Costs and benefits of the Single Market

Analysis 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
Irishs 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 Irelands 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