The European Community and the Single European Act of 1987: What Does It Mean?

By Hurwitz, Leon | National Forum, Spring 1992 | Go to article overview

The European Community and the Single European Act of 1987: What Does It Mean?


Hurwitz, Leon, National Forum


Background to the Single European Act and the Internal Market. Five hundred years after the Europeans discovered and began to form a "new world" in America, they have set out to reorganize their "old world" at home. The Treaty of Rome that .established the European Economic Community in 1957 assumed that the economic, political, and social unification of the Community's member states would be based on one large, integrated, single, internal market. But by the mid1980s this integrated, single, internal market had yet to be achieved. In 1985, the European Council (the heads of state or government of the EC's member states) decided that this internal market should be completed by 31 December 1992.

On 14 June 1985, the Commission of the European Communities transmitted to the European Council its now-famous White Paper titled "Completing the Internal Market." This document outlined approximately 290 regulations and directives that had to be passed by the European Community institutions (the Commission, the Council of Ministers, and the European Parliament) and then implemented by the national political processes in each of the twelve member states before the single market could be achieved.

In brief, the White Paper called for the eventual abolition of all physical, technical, legal, fiscal, and social obstacles or barriers to full free trade and movement of people, goods, services, and capital. The existing physical controls--both bureaucratic and physical--at the EC's internal borders are to be progressively eased and then eliminated altogether; these controls will then be shifted to the Community's external borders. Parallel developments include the adoption of EC-wide harmonized public policies in certain areas and the increased reliance on full faith and credit plus mutual recognition of abuses of the various EC treaties. This 1985 White Paper resulted in the signing, on 26 February 1986, of the Single European Act (SEA), which entered into force on 1 July 1987.

The SEA is a frontal assault on the remaining areas of fragmentation and noncooperation within the European Community and is especially directed at the elimination of barriers to the totally free movement of people, goods, services, and capital. Although the EC has made tremendous strides in international integration since the European Coal and Steel Community began operations in 1952, the Community has not yet made effective and efficient use of its collective resources. The costs of this "non-Europe"--and there are both financial and psychological costs--are staggering.

A 1988 EC Commission-sponsored study led by Paolo Cecchini (Research on the Cost of Non-Europe) concluded that the total potential gain to the Community as a whole from the completion of the single unified market would be approximately ECU (European Currency Unit) 200 billion (expressed in 1988 prices). This ECU 200 billion would add approximately 5 percent to the Community's gross domestic product. Cecchini's calculations included not only the savings resulting in the removal of the barriers that directly impinge on intra-EC trade (especially the technical formalities at the internal borders and the related delays), but also the real benefits to be gained from removing the obstacles that hinder entry to different national markets and from the free play of competition within the Community. Cecchini's study also predicted that the total integration of the EC market would deflate real consumer prices by an average of 6 percent while, concurrently, it would increase output and improve living conditions. Depending upon the specific macro-economic policies adopted, it was estimated that a minimum of two million--and a possible five million--new jobs would be created over the medium term. The single market would also produce economies in public-sector costs equivalent to 2.2 percent of the gross domestic product and increase the EC's trade with other countries by approximately 1 percent of the gross domestic product. …

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