THE INTERNAL MARKET: GENERAL PRINCIPLES

The internal market is an area of prosperity and freedom, providing access to

goods, services, jobs, business opportunities and cultural richness. Continuous
efforts are required to ensure the further deepening of the single market, which
could yield significant gains for EU consumers and businesses. In particular, the
digital single market opens up new opportunities to boost the economy (through e-
commerce), while also cutting red tape (through e-governance and the digitalisation
of public services). Despite these substantial moves towards a (digital) single market,
challenges remain. COVID-19 has brought back some obstacles to the four freedoms
(free movement of goods, services, capital and persons).

LEGAL BASIS
Articles 4(2)(a), 26, 27, 114 and 115 of the Treaty on the Functioning of the European
Union (TFEU).

OBJECTIVES
The common market created by the Treaty of Rome in 1958 was intended to eliminate
trade barriers between Member States with the aim of increasing economic prosperity
and contributing to ‘an ever closer union among the peoples of Europe’. The Single
European Act of 1986 included the objective of establishing the internal market in
the European Economic Community (EEC) Treaty, defining it as ‘an area without
internal frontiers in which the free movement of goods, persons, services and capital
is ensured’.

ACHIEVEMENTS
A. The common market of 1958
The common market, the Treaty of Rome’s main objective, was achieved through
the 1968 customs union, the abolition of quotas, the free movement of citizens and
workers, and a degree of tax harmonisation with the general introduction of value added
tax (VAT) in 1970. However, the freedom of trade in goods and services and the freedom
of establishment were still limited due to continuing anti-competitive practices imposed
by public authorities.
B. The launch of the internal market in the 1980s and the Single European Act
The lack of progress in the achievement of the common market was largely attributed
to the choice of an overly detailed method of legislative harmonisation and to the rule

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that required unanimity for decisions taken in the Council. This changed with the Court
of Justice of the European Union rulings in the Dassonville (Case 8-74) and the Cassis
de Dijon (Case 120/78) cases in the 1970s, which ruled that import restrictions having
an effect equivalent to quantitative restrictions are unlawful, thereby introducing the
principle of mutual recognition[1]. Through these rulings, the political debate on inter-
community trading regained momentum and led the EEC to consider a more thorough
approach to the objective of removing trade barriers by mid-1980: the internal market.
The Single European Act entered into force on 1 July 1987, setting a precise deadline
of 31 December 1992 for the completion of the internal market. It also strengthened the
decision-making mechanisms for the internal market by introducing qualified majority
voting for common customs tariffs, free provision of services, free movement of
capital and approximation of national legislation. By the time the deadline had passed,
over 90% of the legislative acts listed in the 1985 White Paper had been adopted,
largely under the qualified majority rule.
C. Towards a shared responsibility to complete the internal market: 2003-2010
The internal market has made a significant contribution to the prosperity and integration
of the EU economy. A new internal market strategy running from 2003 to 2010 focused
on the need to facilitate the free movement of goods, integrate the services markets,
reduce the impact of tax obstacles and simplify the regulatory environment. Substantial
progress was made in opening up transport, telecommunications, electricity, gas and
postal services.
D. The relaunch of the internal market in 2010
In order to boost the European single market once again and put the public,
consumers and SMEs at the centre of the single market policy, the Commission
published in October 2010 a communication entitled ‘Towards a Single Market
Act’ (COM(2010)0608). A series of measures were presented to boost the EU economy
and create jobs, resulting in a more ambitious single market policy.
In October 2012, the Commission presented the Single Market Act II (COM(2012)0573)
to further develop the single market and exploit its untapped potential as an engine for
growth. The act sets out 12 key actions to be rapidly adopted by the EU institutions.
These actions are concentrated on the four main drivers of growth, employment
and confidence: (1) integrated networks, (2) cross-border mobility of citizens and
businesses, (3) the digital economy, and (4) actions that reinforce cohesion and
consumer benefits.
In its communication entitled ‘Better governance for the Single
Market’ (COM(2012)0259), the Commission proposed horizontal measures such as an
emphasis on clear, easily implementable new regulations, better use of existing IT tools
to facilitate the exercise of single market rights, and the setting up of national centres to
oversee the operation of the single market. Monitoring is an integral part of the annual
reports on single market integration in the context of the European Semester process.

[1]The principle of mutual recognition establishes that products lawfully sold in one Member State may not be prohibited from
being sold in another; exceptions apply, however.

