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Barriers of Single Market

Updated on February 21, 2012

Physical Barrier

Although the European countries share a lot of similarities and are located in the same area, there are still some physical barriers of forming a single market. And the physical barriers are mainly embodied in legislations. Because all the county members are all sovereignties who own dependant legislative power, judicial power and executive power, therefore, the consultation and coordination between the EU common legislation and member legislation is also difficult to make. For example, in 2004, the 25 country members of EU signed the Constitutional Treaty of European Union which is the first constitutional or legislative treaty in EU for further developing the European integration. However, the constitutional treaty was vetoed by French and Holland people. In 2007, the 27 country members reached a consensus to sign the Treaty of Lisbon for political and legislative integration, but it was vetoed by Ireland people in 2008.

As a result, the EU must solve many problems in legislation to remove the barriers. For example, the country member should decide whether admit or implement all the economic policies in EU; meanwhile, the national legislation may have conflicts with the common EU one; besides, how to solve the disputes according to the different legislations is also a big problem emerging in the process. Although in the treaty, all the country members agreed to alienate some legislative rights to EU, the EU does not have the right to change the legislations of country members. Moreover, along with the spread and influence of global crisis, the protectionism in EU member countries began to emerge; however, it is the temporary phenomenon and will be solved for further EU economic integration.

Technical Barrier

The technical barriers mainly come from the healthy, safety, and consumer protection rules in different country members in EU. In order to better promote the economic development, the EU has made many measures in eliminating the internal barrier in EU market; however, the technical barriers based on the healthy, safety and consumer protection rules prevent the development of EU single market and economic integration. Besides, along with the global crisis influencing Europe, these technical barriers gradually become an excuse or method to protect domestic product and markets. For example, the Austria baker must apply 8 different business licenses if he or she wants to own a baking store in the nearby Italy due to consideration of healthy, safety and consumer protection roles, which actually impedes the development and expansion of new market of the service industry.

What’s more, some country members have not successfully integrated EU laws into national legislation. For example, the Italy government once reserved the right of institute legal proceedings towards European Court in the technology rules of installing trailers and tractors for the sake of domestic consumer safety, which actually excluded other producers in Italian market and protected the local producers. Besides, due to the inferior economic development levels and legislation systems, the new members have difficulties in integrating the single market. Therefore, the EU commission has to implement new measures in guaranteeing the free trade in EU and eliminate the technical barriers.

Fiscal Barrier

The EU also encounters with fiscal barriers such as different value added taxes (VAT) in different country members and different kinds of products. All the EU members must impose VAT; however, some of them have free zones such as the Canary Islands, Ceuta and Melilla in Span, Gibraltar in Britain, Aland Islands in Fenland. Therefore, it is inevitable that the behavior of evasion and avoidance will emerge in the free zone or lower rate areas, especially when the global economic crisis spreading in Europe. Meanwhile, the VAT rates differ in different country members with the lowest standard rate of 15%; however, some products such as family use fuel and electricity can enjoy low rate of 5% while some products such as luxuries must be imposed high rate of 25%. However, it is difficult to define and distinguish “luxuries” and “essentials”.

For example, in 1980s France still taxed cars as a luxury with 33% VAT rate when most of the French family had one or more cars. What’s more, the fiscal system of EU needs improvement and optimization due to the recent global economic crisis and Greece crisis. The fiscal order in EU is in a mess because the country members have different micro economic policies. Therefore, the EU should implement fundamental measures to optimize economic reform and fiscal integration of all the EU members.

To sum up, along with the intensification of economic crisis, the trade protectionism in EU is rising and some country members are beginning to break the rules of common treaty; however, the barriers such as boundary barrier and fiscal barrier are removing by the EU members for further common development of the economic integration in the single market. Thus we can conclude that the SEM is really on the ground in EU, thus it is feasible to establish and develop the single market in the EU. The EU members should work together to overcome the difficulties and risks in the serve situation of global economy crisis and European financial crisis, thus better developing the European economy.

(By Cong Zhou)

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