As Europe and the United States struggle to recover from the financial crisis, boosting growth and employment is the number one priority for leaders on both sides of the Atlantic. Europe has enormous unrealised potential to restore economic growth by unleashing the power of the single market, a project which turns 20 years old this month.
The original aim of the EU's single market was to stimulate industrial and commercial expansion within a unified economic area on par with the US market. The EU has achieved notable but incomplete success in reaching this goal: the European Commission estimates that single-market integration boosted the EU's gross domestic product (GDP) by 2.13% and generated an extra 2.77 million jobs between 1992 and 2008. During this period, market liberalisation diversified export opportunities for EU businesses while attracting new investment from abroad. Thus, it is no surprise that American companies – whose aggregate investments in the EU are larger today than those of the next 20 countries combined – are among the strongest proponents of further European economic integration.
In the US, we have reaped enormous dividends from an integrated market. It has enabled us to attract investment and talent from around the world. During the explosive growth of Silicon Valley from 1995 to 2005, more than 50% of engineering and technology start-up companies had an immigrant as a key founder. World-class talent migrated to the US to create companies such as Google, eBay and Intel because a large, integrated market offers a platform for enormous scale and success.
As a market with 500 million people, the EU has this potential and more. A 2011 study by the British government estimated that the elimination of all intra-EU barriers to trade over ten years would increase the EU's GDP by 14%. And earlier this year, the European Commission found that abolishing restrictions in the services sector – which accounts for more than 45% of EU GDP – could boost GDP by 2.6%.
A fragmented market
But for now the EU's single market remains too fragmented. There are too many barriers to market entrants, innovation and growth. The preservation of the status quo could make matters worse if member states erect new national barriers in response to emerging technologies and business models, such as nanotechnology and cloud computing.
That is why the US welcomed the launch earlier this month of the EU's Single Market Act II. This act aims to integrate Europe's market better by improving ease of mobility for individuals and businesses, encouraging entrepreneurship, and making finance more accessible across the EU. Integration in these areas is essential to creating the conditions for more economic growth and new, high-wage jobs.
We also hope that the EU's work to complete the single market will include a transatlantic dimension. Europe's efforts to create a single digital market, for example, coincide with work in the US to update our policies for the digital marketplace in the area of privacy, patents and broadband. Both the US and EU would benefit if we put aside our differences – often minor in the larger scheme of things – and created the conditions for a transatlantic digital marketplace that would catalyse investment and serve as a model for the rest of the world.
In the US, we have watched with concern as the economic crisis has threatened social cohesion, sent unemployment – especially among the youth – skyrocketing in some places and brought protesters by the thousands onto European streets. Creating a larger, more integrated single market is the best way for the EU to offer its citizens a pathway to a brighter economic future in a rapidly globalising world economy.
Economic integration that brings lasting peace and prosperity to Europe is a powerful vision that propelled the EU's formation in the first few decades after the Second World War.
I disagree with those who say that this vision can no longer resonate with today's generation of younger Europeans. Indeed, the challenge for today's European leaders is to reinvigorate this vision. Completing the single market is an indispensable step in doing so and in achieving long-term economic security and stability in Europe.
William Kennard is the US ambassador to the European Union