Lecture 5 - The single market

Question 1

What are the 3 main benefits to a country of joining a single market?

Answer 1

Three main sources of gain (Cecchini 1988):
1- Cost savings and specialisation from elimination of frontier controls and the removal of other non-tariff barriers to trade
2- Economies of scale: large plants can use more specialised machinery at potentially lower cost and firms can spread R&D, marketing costs etc over more output
3- Increased cross-border competition: raised efficiency and increased innovation

Question 2

Explain the 1985 Single Market Programme

Answer 2

• The 1985 Single Market program aimed to revitalise the European customs market in order to stimulate growth and employment and improve European competitiveness
• It did this by creating an area without internal frontiers via four freedoms of movement: goods, services, persons and capital

Question 3

What actions were taken to create the 1985 single market?

Answer 3

1- Abolishment of intra-EU frontier controls
2- Harmonisation of technical barriers: The 28 national standards were replaced with 1 EU standard - the Euro Sausage or replace with a mutual recognition of each other’s standards
3- Ended discriminatory public procurement: all state bodies were to buy from the cheapest source
4- Streamline patent protection: 2012 unitary patent was agreed
5- Encourage more cross border services: Financial services were allowed to operate foreign branches under home country control

Question 4

What were the effects of the 1985 single market on GDP?

Answer 4

The measured impact on GDP is small, however large potential remains