Single market - what is a single market?
A single market is an area where trade borders have been removed and free movement of goods, services, and people is permitted.
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A great example is the European single market, where free trade is allowed throughout the 27 EU member states and 5 non-EU states, and there is clear economic integration between countries. A single market may also be called a common market or internal market.
The benefits of a single market
There are many beneficial aspects to a single market. It can benefit your business, your workers, and your selling prospects. It also creates a competitive environment which keeps costs low. The obvious benefits are the free movement of labour, goods, and service.
Because of the free access to markets, the flow of trade is vast among different countries, allowing much higher consumer potential for businesses. Because of the vast competition, consumers then have many more options, lower prices, and the ability to work anywhere within the market.
The disadvantages of a single market
Because of the competition, and the potential influx of workers due to free movement, wages may be lower. Trade rules may accommodate some countries over others and certain industries over others, and therefore job losses could occur in certain areas. Due to the unity of several member states, it is possible that sovereignty and control over laws could also be lost.
What is the difference between a single market and a customs union?
A customs union can often be confused with a single market. There is one key difference I’ll explain below. A customs union is defined as a trade bloc with arrangements between member countries who agree to free trade and a common external tariff.
Both a single market and a customs union have no internal trade barriers and a common external tariff. A single market also has factor and asset mobility, where a customs union does not. Factor and asset mobility is the ability to move factors of production such as land, capital, and labour.
Turkey, for instance, is not part of the EU single market but is in a customs union with the EU. Therefore, Turkey has free trade and a common external tariff with the EU, but this does not include the free movement of land, capital, and labour.
The EU is both a single market and a customs union. The main difference is Norway, Iceland, Switzerland, and Liechtenstein. These countries are not in the EU, but are in the EU’s single market.
Examples of single markets
- The European Single Market
- The Caribbean Community (CARICOM)
- The ASEAN Economic Community (AEC)
The European Single Market consists of 27 EU member states, and 5 non-EU members, and guarantees the free movement of goods, services, labour, and capital. The EU is both a single market, as well as an economic and political alliance.
The Caribbean Community (CARICOM or CC) single market consists of 15 Caribbean nations and dependencies which encourages economic integration among its members. This market helps coordinate foreign policy, and encourage economic integration.
The ASEAN Economic Community (AEC) single market consists of 10 Southeast Asian countries. It is also known as the ‘Association of Southeast Asian Nations’. This market encourages intergovernmental cooperation, along with economic, educational, political, and security unification among the countries.