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On 28 October 2015, the Commission published a communication entitled ‘Upgrading
the Single Market: More opportunities for people and business’ (COM(2015)0550),
which focused on ensuring practical benefits for people in their daily lives and creating
additional opportunities for consumers, professionals and businesses. It complemented
the Commission’s efforts to boost investment, reap the opportunities of the digital single
market and improve competitiveness and access to finance. The strategy also aimed to
ensure a well-functioning internal market for energy and promote and facilitate labour
mobility while preventing abuse of the rules. To further improve trading practices in the
internal market, Directive (EU) 2019/633 banning certain unfair trading practices was
adopted on 17 April 2019.
In May 2015, the Commission adopted a digital single market strategy
(COM(2015)0192), which set an intensive legislative programme for building a
European digital economy. In Ursula von der Leyen’s 2019 Agenda for Europe, the
Commission firmly placed the strengthening of the digital single market at the heart
of its working guidelines. This commitment was renewed in the Commission strategy
paper entitled ‘Shaping Europe’s Digital Future‘ of February 2020, which outlines how
the completion of the digital single market is to be achieved. Specifically, this is to be
done by establishing a European single market for data and creating a level playing
field on- and offline by means of consistent regulation.
During the COVID-19 pandemic, in its communication entitled ‘Europe’s moment:
Repair and Prepare for the Next Generation’ (COM(2020)456), the Commission further
highlighted the pivotal role that the digitalisation of the single market would play in the
recovery from the crisis. The recovery will be based on four elements: (1) investment
in better connectivity, (2) a stronger industrial and technological presence in strategic
parts of the supply chain (e.g. AI, cybersecurity, cloud infrastructure, 5G), (3) a real data
economy and common European data spaces, and (4) a fairer and easier business
environment.

ROLE OF THE EUROPEAN PARLIAMENT

A. General
Parliament was the driving force behind the process that led to the creation of the
internal market. Specifically, in its resolution of 20 November 1997, it backed the idea
of turning the internal market into a fully integrated single market by 2002. In several
resolutions adopted in 2006 (e.g. those of 12 February, 14 February, 16 May and 6 July),
Parliament supported the idea that the internal market was a common framework and
a point of reference for many EU policies.
Parliament also played an active role in the relaunch of the internal market. In its
resolution of 20 May 2010 on delivering a single market to consumers and citizens,
Parliament emphasised that measures must be taken in order to inform and empower
consumers and SMEs more effectively and to increase citizens’ confidence. Parliament
issued further responses to the Single Market Act with three resolutions adopted on
6 April 2011: ‘Governance and Partnership in the Single Market‘, ‘A Single Market for
Europeans‘ and ‘A Single Market for Enterprises and Growth‘.

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Parliament has been similarly active on single market governance. It adopted a
resolution on 7 February 2013 with recommendations to the Commission on the
governance of the single market, calling for the establishment of a single market
governance cycle as a specific pillar of the European Semester. Furthermore,
Parliament adopted a resolution on 25 February 2014 on single market governance
within the European Semester 2014, followed by a resolution of 27 February 2014
on SOLVIT, the EU-wide service that provides solutions to problems with EU rights.
Parliament then adopted a resolution of 12 April 2016 entitled ‘Towards improved single
market regulation’.
Research commissioned by the Committee on the Internal Market and Consumer
Protection (IMCO) in 2016 identifies the need for the EU economy to be focused
on more digital, green and social policies[2]. In line with the policy recommendations
from this study, Parliament adopted a resolution on the single market strategy calling
for a more innovative, deeper and fairer single market. In order to facilitate online
access to the information, administrative procedures and assistance services that
citizens and businesses need, Parliament adopted its position at first reading on the
proposal for the establishment of a single digital gateway on 13 September 2018.
EU citizens and businesses, especially those operating in another EU country, often
struggle to understand the rules that apply to their particular case or the steps required
to carry out simple procedures. The digital single gateway aims to address this issue.
Regulation (EU) 2018/1724 was adopted on 2 October 2018 and entered into force on
11 December 2018. Part of its provisions applied from 12 December 2020 and part will
apply from 12 December 2023.
Research from 2019 indicated that the principles of free movement of goods and
services and legislation in this area generate benefits estimated at EUR 985 billion
annually[3]. However, a study[4] published in November 2020 entitled ‘Legal obstacles
in Member States to Single Market rules’ found that although the EU single market was

[2]Research papers include: Godel, M. I. et al., Reducing Costs and Barriers for Businesses in the Single Market, Publication
for the Committee on the Internal Market and Consumer Protection, Policy Department for Economic, Scientific and Quality
of Life Policies, European Parliament, Luxembourg, 2016; Montalvo, C. et al., A Longer Lifetime for Products: Benefits for
Consumers and Companies, Publication for the Committee on the Internal Market and Consumer Protection, Policy Department
for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg, 2016; Liger, Q. et al., Social Economy,
Publication for the Committee on the Internal Market and Consumer Protection, Policy Department for Economic, Scientific
and Quality of Life Policies, European Parliament, Luxembourg, 2016. More recent examples include: Ström, P., The European
Services Sector and the Green Transition, Publication for the Committee on the Internal Market and Consumer Protection,
Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg, 2020; Núñez
Ferrer, J., The EU’s Public Procurement Framework, Publication for the Committee on the Internal Market and Consumer
Protection, Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg, 2020;
Keirsbilck, B. et al., Sustainable Consumption and Consumer Protection Legislation, Publication for the Committee on the
Internal Market and Consumer Protection, Policy Department for Economic, Scientific and Quality of Life Policies, European
Parliament, Luxembourg, 2020; Marcus, J. S. et al., Promoting product longevity, Publication for the Committee on the Internal
Market and Consumer Protection, Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament,
Luxembourg, 2020.
[3]Relevant research includes: Poutvaara, P. et al., Contribution to Growth: Free Movement of Goods. Delivering Economic
Benefits for Citizens and Businesses, Publication for the Committee on the Internal Market and Consumer Protection, Policy
Department for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg, 2019; Pelkmans, J. et al.,
Contribution to Growth: The Single Market for Services. Delivering economic benefits for citizens and businesses, Publication
for the Committee on the Internal Market and Consumer Protection, Policy Department for Economic, Scientific and Quality of
Life Policies, European Parliament, Luxembourg, 2020.
[4]Dahlberg, E. et al., Legal obstacles in Member States to Single Market rules, Publication for the Committee on the Internal
Market and Consumer Protection, Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament,
Luxembourg, 2020.

