common market

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Common market

An agreement between two or more countries that permits the free movement of capital and labor as well as goods and services.

Common Market

1. A market with the free movement of goods, services, labor, and capital between two or more places. For example, even though Texas and Oklahoma are different places with different governments and regulations, the two have a common market because workers do not need permission to move between them, and one may transfer money between them without incurring any tariffs or fees. See also: Free trade.

2. An informal term for the European Economic Community.

Common Market

common market

see TRADE INTEGRATION.

common market

a form of TRADE INTEGRATION between a number of countries in which members eliminate all trade barriers (TARIFFS, etc.) amongst themselves on goods and services and establish a uniform set of barriers against trade with the rest of the world, in particular, a common external tariff (see CUSTOMS UNION). In addition, a common market provides for the free movement of labour and capital across national boundaries. The aim of a common market is to secure the benefits of international SPECIALIZATION, thereby improving members’ real living standards.

The short- and medium-term impact of the formation of a common market is mainly felt through an increase in trade between member countries. TRADE CREATION is typically associated with a reallocation of resources within the market favouring least-cost supply locations and a reduction in prices resulting from the elimination of tariffs and lower production costs. (See GAINS FROM TRADE.)

In addition, a common market can be expected to promote longer-term (dynamic) changes conducive to economic efficiency through:

  1. COMPETITION. The removal of tariffs, etc., can be expected to widen the area of effective competition; high-cost producers are eliminated, while efficient and progressive suppliers are able to exploit new market opportunities;
  2. ECONOMIES OF SCALE. A larger ‘home’ market enables firms to take advantage of economies of large-scale production and distribution, thereby lowering supply costs and enhancing COMPARATIVE ADVANTAGE;
  3. TECHNOLOGICAL PROGRESSIVENESS. Wider market opportunities and exposure to greater competition can be expected to encourage firms to invest and innovate new techniques and products;
  4. INVESTMENT and ECONOMIC GROWTH.

Finally, the virtuous circle of rising income per head, growing trade, increased productive efficiency and investment may be expected to combine to produce higher growth rates and real standards of living.

The EUROPEAN UNION is one example of a common market. See ANDEAN PACT.

References in periodicals archive ?
The Digital Single Market is the blueprint for Europe claiming its place in the digital era; today we start making it a reality".
Their evidence from their own direct experiences will be very helpful to me in identifying the many different non-tariff barriers in the single market today that we need to break down to ensure British companies are able to trade freely on the continent.
I suspect this is why the single market has had virtually no macroeconomic impact - for example on aggregate productivity or gross domestic product.
In the Digital Single Market Strategy we have already put forward some measures we would like to take, such as a VAT threshold for startups.
The ASEAN Economic Community (AEC) is being established with the target of building a single market and production base.
aIn physical terms the EU has a Single Market but in digital terms there are 28 small markets with different regulatory policies and this creates barriers,a he added.
First, make the case for the UK staying in a reformed EU so we maintain our access to the world's largest single market, developing alliances with other member states to achieve reforms that encourage enterprise and identify where the EU should do less.
The strategic planning and harmonisation of the use of radio spectrum can promote the development of cross-border services and foster the emergence of a single market.
This will be the economic lifeblood of the single market, allowing a real free flow of goods and people around the EU", the press release says.
European Commission vice president Neelie Kroes said: "As these numbers clearly show, the 28 national telecoms markets in Europe today are not benefiting consumers like a single market would.
The Report details a combination of factors which have resulted in this stagnating competitive position vis-a-vis global counterparts including, most notably the lack of an EU Industrial Policy for the food sector; the absence of a true Single Market for food and the need for a better functioning food supply chain.
Although reforms are needed to restore credibility and stability to euro area banks there is a "significant risk" new measures will undermine the single market and leave Britain marginalised, peers said.

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