Politicians often find themselves slipping into a Byzantine discourse about Brexit that means little to those outside of the Westminster bubble. Today we aim to cut through the noise by looking at four of the fundamental principles behind European Union membership. Welcome to the four freedoms of the EU’s internal market.
The Four Freedoms of the European Union: The Context
On 25th March 1957, six countries signed the Treaty of Rome (Belgium, Germany, France, Italy, Luxembourg and the Netherlands). The Treaty resulted in the formation of a European Economic Community (EEC) based on a common market where goods, people, services and capital would be allowed to move freely in member states. The signing of the Treaty marked an important step that bookmarked a particularly volatile period of European history, and it aimed to improve the lives of citizens of member states, reduce the economic and social difference between member states and introduce a common trade policy (among other things). Perhaps most importantly, the Treaty of Rome served as a commitment from European countries, which echoed throughout Europe, to maintaining peace through a political and commercial coalition.
While keeping the peace would undoubtedly have been at the forefront of politicians’ and civilians’ thoughts when the Treaty was signed, the four freedoms have since arguably become the principle characteristic of EU membership. But what exactly are these four freedoms?
The Four Freedoms
These four freedoms were used by both the Remain and Leave campaigners in the EU Referendum vote to influence voters. They are the principles which govern the EU’s internal market. Let’s break them down one-by-one.
Goods in the EU can move freely between member states. Unlike international goods, goods moved within the EU are not subject to customs duties (a tax imposed by a country on goods from outside) or quantitative restrictions (but the goods comply by specific rules, such as low environmental impacts). Entangled within the free movement of goods are regulations surrounding consumer protection, in which goods must meet specific standards. Reports have suggested that areas such as food imports would see a significant drop in standards if the UK were to have trade deals with other countries. Currently, the EU represents all member states concerning goods imported: “Goods imported into Europe need to fulfil technical, safety and labelling requirements and regulations as defined by EU laws.”
If free movement of goods were to be restricted between the UK and the EU, costs of everyday products may rise if new duty taxes are imposed. Likewise, selling and moving goods into the EU could also become more difficult, resulting in more bureaucratic pressures on sellers and buyers and an increased workload to sell and import goods.
Citizens (and their families) of EU countries are free to move to and live in any other EU country. This founding freedom was created with the aim of producing a mobile workforce. EU citizens planning on staying under three months in another EU country require only a valid identity document. Those who stay longer than three months must find work in that country or show they have “sufficient resources and sickness insurance to ensure that they do not become a burden on the social services of the host Member State during their stay.”
EU citizens moving to EU states in which they do not hold citizenship do not require residence permits, but they can apply for citizenship after five consecutive years in said EU country.
Rules surrounding social security are EU member state dependent; in the UK and Germany, for example, EU citizens can start receiving job seekers allowance from the first day they arrive in the country; other EU states work on a contribution scheme where one must pay in before receiving such benefits.
For the Leave campaign, freedom of movement was liberally used for voter leverage. The slogan “taking back control” tied together concerns regarding who comes in and out of the country: “In a world with so many new threats, it’s safer to control our own borders and decide for ourselves who can come into this country, not be overruled by EU judges;” and controlling immigration: “[to] have a fairer system which welcomes people to the UK based on the skills they have, not the passport they hold.”
According to reports, a VISA system is unlikely to be introduced for EU citizens travelling to the UK when Australian and American citizens are not subject to such travel restrictions. Strictly regulating access for EU citizens is likely to have considerable impacts on both tourism and trade – both important sources of income for the UK. In fact, border controls are likely to stay rather similar, as non-EU passports (presumably the one deemed by the Leave campaigns as “new threats”) are already subject to further checks. Adding EU passports to “border decisions” by immigration officials would require, according to one report, “230% more decisions a year if the existing regime for travellers from outside the European Economic Area is extended to European arrivals.”
Likewise, controlling who arrives in the UK for work is unlikely to be policed by border control agents. The current system, both here and in many countries around the world (with stricter border controls), places the responsibility of employing eligible people on the employer: “Employers will have to verify that EEA nationals are entitled to work in the UK, just as they currently do for non-EEA nationals.” The bottom line here appears to be that very little will change at the border.
The free movement of capital involves lowering (with the aim of completely removing) the restrictions and controls on capital funds moving between EU member states. It shares similarities with our other freedoms, especially so in the UK as financial services (in which free movement of services, capital and workers are daily occurrences) contribute a significant amount to the UK’s GDP and is, according to reports, “the UK’s largest exporter, running a trade surplus of around £72bn.”
By leaving the EU, companies are likely to see the costs of importing and exporting goods rise because a new set of regulations regarding the flow of capital will need to be established. Likewise, investment in the UK from the EU will likely take a hit as moving capital becomes more challenging.
Implementing additional regulations regarding the movement of capital may also result in lengthier processes that result in businesses (both UK-based companies trading with EU companies and vice-versa) becoming much more inflexible in terms of trade.
Our last freedom involves the freedom to provide services within the EU borders. A company established in the EU can sell its services in other EU countries without needing to have a location in that country physically; this is called passporting.
The UK’s financial service industry (primarily based in the City, London) have been lobbying chancellor Philip Hammond to include financial services in a free trade deal within the EU’s Brexit negotiations. Although, the EU’s chief Brexit negotiator Michel Barnier said: “the legal consequence of Brexit is that the UK financial service providers lose their EU passport.”
The ramifications of Brexit for the financial industry are far-reaching; non-EU companies can (and have) set up their European branches in the UK as a means of accessing the EU market. After Brexit, if freedom to sell services is removed from the UK, companies are likely to consider moving their European branch elsewhere.
Are you concerned about Brexit, or do you think things will stay much the same? Comment below.
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