The European Internal Market is an
agreement of the European Union which was created in 1993 as a single market
that aims to provide free movement of services, capital, goods and people and
which gives people and citizens the freedom to live, work, study and do
business. At that, the internal market has had an impact on the creation of new
jobs, lowered barriers that had been affiliated with trade beforehand, as well
as expand the competition.

   Even though the internal market had many
positive impacts such as the ones mentioned beforehand, as well as other
positive changes for the citizens and businesses of the member states, like the
reduction of mobile device prices by 70% or the lowering of airline fares by
40%, the European Commission felt the need to alter the Single Market. Some of
the main reasons for such alterations included factors like the economical
crisis, technological innovations and movements and the uprising of new global
players, which according to the EU demanded a fresh response that would be
achieved by re-launching the market and would consequently create new
workplaces, address problems regarding environmental sustainability and social
protection. To boot, the Internal Market or also known as The Single Market Act
was re-presented in two parts; the first one being published in April 2011 by
the European Commission which set out twelve points that would initially expand
and maximize progress in the economy. Later, in October 2012, the second Single
Market Act was proposed with the aim to further exploit the economical
opportunities that the single market offered. This new 2012 version of the
single market act is the one that is still used to this day in the European
Union by the member states.

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  The single
market movement or rather, the implementation of it, can modestly be considered
as one of the most earnest political projects to have ever taken place. Besides
thoroughly affecting the relationship between the market and the state, it has
additionally, altered the position of power when it comes to making more
microeconomic decisions, from a member state, to the Union.

  Along with
the single market as a part of the EU, comes the enormous regulatory share of
it. Without going further, I shall give some definitions of the word itself;
The Webster dictionary defines regulation
as “a rule or order issued by an executive authority or regulatory agency
of a government and having the force of law”.1
Consequently, we can say that regulation embroils the policing and enactment of
rules with the intention of transmitting a discipline within the behavior of
the many economic elements. From basic economics and taxation courses, by this
time, we have determined that regulations are mainly aimed at settling market
failures such as asymmetric information, externalities, and competition
failures (monopolies). Undeniably, the field of regulation is extremely broad,
but throughout the proceeding arguments, I will try to consider it from the
direct standpoint, with regard to the single market.

off, I would like to first, point out the varying expectations set out for the
single market to meet. There was a definite distinction between a more economic
efficiency vision, where economic expansion was expected because of the
liberalization of trade within the member states; and on the other side,
expectations were set high for Europe to achieve a capable competition with
other international economic competitors. All of these assumptions were made
based on the idea that the firms of Europe would take advantage of greater
economies of scale. Naturally, a regulatory state links a much larger
importance on the processes linked to regulation as it pays a particularly
close attention to the rule of law and it seeks to come up with judicial
results and solutions. Nevertheless, we can fairly say that the institution of
the EU itself has rarely shown to have directly engaged in the regulation of
private individuals, or businesses for that matter.

   What comes
as a natural challenge within the scope of the single market is the idea of
forming a combinatorial regulation that compiles the very divergent approaches
of different member states, all of which of course, in themselves may contain
adjustments and concessions made to best fit the needs and preferences of that
respective nation. Hence, we expectedly end up with a multilevel decision
making process and regulatory governance. Likewise, of course that there is an
expectation of a desired balance between a kept autonomy when it comes to the
regulation, that belongs to the member states and the functionality of the
internal market.

  What we end up
looking at, evidently, is a pro-competitive market founded on diverse national
choices but who aims to reduce regulatory discrepancies that originate from
decentralized decisions. Nonetheless, regardless of these freedoms enabled by
the single market, it is crucial that there is no undermining of consumer
protection, fairness, and sustainability.

we now discuss the biggest challenge that the single market has had to face:
non-tariff regulatory barriers. These are barriers which arrive simply through
the differences which exist between national legal systems that then create
difficulties for people who want to engage in cross-border commerce. Let’s say
we manufacture a particular good that follows the rules of the country we are
in; that is, the guidelines on the safety of the components, appropriate
labeling, and packaging. But when we go on and we want to sell that product in
another country, we happen to not meet all of their slightly different
standards on component, labeling, and packaging. Not just that country and its
rules, but 28 other marginally different rules. Therefore, we would be left
with either choosing to open new production lines dedicated to producing
somewhat different goods in order to meet the different requirements of each of
the country we want to sell in (which would be unquestionably extremely costly
and would reduce our competitiveness); or we stick to selling the product in
our own country only, where our product already meets all of the set national
rules. Now here we can obviously tell that the international trade is being
held back by the simple and inevitable fact that different countries have
different rules and those different rules naturally partition national markets
and make it more difficult to engage in cross border commerce. These regulatory
barriers are absolutely commonplace and completely disruptive but they are also
very difficult to deal with. It is simply inherent in the existence of these
regulations that we have cross border trade obstacles.

