Single market
Encyclopedia
A single market is a type of trade bloc
which is composed of a free trade area
(for goods) with common policies on product regulation, and freedom of movement
of the factors of production
(capital
and labour) and of enterprise
and services. The goal is that the movement of capital, labour, goods, and services between the members is as easy as within them. The physical (borders), technical (standards) and fiscal (taxes) barriers among the member states are removed to the maximum extent possible. These barriers obstruct the freedom of movement of the four factors of production.
A common market is a first stage towards a single market, and may be limited initially to a free trade area with relatively free movement of capital and of services, but not so advanced in reduction of the rest of the trade barrier
s.
The European Economic Community
was the first example of a both common and single market, but it was an economic union
since it had additionally a customs union
.
For both business within the market and consumers, a single market is a very competitive environment, making the existence of monopolies more difficult. This means that inefficient companies will suffer a loss of market share and may have to close down. However, efficient firms can benefit from economies of scale, increased competitiveness and lower costs, as well as expect profitability to be a result. Consumers are benefited by the single market in the sense that the competitive environment brings them cheaper products, more efficient providers of products and also increased choice of products. What is more, businesses in competition will innovate to create new products; another benefit for consumers.
Transition to a single market can have short term negative impact on some sectors of a national economy due to increased international competition. Enterprises that previously enjoyed national market protection
and national subsidy
(and could therefore continue in business despite falling short of international performance benchmarks) may struggle to survive against their more efficient peers, even for its traditional markets. Ultimately, if the enterprise fails to improve its organization and methods, it will fail. The consequence may be unemployment or migration.
and Economic and monetary union
has also a Common market
Additionally the autonomous and dependent
territories, such as some of the EU member state special territories, are sometimes treated as separate customs territory
from their mainland state or have varying arrangements of formal or de-facto customs union
, common market and currency union
(or combinations thereof) with the mainland and in regards to third countries trough the trade pact
s signed by the mainland state.
Trade bloc
A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade, are reduced or eliminated among the participating states.-Description:...
which is composed of a free trade area
Free trade area
A free trade area is a trade bloc whose member countries have signed a free trade agreement , which eliminates tariffs, import quotas, and preferences on most goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be...
(for goods) with common policies on product regulation, and freedom of movement
Freedom of movement
Freedom of movement, mobility rights or the right to travel is a human right concept that the constitutions of numerous states respect...
of the factors of production
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
(capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
and labour) and of enterprise
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
and services. The goal is that the movement of capital, labour, goods, and services between the members is as easy as within them. The physical (borders), technical (standards) and fiscal (taxes) barriers among the member states are removed to the maximum extent possible. These barriers obstruct the freedom of movement of the four factors of production.
A common market is a first stage towards a single market, and may be limited initially to a free trade area with relatively free movement of capital and of services, but not so advanced in reduction of the rest of the trade barrier
Trade barrier
Trade barriers are government-induced restrictions on international trade. The barriers can take many forms, including the following:* Tariffs* Non-tariff barriers to trade** Import licenses** Export licenses** Import quotas** Subsidies...
s.
The European Economic Community
European Economic Community
The European Economic Community The European Economic Community (EEC) The European Economic Community (EEC) (also known as the Common Market in the English-speaking world, renamed the European Community (EC) in 1993The information in this article primarily covers the EEC's time as an independent...
was the first example of a both common and single market, but it was an economic union
Economic union
An economic union is a type of trade bloc which is composed of a common market with a customs union. The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production and a common external trade policy.The countries...
since it had additionally a customs union
Customs union
A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...
.
Benefits and costs
A single market has many benefits. With full freedom of movement for all the factors of production between the member countries, the factors of production become more efficiently allocated, further increasing productivity.For both business within the market and consumers, a single market is a very competitive environment, making the existence of monopolies more difficult. This means that inefficient companies will suffer a loss of market share and may have to close down. However, efficient firms can benefit from economies of scale, increased competitiveness and lower costs, as well as expect profitability to be a result. Consumers are benefited by the single market in the sense that the competitive environment brings them cheaper products, more efficient providers of products and also increased choice of products. What is more, businesses in competition will innovate to create new products; another benefit for consumers.
