The Single European Market (SEM) was created at the end of 1992 and its operation was to stimulate trade activities between member states by creating a larger free trade area. The idea behind the single market was to reduce the cost of European business, by removing internal tariffs and standardising regulations. Since, the process has expanded to include the establishment of a common currency and monetary policy across most of the European Union (E.U). The E.U aims to achieve a common fiscal policy near future. According to European Commission the removal of national trade barriers has generated approximately 800 billion euros in wealth for E.U (Business Europe, 2012).
Prior to the SEM, firms establishing a branch or selling their products in other E.U states had to comply with the requirements of that particular state, however, when the SEM established, firms across E.U can establish a branch and sell their products freely throughout the E.U without having to meet separate member state requirements. Removing non-tariff barriers has achieved lower costs and it has increased trade which has led to increased competition between firms, and this has resulted in lower prices and stimulus in investment with greater competitiveness that has led to more growth and jobs (Riley, 2003).
The single market has removed barriers and tariffs which have created the free movement of goods across E.U states. Around 75% of intra-EU trade is in goods (European Union, 2010). It is one of the freedoms established by the European Community (E.C). Articles 28, 29 and 30 of the EC Treaty defined the scope and content of the principle by probating unjustified restrictions on intra-EU trade. Regulation on chemicals were restricted until 2007 and the goods packages on the marketing of products entered into force in 2010. Many of the major restrictions on the free movement of goods between member states have now been abolished. Although many restrictions have been removed, new innovation of products and technological advances pose new challenges for the SEM.
The SEM has created free movement of services; however the progression has been substantially slower compared to goods. Despite the progress in some specific service sectors, The Internal Market for services is not working as it should (European Commission, 2013). The Internal Market for services is very complex, as if the service is goods related then it falls into Article 34 of Treaty on the Functioning of the European Union (TFEU), if it is service related then Article 56 TFEU applies.
The SEM has permitted E.U citizens to work in other states and Article 45 TFEU provides for the freedom of movement. The freedom removes any discrimination based on nationality against EU migrant workers. Article 45 TFEU also prohibits discrimination against migrant workers based on on national rules (Arnull et al., 2006).
The SEM has been successful in several areas, such has creating three million new jobs since its establishment and it’s the world’s largest economy with Gross Domestic Product (GDP) at €12.6 trillion. It has increased more competition in the market, leading to lower prices and wider choice of goods and services. As there is a high competition in the market, airline tickets has dropped by 40% since. The SEM has encouraged 6 million people to work in another state member and 2.8 million students to study in another member state since the establishment and every year 200,000 add to that figure. It also accounts for 20% of global exports and imports (Businesseurope, 2012).
Although the above facts may seem the SEM has been effective over its 21 year period, it does not express the price differences between member states. Several studies have revealed there are considerable price differences between the states, and therefore, price differences are viewed as a signal of the non-effective of the single market (National Consumer Research Centre, 2007). The SEM should control price
