Lesson 7 The Single Market and Free Trade

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1 The Single Market and Free Trade Lesson Essential Question How has the single market benefited millions of Europeans? Introduction The single market is designed to eliminate barriers and simplify existing rules to enable individuals, consumers and businesses in the EU to capitalize on opportunities offered by having direct access to 27 countries and 500 million people. The free movement of people, goods, services and capital allows for increased competition, lower prices, more variety, and the ability to live, work, study or retire in another EU country. In addition, the single market also lowers the cost of doing business across borders. What s the Big Idea? Within the European single market people, goods, services, and capital move freely as they do in one country. When trade barriers are removed and national markets opened, more firms can compete against each other. Fewer barriers mean more opportunities to trade, travel, and work within the European community. The European Union is one of the largest traders of goods and services in the world. The single market's successful functioning depends on the application of common rules at its external borders by all 27 Customs administrations of the EU Member States. The Customs Union is a foundation of the European Union and an essential element in the functioning of the single market. NCSS Themes Addressed VII Production, Distribution, and Consumption IX Global Connections X Civic Ideals and Practices Knowledge The student will know the benefits of a single EU market. the single market helps to bring down barriers, create more jobs and increase overall prosperity in the EU. Core Skills The student will be able to read for information. draw conclusions and make generalizations. compare similarities and differences. page 1 of 23

2 Materials Needed Handout 1, Country Currency (approximately five to seven notes per student) Handout 2, Supplier and Consumer Cards (one supplier card for each group, enough consumer cards for remainder of each group) Handout 3, Suppliers Part II Cards (one supplier card for each group, enough consumer cards for remainder of each group) Handout 4, The Single Market Handout 5, Bilateral Relations Visual 1, Country Signs Computers with Internet connectivity PowerPoint for Time Needed to Complete this Lesson Two 55 minute class periods Procedures Activity 1 Trade Simulation 1. Before the start of the lesson divide the classroom into five separate sections. Hang one country sign (Visual 1) in each of the five sections, each section will represent a hypothetical country. 2. Assign an even number of students to each of the five groups. Inform the students that they are now citizens of the country to which they have been assigned. Explain to the students that within each group one person is going to be the sole supplier of electricity for the country while everyone else in the group will be a consumer of electricity. 3. Provide between five and seven bills of currency (Handout 1) to each group member. 4. Distribute Handout 2- Supplier or Consumer cards to each group. One person in each group should receive an Electricity Supplier card while all other group members should receive a Consumer of Electricity card. 5. Tell the students that because of high tariffs and other trade restrictions between the countries it does not make sense for consumers to go to other countries to purchase electricity, and as a result, each consumer must purchase his or her electricity from the Electricity Supplier in their country. 6. Allow time for students to make purchases of electricity within their own group based on the information provided on the cards. 7. Ask students in group A how much they paid for a month s supply of page 2 of 23

3 electricity. Record this information on a whiteboard or transparency. Repeat this process until all five group rates have been recorded. Ask the class how they feel about the large spread in the price of electricity from country to country. Answers will vary but may include, not fair as electricity is the same no matter where you buy it, not fair to the citizens in the countries with the higher prices. 8. Distribute Handout 3- Suppliers Part II cards to each group supplier. 9. Provide between five and seven bills of currency (Handout 1) to each group member. Tell each consumer that their role has not changed. 10. Explain to students that consumers in country A, B, C and D will now have the opportunity to purchase electricity from suppliers in any of those four countries. Consumers in group E must still purchase their electricity from the same supplier of electricity in round Allow time for students to make purchases of electricity within the group(s) based on the information provided on the Handout 3- Suppliers Part II cards. 12. Ask students in group A how much they paid for a month s supply of electricity during round two. Record this information on a whiteboard or transparency. Repeat this process until all five group rates have been recorded. 13. Ask students to explain what happened to the price of electricity in group A, B, C and D. Ask students why this happened. Price should have decreased because of competition and consumer choice. Consumers now had the choice to look for a better price in another country. 14. Ask students to explain what happened to the price of electricity in group E. Price did not decrease and ended up being higher than the price paid by the members of groups A, B, C and D. 15. Ask the students in group E how they feel about the results of the second round. Answers will very but may include, not fair that they had to pay more, they would like the opportunity to purchase electricity in another country. 16. Tell the class that what they just experienced is very similar to what has happened within the EU as a result of the single market, which is all about bringing down barriers and simplifying existing rules to enable everyone in the EU individuals, consumers and businesses to make the most of the opportunities offered to them by having direct access to 27 countries and 500 million people. Source. Activity 2 Principles of Free Trade 17. Review with students the Historical Overview of the EU single market. This website shows the evolution of the EU single market. Point out that the process of page 3 of 23

