Academic journal article Harvard International Review

Unity under Siege: The European Single Market after the Financial Crisis

Academic journal article Harvard International Review

Unity under Siege: The European Single Market after the Financial Crisis

Article excerpt

As Europe's leaders respond to the financial crisis, concerns of economic protectionism are leading to greater questions over the fundamental unity of the European Union. At risk is the European Single Market, which, though less prominent than the symbolic euro, is the true basis for unity among the various European countries. The strain of the crisis has led to controversial policy responses such as the French and German automotive bailouts, which appear protectionist to other countries - particularly those in Eastern Europe. Given the current financial circumstances, protectionist impulses are the natural outcome of pressing political pressures; in addition, they play a particularly strong role for European national leaders given the nature of the single market that connects all EU country economies. Nevertheless, the long history of unity and its legacy of economic benefit to Europe require that European leaders strongly defend the core ideals of the European Single Market in the wake of the economic downturn.

The Single Market

One of the EU's greatest achievements is its economic core, the idea of a single market spanning all of its member countries. The modern definition of the single market is based on the "four freedoms," the principle that people, goods, services, and money should enjoy unrestricted movement across Europe. Even before the four freedoms were established in 1993, however, foundations for the single market were already in place. In 1957, Belgium, France, Germany, Italy, Luxembourg, and the Netherlands united under the European Economic Community (EEC) with the intent of building a common market. For the duration of the EEC, member countries cooperated to strengthen free trade and freedom of movement by passing hundreds of laws to eliminate "technical, regulatory, legal, and bureaucratic barriers," according to the European Union. Particularly impressive was the elimination of so-called "non-tariff barriers to trade, such as variable standards in different countries, different excise taxes rates, and favoritism in awarding public contracts to domestic firms. The majority of this work occurred in the seven years prior to 1992 and cumulated in the inauguration of the European Community in 1993. During those seven years, 280 new laws came into existence to eliminate traditional and non-tariff trade barriers. The economic underpinnings of the EEC and the strengthening and continuance of economic policy under the European Community make the single market the most important of the three "pillars" of policies governing the modern European Union today.

The benefits of the European single market have been widespread and substantial. The European Commission estimates that the removal of national trade barriers has generated an additional 800 billion euros in wealth for EU consumers--of which there are now over 458 million--and 2.5 million new jobs for Europe. Consumers have benefited from lower prices, higher quality goods, and a wider array of goods from which to choose. Additionally, the liberalization of air travel and utility markets has drastically reduced costs for consumers.

Of course, certain costs have accompanied the rapid opening of domestic economies to international market forces. As would be expected, national industries previously shielded from international competition became unprotected. A landmark case occurred in 2007, when the European Court of Justice--the highest court of the EU--ruled against the so-called "VW Law," a German law protecting Volkswagen from hostile takeovers. Since then, against the wishes of German labor unions and German politicians, Porsche has taken control of Volkswagen, purchasing over 50 percent of the German company's shares. Despite possible costs to parts of the German labor market and the imminent loss of German ownership in one of its key automotive manufacturers, the court nonetheless struck down the law, upholding the hegemony of the four freedoms--in this particular case, that of free movement of capital--and protecting the single market ideal. …

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