Transition to a single market can have short term negative impact on some sectors of a national economy due to increased international competition. Enterprises that previously enjoyed national market protection
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
and national subsidy
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
(and could therefore continue in business despite falling short of international performance benchmarks) may struggle to survive against their more efficient peers, even for its traditional markets. Ultimately, if the enterprise fails to improve its organization and methods, it will fail. The consequence may be unemployment or migration.
List of single markets
Every Economic unionEconomic union
An economic union is a type of trade bloc which is composed of a common market with a customs union. The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production and a common external trade policy.The countries...
and Economic and monetary union
Economic and monetary union
An economic and monetary union is a type of trade bloc which is composed of an economic union with a monetary union. It is to be distinguished from a mere monetary union , which does not involve a common market. This is the fifth stage of economic integration...
has also a Common market
- CanadaProvinces and territories of CanadaThe provinces and territories of Canada combine to make up the world's second-largest country by area. There are ten provinces and three territories...
– Agreement on Internal TradeCanadian Agreement on Internal TradeThe Agreement on Internal Trade entered into force on July 1, 1995 and includes government departments, agencies, commissions and Crown corporations of the 10 Canadian provinces, the three territories and the federal government....
(AIT) - South Asian Free Trade AreaSouth Asian Free Trade AreaThe South Asian Free Trade Area or SAFTA is a pact signed in 6 January 2004 that would gradually eliminate most tariffs and other trade barriers on products and services passing between the Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Afghanistan and Sri Lanka...
(SAFTA) - European Free Trade AssociationEuropean Free Trade AssociationThe European Free Trade Association or EFTA is a free trade organisation between four European countries that operates parallel to, and is linked to, the European Union . EFTA was established on 3 May 1960 as a trade bloc-alternative for European states who were either unable to, or chose not to,...
(EFTA) - European Economic AreaEuropean Economic AreaThe European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
(EEA) - Switzerland – European Union
Additionally the autonomous and dependent
Dependent territory
A dependent territory, dependent area or dependency is a territory that does not possess full political independence or sovereignty as a State, and remains politically outside of the controlling state's integral area....
territories, such as some of the EU member state special territories, are sometimes treated as separate customs territory
Customs territory
A customs territory is a territory with individual customs regulations.The most common type of customs territory is the sovereign state and the others are the Trade bloc that has a customs union; and the autonomous or dependent territory that has independence in foreign trade and customs...
from their mainland state or have varying arrangements of formal or de-facto customs union
Customs union
A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...
, common market and currency union
Currency union
A currency union is where two or more states share the same currency, though without there necessarily having any further integration such as an Economic and Monetary Union, which has in addition a customs union and a single market.There are three types of currency unions:#Informal - unilateral...
(or combinations thereof) with the mainland and in regards to third countries trough the trade pact
Trade pact
A trade pact is a wide ranging tax, tariff and trade pact that often includes investment guarantees. The most common trade pacts are of the preferential and free trade types are concluded in order to reduce tariffs, quotas and other trade restrictions on items traded between the signatories.-By...
s signed by the mainland state.
Proposed
- 2012 Common Economic Space of the Commonwealth of Independent StatesCommonwealth of Independent StatesThe Commonwealth of Independent States is a regional organization whose participating countries are former Soviet Republics, formed during the breakup of the Soviet Union....
, Eurasian Economic CommunityEurasian Economic CommunityThe Eurasian Economic Community originated from the Commonwealth of Independent States customs union between Belarus, Russia and Kazakhstan on 29 March 1996...
or the Customs Union of Belarus, Kazakhstan and RussiaCustoms Union of Belarus, Kazakhstan and RussiaThe Customs Union between Belarus, Kazakhstan, and Russia came into existence on January 1, 2010. Belarus, Kazakhstan, and Russia are to go on with economic integration and were set to remove all customs borders between each other after July 2011.... - 2015 ASEAN Economic Community (AEC)
- East African CommunityEast African CommunityThe East African Community is an intergovernmental organisation comprising the five east African countries Burundi, Kenya, Rwanda, Tanzania, and Uganda. Pierre Nkurunziza, the President of the Republic of Burundi, is the current Chairman of the East African Community. The EAC was originally...
(EAC)