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European free market – cornerstone for competitiveness and growth

European free market can be the cornerstone for competitiveness and growth. First, we need further liberalisation and deregulation efforts.

European internal market

The essential manifestation of liberty in the European Union has been the Single Market. The post-war Europe needed to ensure conditions for peace and prosperity. Free trade and competition have been essential elements of promoting cooperation and integration throughout united Europe.

Establishing the internal market where goods, service, workers and capital will be traded freely has been a long process and never ending story. Nowadays, European Union has its Single Market and its further liberalisation and digitalisation, especially in the services sector, is one of the main European strategic objectives for 2020.

Quantitative and tariff restrictions on trading goods have been abolished, technical standards for goods have been harmonised, the movement of capital is free, people are free to move for living, studying, working and retirement location anywhere in the EU. However, one of the most important steps forward was the Services Directive, originally initiated by the Dutch classical liberal Fritz Bolkenstein.

Services free market

The services market started to liberalise by removing trade barriers, mostly on cross-border provision of services. The business establishment is required only in one EU/EEA state, as a condition for freedom to provide services on the whole European Economic Area. Moreover, the Services Directive enhances the administrative simplification of procedures for the business establishment. This means removing unnecessary, disproportionate or discriminatory regulations related to the services market. In particular, the Member States are required to develop the Points of Single Contact, as e-government web sites which could make doing business easier in the context of business information and registering business. Moreover, the authorities competent for the liberalisation of the European services market are now easily connected via internet through the Internal Market Information System (IMI system), designed as an electronic tool for efficient and fast administrative cooperation.

Liberalisation of the European services market and development of innovative and digital services has become one of the mayor hopes for enhancing the EU growth, including the investments, trade, productivity, wages, jobs, consumption and consumer income. However, further deregulation in this field would contribute growth even more.

Consumers first

Relatively lower prices, as a consequence of increasing competition among providers of service and goods, are the essential benefit of trade integration and liberalisation for consumers, while businesses can gain from free access to the large market, constant restructuring, administrative deregulation and freedom to provide services across the European Economic Area.

The importance of EU enlargement and competition

Further EU enlargement is beneficial for all Europeans. The EU internal market will be even larger and more competitive on the globalised market when it touches consumers and businesses across South Eastern and Eastern Europe. Croatia has already started institutional adjustments and the economic liberalisation for joining the EU internal market in 2013. Especially on historically turbulent areas of South Eastern Europe free trade can be the only true guarantee for lasting peace and cooperation, overcoming the remnants of socialism and ethnic nationalism and developing free market capitalism.

The benefit of the EU internal market is that it has been driven by the competition policy on the supranational level. Protecting competition from monopolies, cartels and abuse of dominant market position, the competition policy enhances consumer choice for better prices and quality, while guaranteeing suppliers’ freedom and equality on the market when they compete for consumers’ trust. Competition also enhances business restructuring for increasing efficiency, which lead to lower price and higher consumer net income.

Various selective sorts of governmental fiscal, interest and price deductions and subsidies, distort the competition by giving favour and advantage to particular businesses and sectors, enhances their income at the expense of the taxpayers and consumers. Therefore, the EU competition policy bans the vertical (sectoral) state aid, especially to loos makers and in big amounts. However, the EU enhances limited horizontal state aid directed towards small and medium enterprises, research and development, active labour market policies, environmental protection etc. It is also important to mention that agricultural and regional policy, as the key EU budgetary policy, represents a specific sort of state aid which has been allowed in the EU. Therefore, the EU should rely even more on the free market and consider abolishing all subsidies and grants.

Environment and sustainability

We may face with doubts whether the free market harms the environment. For liberals, there is no contradiction. Free trade related to services, goods, workers and capital, does not have negative environmental impacts. Morever, countries with more economic freedom usually have better environmental conditions than those less free. It is up to self responsible individuals how the environment will look like, not the government solutions.

The idea of sustainable development responsibility towards future has especially been relevant for young people. Therefore, fostering the European Single Market would mean even more environmental solutions provides by private enterprises.

Liberals should emphasize the individual responsibility towards natural and also social environment which is a matter of good virtue and voluntary relations, not regulative and fiscal coercion set by the government.

Moreover, when we think about sustainability, the current debt crisis gives us a clear lesson how important fiscal responsibility is. Implementing sound fiscal reforms is a necessary condition for being responsible towards the youth and the new generations.

The way forward

The EU citizens need a small and limited federal government, which will represent a sound and horizontal framework for even more economic freedom and trade integration. Relying on the European free market agenda is even more important today when many European countries have been facing the debt crisis as a consequence of rising costs of welfare, regulations, administration, state aid and grants.

In this context, fiscal discipline and flat tax reforms are needed for growth and competitiveness, not more tax, debt and spending policies. Moreover, full potential for jobs and competitiveness will be possible only with completely free labour market in order to set sound conditions for new jobs, especially in the rising services sector and the digital market.

As liberals, we need more Europe, which means more market solutions, competition and liberty, not more central planning, government regulation, new taxes and other misguiding policies proposed by the socialists and many conservatives. The way out of this crisis is not to stimulate the growth by national and European government interventions. Europeans do not need top-down solutions proposed by several powerful politicians.

Europe will spontaneously find solutions made by consumers of the Single Market. Governments would be needed only to represent the sound order for protecting the Single Market, competition, the rule of law and our basic individual rights.

European free market is therefore the crucial point which will make our Europe stronger and more prosperous.