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The European Single Market - the future or passé?

This article includes several parts:

The European Single Market has been in existence since 1992. In practice, however, numerous barriers limit the actual freedom of movement of EU citizens, goods, services and capital. 

In many respects, confidence in Europe is currently no longer a given. Eurosceptic and nationalist parties are on the rise and enjoy increasing representation both at the national and European Parliament level. People are also increasingly protesting around the world against free trade and globalisation.

People’s fears about the consequences of globalisation cannot be ignored. The promises of equal opportunities, economic growth, jobs and prosperity have not been kept everywhere or in equal measure. This applies to the European Single Market too. It has, nonetheless, allowed the national economies to benefit on the whole from the free movement of goods, people, services and capital. This has resulted in a strong European market that protects the countries and citizens of the EU from the pressure of global competition exerted by other regions such as Asia and America. The key principle here is mutual recognition. These days, goods manufactured in an EU member state can usually be sold throughout the EU.
  
The European Single Market is crucial to METRO GROUP. It generated 81 per cent of its sales within the EU in financial year 2015/16 and was represented by its sales lines in 18 of the EU’s member states. ‘Europe is our home. We have firm roots here, both economically and culturally speaking. We are therefore also very keen for Europe to be healthy and robust and characterised by a strong sense of community,’ says Olaf Koch, Chairman of the Management Board of METRO AG.

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Bureaucracy inhibits the free movement of goods

In practice, however, the Single Market has not been working seamlessly for some time. Directives aren’t implemented, or are circumvented or violated. And even within the EU Single Market, there are numerous hurdles for companies to overcome, such as VAT regulations, shipping documents and import duties. Each country has its own rules regarding the value of goods from which suppliers are required to pay taxes to the country of destination. Retailers and wholesalers frequently turn down orders to avoid the bureaucratic registration process.

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Protectionism discriminates against European businesses

The principle of mutual recognition is also frequently not observed and the basic freedoms of the Single Market are violated in order to protect the local economy. For example, global enterprises are required to pay higher taxes in some eastern European countries upon generating a specified level of sales or expanding beyond a particular size. The thresholds are set in such a way that the national economy is largely spared, while companies from the western parts of the EU are most affected.

Protectionist legislation in eastern Europe...

There is a current case in Poland, where the government passed a law for additional VAT in July 2016. This VAT applies to companies with selling space of more than 250 square metres, therefore applying first and foremost to major international retail companies. In the eyes of the retail sector, this legislation infringes Single Market freedoms and the EU’s VAT directive. The European Commission launched an investigation into state aid shortly after the law entered into force in September. Levying of the tax is suspended while the investigation is ongoing.

Another example: it is again primarily international retail companies that are affected by a new law on food trading introduced in Romania in July 2016. Pursuant to this law, all retailers with annual sales in excess of two million euros are required to source 51 per cent of their food range from the short supply chain, i.e. buy products locally.

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This article is continued in The European Single Market Part 2.

Information about the author

Brussels Office, METRO GROUP

This article includes several parts: