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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 (goods, capital, services, workers).
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 no tariffs for goods and relatively free movement of capital and of services, but not so advanced in reduction of other trade barriers.
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 to trade remain, such as differences between the Member States' rules on product safety, packaging requirements and national administrative procedures. These prevent 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 large-scale example of a common market.[a]
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. Complete economic integration can be seen within many countries, whether in a single unitary state with a single set of economic rules, or among the members of a strong national federation. For example, the sovereign states of the United States do to some degree have different local economic regulations (e.g. licensing requirements for professionals, rules and pricing for utilities and insurance, consumer safety laws, environmental laws, minimum wage) and taxes, but are subordinate to the federal government on any matter of interstate commerce the national government chooses to assert itself. Movement of people and goods among the states is unrestricted and without tariffs.
Benefits and costs
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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 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 expecting profitability to increase as a result. This is true especially for companies selling goods and services easily distributed all around the countries of single market.
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 and their quality. What is more, businesses in competition will innovate to create new products; another benefit for consumers.
Single market play significant role in increasing prosperity of nations involved in this area. For example, single market helps European Union to achieve annual growth of GDP with 2.2% p.a. between 1992–2006, rise in employment and job creation.
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.
National participation into single market opens political debates, about skills loss through worker migration from less developed countries, and wage suppression in countries to which they migrate.
List of common markets
- European Single Market (European Economic Area – Switzerland)
- ASEAN Economic Community (AEC)
- Central American Common Market[failed verification] (CACM)
- Eurasian Economic Space
- Southern Common Market (Mercosur)
- East African Community (EAC)
- African Economic Community (AEC)
- CARICOM Single Market and Economy (CSME) - Originally envisioned to be complete by 2008, it has since been delayed and is now envisioned to have free movement of people between willing member states by 2021.
- Gulf Cooperation Council (GCC) - Not yet a common market, though integration is continuing
- Latin American Integration Association (ALADI)
- Commonwealth free trade area - proposed by politicians in Canada, New Zealand, and the United Kingdom but never implemented
- Free Trade Area of the Americas - proposed trade bloc at the Summit of the Americas intended to be implemented across the Western Hemisphere (excluding Cuba) by 2005
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.
- "Trade: Chapter 110-2: Economic Integration: Overview". internationalecon.com.
- "Historical overview". European Commission. Retrieved 14 December 2014.
- "One market without borders". European Commission. Retrieved 14 December 2014.
- al-Ubaydli, Omar (14 February 2014). "GCC Single Market Failure: Problems And Solutions" (PDF). Op-Ed. Middle East Petroleum and Economic Publications (Cyprus) Ltd. pp. 20–21. Archived from the original (PDF) on 14 December 2014. Retrieved 14 December 2014.
However according to the same data source, certain figures point toward a seriously malfunctioning GCC single marketCite magazine requires
- Usman, Adamu Kyuka (2017). Theory and Practice of International Economic Law. Malthouse Press. p. 279. ISBN 9789875477568.
- Initial FTA enforced 1 January 1973 WT/REG94/R/B/1 Archived 27 March 2009 at the Wayback Machine
- Lehmacher, Wolfgang. "The ASEAN Economic Community: what you need to know". World Economic Forum. World Economic Forum. Retrieved 4 July 2020.
- "FACTBOX-East African common market begins - 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". af.reuters.com.