Business in the European Single Market 101

EU single market map

The European Single Market (ESM) is the largest internal market in the world. It allows for the free movement of goods, services, capital and people within the European Union and Norway, Iceland and Liechtenstein. These last 3 countries participate in the EU’s internal market without being members of the European Union.

The Single Market works to ensure that all countries within the market follow the same regulations and laws when it comes to trade and commerce, allowing businesses to operate more easily across borders. This market creates an economic space in which people and businesses can operate across multiple countries as if they were operating in only one. The single market has  increased economic competitiveness among the participating countries, allowing them to compete more effectively in other larger global markets such as in North America and Asia. This allows European companies to innovate more rapidly than would have been possible otherwise and encourages entrepreneurship throughout the continent. The creation of the single market is a testament to the EU’s commitment to collaboration and openness, contributing significantly to its strength as a global leader in industry and commerce.

The Power of the EU

The European Union is based on the shared values of democracy, justice, human rights, individual freedom, equality and welfare. The strength of the European Union and its single market makes it the de facto global leader in setting global business standards, as demonstrated by the wide worldwide adoption of the principles of the European privacy guidelines (GDPR). Another example is the driving of sustainable change by ensuring that EU funds are only allocated to companies that embrace high environmental and social principles. This includes commitments in protecting human rights, safeguarding privacy, providing better working conditions and preventing tax avoidance. The EU has recently responded remarkably strongly to the growing global challenges of climate change, pandemics, war-in-Europe and totalitarian regimes. The expansion of renewable energy sources to facilitate a transition away from burning fossil fuels, as well as enforcing transmission tariffs on cross-border trading of electricity, are just two measures taken by the EU to facilitate climate sustainability. The EU also has advanced plans for some specific de-globalization of critical supply chains to safeguard the internal market from serious disruption. This entails some relocation of production processes back to Europe over time instead of relying on imports sourced globally, along with various trade tariffs when importing goods from outside of the EU in order to create a level playing field, foster internal competition and improve human rights globally. The diversity within Europe should also be seen as a strength, with the member states maintaining their independence while pooling sovereignty in certain areas of policy. In other words, they have committed to work collectively on particular matters. 

The Power of the World’s Largest Market

The European single market is a force to be reckoned with. With over 500 million citizens and a total value of EU internal exports and imports of around €10 trillion, it is the largest consumer market in the world. By removing trade barriers between EU economies, it has increased consumer choice, improved access to services, boosted competition and driven economic growth for businesses trading within the EU. In this way it has been instrumental in promoting EU prosperity by enabling risk-taking by entrepreneurs and fostering collaboration between EU countries when competing with non-EU states. As such, the European single market’s influence cannot be underestimated – indeed its far reach makes it bigger than many people imagine. Business activity in Europe is widespread and diverse, supported by the European single market. Similarly, in Business-to-Business (B2B), industrial services like trade and logistics; information technology; real estate; automotive; commercial services; energy; travel & tourism and manufacturing are just a few examples of sectors driving economic growth across Europe. In light of the scope and complexity of these sectors it’s no surprise that they remain the largest business markets within the European single market.

European Single Market largest sectors

The largest sectors of transportation, health care, retailing, manufacturing, construction and finance account for over 70% of the GDP of the single market countries. Financial services are especially important in the European market with leading firms such as Deutsche Bank AG and UBS Group AG. It generates more total income than any other sector. Manufacturing is a particularly important industry and contributes heavily to the single market’s economic output. Automotive production ranging from luxury vehicles produced by BMW and Ferrari to mass produced small cars like those from Volkswagen is tightly integrated within this region and also provides a large number of jobs.

Many countries in the European single market are heavily reliant on these essential industries making it essential that they remain efficient and commercially viable on an EU level. Other industrial sectors like trade and logistics; information technology; real estate; commercial services; energy; travel & tourism are just a few examples of other sectors driving economic growth across Europe.  As the European single market continues to expand, these industries will play an increasingly important role in driving economic growth and improving the quality of life for all its citizens.

The United Kingdom of Great Britain and Northern Ireland

The UK decided in 2016 to leave the EU so that it could make its own rules and regulations independently of Brussels, i.e. the EU. Therefore the UK is no longer part of the European single market. Since the UK’s Brexit from the European Union, UK-based businesses have found themselves struggling in the new international trade environment. Exports have become increasingly expensive and complicated with tariffs, paperwork, and confusion over product standards. Processes that were previously virtually frictionless now incur major delays as goods exchanges move through customs. Meanwhile, imports to the UK have become more costly as European firms fret over future tax regulations and other potential complications of doing business with Britain. With the Brexit treaties and new laws still not completely settled and uncertainty remaining high, it is no wonder that trade between the UK and EU has declined significantly.

Further reading: where should businesses go post-Brexit?

North America

Europe and North America are connected through extensive trading relationships, offering boundless opportunities for both sides. However the negotiations between the EU and the USA for the Transatlantic Trade and Investment Partnership (TTIP), which aims to further reduce trade barriers between their markets, are currently suspended. Meanwhile, the EU and Canada are connected through the Comprehensive Economic and Trade Agreement (CETA), which has seen some major successes since being implemented in 2017. Finally, Europe and North America often cooperate also through the World Trade Organisation (WTO) to strengthen global free trade values. These trading ties are immensely valuable for all parties and will remain a critical aspect of economic partnerships in the future.

Entry to the Single Market

Expansion into the European single market is a great opportunity for non-European businesses looking to gain access and grow. Although navigating international laws can be tricky due to various regulations from country to country, planning ahead is vital for a smooth experience. Choice of location can make the difference between success and disaster. Expansion may involve distribution strategies, relocation of operations or employees, or even the development of new products specifically designed for the European market. Paying close attention to tariffs is essential to be able to optimize the cost of doing business across international borders. With diligent research and a sound strategy, non-European businesses can become very successful in tapping into the lucrative European single market.

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