Assess the Advantages and Disadvantages of the Single Market.

786 Words Jun 6th, 2006 4 Pages
There have been various stages of economic growth between the countries of the European Union since 1958, when its history began. The pen-ultimate stage of its integration was a common or single market. Within a single market there a no tariffs between member countries and there are common external tariffs against countries outside the agreement. A single market is a strong form of integration involving the establishment of a common system of taxation, common laws relating to employment and trade, and the free movement of factors of production as well as goods and services. Within the European Union, members not only enjoy free trade in goods and services but also the free movement of labour and capital. For example, a worker in the …show more content…
A further benefit of an enlarged market is the establishment of Economies of Scale. Scale economies will be large in those industries that, prior to the removal of trade barriers, operated in national markets which were not significantly large enough to allow for optimum output levels. The introduction of economies of scale will lead to efficiency gains reflected in cost reductions. In the longer term there will be dynamic gains. The increased level of competition and market enlargement should lead to technical progress and an improvement in the allocation of factors of production such as capital and labour in the trading area. These should lead to improvements in GDP and future economic growth levels. Of course, there are possible disadvantages as well. The enhanced competition will lead to the removal of less efficient firms and industries and therefore unemployment. However, it can be argued that this is a necessary outcome in the process of moving towards a more optimum allocation of resources within a trading area. One concern with market integration is the establishment of a Core- Periphery division. This has been a criticism levied against the European Union. Economic integration can cause the concentration of new industry and the re-location of existing industry

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