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A common market is usually referred to as the first stage towards the creation of a single market. It usually is built upon a free trade area with relatively free movement of capital and of services, but not so advanced in reduction of the rest of the trade barriers.
A single market is a type of trade bloc in which most trade barriers have been removed (for goods) with some common policies on product regulation, and freedom of movement of the factors of production (capital and labour) and of enterprise and services. The goal is that the movement of capital, labour, goods, and services between the members is as easy as within them. The physical (borders), technical (standards) and fiscal (taxes) barriers among the member states are removed to the maximum extent possible. These barriers obstruct the freedom of movement of the four factors of production.
A unified market is the last stage and ultimate goal of a single market. It requires the total free movement of goods, services (including financial services), capital and people without regard to national boundaries.
A common market allows for the free movement of capital and services but large amounts of trade barriers remain. It eliminates all quotas and “tariffs” – duties on imported goods – from trade in goods within it. However “non-tariff barriers” remain such as differences between the Member States’ safety, packaging requirements and national administrative procedures. They prevent for example manufacturers from marketing the same goods in all member states. The objective of a common market is most often economic convergence and the creation of an integrated single market. It is sometimes considered as the first stage of a single market. The European Economic Community was the first example of a common market. It was an economic union since it had a customs union in addition to its internal market. Today, existing common markets include Mercosur and ASEAN, which plans to create a common market by December 2015.
A single market (sometimes called 'internal market') allows for people, goods, services and capital to move around a union as freely as they do within a single country – instead of being obstructed by national borders and barriers as they were in the past. Citizens can study, live, shop, work and retire in any member state. Consumers enjoy a vast array of products from all member states and businesses have unrestricted access to more consumers. A single market is commonly described as "frontier-free". However, several barriers remain such as differences in national tax systems, differences in parts of the services sector and different requirements for e-commerce. In addition separate national markets still exist for financial services, energy and transport. Laws concerning the recognition of professional qualifications also may not be fully harmonized. The Eurasian Economic Union, the Gulf Cooperation Council, CARICOM and the European Union are current examples of single markets. Although the GCC's single market has been described as "malfunctioning" in 2014. The European Union is the only economic union whose objective is "completing the single market."
A completed, unified market usually refers to the complete removal of barriers and integration of the remaining national markets.
Benefits and costs
A single market has many benefits. With full freedom of movement for all the factors of production between the member countries, the factors of production become more efficiently allocated, further increasing productivity.
For both business within the market and consumers, a single market is a very competitive environment, making the existence of monopolies more difficult. This means that inefficient companies will suffer a loss of market share and may have to close down. However, efficient firms can benefit from economies of scale, increased competitiveness and lower costs, as well as expect profitability to be a result. Consumers are benefited by the single market in the sense that the competitive environment brings them cheaper products, more efficient providers of products and also increased choice of products. What is more, businesses in competition will innovate to create new products; another benefit for consumers.
Transition to a single market can have a negative impact on some sectors of a national economy due to increased international competition. Enterprises that previously enjoyed national market protection and national subsidy (and could therefore continue in business despite falling short of international performance benchmarks) may struggle to survive against their more efficient peers, even for its traditional markets. Ultimately, if the enterprise fails to improve its organization and methods, it will fail. The consequence may be unemployment or migration.
List of single markets
- European Economic Area (EEA) including Switzerland – European Union
- CARICOM Single Market and Economy (CSME)
- Eurasian Economic Union (EEU / EAU)
- Gulf Cooperation Council (GCC)
Additionally the autonomous and dependent territories, such as some of the EU member state special territories, are sometimes treated as separate customs territory from their mainland state or have varying arrangements of formal or de facto customs union, common market and currency union (or combinations thereof) with the mainland and in regards to third countries through the trade pacts signed by the mainland state.
- 2015 ASEAN Economic Community (AEC)
- East African Community (EAC)
- Union of South American Nations (USAN)
A unified market is the economic term for a single market where goods, services, capital and people can move freely without regard to national boundaries. These "four freedoms" are implemented by, among other things, removal of tariffs on the transfer of goods and services among the member nations, imposition of uniform product standards, revision of laws to permit "market-wide" financial services, and the restructuring of most government procurement practices, so as not to favour local businesses over other member states' businesses.
- International Trade Theory and Policy
- "Historical overview". http://ec.europa.eu/. European Commission. Retrieved 14 December 2014.
- "One market without borders". http://europa.eu/. European Commission. Retrieved 14 December 2014.
- al-Ubaydli, Omar (14 February 2014). "GCC Single Market Failure: Problems And Solutions". http://www.derasat.org.bh/wp-content/uploads/2014/02/mees.pdf (Middle East Petroleum and Economic Publications (Cyprus) Ltd). op-ed.
However according to the same data source, certain figures point toward a seriously malfunctioning GCC single market
- Initial FTA enforced 1 January 1973 WT/REG94/R/B/1
- EU Overseas countries and some other territories participate partially in the EU single market per part four of the Treaty Establishing the European Community; Some EU Outermost regions and other territories use the Euro of the currency union, others are part of the customs union; some participate in both unions and some in neither.
Territories of the United States, Australian External Territories and Realm of New Zealand territories share the currency and mostly also the market of their respective mainland state, but are generally not part of its customs territory.
- Member states will have to make several changes to their national laws to allow full implementation of the common market in areas such as immigration, labour and customs.