4 moving to a single market has taken a number of years and continues to evolve as EU countries and citizens adapt to the realities of this single market. 18. List the cornerstone four freedoms of the single market. The free movement of people The free movement of goods The free movement of services The free movement of capital (money) 19. Ask students how each of the four freedoms potentially benefit individuals, consumers and businesses within the EU. Record student responses on whiteboard or transparency. Answers will vary but may include, Individuals: the right to live, work, study or retire in another EU country, Consumers: increased competition leading to lower prices, a wider choice of things to buy and higher levels of protection, Businesses: much easier and cheaper to do business across borders. 20. Refer the students to Handout 4, The Single Market; ask them to read the activity sheet and answer the questions. Review and discuss the students answers using the key provided. 21. Ask students how the single market may impact the EU s ability to trade with the rest of the world. Answers will vary but may include, EU countries can trade more if they lower tariffs and other protectionist policies; if the single market creates more jobs, the individuals working those jobs will have more money to buy goods and services from other countries; better competition in the single market makes EU businesses more competitive globally. Activity 3 Trade Relationships 22. Tell students that they will now research the trade relationship between the EU and four of its leading trade partners. 23. Working in groups of two, students will use the Internet to complete Handout 5, Bilateral Relations. Note: students will need to click on the names of the countries in order to retrieve information 24. Review the key findings of Handout 5. Discuss the similarities and differences in trade between the EU and the United States, Japan, China and Russia. 25. Summarize the main points of the lesson. The single market helps to bring down barriers, create more jobs, and increase overall prosperity in the EU. The single market also helps increase the levels of trade between the EU and other countries. page 4 of 23

5 Web Support For more background information to support this lesson, visit these websites: The European Commission: The Single Market The European Commission: Trade Assessment 1. The four freedoms of the single market include the free movement of people, the free movement of goods, the free movement of services, and A. the free movement of laws. B. the free movement of taxes. C. the free movement of tariffs. D. the free movement of capital.* 2. The single market became a reality in the EU in A B C D * 3. The EU s number one trading partner of goods and services is A. China. B. Japan. C. Russia. D. The United States. * page 5 of 23

6 Country Currency Handout page 6 of 23

7 Supplier and Consumer Cards, Country A Handout 2, page 1 You are the supplier of electricity for your country. As you have no domestic competition you can charge a kilowatt per month fee of up to 40 per person. Government regulations do not allow you to exceed this amount. page 7 of 23

8 Supplier and Consumer Cards, Country B Handout 2, page 2 You are the supplier of electricity for your country. As you have no domestic competition you can charge a kilowatt per month fee of up to 80 per person. Government regulations do not allow you to exceed this amount. page 8 of 23

9 Supplier and Consumer Cards, Country C Handout 2, page 3 You are the supplier of electricity for your country. As you have no domestic competition you can charge a kilowatt per month fee of up to 50 per person. Government regulations do not allow you to exceed this amount. page 9 of 23

10 Supplier and Consumer Cards, Country D Handout 2, page 4 You are the supplier of electricity for your country. As you have no domestic competition you can charge a kilowatt per month fee of up to 100 per person. Government regulations do not allow you to exceed this amount. page 10 of 23

