Alexia Zammit

Economist, European Commission Representation in Malta

The European single market and its four freedoms

Tuesday 31st January 2017

I am a firm believer in the EU project. I feel that there is a lot more that one can gain from being a member of the Union than remaining out of it. For some member states, of course, there are greater financial obligations, but these are normally matched by greater voting rights in the institutions, so normally, such disadvantages are wiped out. However, even for those countries that have a small population size (and hence less voting powers), and are also relatively rich (so are net contributors to the EU budget) such as Luxembourg, I still feel the EU has a lot to offer. Being part of the Single Market is one such advantage.

“In the EU’s single market (sometimes also called the internal market), people, goods, services, and money can move around the EU as freely as within a single country.” – European Commission

The ‘four freedoms’, as they are often referred to, imply that the boundaries confining countries geographically are somehow magically removed. Sure, cultural differences, including language, still characterise the Union, but Member States are freely allowed access to 500 million citizens in 28 Member States.

What does this mean?

It means that enterprises that operate within the single market can sell their goods and services to citizens outside their national confines with the same freedom they would internally; and citizens can hold capital and jobs without restrictions in any of the 28 Member States. In addition, the European Commission together with the Court of Justice ensure that no discrimination takes place in any Member State of the Union with respect to any enterprise or citizen of another Member State. So for a country like Luxembourg with a population size of just over half a million, EU membership now means that they can access a market in which half a billion people could choose to purchase their products; and their citizens could choose to seek employment in any of the 28 Member States they wish to reside in.

These are not rights that one should take for granted. There was a time (not too long ago) when Europe was heavily divided. The decision in 1957 with the signing of the Treaty of Rome between the six founding Member States of the then European Economic Community (Germany, France, Italy, Belgium, Netherlands and Luxembourg) was a bold decision to take, particularly when it occurred a little over a decade after the end of the 2nd World War. The founding treaty of what then became known as the European Union actually proposed the establishment of the four freedoms.

The importance of such a fundamental agreement was heavily debated in the run up to the UK’s vote to leave the European Union. Unfortunately one of the main elements debated by the ‘leave’ campaigners was exactly one of these fundamental freedoms that EU citizens enjoy; namely the ability of EU citizens to reside and work in the UK. I will not debate the merits of the arguments raised during the campaign for fear that I will let my emotions get the better of me; however, while ‘leave’ campaigners seem to have promised some sort of arrangement with the Union that would allow the UK access to the single market without the need to accept the free movement of people, leaders of the other 27 EU Member States have clearly stated that the UK would have to accept all four freedoms if it wishes to access the single market. The terms of the UK’s withdrawal from EU membership, however, still need to be determined. Therefore we will only know the outcome of these once the UK triggers Article 50 of the Treaty of Lisbon and negotiations begin. Until then, the UK is still a member of the EU with all the rights and obligations that this entails.

The European Commission is today proposing further amendments to elements of the single market in a bid to remove any obstacles that still remain in its proper functioning. When President Junker took office in November 2014, he proposed ten political priorities for his five year term; at least two of which aim to ameliorate the functioning of the internal market.

The first of these is made up of four policy areas; three of which addressing the deepening of the market and the last addressing its fairness.

  • Unlocking the full potential of the Single Market so that citizens, business and public authorities can access goods and services for the best quality, price or service; professionals can offer services across the EU quickly and conveniently; entrepreneurs can innovate and expand; new business models and services can flourish; and retailers find it easy to establish, do business and deliver their products across borders.
  • More work is also being carried out on the Capital Markets Union to ensure that fragmentation in financial markets is reduced, financing sources are diversified, cross border capital flows are strengthened and access to finance for businesses, particularly SMEs, is improved.
  • On Labour Mobility, the work of the Commission focuses on its promotion, especially where persistent vacancies and skills mismatches exist, while protecting workers’ social rights and ensuring a fair European labour market.
  • The Commission is also seeking to ensure greater fairness within the internal market particularly through an action plan on corporate tax. The idea is that countries wherein economic activity is generated should be able to tax the generation of profits made on its territory. This will allow the Union to tackle abuse, ensure sustainable revenues and support a better business environment within the Single Market.

President Junker also announced easier access to products within the internal market through the creation of a Digital Single Market. It is estimated that this could contribute €415 billion per year to the EU’s economy and create hundreds of thousands of new jobs.

Are we done yet? No, I don't think so.

The outcome of the UK referendum has taught us that no matter how many policies are enacted for citizens to benefit from an enlarged internal market, unless we truly begin to feel European and tear down our cultural barriers, breaking down economic or digital ones will serve us very little indeed.