What is a single market? Definition and meaning
A single market consists of a group of countries that do not charge tax on goods and services they import from and export to each other, thus forming one market. The term is commonly used when talking about the European Union (EU) and the North American Free Trade Agreement (NAFTA).
The single market is one of the final stages of a commercial cooperation strategy between nations, it follows the common market stage.
There are different levels of single markets, from the free movement of capital and services, to the total elimination of trade barriers and a common currency. Below are some examples:
Free Trade Area – there are no internal trade barriers. However, there are no common external tarrifs, common currency or common economic policy.
Creating a single market has several advantages, such as benefiting from larger economies of scale, and having more global economic and political clout.
Customs Union – there are no internal trade barriers, and there is a common external tariff. However, there is no common currency or common economic policy.
Single Market – there are no internal trade barriers, there is a common external tariff, plus the free movement of labor. There might be a common single currency. In the case of the EU, some nations are in the Eurozone (the euro is their currency), while others are not.
Economic Union – in this case there is total unity. It is the ultimate goal of a single market All members fuse into virtually one country. There is total free movement of goods & services (including financial services), labor & capital, without regard to national boundaries.
“The idea behind the Single Market is simplicity itself: treat the EU as one territory where people, money, goods and services interact freely to stimulate competition and trade, and improved efficiency. The increased choice of goods and services will raise quality and cut prices. It is the basic recipe for prosperity.”
The NAFTA Secretariat says its objectives are to eliminate trade barriers, facilitate the movement of goods and services between member states, promote conditions of fair competition and increased investment within the trade bloc, and effectively protect and enforce intellectual property rights.
John F. Kerry, the 68th United States Secretary of State, said:
“NAFTA recognizes the reality of today’s economy – globalization and technology. Our future is not in competing at the low-level wage job; it is in creating high-wage, new technology jobs based on our skills and our productivity.”
There are many regional trade blocs across the world. Some of them, such as the EU, aim to become totally unified single markets.
British Prime Minister David Cameron said of the European Union:
“After the Berlin Wall came down I visited that city and I will never forget it. The abandoned checkpoints. The sense of excitement about the future. The knowledge that a great continent was coming together. Healing those wounds of our history is the central story of the European Union.”
Eminent economists say economic union can only succeed if all member states belong to one currency, have one central bank, and have identical monetary and economic policies.
The problem is that some member states of a common or single market do not want total union, while others do. The UK, for example, says it welcomes the economic benefits and help to consumers that the EU offers, but insists on keeping control of its own tax policy.
According to several polls, the British population will probably vote to leave the EU in a 2017 referendum if a new deal that gives the country more control over its internal affairs and immigration policies cannot be agreed upon.
Businesses like single markets
Financial institutions, multinational corporations and companies in general favor the idea of a single market and believe the UK should remain in the EU.
Gary Cohn, President and Chief Operating Office of The Goldman Sachs Group, said leaving the EU would be bad for London’s future as Europe’s financial hub.
Mr. Cohn said:
“I think for the UK it’s imperative to keep the financial services industry in London. We all want to stay in London. I think that having a great financial capital of the world staying in the UK and having the UK be part of Europe is the best thing for all of us.”
Video – The European Union, the great single market
The EU is the world’s largest market, consisting of 27 member states and nearly half a billion consumers. It all started in 1957 when six countries met in Rome.