Internal market and competition
In many ways, the internal market was the prelude to the EU we know today. The freedom to travel, work, study and do business in other EU countries has increased trade and created new ways of life for Europeans.
The idea of abolishing the borders between countries for goods, services, capital and workers was present as early as the 1950’s but did not become a reality until several decades later, in 1993, after a long and deep recession in Europe. By offering companies a larger domestic market, the increased competition would give consumers more, better and cheaper goods and services.
Before border controls are removed, laws and regulations for goods and services must be the same in all EU countries. No Member State wanted to admit goods or companies that held too low a standard. It was slow for the EC countries to agree on common rules until 1987 when they released the requirement for unanimity. For all decisions concerning the internal market, a qualified majority was then sufficient, which accelerated the work. Setting a time limit also contributed; on January 1, 1993, the boundary barriers could be lifted.
Ten years later, the European Commission calculated a kind of conclusion. The single market is estimated to have created 2.5 million new jobs in ten years and increased GDP growth by 1.8% or € 164.5 billion. Distributed per household, it was 5,700 euros (around 55,000 kronor).
For a lot of goods, the difference in price is clearly noticeable. This applies, for example, to telephone calls, cars and airline tickets. Europe got a low-cost flight, many regional airports have therefore been able to get more traffic and weekend tourism outside the capitals became a new tourist phenomenon.
For other goods but above all for services, there were no clear price gains and the expected competition across borders, for example in energy, banking services or trains. In 2005, therefore, the internal market was complemented by a common market for financial services – mutual fund savings, bank savings and equity trading can now take place in any marketplace in Europe under the same control. However, the global financial crisis that came a few years later frightened many to return to their national home markets.
In 2015, the European Commission launched a new effort to try to create a European capital market by 2019. Broader trade, even outside the banks, can reduce the vulnerability of the European system to new financial crises. But it has proved difficult to agree on new rules that open up national capital markets.
The purpose of the Services Directive, which came in 2010, was to make it easier for service companies to operate on the other side of a national border. In 2017, new attempts were made to remove stubbornly persistent barriers to trade in services. From 2020, for example, many administrative steps for both companies and citizens will be able to be done electronically, from an easily accessible portal.
Passenger traffic by train is another example of a service that has remained nationally controlled for the longest time. From 2020, domestic passenger traffic on rail will be opened up to competition.
As defined by COUNTRYAAH.COM, the EU has been working in a common energy market since 2015 under the name European Energy Union. It requires some common rules, but above all new gas and electricity lines that make it possible to deliver energy across borders so that peaks and valleys in the energy supply can be evened out.
Since 2014, the EU has a “ digital agenda ” with a collection of initiatives that will contribute to Europe becoming competitive in new technology, with, for example, support for research, for companies to develop digital services, broadband connection to more locations, adaptation of legislation to a digital reality, and so on.
Free movement of workers has been shown to lead to irritation in several places, not least during crisis years and unemployment. Eastern Europeans who moved west were not always welcome. In some places, the unions considered that mobility in the long run led to lower wages (wage dumping) when companies could employ citizens from other EU countries at significantly lower wages than the usual ones. Elsewhere, there was criticism that EU citizens won the right to social benefits in the host country. The EU did not want to restrict mobility but tried to solve the problems by tightening controls, including temporary staffing.
The EU pursues a tough competition policy where the conditions must be the same for all companies in the market.
• Large companies must not abuse their dominance in the market by restricting competition or forcing a weaker business partner to accept unreasonable business terms.
• Cooperation between companies in order to reduce competition is prohibited. This applies to agreements on prices, terms of sale or division of the market.
• State or private monopolies are in principle prohibited. The state or municipality may not favor public companies in a commercial market.
• Acquisitions or mergers of companies must not lead to companies so dominant that consumers no longer have any alternatives.
The Commission is the EU’s ‘competition police’. Its officials have the right to enter a company and seize business documents. Companies that violate competition rules can be fined up to 30 percent of annual sales. Between 1990 and 2015, the European Commission imposed fines for illegal cartels of just over EUR 6.25 billion (approximately SEK 58.5 billion).
When the competition rules are to be complied with, it sometimes raises resistance and demands for special treatment. In Sweden, for example, the EU banned Volvo Trucks and Scania from merging their truck manufacturing for competition reasons, which aroused Swedish criticism. It also caused anger in Italy when the state airline Alitalia in 2008 was denied new state aid since previous state aid could not save the company.
The competition rules are primarily aimed at large companies, while small companies or small sums are generally excluded. The European Commission’s competition department has taken on international giants when they were considered to dominate improperly, such as American Microsoft and Apple who have been fined billions and forced to change business practices.
It was controversial when the European Commission in the winter of 2016 ruled a favorable Irish tax treaty for Apple as a violation of fair competition. Fiat, McDonalds, Ikea and several large companies are also in the firing line for unduly favorable tax rebates in Luxembourg and the Netherlands.