  Now what the
EU has done to reduce these regulatory barriers to trade, is come up with a
strategy that can be summed up with two main components: limited harmonization
and mutual recognition. The former is followed by the latter. Limited
harmonization is the process whereby the member states identify what we call
the essential public interest requirements that they want to protect at any
given sector. Having identified those essential public interests, they try to
agree a common set of principles which will govern those public interests upon
every member state and they harmonize their national rules on those specific
issues, or rather, they adopt common standards in every country. Limited
harmonization then paves the way for mutual recognition. Provided goods or
services that have been lawfully manufactured or provided in a country, that
meet the agreed common standards, those goods and services can be sold and
provided in every other country within the single market, without any other
obstacle or barrier, even if they do not meet all of the other non-harmonized
rules of the legal regime belonging to that member state. Having arranged this
sort of template for the single market to rely on, the EU believes and actively
works towards building and maintaining a mutual trust between these member

the Single Market Act is based on the principles of the Four Freedoms which
were initially set out in the Treaty of Rome but were then extended and modeled
to fit this market by being introduced as the foundation of this agreement.
These freedoms are considered to be fundamental to the internal market and they
refer to the free movement goods, services, capital and people inside the EU.2

  Upon its creation, the Free Movement of Goods
was one of the main and primary objectives of the European Community as it
would remove barriers to trade goods and was expected to promote an enhancement
in trade between the member states of the EU and the Single Market was the
perfect initiator for such progress in trade. The positive impact of the
internal market is clear because prior to the launch of the market, EU
countries traded a low percentage of 9% of their GDP with each other, while
after the implementation of the single market and the free movement of goods,
that number rose significantly to 21% of their GDP. Other effects that the free
movement of goods has had on EU citizens include factors such as giving them
the ability to choose from a more diverse variety of products, especially in
the newer and smaller member states of the EU, as well as increasing
competition in the manufacturing sector which has lead to reduced costs for

  Secondly, we
discuss the Free Movement of Services which generally gives businesses two
major ways to maintain cross-border relations by giving them the right to
provide services freely outside their countries and borders (in the member
states), and the right to arrange their businesses in other member states. The
market also allows states to set up their own national regulations for services
in order to maintain levels of good quality, costumer and environmental
protection, however, these rules can only be established as long they do not
disfavor against other foreign agents.

the first years of the European Commission, capital flows between countries
were often viewed as the reason for continuous economical and banking crises,
which lead to them being only liberalized to some limited extend that was
crucial for the functionality of the free movement of goods. To add to that, at
the time, countries in Europe wanted to maintain their sovereign monetary by
operating with fixed exchange policies which, of course, was a big milestone in
the free movement of capital. However, the launch of the single market and
presenting the free movement of capital as one of the four freedoms of this
market brought rapid positive development in this field as it removed all
restrictions that capital mobility had faced up to that point. As a result of
this market and the free movement of capital, the Foreign Direct Investment or
the FDI, which is the terminology used when businesses or firms invest capital
in another state with the intention of having an ongoing interest and a notable
level of influence, has undergone a positive increase in their activity. In
addition to that, the free movement of capital has made it significantly easier
for investors to invest in the member states of Europe, and vice versa, by also
making it easier for firms of Europe to invest in other countries.

  Finally, the fourth of the four freedoms is
the Free Movement of Persons. After giving businesses the freedom to compete
and capitals being able to flow freely, it was seen that giving people the
freedom to move where the jobs were, was of fundamental importance and as such,
people should be given the right to move without the legal and administrative
barriers that are often affiliated with moving from one country to another. So,
considering these reasons, the Free Movement of Persons was added to the Single
Market. Ever since its been launched, the freedom of movement has not had big
economic effects on the economy of net-receiving countries (countries that have
more people coming in), however, it has made an impact on net sending
countries, which are usually new member states of the EU, in the sense that is
has eased unemployment numbers which can often be seen as a good thing on the
short run, but when thinking long term it has lead to a problem where qualified
workers leave to work abroad.

Definition of Regulation; Merriam-webster.com/dictionary/regulation

2 http://en.euabc.com/word/506

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