Executive summary and key recommendations

The Single Market is the heart of the EU and is undeniably one of its greatest achievements. It has brought long-lasting peace and driven growth in Europe for decades, creating the businesses, jobs and prosperity on which Europeans depend. It has generated a continent-sized market and created the world’s largest trader of manufactured goods and services. All this has been made possible by the vision, leadership and determination of the EU’s founding fathers, the EU Institutions, Member State governments, and officials in Brussels and in national capitals. 

The Single Market has also depended on a uniquely open approach to policy-making, with the EU Institutions drawing on the expertise of industry and other social partners. It is with this in mind that ERT is calling for renewed dynamism and determination in its development. The concrete and practical stories from our Members in the latter part of this publication show the difficulties and fragmentation of the Single Market of today, as well as the existing limitations to the free circulation of goods, services, and capital.

The Single Market has grown and evolved as the economy has changed. It must now change again to address new challenges. The EU faces the considerable task of rebuilding its economy after the pandemic, replacing the jobs that have been lost and unlocking new sources of growth. As it does so, it must ensure that it not only continues to uphold European values and our social model, but also delivers the twin green and digital transitions which have been promised to Europe’s citizens. It means not only engagement from the private sector, but also a radical new commitment from the public sector, which carries an immense responsibility, as governments need to create the conditions for innovative technologies to be deployed and scaled-up across the EU.

The headwinds facing the EU’s competitiveness are powerful. First, there are long term challenges from the changing composition of the global economy. Between 2008 and 2018, the EU’s real GDP grew by less than 1% a year, while India’s and China’s grew by 7% and 8% respectively, and the EU’s share of global GDP fell from 25.6% to 18.6%. The US share of global GDP fell by only 0.9% from 24.9% to 24% over the same period. Meanwhile, unfair trading practices have spread, tariff disputes have increased, and the WTO is a less reliable channel for resolving disputes. The rules-based system, which provides a wider guarantor of the EU’s prosperity, must itself be strengthened. At the same time, we see that, following Brexit, the EU and the UK now have trade barriers with each other, entailing serious economic consequences: the UK leaving the Single Market reminds us all of the latter’s value. 

In the face of these challenges, the EU has declared its ambition to achieve ‘open strategic autonomy’ and ERT supports the emphasis on long-term industrial competitiveness. However, the EU also needs a clear definition of its interests in key supply chains for critical goods, and a precise approach to applying the concept, to ensure it does not inadvertently enable protectionist measures. We firmly believe that open strategic autonomy starts by strengthening the Single Market as our home base. 

The Single Market remains the EU’s greatest asset and must provide the central plank of a new programme for integration. Its construction has been an enormous achievement, but its full potential remains to be realised. The EU’s goals will not be delivered without unlocking new sources of growth. The EU will not nurture a thriving economy that works for all its 450 million citizens if barriers to growth are not removed. 

Few of these goals will require new funds, and they do not necessarily require changes to the Treaties. Technical adjustments to the Single Market by changing practices within the current Treaties can already deliver huge gains, provided that there is not only the political will, but also the administrative capacity, in Brussels and all the national capitals, to work together on harmonising the framework for doing business in Europe. 

A recent survey of all ERT Members revealed that the completion rate of the Single Market stands only at 75%, when they were asked to rate the free movement of people, goods, services and capital.

The benefits of removing Member State-level barriers to the Single Market for goods and services could amount to €713 billion by the end of 2029; a sum similar to the investment promised under the ‘Next Generation EU’ recovery package.

To achieve these goals, we now need to supplement methods of soft co-ordination within the Single Market with better enforcement and, where needed, legislative action. Even more importantly, we need deeper market integration to overcome the current fragmentation of rules. The importance of EU-wide infrastructure (in telecommunications, gas and electricity networks and rail services) should not be underestimated, in particular to spur the cross-border circulation of goods and services.

This should be coupled with a less politicised approach to standardisation: the recent approach risks undermining the EU’s currently very constructive influence on world standardisation. An industry-led – but not industry-controlled – approach to standardisation has been proven to be the most effective for the EU, and highly beneficial for worldwide value-chains.

Overview

In this publication, ERT looks at the challenges the EU faces and the strategies it has spelled out to tackle them: open strategic autonomy, the green and digital transitions, the industrial strategy, and innovation policy. It looks at how EU policies all rely on a smoothly functioning Single Market for their success and at the Single Market’s potential to make the EU a stronger geopolitical actor. In doing so, it takes up questions posed by the Commission on how the Single Market can achieve more by removing barriers within and between the EU Member States. ERT also greatly appreciates the significant contributions from the European Parliament (published in November 2020 and February 2021).

ERT is convinced that the time to act is now. With the Conference on the Future of Europe in session, this paper is ERT’s contribution to stimulate that debate towards an ambitious outcome.

The urgency is illustrated by 30 practical and concrete stories in which ERT Members talk about how specific barriers within the EU are holding back growth and job creation, and preventing our society from achieving the twin transitions. The bulk of contributions concern the twin transitions: over 15 stories chiefly address the Green Deal, and 10 the EU’s Digital Strategy. And we also identify the opportunities gained from tackling these barriers: it is through stories that we can often best convey not only the Union’s achievements but also its potential. This publication sets out the next steps we should take to realise that full potential. 

By analysing stories of business leaders, ERT finds that the EU can boost economic recovery by removing remaining barriers to trade within the Single Market through the application of three principles:

• Speed and simplicity;
• Aligning ends and means;
• Better enforcement and greater harmonisation.

ERT has applied these three principles to those policy areas most in need of attention. The EU will only make the most of its economic power if the Single Market receives renewed commitment from the Member States and the European Institutions. To succeed, political will is needed as well as a new encompassing programme: an agenda for action towards 2030.

Key recommendations and actions

This table sets out specific recommendations to strengthen the Single Market categorised by policy area and by means of delivery. Beyond better management and revising policies, deeper EU integration is needed in the four policy areas to shape an effective Single Market in the fields of Environment & Consumption, Energy, Digital and Finance & Capital.

These recommendations are in the first instance based on the ERT Members’ stories regarding barriers to the Single Market that need to be addressed. They focus on achieving greater harmonisation across the EU and are divided into three sets. The first focusses on the implementation of what already exists, the second on the revision of existing legislation and the third on deepening the Single Market through new policy action.

When insufficient action is taken by the Member States to remove existing barriers and European companies are faced with potential new fragmentation in future markets, the governance framework for the Single Market should be overhauled. Better reporting on barriers, systematic follow-up on removing these and a more pro-active role of the European Commission are part of the solution. 

However, the Conference on the Future of Europe also constitutes the perfect occasion to reflect on the division of competences between the European and national level and which powers should be exercised by the European Commission to instil more harmony in the ‘Single’ Market.