common market

A Common Market is a customs union with common policies on product regulation, and freedom of movement of all the three factors of production (land, capital and labour) and of enterprise. The goal is that movement of capital, labour, goods, and services between the members is as easy as within them.

Sometimes a Single Market is differentiated as a more advanced form of common market. In comparison to common a single market envisions more efforts geared towards removing the physical (borders), technical (standards) and fiscal (taxes) barriers among the member states. These barriers obstruct the freedom of movement of the four factors of production. To remove these barriers the member states need political will and they have to formulate common economic policies.

This is the fourth stage of economic integration.

List of Single Markets

• the European Union (EU) began life as the European Coal and Steel Community in 1951 (Treaty of Paris (1951)) and went on to become the European Economic Community (EEC) in 1957 (Treaty of Rome (1957)) (when it become known in Britain and Ireland as "the Common Market"). The abolition of internal tariff barriers was achieved in 1968. In subsequent years little was done to move from this basic customs union to a full single market. The Single European Act was signed in 1986 to establish a Single European Market by 1992, by removing the barriers to free movement of capital, labour, goods and services (at least in principle, if not always observed in practice) Further information on the European Union single market can be found here.
• European Economic Area (EEA) between the EC, Norway, Iceland and Liechtenstein
• the Caribbean Community single market (CARICOM)

Proposed

• Economic Community of West African States (ECOWAS)
• Central African Common Market of the Economic Community of Central African States (ECCAS)
• Gulf Cooperation Council (GCC), due in 2007
• Southern African Development Community (SADC), due in 2012
• ASEAN Economic Communiy (AEC), due in 2020
• African Economic Community (AEC), due in 2023

Benefits of a single market

A single market has many benefits. The central benefit is the increase of division of labour and the consequent increase in productivity. Other important benefit is, with full freedom of movement for all the factors of production between the member countries, that the factors of production also become more efficiently allocated, further increasing productivity.

For both business within the market and consumers, a single market is a very competitive environment, turning the existence of monopolies more difficult. This means that inefficient companies will suffer a loss of market share and may have to close down. However, efficient firms can benefit from economies of scale, increased competitiveness and lower costs, as well as expect profitability to be a result. Consumers are benefited by the single market in the sense that the competitive environment brings them cheaper products, more efficient providers of products and also increased choice of products. What is more, businesses in competition will innovate to create new products; another benefit for consumers.

Costs of a single market

Transition to a single market can have short term negative impact on some sectors of a national economy due to increased international competition. Enterprises that previously enjoyed national market protection and national subsidy (and could therefore continue in business despite falling short of international performance benchmarks) may struggle to survive against their more efficient peers, even for its traditional markets. Ultimately, if the enterprise fails to improve its organisation and methods, it will fail. The consequence is unemployment.

See also

• Economic and monetary union
• Globalisation

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