Reflections on Europe Day 2023
by George I. H. Cooke
The impact of trade on countries that engage
in it heavily internationally, and the overall effect it is having on
international relations as a whole, continues to baffle. European historian, Norman
Davis, points out that “Western Europe’s greatest success story lay in the realm of economic
performance. The speed and the scale of economic resurgence after 1948 was
unprecedented in European history, and unmatched in any part of the world
except Japan. It was so unexpected and spectacular that historians cannot
easily agree on its causes. It is far more easily described than explained.”
Herein lies the crucial argument for trade
and its intensification, which the European Union, as the foremost model of
integration, has been able to achieve. As the Union marks three decades since
the establishment of the Single Market, it is prudent to reflect upon that
which has been achieved individually by countries, and collectively by the
region.
Geared towards facilitating the free flow of
goods, services, people and capital, the depth of integration was first
envisioned in 1957 through the Treaty of Rome. Considered to be well ahead of
its time, the Treaty proposed the reduction of customs duties, establishment of
a customs union, creation of a common market, as well as common transport and
agricultural policies, and even envisaged the setting up of the European
Commission, which is one of the most unique institutions in multilateral
bodies.
It was the signing of the Maastricht Treaty
on 7 February 1992, that led to the establishment of the Single Market on 1
January 1993 bringing together 12 EU countries, notably, Belgium, Denmark,
Germany, Ireland, Greece, Spain, France, Italy, Luxembourg, the Netherlands,
Portugal and the United Kingdom. With the expansion of the Union, the Single
Market now comprises of the 27 EU Member States and also includes Iceland,
Liechtenstein, and Norway, while Switzerland has a degree of involvement as
well.
The European Commission highlights that the
Single Market has been able to make three distinct shifts - ‘accelerating the
transition to a greener and more digital economy; guaranteeing high safety and
leading global technological standards; and responding to recent crises with
unprecedented speed and determination” – but from an analytical point of view, it
has made the European Union one of the strongest trading blocs, and boosted its
currency globally. This translates to power on the world stage, that many other
regions which have attempted integrating can only aspire to, and are yet to
realise.
While the deepened integration might be
questioned against the backdrop of the exit of the United Kingdom, it needs to
be examined for the progress and impact made over the last three decades.
Greece, is probably the EU member that has faced the most trying of financial
times in recent years, hence the Greek Foreign Ministry’s assertation that “the seamless operation of the Single Market is a
precondition for a strong economy that will benefit all Member States, citizens
and businesses and that will meet the conditions of global competition,” is
testimony to its resolute commitment to the Single Market. In contrast,
Germany, seen as the foremost and strongest economy in the Union, has benefited
immensely from the Market. The Bertelsmann Foundation notes that “Germany
benefited most in absolute terms from the single market, earning an extra 86
billion euros ($96 billion) a year because of it.”
At
first glance it appears that all countries are benefitting from the Single
Market, but it is important to note that the advantages accrued vary from one
member state to another, and is largely dependent on their size, economy and
strength. There is relative gain with Germany for example gaining tremendously,
and Greece gaining relatively less, but gaining nonetheless.
Arguments on the contrary
claim that the Single Market remains an illusion, which is yet an ‘ongoing
project’ despite its many decades of implementation. Fredrik Erixon and
Rositsa Georgieva of The Five Freedoms
Project, claim that “While the nature and profile of the Single Market, and
its regulations, have changed over the years, they often have focused on the
wrong issues, or on factors that would not change the nature of markets as
such.” This observation relates specifically to the Services sector, with their
further claim that “The piecemeal approach to reform, followed until now, has
created a complex web of regulations, administrative rules, national
discretion, and partial freedoms. Fractional and incomplete liberalization have
reduced the potential gains.”
Similarly, highlighting the legal obstacles
to implementation, Copenhagen Economics,
points out that “the functioning of the Single Market is a shared responsibility
between the EU and the Member States. Differences in interpretation and
application of EU law are inevitable. Despite years of hard work and
substantial real progress, we appear to be some distance from having a well-functioning
Single Market, free from unjustified or inappropriate obstacles to free
movement.”
