ECB study details barriers and potential of EU Single Market
The European Central Bank's latest article explores the untapped potential of the EU Single Market, a cornerstone of European integration. It identifies remaining structural obstacles, particularly in services, that limit welfare gains and hinder the EU's resilience and competitiveness.
Goods flow freely, services lag
The EU Single Market, established by the Treaty of Rome and officially launched in 1993, has significantly boosted real GDP per capita and welfare across Member States.
It facilitates the free movement of goods, services, capital, and labour, enhancing economic efficiency and resilience.
However, integration remains uneven.
While intra-EU trade in goods accounts for over 40 percent of EU GDP, services trade lags significantly, reaching only 16 percent of GDP – a level comparable to extra-EU services trade.
This disparity is striking given that services constitute nearly three-quarters of the EU's economic activity.
Factors contributing to this include the localised nature of many services and varying depths of integration across subsectors.
Highly harmonised manufacturing industries show strong cross-border activity, whereas primary goods and many service sectors like retail and professional activities face persistent national barriers.
Persistent hurdles and untapped gains
Despite its benefits, the Single Market faces numerous structural obstacles, particularly in services.
These barriers stem from diverse sources, including fragmented national regulations, cumbersome administrative procedures, inconsistent application of EU rules (gold-plating), and anti-competitive practices favouring domestic firms.
Specific challenges include divergent technical standards for goods, and labour mobility restrictions and professional qualification recognition for services.
Data limitations make quantifying these barriers challenging, but models like the gravity model infer their magnitude.
The European Commission identifies 'Terrible 10' persistent barriers, such as discriminatory authorisation and unjustified territorial supply constraints.
Overcoming these limitations is crucial for strengthening the EU's resilience, fostering competitiveness, and unlocking substantial potential welfare gains beyond the estimated €840 per person annually.