The internal market — an area without internal frontiers where goods, persons, services, and capital move freely — is the EU's greatest achievement and the heart of European integration. It was completed on 31 December 1992 following the Single European Act (1987).
1. What is the Internal Market?
Article 26 TFEU: The internal market comprises "an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured." It covers 27 EU member states + EEA countries (Norway, Iceland, Liechtenstein) for most purposes.
Internal Market vs Single Market vs Common Market: These terms are often used interchangeably but technically the "internal market" is the current legal term (post-Lisbon). "Single Market" is informal. "Common Market" was the older term (pre-Maastricht). For EPSO, use "internal market."
2. The Four Freedoms
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Freedom 1
Free Movement of Goods
Art. 28–37 TFEU
Abolition of customs duties and charges with equivalent effect between member states. Prohibition of quantitative restrictions (quotas) and measures having equivalent effect (MEEs). Customs Union with common external tariff.
⚠️ Justified restrictions (Art. 36): public morality, public policy, public security, protection of health/life, national treasures, industrial/commercial property.
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Freedom 2
Free Movement of Persons
Art. 45 (workers) · Art. 21 (citizens) TFEU
Workers have the right to move, work, and reside in any member state (Art. 45). Cannot be discriminated against on grounds of nationality. Includes job seekers, self-employed, and family members. EU citizens (Art. 21) have broader residence rights.
⚠️ Exceptions: employment in public service (Art. 45(4)), public policy, security, public health.
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Freedom 3
Freedom of Establishment & Services
Art. 49 (establishment) · Art. 56 (services) TFEU
Right to set up a business or professional practice in any member state (establishment). Right to provide services temporarily across borders without establishing a permanent presence (services). Services Directive (2006/123/EC) — "Bolkestein Directive."
⚠️ Exceptions: public service activities connected with exercise of official authority.
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Freedom 4
Free Movement of Capital
Art. 63–66 TFEU
Most liberal freedom — applies not only between member states but also between member states and third countries. Prohibits all restrictions on capital movements and payments. Enables cross-border investments, banking, and financial services.
⚠️ Exceptions: tax rules, prudential supervision, public policy/security. Third-country restrictions possible in special cases.
3. Levels of Economic Integration
📊 Stages of Economic Integration
1
Free Trade Area
No tariffs between members, but each keeps its own external tariffs. Example: EFTA
2
Customs Union
Free trade area + common external tariff on imports from outside. The EU has been a customs union since 1968. ← EU is here (minimum)
3
Internal (Single) Market
Customs union + free movement of goods, persons, services, capital. Harmonisation of regulations. ← EU is here (in practice)
4
Economic Union
Internal market + monetary union (single currency) + coordinated economic policies. ← Eurozone countries
4. Key Principles — Free Movement of Goods
Cassis de Dijon — Mutual Recognition
The 1979 CJEU (Court of Justice of the European Union) ruling in Cassis de Dijon established the principle of mutual recognition: a product lawfully produced and marketed in one member state must in principle be admitted to the market of any other member state, even if it does not comply with the technical rules of the destination state.
This dramatically reduced barriers to trade — instead of harmonising all product standards, member states must recognise each other's standards.
Non-Tariff Barriers (MEEs)
Article 34 TFEU prohibits not only quotas but also "measures having equivalent effect" (MEEs) — any national rule that actually or potentially, directly or indirectly hinders intra-EU trade (Dassonville formula, 1974).
5. Key Legislation
| Act | Subject | Key Rule |
|---|
| Services Directive 2006/123 | Freedom to provide services | "Country of origin" principle — service providers subject to home country law |
| Citizens' Rights Dir. 2004/38 | Free movement of persons | Right of entry/residence; permanent residence after 5 years |
| Professional Qualifications Dir. 2005/36 | Freedom of establishment | Mutual recognition of professional qualifications |
| Regulation 492/2011 | Free movement of workers | Equal treatment of EU workers — access to employment, working conditions, social advantages |
The Internal Market post-COVID: The Single Market Emergency Instrument (SMEI) was proposed after COVID exposed vulnerabilities in supply chains. It would allow the Commission to coordinate crisis responses — ensuring supply of critical goods remains open across the EU even in emergencies.
Key Terms
Mutual recognition
Goods lawfully sold in one member state must be accepted in all others (Cassis de Dijon principle). Avoids the need to harmonise every product standard.
Customs union
The EU's common external tariff (CET) applied to all imports from outside the EU. Member states do not have their own trade policy — only the EU does.
MEE (Measure of Equivalent Effect)
Any national rule that hinders intra-EU trade, prohibited under Art. 34 TFEU (Dassonville formula). Can be justified under Art. 36 TFEU.
Freedom of establishment (Art. 49)
The right to set up and manage a company or professional practice in any EU member state on a permanent or long-term basis.
Freedom to provide services (Art. 56)
The right to provide services temporarily in another member state without establishing there. Distinct from and more flexible than the right of establishment.
EEA — European Economic Area
Extends the EU internal market to Norway, Iceland, and Liechtenstein (non-EU). These countries participate in the four freedoms but not in the customs union or CAP (Common Agricultural Policy).