spaak Report, Treaty of Rome (1957) aimed for
  o common market by coordinating economic activities
  o ensuring stability and economic development
  o and raising living standards
• the customs union was at the core of the common market: not only the abolishment of customs duties on mutual trade but a uniform tariff on trade with non-EC countries
• other measures to promote internal trade: free movement of labour, services, capital, and sectoral regulation (agriculture, transport and competition)
• the transformation of the EC into Common market was to take place over 12-15 yrs
  o begun with efforts to address trade tariffs: elimination of customs duties btw MS and quantitative restrictions in 1958 and introducing common external tariffs in 1968

Question 5

List the 4 stages of economic integration!

Answer 5

➔ Free trade area (FTA): reduces tariffs to 0 btw members.
➔ Customs union: reduces tariffs to 0 btw members and establishes a common external tariff. (Members are unable to conclude international agreements with 3rd countries)
➔ Single market: establishes a free flow of factors of production (labour and capital, goods and services). Free movement of labour contributes to an economic community.
➔ Economic (monetary) union: involves agreement to harmonize economic policies (and a common currency, the Euro).

Question 6

Talk about the removal of barriers!

Answer 6

• Goods: the removal of tariff and quantitative restrictions for goods was followed by the removal of non-tariff barriers: Quotas, subsidies, export restraints, national product regulation & standards, licensing practices
• Capital: enable capital to go where it would be most productive (subject to safeguard clauses used during recessions)
• Services: freedom of establishment for industrial and commercial activity → right to set up business anywhere in the EC
• Labour: abolition of restrictions on labour mobility
• 1960s: MS were receptive to early efforts to eliminate trade barriers and creating a customs union and they used social policy to compensate for the losses and for the increased competition:
  o regional policy: through investment in underdeveloped regions
  o suppression of large-scale unemployment
  o willingness to cooperate and coordinate in economic policies
• major characteristics of Eu economies: national variation in industry, social welfare, and financial system and systematic diff. in how national economic are organized: diff. regulations of products/investment
• So, efforts to create the Single Market sought to unify interests and market ideologies → deeply contested
  o key debate: Laissez faire: market integration will solve the market economic problems / interventions: by the European communities by the state (Q whether to introduce neoliberalism/regulated capitalism → used both)
  o Neoliberalism: restriction to trade removed, regulatory climate attractive to business (regulatory competition among MS leads to competition among national regulatory policies). Excludes political interference and rejects regulatory power of EU inst. to retain pol. authority at national level. Usually supported by conservative parties, multinationals, industry associations and financial institutions.
  o Regulated capitalism: govt intervention in the market, emphasis on welfare and distributive politics (social market economy & social solidarity). Provides an increased capacity to regulate at Eu level (mobilisation of social groups, reform inst. to generate greater use of QMV, legislative legitimacy). Social and Christian Democratic parties support it.

Question 7

What were the two important changes setting the scene for the creation of SM?

Answer 7

1. Principle of mutual recognition: allows MS to recognize regulations as equivalent
   - policy harmonization (or standardization): e.g. harmonizing noise limits on lawnmowers → UNANIMITY made reaching an agreement extremely difficult
   - SOLUTION – new mode of governance: principle of mutual recognition
   ➢ no unconditional acceptance of such mutual equivalence
   ➢ reserve the right to enforce their own legislation (balance btw community level and MS level regulation)
   ➢ but reduces the barriers created by national regulations and provides a necessary level playing field
   - Without it there would be a ‘race to the bottom’: no mutual recognition. States seek to reduce their domestic measures to attract foreign direct investment and gain competitive advantage through social dumping
2. The increasing judicial activism of the CJEU
   - harmonization didn’t go unnoticed by the CJEU → Judicial activism
   - firms began to seek redress through the community legal system. Court asked to determine whether restrictions placed on imports were legitimate under the Treaties
   - E.g. Italy’s prohibition on the sale pasta not made with durum wheat