The European Union is ripe for a big, new single-market push. Deepening the single market would do a lot for the EU’s sagging competitiveness. Vested interests may be opposed. But a drive to open up markets would help the euro zone periphery and could keep Britain in the EU – killing two birds with one stone.
It may seem odd to be calling for more work on the single market. Did the Treaty of Rome not promise the freedom of movement of goods and services throughout what is now the EU all the way back in 1957? Did the EU not complete the single market in 1992? And wasn’t a directive pledging free trade in services passed in 2006?
Well, yes and no. Free trade is not just about lifting intra-EU tariffs which were, indeed, abolished decades ago. It is also about dealing with a mass of national red tape, which protects local industries from competition. Such rules are especially prevalent in services industries.
That is why the job of freeing up the EU’s internal market is still far from complete. Even the services directive covered only sectors that account for a bit more than 40 percent of gross domestic product. Areas like energy, transport and telecoms were left out. The legislation was also diluted so that even companies operating in the areas supposedly covered often have to go through lots of hoops to provide services in other countries. What’s more, the rules are often not enforced.
Services account for 70 percent of EU GDP, but only 22 percent to 23 percent of intra-EU trade. The EU is also notoriously inefficient in their provision. This is a big reason the region is poorer than the United States.