25 years of the European Single Market

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The aim of this report is to analyse the economic implications of the Single Market. It demonstrates that becoming a member of the Single Market has significantly boosted the Danish economy. Futher, it is shown that the economic benefits from being part of the Single Market is not limited to small open economies like Denmark – but are most likely to occur in every individual member state. Finally, we examine the role of the EU in global markets. We show that the EU is a global leader in trade and international investment and that EU member states take advantage og this status by participating in European value chains.

Main conlusions

The European Single Market has boosted the Danish economy and contributed to higher living standards in Denmark. Today, the gross domestic product (GDP) in Denmark is five per cent higher than it would have been had Denmark not been a member of the Single Market - representing the isolated effect of the Single Market. Specifically:

  • The Single Market has a huge impact on ordinary life in Denmark by lifting living standards and income of Danish households and families. Consumption in Danish households is estimated to be six per cent higher than without the Single Market, meaning Danish households were able to spend an additional 7.7 billion EUR in 2016.
  • The Single Market is designed to allow goods, services, capital and people to move more freely across the EU. When goods and services move more freely, 500 million European consumers get easier access to Danish products in local stores, and 26 million businesses across the EU get better access to equipment, machinery and expertise from Denmark. Companies take advantage of these business opportunities and trade is generated. In fact, Danish exports are seven per cent higher (8.8 billion EUR in 2016) due to the membership of the Single Market.

The mechanisms through which the Single Markets boosts economic activity in Denmark work in other EU member states as well. Specifically, EU member states gain from trade, investment and labour mobility facilitated by the Single Market.

  • In 26 out of 28 EU member states, trade conducted with the Single Market accounts for at least half of the total trade (relative to GDP). One reason is the absence of customs borders and the removal of regulatory obstacles to the free movement of goods and services. Also, historical ties and geographical proximity are of importance. In fact, 56 million jobs in the EU today depend on trade within the Single Market.
  • EU member states are by far the most dominant investors in almost all individual country of the EU. In countries like Belgium, Italy and most EU13 member states, more than 80 per cent of international investments are held by investors from other EU member states.

Standing together, the members of the EU constitute a powerful player and an important voice on the global scene. In 2016, the EU was the largest exporter and second largest importer of goods and services. Furthermore, 28 per cent of world inward foreign direct investments are held by EU member states, making the EU a dominating investor in world markets. SMEs gain access to world markets via European value chains and services play an important role in the European value chain Service is becoming increasingly important to trade as companies.

Links

Højbjerre Brauer Schultz (2018): "25 years of the European Single Market".

Kontakt

MARTIN KRISTIAN BRAUER

MARTIN KRISTIAN BRAUER

PARTNER, CAND.POLIT.