The main aim of the European Union single market was to facilitate the free movement of capital, people, goods and services within its member states. This statement is usually called ‘’four freedoms’’ (Warburton, 2010). Its main aim was to increase the level of competition among EU firms, to increase the level of specialization among countries and also ensure that the movement of the factors needed for production to markets that they would be optimally used in a free and fair way. This was meant to create an economic integration where economies of different countries were meant to integrate as one market/economy and thus enjoy economies of scale. More than two million job opportunities have been created by the advent of the European Union making the firms in this union the most competitive in the world (Warburton, 2010). However, despite the many strides that have been taken towards this endeavor the completion of the single market has not been possible. Having been warned of the risks involved if the market is not completed, the European Union is now facing political and economic risks for non-completion of the single market.
European Union states have been known to practice protectionism within their national industries therefore restricting some or all of the four freedoms. A good example is how Poland and France have been protecting industries vital to its economic interests from takeovers by foreign companies (Sanseau & Smith, 2012). Another example is the refusal of the Spanish government to let go of its energy manufacturing companies. The European Commission has made it clear that trade among the member states is to be fair, but what is seen here is a direct defiance to the commission. Most political leaders in these states have not been showing their support to the integration process, with utter disregard for its far reaching significance. Another reason for the difficulty in completing of the single market is that most of the politicians of the member states do not understand the benefits their national markets stand to gain from the single maket. Therefore either deliberately or not these leaders have downplayed this making the integration process not receive the due importance. For example, Britain has benefited a lot from this market but we haven’t heard any statement attributing the economic performance to the European Single market. The European Union has been known to have the European and Monetary Union which presented the union with a common currency with which to conduct all trades with. The establishment of the Euro (£) was meant to bring efficiency to the common market and make economic activity very simplified. However this has not been the case, many countries such as Britain still cling to their old currencies. These countries have presented a lot of excuses to support their actions which in real sense sound like an excuse for a protectionist policy. This has made trade very complicated despite of the many critics who argue with this statement.
Apart from breaking the market rules, most governments in the EU are reluctant to the single market policy and often hindered the enactment and the establishment new laws or agreements that are meant to facilitate the integration process. A good example is when Denmark and France declined to sign the landmark ‘’constitutional treaty’’. The above and many more are the reasons why the European Union economic integration process has hit a snag.
Social dumping is seen as a negative practice around many countries in the European Union. It is where a company locates itself in another country where the standards of labour are lower or very poorly enforced (Kerremans & Cuyvers, 2009). Taking advantage of this, the company exports from this country at a lower production than its competitors who are located in countries that have higher standards of labor or the labor laws are strictly enforced. This presents the exporter with an unfair advantage over its competitors. This undue advantage has greatly affected international trade. It is mainly caused by the differences in the different countries in their indirect or direct costs of labor. This gives a large competitive and economic advantage for the businesses in the cheap country but has unfavorable implications on the other country (Kerremans & Cuyvers, 2009). This is because most of the enterprises will be attracted to this cheap country and workers too will be forced to seek jobs with lower employment standards and income rather than face retrenchment from their previous employment. The reduction in income in some of the companies will see them try to reduce the cost of production by retrenchment or moving to cheaper production grounds. The establishment of the European single market has introduced a new kind of market practice or firms. Companies that used to operate on a national level previously now have been thrust into the international scene facing more competition and bigger stakes. Therefore there is a lot of pressure on enterprises that have high costs of direct wage to find a way in which they can produce and have a competitive advantage compared to those firms with lower wages. The principle of rewarding productivity is one of the major objectives of the establishment of the single market; however, this has taken a turn for the worst.
Some of the laws regarding employment, the power of labor unions and the imposing of minimum wages in many countries have led to the rise in the direct cost of labor. This however has been contrasted to other countries where this is not the case. Some of the countries in the European Union such as Ireland have given less power to their labor unions as compared to others like France which has enabled many firms to switch their operations to such countries. When firms close production facilities and moves such facilities to other places that are favorable, this leads to the loss of employment of most of its employees. This is social dumping. A great solution to this is the establishment of a genuine fiscal union. This gives companies one currency on which to do their trade in; in this case the implementation of the use of the Euro in all European Union member states. The creation of these tends to put the prices of goods and services at an almost same rate within the countries. This tends to create an artificial union in the living costs of the citizens in the member states. If the cost of living is similar this will tend affect the wages that employees receive. Thus the demand for employment in places of low wage will reduce and will rise in places where the wage rate is higher thus coming to an equilibrium wage rate within the region. The advantage of an economic union is that it can also dictate the blanket minimum wage rate among all the member countries. This would reduce the unfair competitive advantage that most firms had initially. However all this is only effective if member countries support this and implement it to the letter.
Sanseau, P. & Smith, M. (2012). Regulatory Change and Work-Life Integration in France and the UK. Personnel Review, 41(4)
Warburton, C. (2010). International trade law and trade theory. Journal of International Trade Law and Policy, 9(1), 64 - 82