11 Supplier and Consumer Cards, Country E Handout 2, page 5 You are the supplier of electricity for your country. As you have no domestic competition you can charge a kilowatt per month fee of up to 60 per person. Government regulations do not allow you to exceed this amount. page 11 of 23

12 Suppliers Part II Cards Handout 3 Electricity Supplier for Country A You are a supplier of electricity for the citizens of countries A, B, C and D. In order to make a profit you must charge a kilowatt per month fee of at least 30. Electricity Supplier for Country B You are a supplier of electricity for the citizens of countries A, B, C and D. In order to make a profit you must charge a kilowatt per month fee of at least 30. Electricity Supplier for Country C You are a supplier of electricity for the citizens of countries A, B, C and D. In order to make a profit you must charge a kilowatt per month fee of at least 30. Electricity Supplier for Country D You are a supplier of electricity for the citizens of countries A, B, C and D. In order to make a profit you must charge a kilowatt per month fee of at least 30. Electricity Supplier for Country E You are the supplier of electricity for your country. As you have no domestic competition you can charge a kilowatt per month fee of up to 60 per person. Government regulations do not allow you to exceed this amount. page 12 of 23

13 The Single Market The core of the Union Handout 4, page 1 The single market is the core of today s Union. Yet getting it up and running took seven years. The hundreds of laws needed to sweep away the technical, regulatory, legal, and bureaucratic barriers that stifled free trade and free movement were finally approved by According to the European Commission, the single market has created several million jobs since its launch and generated more than 800 billion in extra wealth. Phone calls in Europe cost a fraction of what they did 10 years ago, many air fares in Europe have fallen significantly and new routes have opened. Households and businesses are now able to choose who supplies them with electricity and gas. How does it work? When trade barriers are removed and national markets opened, more firms can compete against each other. This means lower prices and wider choice for the consumer. Firms selling in the single market have unrestricted access to 500 million consumers in the European Union. The Customs Union The Customs Union, where all goods circulate freely, is a foundation of the European Union and an essential element in the functioning of the single market. The single market can only function properly when there is a common application of common rules at its external borders. This implies that the 27 Customs administrations of the EU must act as though they were one. These common rules go beyond the Customs Union as such with its common tariff and extend to all aspects of trade policy, such as preferential trade, health and environmental controls, the common agricultural and fisheries policies, the protection of our economic interests by non-tariff instruments and external relations policy measures. Customs authorities implement EU policies in almost every field connected with international trade. They are in the front line in the fight against fraud, terrorism, and organized crime. Until recently, the role of the customs authorities consisted primarily of collecting customs duties and indirect taxes at import. Numerous developments, including enlargement and the development of e-commerce and the threat of terrorist attacks and the internationalization of organized crime, have altered the environment in which customs operate. The way out of the crisis The single market is a valuable shield against the current economic crisis. It prevents beggar-thyneighbor policies in which countries try to pass problems on to neighbors instead of tackling them themselves. EU countries have avoided protectionist measures that would have worsened the crisis and have instead agreed to a joint recovery plan. The aim is to stimulate demand through public investment, to better regulate the financial sector and to create sustainable jobs. page 13 of 23

