The
European Union's (EU) internal market (sometimes known as the single market, formerly the
common market) seeks to guarantee the
free movement of goods, capital, services, and people the EU's "four
freedoms" within the EU's 28 member states.
The internal market is intended to
be conducive to increased competition, increased specialisation, larger
economies of scale, allowing goods and factors of production to move to the
area where they are most valued, thus improving the efficiency of the
allocation of resources.
It is also intended to drive
economic integration whereby the once separate economies of the member
states become integrated within a single EU wide economy. Half of the trade
in goods within the EU is covered by legislation harmonised by the EU.
The creation of the internal
market as a seamless, single market is an ongoing process, with the
integration of the service industry still containing gaps. It also has an
increasing international element, with the market represented as one in
international trade negotiations. Notably, the internal market is open to
three non-EU states via the European Economic Area.
History
Two of the original core
objectives of the European Economic Community (EEC) were the development of
a common market offering free movement of goods, service, people and capital
(see below). Free movement of goods was established in principle through the
customs union between its then-six member states.
However the EEC struggled to
enforce a single market due to the absence of strong decision making
structures. It was difficult to remove intangible barriers with mutual
recognition of standards and common regulations due to protectionist
attitudes.
In the 1980s, when the economy of
the EEC began to lag behind the rest of the developed world, the Delors
Commission took the initiative to attempt to relaunch the common market,
publishing a White Paper in 1985 identifying 300 measures to be addressed in
order to complete a single market. The White Paper which was well received
and led to the adoption of the Single European Act, a treaty which reformed
the decision making mechanisms of the EEC and set a deadline of 31 December
1992 for the completion of a single market. In the end, it was launched on 1
January 1993.
The new approach, pioneered by the
Delors Commission, combined positive and negative integration, relying upon
minimum rather than exhaustive harmonisation. Negative integration consists
of prohibitions imposed on member states of discriminatory behaviour and
other restrictive practices. Positive integration consists in approximation
of laws and standards. Especially important (and controversial) in this
respect is the adoption of harmonising legislation under Article 114 of the
TFEU.
The Commission also relied upon
the European Court of Justice's Cassis de Dijon jurisprudence, under
which member states were obliged to recognise goods which had been legally
produced in another member state, unless the member state could justify the
restriction by reference to a mandatory requirement. Harmonisation would
only be used to overcome barriers created by trade restrictions which
survived the Cassis mandatory requirements test, and to ensure
essential standards where there was a risk of a race to the bottom. Thus
harmonisation was largely used to ensure basic health and safety standards
were met.
By 1992 about 90% of the issues
had been resolved and in the same year the Maastricht Treaty set about to
create Economic and Monetary Union as the next stage of integration. Work on
freedom for services did take longer, and was the last freedom to be
implemented, mainly through the Posting of Workers Directive (adopted in
1996) and the Directive on services in the internal market (adopted in
2006).
In 1997 the Amsterdam Treaty
abolished physical barriers across the internal market by incorporating the
Schengen Area within the competences of the EU. The Schengen Agreement
implements the abolition of border controls between most member states,
common rules on visas, and police and judicial cooperation.
Even as the Lisbon Treaty came
into force in 2009 however, some areas pertaining parts of the four freedoms
(especially in the field of services) had not yet been completely opened.
Those, along with further work on the economic and monetary union, would see
the EU move further to a European Home Market.
Free movement of goods
Customs duties and taxation
The European Union is also a
customs union. This means that member states have removed customs barriers
between themselves and introduced a common customs policy towards other
countries. The overall purpose of the duties is "to ensure normal conditions
of competition and to remove all restrictions of a fiscal nature capable of
hindering the free movement of goods within the Common Market".
By agreement between the Union and
the states concerned Andorra, Monaco, San Marino and Turkey also participate
in the EU Customs Union.
Product requirements and certain selling arrangements
Naturally, allegations can be made
against any rule that inconveniences the trader, and this includes a very
large number of rules. Therefore, in the last of the mentioned cases, Keck,
and those that followed it, the Court decided that only rules relating to
product requirements (shape, size, colour, etc.) should be illegal, while
those relating to selling arrangements (opening hours, staff training
requirements, etc.) will mostly not be. The division was an attempt to limit
the number of cases to only those situations where, in the absence of
discrimination, there is real danger of importer suffering the presence of
dual burden.
Justification
Under certain circumstances,
member states whose rules have been disapplied may defend them. For rules
that discriminate, a defence will be possible under Article 36 which
mentions, among other grounds for prohibition or restriction of free
movement, public morality, public policy, public security, protection of
health, etc. For example, a national restriction of import of meat from
certain countries will be justified, though deemed contrary to free movement
rules, if the member state can justify it by proving that it was necessary
for "the protection of health and life of humans". A restriction of
importation of pornographic material may be justified on the grounds of
public morality, if such material is normally illegal in the said Member
State. Non-discriminatory rules may be justified not only by reference to
Article 36 but also to a Court-made list of exceptions which were first set
out in the Cassis de Dijon case, and are commonly referred to as
"mandatory requirements"
Free movement of capital
Free movement of capital is
intended to permit movement of investments such as property purchases and
buying of shares between countries. Until the drive towards Economic and
Monetary Union the development of the capital provisions had been slow.
