Today, European heads of state and government are discussing how to strengthen the EU single market and increase competitiveness. There are frequent calls for further steps to remove "trade barriers", often with reference to the US as a prime example of a fully integrated market.
However, a new study by Humboldt-Universität zu Berlin (HU) shows that the EU is already highly integrated in terms of the free movement of goods – more so than previously assumed and with fewer trade barriers between member states than the US internal market.
"Anyone talking about further dismantling trade barriers today should not overlook the fact that the rules of free movement of goods already have a profound impact on national legislation," says political economist Jasmin Zöllmer from Humboldt-Universität. "Competitiveness must not mean that ambitious social, environmental or animal welfare standards, for example, are automatically regarded as barriers to trade."
With around 450 million consumers, the EU internal market is one of the largest integrated economic areas in the world. It is a driver of economic growth, competition and innovation and has doubled the trade in goods and services among member states over the last 33 years.
At the same time, the free movement of goods can lead to an imbalance between the market and the state: while it grants companies the right to unrestricted market access, it reduces the scope for member states to enforce ambitious standards for the environment, consumers or animal welfare.
Prevention instead of lawsuits
For a long time, so-called "negative integration" – i.e. the removal of national trade barriers – was considered the driving force behind the EU. The fact that the number of court cases on the free movement of goods has recently declined sharply is interpreted by current research predominantly as a decline in negative integration and thus as a strengthening of market regulation over market liberalisation.
However, a new study by EU expert and political economist Jasmin Zöllmer from HU, published in the Journal of European Public Policy, shows that market liberalisation within the single market is having a stronger impact than ever. Member states have internalised EU internal market rules to such an extent that potential conflicts over the free movement of goods do not arise in the first place or are resolved in advance – even before the courts have to be involved.
Before national governments pass new laws, for example on environmental or animal welfare standards, they must notify the European Commission. These regulations must not impede the free movement of goods, not even potentially or indirectly. As a result, potentially restrictive laws are often not even introduced in the first place. Market liberalisation is thus increasingly taking place "silently". Negative integration has thus deepened and is firmly anchored in national decision-making processes.
The downside: ambitious public welfare policies under pressure
Under EU rules on the free movement of goods, national laws within the EU only apply to domestic production; imports cannot be subject to the same requirements. This often leads to "political inaction" in individual Member States: "When governments know that they cannot apply stricter regulations to imports from other Member States, they often hesitate to enforce higher standards for environmental, consumer or animal protection domestically – out of concern that this could jeopardise the competitiveness of their domestic companies," explains Jasmin Zöllmer. Reform proposals for higher social, animal welfare or environmental standards are often nipped in the bud or postponed indefinitely.
A look at the USA: a model for the future?
This raises a fundamental question for the future of the EU: how can market integration be reconciled with ambitious social, environmental and public interest policies? Jasmin Zöllmer: "Surprisingly, the US internal market allows individual states more leeway for progressive regulations than the EU allows its member states. This could serve as a model for readjusting the balance between free trade and political leeway in Europe."