14 The Single Market Handout 4, page 2 Still some way to go The successes of the single market must not blind us to its shortcomings. The services sector, for instance, has opened up more slowly than markets for goods, although a major new law was adopted in 2006 enabling companies to offer a range of cross-border services from their home base. Delays have also affected financial services and transportation, where separate national markets still exist. The fragmented nature of national tax systems also puts a brake on market integration and efficiency. Most financial services have been liberalized. As a result, it is easier for consumers to use credit or debit cards abroad and to transfer money to another EU country. Bank charges for crossborder payments have also been reduced. The EU has also decided to open the market for postal services. The aim is to increase competition, lowering prices and improving quality of service. Full market opening will also create jobs in new postal companies and in the industries dependent on the postal sector. Protecting the single market The right to free movement means that every EU citizen is entitled to travel freely around the Member States of the European Union and to settle anywhere within the EU. This right is in force in every EU Member State and is enshrined in the founding treaties. It should not be confused with the Schengen cooperation, which has gone further and abolished border controls between the participating countries (note that not all EU Member States participate fully in the Schengen arrangements). The traditional right to free movement means that no special formalities are required in order to enter any EU Member State other than to hold a valid travel document. This fundamental right extends to members of an EU citizen s family irrespective of their nationality. However, they might still be subject to a visa requirement. EU citizens and their family members can also travel freely to Norway, Iceland and Liechtenstein on the basis of the EEA Agreement and to Switzerland under the relevant bilateral agreement. Questions on next page. page 14 of 23

15 The Single Market Handout 4, page 3 1. What has the single market done to the job market? 2. What do the removal of trade barriers and the opening of national markets mean to single market consumers? 3. How is the Customs Union a foundation of the European Union and an essential element in the functioning of the single market? 4. How has the single market shielded EU countries against the current economic crisis? 5. In what areas does the single market still have a way to go? 6. What has the Schengen cooperation done for the single market? page 15 of 23

16 The Single Market Handout 4 KEY Questions 1. What has the single market done to the job market? (created several million jobs since its launch) 2. What do the removal of trade barriers and the opening of national markets mean to single market consumers? (lower prices and wider choices) 3. How is the Customs Union a foundation of the European Union and an essential element in the functioning of the single market? (facilitates common rules at external borders, implements EU policies in almost every field connected with international trade, leads the fight against fraud, terrorism, and organized crime) 3. How has the single market shielded EU countries against the current economic crisis? (single market countries have worked together instead of against each other, and have avoided protectionist policies) 4. In what areas does the single market still have a way to go? (the service sector is still not where it could be, national tax systems still hinder integration, some industries are still not fully opened) 5. What has the Schengen cooperation done for the single market? (abolished border controls between the participating countries) page 16 of 23

17 Bilateral Relations Handout 5 Directions: Visit the European Commission Trade-Creating Opportunities, Bilateral Relations page. Focus countries: the United States, China, Japan, Russia 1. How would you describe overall trade relations between the EU and these four countries? 2. Which of the four countries is the EU s leading trade partner? 3. Which of the four countries is the greatest single challenge to the EU s trade policy? Why is this country a challenge? 4. Does the EU have a trade surplus or trade deficit in goods and services with the United States? 5. Rank order the four countries in terms of an export market for the EU. 6. Rank order the four countries in terms of an import market with the EU. page 17 of 23

18 Bilateral Relations Handout 5- ANSWER KEY Directions: Visit the European Commission Trade- Creating Opportunities, Bilateral Relations page. Focus countries: the United States, China, Japan, Russia 1. How would you describe overall trade relations between the EU and these four countries? (very strong) 2. Which of the four countries is the EU s leading trade partner? (The United States) 3. Which of the four countries is the biggest single challenge to the EU s trade policy? Why is this country a challenge? (China. It is growing at a very rapid pace and is getting stronger politically) 4. Does the EU have a trade surplus or trade deficit in goods and services with the United States? (trade surplus) 5. Rank order the four countries in terms of an export market for the EU. (Source: Eurostat 2009) (1.United States, 2. Russia, 3. China, 4. Japan) 6. Rank order the four countries in terms of an import market with the EU. (Source: Eurostat 2009) (1. China, 2. United States, 3. Russia, 4. Japan) page 18 of 23

19 Country Signs Visual 1, page 1 COUNTRY page 19 of 23

20 Visual 1, page 2 Country Signs COUNTRY page 20 of 23

21 Country Signs Visual 1, page 3 COUNTRY page 21 of 23

22 Country Signs Visual 1, page 4 COUNTRY page 22 of 23

23 Country Signs Visual 1, page 5 COUNTRY page 23 of 23

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