Single Market (L5)

Question 1

What is a single market?

Answer 1

A single market is an area where trade borders have been removed and free movement of goods, services, and people is permitted.

It scraps any other remaining NTB.

Question 2

What was the white paper?

Answer 2

in 1985 the white paper was published and it identified 4 NTB’s:

1. physical barriers like border controls
2. tax barriers (vat organised nationally)
3. technical barriers for goods - national standards
4. ‘buy national’ policy - where government favours domestic firms, especially for services. it is a barrier as it discriminates against foreign firms.

Question 3

What did cecchini say about the effect of removing these NTBs?

Answer 3

that eliminating NTB’s (i.e., forming a SM) could increase GDP by 5%

Question 4

3 ADVANTAGES of forming a single market

Answer 4

1. Cost savings + specialisation
2. Economies of scale / size (cost of production reduced, can sell more + specialised machinery comes at a lower cost. R&D costs spread over more output)
3. Increased cross border competition (more efficiency + innovation)

Question 5

Assumptions initially of NTB removal?

Answer 5

1.Partial equilibrium: ignore impact on other markets
2. TWO LARGE COUNTRIES (ignore ROW)
3.Start with non-tariff barrier large enough to make cross-border trade unprofitable
4.Perfect competition
5.Comparative stati

Question 6

Draw me removal of NTB model

Question 7

Where is equilibirium in the removal of NTB model?

Answer 7

When Price(France) meets Price(Germany), trade will stop as there is no incentive to trade anymore. Prices converge.

Question 8

When does trade happen?

Answer 8

Only when htere is a difference in prices

Question 9

Actions to create the single market (5)

Answer 9

1. End intra-eU frontier controls: no more checkpoints within countries
2. Harmonise technical barriers: replace all national standards with 1 EU standard each. OR mutual acceptance of each others standards
3. End ‘discriminatory public procurement’: governments to buy from cheapest source, no more bias.
4. Unitary patent (EUPTO).- decreases cost per EU wide patent down to 6.5k from 32k.
5. Encourage cross-border services: banking sector can operate foreign branches with home country prudential control.

Question 10

Why is replacing national standards with EU standard hard?

Answer 10

Not everyone will be happy. Countries need to spend costs changing the way they produce goods.

Question 11

Impact of Single Market on GDP?

Answer 11

Small: around 2-3% gain, different studies show different, but all are positive gain.

but these studies ignore dynamic effects.