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The EU’s single market is called the jewel in the bloc’s crown. With a single currency and the Schengen passport-free travel area, it represents one of the most consequential voluntary efforts in history to share sovereignty.
Still the situation is not good. As the Financial Times series makes clear, integration of national markets remains elusive in services, incomplete in goods, and in many ways regressing rather than progress. Simply put, national authorities leave too many obstacles in the way of equal access to their markets for companies and workers from other member states: in the history of the single market, only one French baker has received a certificate recognized in Germany from his home country. National regulations, even if well-intentioned, mean that cross-border activity must bear the costs of multiple sets of rules, such as those on labelling.
International Monetary Fund And European Central Bank Estimates of these non-tariff barriers are staggering, amounting to tariffs of 45-65 percent for goods and 100-110 percent for services. This is certainly a big estimate – but as ECB President Christine Lagarde told the FT’s Global Boardroom last week, even if it is only half that, the cost is still very high.
At a time when the EU is concerned about its competitiveness and finds its productivity lagging behind its geo-economic rivals, leaving the single market to rot would be disastrous. The faction knows this well: last year’s report by former Italian prime ministers Enrico Letta and Mario Draghi was about how to realize the EU’s promise of integrated scale. The exact policies, which vary by region, are no secret. Making them happen is a different matter.
There are three overarching strategies that the Commission should adopt as a matter of priority. One is (as Letta recommends) to move from using instructions – which each capital draws up for its own purposes – to rules, which apply the same rules across the block. Beyond new legislation, there should be an agenda to transform existing directives into regulations. Brussels has promised one in the financial policy area.
The second is to establish an opt-in “28th rule” to co-exist alongside national rules where it is very difficult politically to reconcile them. Both reports recommend it for the corporate code, and the Commission has promised early proposals. It’s important to get this right: an agile, effective corporate code designed specifically to enable innovative start-ups to move forward easily, but without excluding others.
The third is enforcement, where Brussels has fallen asleep at the wheel. The Commission has a duty to strictly monitor Member States’ resistance to the free flow of goods, services, capital and labor in accordance with EU law. But the rate of enforcement actions has declined. Enforcement efforts need to be adequately resourced and attract political attention to make potential European champions feel that the Commission is supporting them.
A tier of specialized commercial courts is being added to the EU judicial system, which will have the power to rapidly adjudicate disputes related to the single market, according to three academics. ProposedCan work wonders.
These strategies essentially amount to the Commission taking off its gloves. It has far greater powers to make the single market work than is currently used. And where politics has become too paralysed, Brussels should encourage and help “coalitions of the willing”, where some but not all states integrate their markets more.
A step change into the single market is justified in Europe’s self-interest – but beyond that it would show the world that the ideal of frictionless cross-border exchange is far from dead.
