SINGLE EUROPEAN MARKET

Single European Market

Single European Market

Background

If the UK decides to join the Euro, it will be joining the largest single market in the world outside the US. As a result of this, business can be sold more widely, achieving economies of scale. It also allows families and businesses to buy from a wider, and so cheaper, range of suppliers. These are factors to boost trade and increase our prosperity. *A previous study has shown that two countries sharing the same currency trade three times as much as two countries with different currencies. Having a stable exchange rate with its biggest trading partner - Euroland - will eliminate uncertainties and so boost trade further for the UK.

However, these theories are controversial. There are arguments stating that the UK has been part of the European Single Market since 1992 and trade barriers have been abolished since then, therefore sharing the same currency will do little extra difference. Firms can already buy consumer their working capital from foreign suppliers and exchange costs are only marginal. UK is currently in the situation that it has access to the this single market while it can avoids the disadvantages, which other countries that has joined the Euro are experiencing, as being part of it, such as inappropriate interest rates. A possible consequence is that the UK will be locked to the Euro and its interest rates, and will be very vulnerable to frequent booms and busts, which is very discouraging for trade.

Even so, supporters of the Euro suggested that abolishing trade barriers is not enough to ensure a single market. According to the European Commissions, prices vary by up to 16% between cheapest and most expensive places in the EU, but by only 11% in the US. Different currencies can also be classified as a barrier to trade, because of the cost and trouble of conversion, and also because of uncertainty about exchange rates can reduce profits made by firms. The only way for UK suppliers to be sure of the volume of profits is to share a single currency.

On the other side of the coin, it is sometimes claimed that the UK has "more in common" with the economies of the US and Canada than with those of Europe. This impression is created by the influence of the "monetary" economy rather than the "real" economy. As an important financial centre, London is an important staging post for monetary movements, most of which are in dollars.

Introduction

The principal objective of the EU, when first constituted as the EEC, was to make war in Europe impossible by developing both a common system of law and making member states' economies completely interdependent. This has been pursued by the creation of a single market and then a single European currency and monetary policy, by the coordinated conduct of economic policy by member states, and by joint action in international trade negotiations. While the single European market (SEM) was ostensibly complete by the end of 1992, it remains a project ...