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a very successful case of market integration, there are still barriers in Member States
which prevent the single market from reaching its full potential. The study calls for more
localised scrutiny of proposed national rules that could potentially conflict with single
market rules and principles.
One such area of conflict is the free movement of services. On 2 December 2020, the
IMCO Committee adopted an own-initiative report entitled ‘Strengthening the Single
Market: the future of free movement of services’. The report, adopted in plenary on
20 January 2021, underlines the need to ensure the implementation of single market
rules for services and to improve the enforcement action of the Commission.
B. The single market overcoming COVID-19
The COVID-19 pandemic has greatly impacted the free movement of goods in the
internal market. Given this, Parliament adopted a resolution on 17 April 2020, in which
it emphasised that the single market is the source of European collective prosperity
and well-being, and a key element of the immediate and continuing response to the
pandemic. An IMCO Committee webinar[5] held in November 2020 analysed the impact
of COVID-19 on the internal market and consumer protection, and suggested what
could be done to ensure a well-functioning internal market now and in future crises.
A study[6] on the same topic was presented on 22 February 2021 in the IMCO
Committee. The research found that the initial border closures and other measures
taken by Member States significantly reduced not only the free movement of goods, but
also of services and people within the internal market. In the same month, Parliament,
together with the Council, established the Recovery and Resilience Facility which
formulates that the recovery of a well-functioning internal market is to be achieved
sustainably by involving robust SMEs. The draft own-initiative report on the tackling
of non-tariff and non-tax barriers in the single market (2021/2043(INI)) of June 2021
is very relevant in this regard, as it addresses not just general and persistent barriers
to the freedom of goods and freedom of services, but also specifically discusses
how COVID-19 and policy-responses to the pandemic pose an obstacle to the four
freedoms.
C. The Digital Single Market
In a similar way to the Commission, over the last 10 years Parliament has also
increasingly focused on the challenges and opportunities for the single market arising
from digitalisation. On 11 December 2012, Parliament adopted two non-legislative
resolutions relating to the internal market, one on completing the digital single market
and one on a digital freedom strategy in EU foreign policy, in which it stressed its strong
support for the principle of net neutrality. This means that internet service providers
should not block, discriminate against, impair or degrade (including through price) the
ability of any person to use a service to access, use, send, post, receive or offer any
content, application or service of their choice, irrespective of source or target. The

[5]Milieu Consulting SRL, The impact of COVID-19 on the Internal Market and Consumer Protection - IMCO Webinar
Proceedings, Publication for the Committee on the Internal Market and Consumer Protection, Policy Department for Economic,
Scientific and Quality of Life Policies, European Parliament, Luxembourg, 2020.
[6]Marcus, J. S. et al., The impact of COVID-19 on the Internal Market, Publication for the Committee on the Internal Market
and Consumer Protection, Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament,
Luxembourg, 2021.

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resolution also called on the Commission and the Council to promote and preserve
high standards of digital freedom in the EU. The aim of the resolutions was to develop
policy and practice with a view to establishing a real digital single market in the EU
that is able to cope with different sets of national rules in key areas. The principles of
net neutrality and the open internet, as well as the abolition of roaming charges, have
been introduced as part of a legislative package laying down measures concerning the
European single market for electronic communications and to achieve a Connected
Continent (COM(2013)0627).
On 20 May 2021, Parliament adopted a resolution on the digital future of Europe,
acknowledging the critical role of the digital developments in the single market and the
need to remove barriers that hinder the functioning of the digital single market. Once in
force, the Digital Markets Act (DMA) and the Digital Services Act (DSA) will facilitate a
competitive, fair, harmonised and safer digital single market. Furthermore, a collection
of studies provided by the Policy Department for Economic, Scientific and Quality of
Life Policies investigates the opportunities and challenges for the digital single market
in the light of the DMA and DSA.
On 19 May 2022, Parliament and the Council reached a provisional agreement
on the Commission’s EU Single Window Environment for Customs proposal
(COM(2020)0673). The proposal’s objective is to make international trade easier by
reducing the administrative burden and costs, with the aid of digital tools. Businesses
and traders will thus be able to provide the customs and non-customs data required for
goods clearance and complete formalities in one single portal in a given Member State.

Christina Ratcliff / Barbara Martinello / Vasileios Litos

07/2022

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