The Internal Market of the European Union: From Indivisibility to Differentiated Integration
Authors: Egan Michelle 
Published: November 2020

The internal market is the workhorse of European integration, promoting the free movement of goods, capital, services, and factors of production to ease cross-border barriers. Research has focused on the evolution and expansion of market integration, drawing on a variety of empirical and theoretical approaches to understand the interests, institutions, and ideas that have shaped an “ever closer economic union.” Yet as the economy has changed from manufacturing to services, the internal market has shifted in scope to encompass a more heterogeneous set of issues where the core rules and legal commitments have generated increased differentiation in market practices and regulatory alignment. Scholarship on the single market has diminished, in part, due to the fragmentation of policy initiatives, often not attributed to the single market. As the European economy has undergone profound structural changes, the legislative agenda has expanded to new policy areas that reflect the need for modernization and expansion of the traditional single market agenda. Often touted as a model for regional integration, the single market is still a differentiated market, much more developed for goods than it is for services and labor. The result is a regulatory patchwork of selective liberalization where the scope and depth of integration vary across the four freedoms. Ironically, the integrity of the single market in the wake of Brexit has led the “four freedoms” of goods, services, capital, and people to be viewed as “indivisible” which does not reflect the reality of decades of market integration.

More attention needs to be given to the incorporation of history and temporality into understanding the single market. On the one hand, the single market is viewed as a means of transferring regulatory norms to third-country markets which has led to a debate about the extent of European “market power” across different issues areas. Rooted in the size and institutional configurations of its internal market, European efforts to export rules to third-country markets also depends on domestic receptiveness and state capacity to accept such jurisdictional boundaries over markets. As the internal market has varying degrees of “depth” across treaty freedoms, its “spillover” effects may differ across goods and service markets. On the other hand, there has been a surge in single market differentiation within the European polity in terms of modes of governance. This reflects growing flexibility in terms of fundamental treaty requirements, the varied compliance and implementation across sectors and firms, and the differential effects of withdrawal from the single market across member states given the substantial consequences of Brexit. Across time and space, the detailed patterns governing the four freedoms and flanking policies of the internal market in Europe are not uniform with differentiation in institutional (legal and administrative) arrangements that have significant trade-offs in terms of social legitimacy and economic competitiveness.