Although three decades might not have yielded
a completely consolidated system it does however indicate much progress that is
yet to be achieved by other regional groupings. The EU Commissioner for
Internal Market, Thierry Breton argues that the Single Market is “much more
than just a legal framework – or indeed a market. We need to continuously preserve,
improve and re-invent this formidable asset.” Breton calls for three crucial measures
to ensure that progress. He notes that “first, by ensuring that the rules we
have agreed collectively are also applied collectively. Second, by putting SMEs
at the centre of Europe’s competitiveness. Third, by ensuring that people and
businesses have access to the goods and services they need, when they need
them.”
While Breton’s assertion contributes to the
concept of the Single Market being an ‘ongoing project’ it indicates the need for
collective action for any progress across the grouping. This collective action might
not always be forthcoming owing to domestic developments as seen with Brexit,
and its impact on the region in particular, and regionalism in general. While
Brexit delayed deeper integration, it also raised the question over the amount
of integration. However, the United Kingdom had first raised concerns about the
European model two years after joining in the mid-1970s. Therefore, the example
of the Brexit needs to be examined in different light. Of relevance however, is
continuous call for collective action. If Member States pull in different
directions, or differ largely over policy and its implementation, the model is
on rocky ground.
Yet the acceleration of economic development
across the region, the enhancement of trade, and the removal of barriers, has
led to the Single Market remaining a firm foundation upon which countries are
able to build solid cooperative mechanisms. The Single Market also causes a
return to the basic understanding that those who trade are less likely to engage
in conflict.
A decade ago, the Stanford Graduate School of
Business focused on the research of Matthew O. Jackson and Stephen Nei, who suggested
that “military alliances alone aren’t enough to stop nations from attacking one
another, and also that the addition of multilateral economic trade creates a
more stable, peaceful world.” In their paper on Networks of Military Alliances,
War and International Trade, Jackson and Nei observed that “once you bring in
trade, you see network structures densify…trade motives are essential to
avoiding wars and sustaining stable networks.”
Member States of the European Union embarked
on an ambitious programme of integration after the Second World War with trade
remaining at the centre, but these members did not sacrifice defence either,
and many are Members of the North Atlantic Treaty Organization (NATO). Thus,
military alliances have not been completely forgotten or sidelined, but have
been nurtured too, and especially so in the last three decades. After the
collapse of the Soviet Union and the end of the Cold War, NATO evolved, and
this evolution is attributed to Member States taking concrete action to ensure
their preparedness if and when required.
While Europe has been able to avoid war among
its constituent, yet sovereign entities, it is today grappling with war on its
border as Ukraine and Russia continue to engage violently. However, NATO not
activating a no-fly zone over Ukraine despite demands for the same from Ukraine,
has probably been the saving factor that has ensured that war has not spilt over
into Europe, and in fact the entire world.
The collective military might, coupled with
the trade prowess, has given the European Union a higher degree of power. Three
decades after the Single Market came into operation it is relevant to question whether
trade ensured the inclusion of power into the equation, especially in light of
the strength of the currency of the EU, and its financial markets. A currency of
several European member states used by approximately 340 million people daily,
is today the second most widely used currency globally, with 60 partner
countries or territories also using the currency in some form.
The 69th plenary meeting of the
Conference of Parliamentary Committees for Union Affairs (COSAC) is due to convene
in Sweden next week. A background note for the session on the Single Market has
been circulated prior to the meeting. It claims that “Over the last
three decades, the single market has promoted healthy competition and created
strong economies and industries across the continent. The removal of barriers
for goods, services, capital and people has given us both better companies and
more thriving countries, and has provided consumers with higher quality
products at better prices. The single market also makes it easier to travel,
study, work, live and retire in other member states…. The single market also
contributes to the Union’s unique peace project as it has generated increased
trade, closer contacts and greater mobility within the Union.”
Trade transposed a region that fought two
world wars in the short span of two decades, and has managed to remain
relatively peaceful and devoid of conflict for over seven decades. It is
granted that challenges remain deeply entrenched, and much doubt is raised over
collective action, but it is also true that the European model of integration
remains unique and in a league of its own, well ahead of the rest. Davies’
claim remains accurate as the progress “is far more easily described than explained.”
