Why does the EU go on about the ‘integrity’ of the Single Market when it has been such a failure?



The European Single Market (SM) is the jewel in the crown of the ‘European Project’ with its four freedoms of movement – of goods, services, workers and capital – or so we are told. Within the SM, all goods and services produced are supposed to satisfy a common set of regulatory standards. This ought to make it easier to export to other member states of the European Union.
Trend growth in traded goods declined

So has the trade in goods and services increased between member states since the SM was launched on 1 January 1993? The answer is complicated by the introduction of the euro on 1 January 1999 and by the expansion of membership – in 1995 (from EU12 to EU15), in 2004 (to EU25), in 2007 (to EU27) and in 2013 (to EU28) – both of which were intended to increase intra-EU trade. 


Nevertheless, Table 1 provides some surprising evidence. It compares export growth in the 20 years before the introduction of the SM and in the 20 years after. The first row shows that the real growth rate in trade between EU member states actually fell from an average annual rate of 4.71% to 3.05% (or by 35%) after the introduction of the SM. Export growth to the rest of the world (ROW) fell by even more – by 73% from 1.20% to 0.32%. This contrasts dramatically with the growth rate in trade between ROW countries which increased over the same periods from 3.66% to 4.22%. ROW export growth to the EU also increased after the introduction of the SM from 3.29% to 4.11% – so was growing between 1993 and 2012 at a faster rate than trade between EU members. And this trade is conducted under World Trade Organization (WTO) rules while facing the EU’s Common External Tariff (CET) – in other words, under what is disparagingly called ‘no deal’ arrangements. The CET covers more than 13,000 imported goods, with an average tariff of 3-4%, but with much higher tariffs on food, clothing, footwear and cars.
Even more striking is the decline in the growth rate of UK exports to the EU from 5.38% to 3.09% following the introduction of the SM. UK export growth to the rest of the world also fell, but was still at a marginally higher rate between 1993 and 2012 than for exports to the rest of the EU (3.11% v 3.09%). This helps to explain why UK exports to the EU have fallen from 55% of the total to 46% since the SM was introduced. Further, only 6% of UK companies export to the EU – accounting for around 13% of Gross Domestic Product (GDP) – yet all regulations on product and service standards – including for the 94% of UK companies that do not trade with the EU – are determined in Brussels.


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