Costs and benefits of the Single MarketAnalysis of Ireland

A Single Market is defined as a trade bloc, benefiting from a free trade area with common policies regarding product regulation and free movement of factors of production and services, aiming the removal of physical barriers to trade and competition, including the removal of border posts, of technical barriers - different national standards for health, safety, environment, consumer protection and sector regulation and of fiscal barriers - excise duties and indirect taxes.

Advantages of the Single Market include lower prices for consumers, a wide range of product choices, more efficient providers of products. In addition, businesses in competition will try and come up with new products, another benefit for consumers. The factors of production become more efficiently allocated, further increasing productivity. Moreover, businesses are developing more and more, being able to exploit complex economies of scale, increasing competitiveness along with lower costs, in order to be profitable.

On the other hand, the disadvantages can be the following: monopolies may be formed, as a external market failure, despite of the very competitive trading environment and also worker mobility may not turn to be the great benefit everyone hoped for.

As an example of a country to analyze, I chose Ireland because despite the little territory, it has a powerful economy that is expanding each day. When the Single European Act was introduced, the Irish economy gained a lot, even though at the time, in 1987, Ireland was nearly in an economic disaster. Therefore, Ireland 's only hope was to enhance its international attraction as a low cost manufacturing base, therefore inviting foreign investment and boosting local employment. The creation of the single market by eradicating obstacles, gave a major boost to Irish’s economy, because it placed this country as a identifiable base for large manufacturers exporting to the EU.

Jacques Delors, the President of the Commission at the time, was the one that considered the creation of the Single Market as the most important factor in the recovery and rehabilitation of the Irish economy. The further promise of deeper integration attracted the attention of higher levels of foreign investment from such countries as Japan and United States of America, which of course, were gladly welcomed by Ireland. But in turn, the Single European Act also forced a change in Irish business strategy. It was easier for Irish exporters to expand abroad. New common technological standards and the guarantee of protection by strengthened EU legislation provided for a more reliable single market. One other benefit was the forced increase in productivity and efficiency of both domestic Irish firms and exporters.

With opportunities also came challenges. For years the Irish economy was completely reliant upon its closest neighbour, the United Kingdom. The creation of a more integrated market meant a new trading scenario, where our dependence upon Britain would irreparably change. This exposure to outside competition would have an immediate impact on certain Irish industries. This economic and social change was managed very well so that it would smoothen the path to further integration.

As explicit state aids were outlawed, the incentive for greater private sector investment, hence creating more jobs, became higher. In Ireland 's case, state aid to companies such as Irish Steel, Aer Lingus and Telecom Eireann was outlawed. Although initially politically sensitive, this form of deregulation proved incredibly beneficial for the Irish consumers. New competitors were created overnight, thereby reducing prices for consumers. Indigenous Irish companies such as Ryanair and Esat Telecom could not have been as successful without the creation of more integrated Single Market.

The introduction of free movement of capital has proved a major boost for the Irish financial services market. Together with the Irish Financial Services Centre, international financial institutions have established themselves in Ireland , creating thousands of jobs in the process. Irish citizens can also invest in a broader range of equities, bonds and differing investment funds both inside and outside Europe. This greater choice has forced companies to deliver greater returns to their shareholders thereby ensuring a very competitive market.

The Single European Act has disproportionately benefited the smaller nations of the EU. By the creation of common standards and total protection under EU legislation, all countries can now compete on approximately the same level. These factors eliminate the greater political and economic might of the larger EU member states, thereby ensuring fairer competition. This advantage has and continues to be positively exploited by Ireland.

In conclusion, the Single Market has been important both for the growth and diversification of Irish trade and for enhancing the attractiveness of Ireland for foreign direct investment. Furthermore, there are practical actions that can be taken to improve Ireland’s trade within the Single Market including, encouraging cross border insurance provision, simplifying business loan procedures and promoting cross border sourcing of inputs to production. The Single Market has delivered real benefits for consumers, in terms of the range and quality of the goods and services available. It has made it easier for Irish consumers to purchase goods from other Member States. But, at the same time, Irish consumers are continuing to pay higher prices than many of their EU counterparts for some essential goods and services and there is also a lack of consumer confidence when it comes to cross border transactions.

 

Moise Ana-Maria, Group 934