How the EU works: what is the single market?

Putting it simply, the aim of EU rules is to make it as easy to trade between London and Lisbon as it is between London and Liverpool.

Creating this single market (also known as the internal market and, originally, the common market) lies at the heart of the EU.

Single market rules require the free movement from one EU member country to another of goods, people, services and capital (the so-called ‘four freedoms’).

Those rules take two forms.

First, they remove barriers to trade.

Second, they harmonise, or unify, national rules at EU level.

Removing barriers to trade

The idea behind the original EEC Treaty in 1957 was simple: barriers to free movement of goods, persons, services and capital would be removed through the use of treaty provisions. This is known as ‘negative integration’.

In exceptional cases such as public policy, public security and public health, national rules would be allowed to stand.

One of the most famous cases decided by the EU court, the Cassis de Dijon case, shows how the EU rules on negative integration work.

France produces the magnificent Cassis de Dijon, a blackcurrant liqueur. It has an alcohol content of 15-20%. However, German law used to require all fruit liqueurs to have an alcohol content of at least 25%. 

The effect of the German rule was to keep French liqueurs off the German market. While this may have pleased the producers of German spirits, the rule was bad news for the French producer and denied German consumers the delights of French crème de cassis.

The EU court said that the German rule interfered with free movement of goods: it stopped French cassis (which had been lawfully produced in France) from being sold in Germany.

The Germans tried to justify their rule on the grounds of public health, arguing that German consumers risked getting drunk because they didn’t realise how potent the French product really was.

The court wasn’t convinced. The German rule was found to be against EU law and so had to be removed.

Making one EU rule in place of 28 national rules

The approach in the Cassis case was always intended to be backed up by ‘positive integration’, or unifying national rules at EU level.

Take the example of lawnmowers. They invariably make a lot of noise. Each EU country could decide for itself how much noise a lawnmower can make.

A manufacturer might want to manufacture lawnmowers to one single EU standard rather than having to find out and meet different noise requirements for different countries.

The Treaty allows the EU to legislate in circumstances like these to create a single market: a single set of rules on, for example, how much noise a lawnmower can make.

Some people say that this is an example of the EU interfering in every aspect of life and imposing too many regulations on small businesses. If a lawnmower maker doesn’t export, it still has to adjust to the EU standard.

Others say this is just what the EU is there for. And they would argue that provided that EU lawmakers are satisfied that the lawnmower noise rules respect the principle of ‘subsidiarity’ and go no further than necessary, the EU should legislate.

Minimum and maximum standards

Most single market laws are made by qualified majority voting.

They can lay down minimum standards which countries are free to make tougher for products made in their own countries. But countries must still allow lawnmowers manufactured according to the minimum standards to be sold in its country.

The rules might instead set down maximum standards. In the case of maximum standards, countries have no room to make them tougher. EU rules are the only rules that apply.

The single market is still developing

The Single European Act, the first major treaty amendment in 1986, set a deadline for completing the internal market by 31 December 1992.

Although a lot was achieved between 1986 and 1992, the single market was never completed as such. In reality it’s considered an ongoing project. One of the European Commission’s objectives at the moment is “completing the internal market in products and services”.