War in Ukraine, the climate challenge and the concept of strategic autonomy are paving the way for a new type of single market.
The single market has been at the heart of European integration since its inception. Its revival in the mid-1980s, with the European Commission white paper on the completion of the internal market in 1985 and adoption of the Single European Act the following year, represented a major milestone.
That revival can generally be understood as a desire to create a European form of capitalism. This project was supported at the time by some 40 major industrial leaders who formed the Round Table of Industrialists, an episode well chronicled by Bastiaan Van Appeldoorn. It was also the project pursued by the president of the commission, Jacques Delors.
Political compromise
This period was marked by compromise between the political forces of the left and right on the internal market and a certain social dimension. It saw the emergence of European social dialogue and the 1989 Community Charter of the Fundamental Social Rights of Workers and the accompanying social programme.
As the globalisation of markets progressed, however, the project of European integration gradually evolved to become a cog in this greater process, in which European autonomy would ultimately be subsumed by globalisation. In the mid-1990s, the Round Table of Industrialists became dominated by Anglo-Saxon multinationals, their goal to produce in the world’s three major economic regions: Asia, Europe and North America. It was then that China became the factory of the world.
Against this backdrop, the compromise was replaced by the weakening of social protection at a national level. At the level of the European Union, the Bolkestein directive (2005) on services in the internal market and rulings such as Laval (2008) by the Court of Justice of the EU privileged the ‘freedom’ of companies to provide services transnationally over the right of workers to take industrial action. These decisions were compounded by political pressures to deregulate markets, stemming (perversely) from the financial crash of 2008 and the first (2004-09) and particularly second (2009-14) commissions under the presidency of José Manuel Barroso.
Populist movements
By the mid-2010s, the situation once again began to change. China was becoming a technological and political power—a systemic competitor—and the idea that a ‘rising tide’ of globalisation would ‘lift all boats’ was fading. At the same time, populist movements critical of European integration and the internal market were on the rise. The most significant case was the radical change in the United Kingdom, where conservative elites advocated a ‘hard’ Brexit, including withdrawal from the single market.
Beginning in 2020, the Covid-19 crisis opened up a new debate, with the initially disorganised European response calling into question the commitment to freedom of movement and highlighting the fragility of the supply chain, now deemed ‘strategic’. Autonomy and strategic sovereignty became the new mantra, with France and others leading the way.
In light of the pandemic and gathering environmental crises, many have questioned excessively long supply chains and called for better integrated and more local production. Recycling and product quality (through high environmental standards) have become essential during this transition. The new environmental (and social) taxonomy, the new environmental and social reporting, and the analyses of the environmental stability of banks and companies in general by the European Central Bank all indicate a change in the outlook of financial markets and companies.
Last phase
The war in Ukraine, its unforeseen scale and its immense consequences, particularly economic, is completing the last phase of the transformation, initiated by the pandemic. Indeed, by highlighting the European Union’s dependence on Moscow and the difficulties in supplying certain goods, this conflict is forcing the commission and the member states to take ambitious decisions on the single market—hence ‘RePowerEU‘, the common European action for more affordable, secure and sustainable energy.
As major investments are being made in this transition, state aid, competition rules and the Stability and Growth Pact are changing. The ‘Alibaba’ model of online exchange—providing the consumer with ever cheaper products from ever further away—has become outdated.
What can we conclude from this? The long cycle which began with the creation of the internal market and the social openings associated with its completion yet ultimately led to global integration associatied with anti-social policies has come to an end. We are now at the beginning of a new period, in which the rules of the internal market are changing in response to the need for environmental sustainability and strategic autonomy.
The question now is what place the social dimension will occupy in this new architecture. Two elements are already emerging: just transition and product quality standards linked to quality employment—good jobs for sustainable products.
Nothing is inevitable. But defining an ambitious social project within the framework of an internal market 2.0 is becoming possible.
Philippe Pochet,former general director of the European Trade Union Institute, is a fellow of the Green European Foundation and an affiliate professor at Sant’Anna College, Pisa.