Post-Maastricht there has been a rapidly developing corpus of ECJ judgements
regarding this initially neglected freedom. The free movement of capital is
unique in that it is a goal of the EU to pursue a liberal capital regime
with third countries.
Capital within the EU may be
transferred in any amount from one country to another. All intra-EU
transfers in euro are considered as domestic payments and bear the
corresponding domestic transfer costs. This includes all member States of
the EU, even those outside the eurozone providing the transactions are
carried out in euro. Credit/debit card charging and ATM withdrawals within
the Eurozone are also charged as domestic, however paper-based payment
orders, like cheques, have not been standardised so these are still
domestic-based. The ECB has also set up a clearing system, TARGET, for large
euro transactions.
Free movement of services
The free movement of services and
of establishment allows self-employed persons to move between member states
in order to provide services on a temporary or permanent basis. While
services account for between sixty and seventy percent of GDP, legislation
in the area is not as developed as in other areas. This lacuna has been
addressed by the recently passed Directive on services in the internal
market which aims to liberalise the cross border provision of services.
According to the Treaty the provision of services is a residual freedom that
only applies if no other freedom is being exercised.
The Free Movement of Services is
established in Article 56 TFEU, with further guidance in Article 57 62
TFEU. Exceptions are found in Articles 51-55 TFEU (common with Freedom of
Establishment). The freedom prohibits restrictions on free circulation of
services within Member States. Services are defined in the negative, they
are normally provided for remuneration, in so far as they are not governed
by the provisions relating to freedom of movement for goods, capital and
persons. (Art. 57 TFEU)
The services are distinguished
from freedom of establishment based on their temporary rather than permanent
nature and from free movement of workers based on the fact that the freedom
affects corporate entities and individuals outside of the relationship of
employment. Chapter 3 of Title IV applies to services as long as either the
service moves across the border, or the provider moves or the service itself
moves (e.g. an internet purchase).
The freedom to provide services is
directly effective, meaning that member states must ensure that national
laws do not conflict with the provisions. The Court has recognised that the
obstacles to freedom to provide services may arise both from discriminatory
and indistinctly applicable rules.
Two directives are also of
particular relevance - the Posting of Workers Directive, sometimes referred
to as the Posted Workers Directive,[7] and the Directive on
services in the internal market.
Freedom of establishment
The principle of the freedom of
establishment has a basis in Articles 49-55 of the TFEU. To better
understand the freedom of establishment, Article 49 and Article 54 tend to
be read together. According to Article 49 "...restrictions on the freedom of
establishment of nationals of a Member State in the territory of another
Member State shall be prohibited.... Freedom of establishment shall include
the right to take up and pursue activities as self-employed persons and to
set up and manage undertakings, in particular companies or firms within the
meaning of the second paragraph of Article 54..." This second paragraph
defines 'companies or firms' as "...companies or firms constituted under
civil or commercial law, including cooperative societies, and other legal
persons governed by public or private law, save for those which are
non-profit-making." The right of establishment, therefore, is granted both
to natural and legal persons.
The principle has been broadly
interpreted by the European Court of Justice. However, its restrictions have
been narrowly and literally interpreted. For example, in the case of
Reyners, the European Court of Justice held that "...the exceptions allowed
by the first paragraph ... cannot be given a scope which would exceed the
objective for which this exemption clause was inserted.". The teeth of this
principle is that natural persons, who are nationals of a Member State, and
Community companies may take up economic activity in any Member State in a
stable and continuous way and cannot be discriminated against based on
nationality or the mode of incorporation.
Free movement of people
The free movement of people means
EU citizens can move freely between member states to live, work, study or
retire in another country. This required the lowering of administrative
formalities and more recognition of professional qualifications of other
states. Fostering the free movement of people has been a major goal of
European integration since the 1950s.
Broadly defined, this freedom
enables citizens of one Member State to travel to another, to reside and to
work there (permanently or temporarily). The idea behind EU legislation in
this field is that citizens from other member states should be treated
equally with domestic ones they should not be discriminated against.
The main provision of the freedom
of movement of persons is Article 45 of the TFEU that prohibits restrictions
on the basis of nationality.
Free movement of workers
Workers have the right to move to
a different Member State, to look for work and be employed under the same
conditions as nationals of that State (subject to a number of reserved areas
greatly varying according to country: this means in many instances nationals
of country A exercising a profession in country B the equivalent of which a
national of country B would not be authorised to exercise in country A),
number and benefit from the same social and tax advantages. This right has
been extended by the Court of Justice to family members that accompany the
worker, although they derive their rights from the main holder. Family
members from non-EU states also have these rights. To claim these rights,
family members must complete specific paperwork. In the United Kingdom, for
example, the relevant document is the EEA family permit.
Free movement for the non-economically active
Following the Maastricht Treaty,
the rights of economically active persons to free movement within the EU
have been complemented by limited rights for non-economically active
citizens to move freely within the EU, under Article 21 (1) of the TFEU and
Directive 2004/38/EC on the right to move and reside freely within the EU.
The Schengen Area
Through the Schengen Area most EU
member states (excluding Bulgaria, Croatia, Cyprus, Ireland, Romania and the
United Kingdom) and four non-members, viz. Iceland, Liechtenstein, Norway,
and Switzerland, have abolished physical barriers across the single market
by eliminating border controls.