In What Ways Is the Single European Market a Reality in Europe - Coursework Example

Single European Market (SEM) Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: In what ways is the Single European Market (SEM) a reality in Europe and in what ways is it not? How do you see it developing in the future? Introduction It is an apparent fact that in the past decades, the European Union and its member states have extensively been engaged in the processes of creating a Single European Market. The primary goal of this integration has been to eliminate the barriers which inhibit trade between the member states. Core to this process was the adoption and execution of a principle legislative programme, a single market program. This culminated in the abolition of non-tariff trade barriers by 1st January, 1993. This undertaking was geared towards the creation of a huge integrated market for the goods and services produced in this region as well as acquisition of economies of scale (Ploae, 2010, p. 79). All these processes were aimed at addressing the elevated discontent in the 1980s in Europe in regard to the poor economic performance and the loss of competitiveness of this region when juxtaposed with their rivals, most notably the USA and Japan. Some of the governments in Europe were thus increasingly committed towards deregulation as a mechanism of not only stimulating output but also trade. This culminated in the formulation and implementation of diverse programs and legislations like those mentioned above aimed at cultivating a Single European Market. Despite some successes that have been credited to this move, there have been several challenges that have generated questions regarding the viability of a Single European Market. Against this background, this paper will analyze the different ways in which the Single European Market (SEM) is a reality in Europe and in what ways it is not. Additionally, it will explore the view about how the SME is bound to develop in the foreseeable future. Ways in which SME is a reality The first way in which the SEM can be perceived as a reality can be viewed from the dismantling of the non-tariff barriers viewpoint. This is whereby Ploae (2010, p. 86) determined that the demolition of non-tariff barriers has played a key role towards the realization of integrated economic systems in Europe. In addition, the subsequent introduction of free market entry in service sectors which include banking, telecommunication as well as financial services has been integral in making it the largest and broadest target sector of foreign direct investment (FDI) as well. This is best epitomized by the fact that in 2008, the member states of the European Union engaged in extensive investment outside their economic jurisdiction. The cumulative total of these investments reached a high of EUR 788.5 billion. Out of this cumulative investment, the investment to other member states (intra-EU) totaled to an impressive amount of EUR 434.2 billion which translated to 55.1% of the total outward investments directed to the internal European market (Ploae, 2010, p. 86). This reality evidenced the fact that the increased economic integration in Europe which was expedited by the move to create a SEM in regard to the eradication of non-tariff barriers has posed great impacts in intra-EU investments and elevated trade. Therefore, the effective implementation of the decision to abolish the non-tariff barriers can be perceived as a key aspect which evidences the reality of the SEM. On the other hand, it is worth noting that the move towards a SEM has also elevated the level of association between institutions in various service sectors across the members of the EU, most notably the banks. This is evidenced by Schwartz (1990, p. 359) determined that there has been a gradual increase of the cross-border associations between various banks in Europe. Several examples include the acquisition of Morgan Grenfell by Deutsche Bank, the association between Banco Santander and Royal Bank of Scotland and also the mutual working relationship between AMRO Bank cum Pierson G. P. and Sal Oppenheim. These are just examples from the banking sector which evidences the fact the transition towards a SEM is a great reality in the contemporary times. The second way in which the SEM can be perceived as a reality is from the European institutional set-up point of view. This is whereby members of the EU became increasingly cognizant of the fact that a union of their institutions was imperative towards the full realization of a SEM. The efforts towards the establishment of a uniting institution were realized with the establishment of European Monetary Union (EMU). This has been perceived as the single most important phenomena for the international financial markets since the fatal collapse of the Bretton Woods system of fixed exchange rates in 1971 (Danthine & Giavazzi, 2000, p. 1). Ploae (2010, p. 82) determined that the establishment of the EMU has played a key role in fortifying the competition and integration effects of the internal market in Europe. This has been through the minimization of the costs which are incurred in cross border activities (abolishment of the costs incurred in the management of multiple currencies as well as of exchange rate risks) and on the other hand elevating the level of transparency of prices between the members of the EU. In this case, the instigation of EMU has been integral in the creation and development of a SEM in the recent times. In this regard, the successful implementation of EMU and the positive drastic impacts on the financial set-up in Europe evidences the reality of a Single European Market which is projected to elevated impacts in the European market. This is evidenced by Hess and Trauth (1998, p. 95) who revealed that majority of the proponents of EMU argue that the lower costs in transaction as well as the dwindling currency risks are bound to elevate the level of trade as well as heightened technical progress and subsequently elevated real growth rates which will increasingly make the SEM a greater reality. Moreover, the operationalization of new EU financial supervisory authorities in January 2011 further evidences the reality in the SEM. Thirdly, the reality of the SEM can be perceived from the movement of labor perspective. In this case, recent decades have seen elevated intra-EU labor movement in diverse sectors of individual countries’ industries. This is mostly after the reinforcement of the 1993 single market programme which makes the SEM phenomenon in contemporary Europe a greater reality. Ways in which SME is not a reality Despite the above facts which have epitomized that SME is a reality, there are several ways which point to the contrary. Firstly, there has been evidence of member states in the EU engaging in extensive interventions aimed at either encouraging or blocking potential takeovers by