Internal Trade Barriers: How EU States Impede Their Own Market

The European Union (EU) faces significant internal trade barriers that are proving to be more detrimental than external tariffs imposed by entities such as the United States. While many businesses within the EU might view Trump-era tariffs of 25% as a challenge, they are instead contending with even more restrictive non-tariff barriers that hinder smooth trading across member states.

Recent evaluations by the International Monetary Fund (IMF) suggest that the various non-tariff barriers that still exist within the EU are equivalent to an average tariff rate of 44% between member countries. This analysis does not even account for agricultural goods, where the barriers to trade in services are reportedly even more severe, suggesting a tariff equivalent of 110%.

Despite the significant advancements made since the inception of the EU's single market over 30 years ago, experts argue that the internal market remains underdeveloped. Many companies experience a convoluted system filled with complex regulations and requirements when attempting to send goods or employees to other EU countries. For instance, sending a worker from Germany to France can involve navigating a maze of bureaucratic processes that include notification mandates, insurance requirements, and the acknowledgment of professional qualifications.

In France, for example, information from authorities is often available only in French, and minimum wage regulations can vary widely based on industry and region. Moreover, documents that employees must carry can conflict with the EU's General Data Protection Regulation (GDPR), complicating compliance further. This administrative burden often leads smaller businesses to avoid cross-border employment altogether, limiting their growth potential.

Trade hurdles manifest in various sectors. The European Commission regularly publishes lists highlighting dozens of examples showcasing these barriers. Studies indicate that the most significant obstacles exist in the textile, food, building materials, and electronics industries. Although some of these challenges may seem minor individually, the cumulative effect creates substantial impediments to trade.

For instance, food products must be labeled in different languages across various countries, and additional national nutritional labels are often required. Temperature regulations for the delivery of food items can also differ, leading to logistical issues. The same applies to electronic devices, which, aside from meeting EU-wide safety standards, must adhere to local disposal regulations. Medical devices such as surgical robots face even stricter hurdles, often requiring a completely new approval process in each country, despite having already received clearance in another EU member state.

Small and medium-sized enterprises (SMEs) particularly feel the strain of these regulations. For example, when a business owner from Schleswig-Holstein seeks to export bakery cleaning machines within the EU, the intricacies of packaging requirements can lead to excessive costs. In Austria, even a single machine incurs hefty fees related to packaging materials, making it financially burdensome for smaller firms to comply with each country's regulations.

Furthermore, the complexities of labor mobility are evidenced by the A1 certificate, which employees must carry when working temporarily in another EU country. This certificate serves as proof of social security coverage in the home country. However, the application processes differ across states, typically taking about twenty minutes to complete. Many business owners argue that this requirement should be waived for short-term assignments.

The European Commission has attempted to streamline these regulations, notably through packaging laws aimed at harmonizing rules across member states. However, these efforts have often fallen short, leading to persistent challenges for exporters. The need for a designated representative for each country, for instance, poses a significant barrier for smaller firms.

Experts estimate that addressing these internal barriers could unlock considerable economic potential. By reducing just 20% of these hurdles, the EU could see a growth of 2% in economic output and the creation of over a million jobs. Efforts are currently focused on enhancing capital markets and advancing the energy sector. However, any genuine progress in the services sector will require a unified commitment from member states to prioritize openness and cooperation.