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Any progress towards the Single Market could improve substantially EU growth path for the years to come
The European Union has always relied first and foremost on a gradual economic integration process. The current euro-zone crisis casts serious doubts on the benefits of such integration. Assessing its economic benefits is therefore central to measuring the overall benefits the European Union (EU) provides to its citizens.
By CEPII
Post
The European Union has always relied first and foremost on a gradual economic integration process. The current euro-zone crisis casts serious doubts on the benefits of such integration. Assessing its economic benefits is therefore central to measuring the overall benefits the European Union (EU) provides to its citizens.
Since 1957 (Treaty of Rome), economic integration has represented one of the core objectives of the EU. The Single Market Programme set out in 1985 and then completed in 1992 clearly aimed at removing obstacles to trade inside the EU in order to foster economic growth through the creation of a large integrated market for goods and services. Although significant progress had been achieved, integration was not complete in 2011. A “Single Market Act” was then adopted to foster and complete the process. But what are the benefits attached to the completion of this project of a Single Market?
Various studies have tried to assess the degree of achievement of the Single Market and the gains attached to it. However, most studies worked without any reliable information regarding the real level of obstacles to trade across Europe. The approach developed in a recent Lettre du CEPII departs from previous studies in several respects. The authors use new and more accurate data on obstacles to trade in goods and services across Europe. Using the MIRAGE dynamic general equilibrium model developed by the CEPII, they intend to measure the economic consequences of a comprehensive reduction of the remaining obstacles to trade, covering the full extent of the European economy and the full range of obstacles to cross-border trade in services, as well as in goods. Such total removal is indeed a theoretical benchmark but it helps gauging the benefits of moving towards such a target.
The economic gains of such scenario are potentially very substantial, and more so than previous studies have so far indicated. Even though the complete elimination of obstacles to trade across the Single market is a stylized and probably an unrealistic scenario, the magnitude of the gains is such that the main conclusion stands robustly: any significant progress towards the Single Market has the potential to improve substancially EU rowth path for the years to come.
La Lettre du CEPII n°316, “What Benefits From Completing The Single Market?”, Vincent Aussilloux, Charlotte Emlinger, Lionel Fontagné, December 15th, 2011.
Since 1957 (Treaty of Rome), economic integration has represented one of the core objectives of the EU. The Single Market Programme set out in 1985 and then completed in 1992 clearly aimed at removing obstacles to trade inside the EU in order to foster economic growth through the creation of a large integrated market for goods and services. Although significant progress had been achieved, integration was not complete in 2011. A “Single Market Act” was then adopted to foster and complete the process. But what are the benefits attached to the completion of this project of a Single Market?
Various studies have tried to assess the degree of achievement of the Single Market and the gains attached to it. However, most studies worked without any reliable information regarding the real level of obstacles to trade across Europe. The approach developed in a recent Lettre du CEPII departs from previous studies in several respects. The authors use new and more accurate data on obstacles to trade in goods and services across Europe. Using the MIRAGE dynamic general equilibrium model developed by the CEPII, they intend to measure the economic consequences of a comprehensive reduction of the remaining obstacles to trade, covering the full extent of the European economy and the full range of obstacles to cross-border trade in services, as well as in goods. Such total removal is indeed a theoretical benchmark but it helps gauging the benefits of moving towards such a target.
The economic gains of such scenario are potentially very substantial, and more so than previous studies have so far indicated. Even though the complete elimination of obstacles to trade across the Single market is a stylized and probably an unrealistic scenario, the magnitude of the gains is such that the main conclusion stands robustly: any significant progress towards the Single Market has the potential to improve substancially EU rowth path for the years to come.
La Lettre du CEPII n°316, “What Benefits From Completing The Single Market?”, Vincent Aussilloux, Charlotte Emlinger, Lionel Fontagné, December 15th, 2011.
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