eu single market session 2. single european market (sem) market integration = removal of barriers...

EU Single Market

Session 2

Single European Market (SEM)

• Market Integration = Removal of Barriers• Four Freedoms:– Goods– Services– Labor– Capital

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Stages of economic integration

• Customs union (complete 1968)– no tariffs between members– Common External Tariff– Static effects - trade creation and trade diversion– Dynamic effects - specialisation, economies of scale, more competition

• Single market• Economic and monetary union

SEM principles

• Harmonisation = common rules– time consuming, complex, inflexible

• Mutual recognition - Cassis de Dijon• Home country control• New approach to standards - ‘essential

requirements’ (EN) – allow products to market• General Liberalisation

SEM IN PRACTICE

• 1985 Single Market White Paper • fiscal barriers• physical barriers• technical barriers

• 1987 Single European Act (282 directives)• 1990 Schengen Adopted (5 countries) • 1992 Adopted 90% and Implemented 79%• 1994 Schengen Implemented• 2000 Lawsuits vs National Govts >1500• 2006 Services Directive passed• 2009 Services Directive in effect

Shortcomings

• The services sector has opened up more slowly than markets for goods.

• Delays have also affected financial services and transportation, where separate national markets still exist.

• The fragmented nature of national tax systems also puts a brake on market integration and efficiency.

• Most financial services have been liberalised, but are still exempted from harmonization.

• Rise of e-commerce has created new issues6

Free Movement of Goods

• Most of the SEM reforms of 1992 involved goods

• Success• Results– Ever increasing intra-EU trade– Reduction in consumer prices (est 11%)

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Key blockages

• Registrations (i.e. Car)• Digital Content• Online retailing• The “Cloud”

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Online Retailing Issues

• Intellectual Property• Returns• Trust• Taxes• Language

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Free Movement of Services

Services currently represent two-thirds of the EU's GDP and employment, they only make up for around one-fifth of total intra-EU trade.

Why?

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Barriers to Exporting Services

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Services Directive

• to ease freedom of establishment for providers and the freedom of provision of services in the EU;

• to strengthen rights of recipients of services as users of the latter;

• to promote the quality of services;• to establish effective administrative

cooperation among the Member States.

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What is included?• distributive trades (including retail and wholesale of goods and services)• the activities of most regulated professions (such as legal and tax advisers, architects,

engineers, accountants, surveyors)• construction services and crafts• business-related services (such as office maintenance, management consultancy, event

organisation, debt recovery, advertising and recruitment services)• tourism services (e.g. travel agents)• leisure services (e.g. sports centres and amusement parks)• installation and maintenance of equipment• information society services (e.g. publishing – print and web, news agencies, computer

programming)• accommodation and food services (hotels, restaurants and caterers)• training and education services• rentals and leasing services (including car rental)• real estate services• household support services (e.g. cleaning, gardening and private nannies).

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Exemptions• financial services• electronic communications services with respect to matters covered by other

community instruments• transport services falling into Title V of the EC Treaty• healthcare services provided by health professionals to patients to assess,

maintain or restore their state of health where those activities are reserved to a regulated health profession

• temporary work agencies' services• private security services• audiovisual services• gambling• certain social services provided by the State, by providers mandated by the State

or by charities recognised as such by the State• services provided by notaries and bailiffs (appointed by an official act of

government)

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Freedom of Labor

• How mobile is labor?• Is labor homogeneous? e.g. is a skilled

carpenter a substitute for an accountant?• Are some professions more mobile?• How diverse is labor?– Productivity– Wages

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Non-nationals (EU)

Non-nationals (All)

Mobility by Profession

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Free Movement of Capital

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• For Europe's citizens– opening bank accounts – buying shares in non-domestic companies– investing where the best return is– buying real estate

• For Europe's big, small and medium-sized companies– being able to invest in, and own, other European

companies – raising money where it is cheapest

• Europe's governments– lower borrowing rates

The competitiveness of the European industrial and service industries

The Objective of the European Union for the

Single Market is to be :

“The most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”

(Lisbon strategy statement, 2000)

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Porter (1990)

• Competitiveness is determined by intensity of competition

• This is aided by clusters• EU policy has directly sought this

Three options to increase competitiveness

1. The low‑wage strategyÞ Nominal wages are decreased while productivity and

exchange rate remain on their normal level

2. The devaluation strategy Þ Enables industry to sell products in foreign markets at lower

prices than at home

3. The innovation strategyÞ Improvement in quality standards, new products and

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Europe 2020 Strategy

• Economic strategy for meeting the Lisbon aim of becoming the most competitive economy in the world

• smart growth (fostering knowledge, innovation, education and digital society)

• sustainable growth (making our production more resource efficient while boosting our competitiveness)

• inclusive growth (raising participation in the labour market, the acquisition of skills and the fight against poverty).

• Five ambitious objectives

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The 5 Benchmarks

1. 75 % of the population aged 20-64 should be employed.2. 3% of the EU's GDP should be invested in R&D.3. The "20/20/20" climate/energy targets should be met.4. The share of early school leavers should be under 10% and at

least 40% of the younger generation should have a degree or diploma.

5. 20 million less people should be at risk of poverty.

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Employment Benchmark

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R&D Benchmark

Energy (% from Renewable)

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Tertiary education attainment

EU Trade - Export

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Exports - percentage

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EU Trade - Import

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Imports - percentage

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Main Trade Partners

Export• United States (18.7%)• Switzerland (8.1%)• China (7.5%)• Russia (6%)• Turkey (4%)

Top 5 total: 44.3%

Import• China (17.9%)• United States (13.3%)• Russia (9.6%)• Switzerland (6.2%)• Norway (5.7%)

Top 5 total: 52.7%

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Main Industries by Country• Automobiles - France, Italy, UK, Germany, Czech Republic,

Slovakia, Spain• Fashion- Italy and France and other western European

countries• Aircraft- France and Germany• Machinery- The entire continent• Electronics- Italy, The Netherlands, Germany• Food products such as wine, beer, cheeses, chocolates-

Western Europe• Pharmaceuticals- Switzerland• Military equipment- UK, France, Italy, Germany, Russia• Industrial chemicals- Most countries

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