foreign firms from other EU members. This situation is best epitomized by Germany, Spain, Italy and France among other countries which have engaged in interventionist approaches aimed at maintaining national ownership in particular ‘strategic’ sectors. These interventions not only contravene the EU competition policy as well as free movement of capital but also reveal that the SEM phenomenon is not yet a reality (Howarth & Sadeh, 2010, p. 926). On the other hand, there is still evident differentiation of taxation policies in Europe despite great efforts towards SEM. These differences have tended to divide the low-corporate tax Atlantic with the eastern members of the EU from the high-corporate tax Mediterranean and continental member states (Howarth & Sadeh, 2010, p. 931). Obviously, it is an apparent fact that the SEM is incomplete without a singular taxation system and the differentiation of the tax policies among the EU members up to date evidenced the fact that the SEM is not yet a reality. Another way of showing that the SEM is not yet a reality is based on the reluctance of different member states to adopt the Euro as a singular currency in the EU. The adoption of the a single currency by all the members of the EU can be an integral move in avoiding the exchange rate instability of the floating-rate currency regime which had been apparent in the recent decades. Nonetheless, countries like the UK still remain pessimistic about adopting the Euro with an opinion poll which was carried out by Cetelem revealing the percentage of British citizens who expressed misgiving about the Euro rose from 48% in 1999 to 65% in 2003. Similarly, a referendum which was conducted in September 2003 in Sweden revealed that 56% of the Swedish citizens voted against the adoption of the Euro. This phenomenon has been evident in other countries which have also exhibited their reluctance to adopt a singular currency among the EU members. Based on the fact that up to date there has not been a concrete consensus among the EU member states about the adoption of the Euro as a common currency in the region point to the fact that the SEM remains an illusion and not yet a reality. This is founded on the fact that the realization of a complete SEM can only be achieved through the adoption of a singular currency by the EU member states. Lastly, Howarth and Sadeh (2010, p. 926) revealed that since the launch of the single market project in 1986, there has been constant challenge on the public procurement by national governments in the EU by the commission which is discriminatory in nature in favor of national firms and disadvantaging foreign competitors. An assessment of the public procurement practices by the EU national governments revealed persistent differentiations. In this case, Smith (cited by Howarth & Sadeh, 2010, p. 927) inferred that the long list of cases which are filed against member states for failing to comply with the public procurement rules and regulations demonstrate similar trends which are apparent in the execution of EU competition as well as single market policy. In this regard, this public procurement differentiations aimed at curtailing foreign competition indicates that the SEM is not yet a reality. Development of SEM in the future There are several indicators which point to an optimistic future of SEM. These include the reality that the dismantling of the non-tariff barriers as well as increased market liberalization in intra-EU trade is bound to elevate the level of integration of the European market in the future. This can play a significant role in the eventual attainment of the SEM. Additionally, with the integration of diverse aspects of globalization ranging from socio-economic, political, cultural and technological receiving tremendous growth in the modern EU, this can be perceived as a major factor which will inform a greater shift towards the SEM in the future which will increase the level of integration among member states in the EU. On the other hand, it is imperative to note that continued reluctance of the EU member states to harmonize their tax policies and public procurement rules and regulations are bound to inhibit the move towards a SEM in the future. Of similar significance, if the EU member states continue to block the adoption of the Euro as the singular currency in the EU is also bound to detrimentally affect the move towards a SEM. However, increased cooperation and coordination in the harmonization of these aspects is bound to change the tide and make the realization of a SEM more viable and feasible. Similarly, the continued occurrence of global economic slumps, best epitomized by the 2008 global financial recession is bound to prompt different member states in the EU to take individual measures to caution themselves against the negative impacts of such occurrences which is also bound to slow down the move towards a SEM in the foreseeable future. Conclusion The above analysis has evidenced that the efforts towards a SEM have been apparent in the recent decades. Different ways like the demolition of the non-tariff barriers, increased labor movement in the recent decades and the elevated prominence and impacts of institutions like European Monetary Union (EMU) and the operationalization of new EU financial supervisory authorities evidences the reality in the SEM. This review has also revealed that the continued differentiation of tax policies and public procurement rules and regulations among EU member states as well as the reluctance of these countries to adopt the Euro as a singular currency in the EU are several ways which evidence that the SEM is not yet a reality. The last section of this analysis has predicted that the indicators of increased labor movement among other point to greater shift towards a SEM in the future. Additionally, increased harmonization process of the tax policies and public procurement by EU national governments is bound to also positively impact on the move towards a SEM. Nonetheless, the impacts of financial phenomena like the 2008 global financial slump and the recent Euro crisis are bound to negatively impact on this paradigm shift in the future. References Danthine, JP. & Giavazzi, F., 2000, ‘European Financial Markets After EMU: A First Assessment’, retrieved 26th April. 2013, < http://www.hec.unil.ch/deep/textes/00.03b.pdf> Hess, T. & Trauth, T., 1998, ‘Towards A Single European Insurance Market’, International Journal of Business, Vol. 3, No. 1, pp. 89-102. Howarth, D. & Sadeh, T., 2010, ‘The ever incomplete single market: differentiation and the evolving frontier of integration’, Journal of European Public Policy, Vol. 17, No. 7, pp. 922 –935. Ploae, C., 2010, ‘The Revitalisation of the EU’s Single Market’, The Romanian Economic Journal, Vol. 13, No. 6, pp. 79-95. Schwartz, P., 1990, ‘The single European financial market’, Cato Journal, Vol. 10, No, 2, pp. 357-361. Read More