A personal view and explanation of the EU rules on free movement

Writing about web page http://ec.europa.eu/social/main.jsp?catId=457

The free movement of EU nationals has in recent years come under increasing scrutiny due to alleged misuses and the rise of the immigration issue. Indeed, it was a central theme of the Brexit campaigns run in the UK with themes such as "take back control of our frontiers". It was quite surprising to me to find that in the discussions leading to and even after the Brexit vote in the UK, the rationale for the freedom of movement, as one of the "four freedoms of the EU", was never fully explained to sceptical voters. In this blog, I will try to give my reasons as to why I see freedom of movement indeed as central to the European idea and an essential part of the other three freedoms.

Let me start by recalling what the four freedoms actually are:

[1] free movement of goods. "Goods", i.e. things that have to be grown or made, can be manufactured anywhere in the EU and sold at any other place in the EU without internal custom tariffs.

[2] freedom of movement for workers. This guarantees every EU citizen in pursuit of a job the right to move freely, to stay and to work in another member state with the right to be treated on equal footing as nationals of their chosen member state.

[3] freedom to provide (and establish) services. "Services" covers a wide field, but for our purposes it suffices to say it encompasses all services that a modern civic society might need, such as e,g, insurance, repairs, warranty, health, etc.

[4] free movement of capital. Largely, this deals with the movement of finances and their services across national boundaries.

Why does the EU need these four freedoms and could one imagine an EU without some or parts of these?

Free movement of goods is not sufficient: Fundamentally, the freedom of goods is what the EU started with in the 1950s, albeit with a much reduced set of goods. Some people argue that a free movement of goods would be sufficient for a European community. However, it should be immediately obvious that this is not the case. Once you have been able to sell your goods across a national boundary, you surely would want to bring at least some of the profits back home. If there was no free movement of capital, this would usually lead to additional charges, such as in the case of trading according to World Trade Organisation (WTO) rules, cutting profits and making investment hard. Therefore freedom 1 implies freedom 4.

Free movement of goods and capital is not sufficient either: Now imagine that you are selling a product across a national boundary (such as, e.g., a car or a TV set or a shirt). Eventually, you will need to service your product. Indeed, much of your profit margin might even lie in this service aspect of your product. However, without the freedom to provide and establish services, this would again be much harder. Your service for your, e.g. TV set, would without freedom 3 be substandard to your competitors in the country your are selling your product since you cannot provide your service and have to reply with lengthy postal/delivery delays or use an alternative service provider.

Now imagine a EU in which only freedoms 1, 3 and 4 hold, i.e. everything but no freedom of movement. Suppose you manufacture jam and scones. Another EU competitor can, via freedom 1, provide these as well and also sell them in your country via, e.g., a franchise system using freedom 3. Since all trade barriers have fallen, the competitors costs are the same as yours and, since they are more productive (for whatever local reasons), they make more profit which they can easily take back into their home EU country. If this is the case, you will eventually go bankrupt.

This is where freedom 2, the freedom of movement, helps. You can take advantage of the same local productivity gains as your competitor by moving into the same local region. Perhaps your competitor was closer to the fruit-rich areas, perhaps they had land with higher potato yield. No matter, you can do the same and move there. If your role in the jam-and-scones business was as employee, then freedom of movement allows you to go to the more competitive manufacturer in the other EU country and apply for a position there. You do not have to take the decline of your local jam-and-scones business without any options, because of freedom of movement.

Now, I agree that the examples provided above are simple. However, I think they are correct in providing the essential rationale for why only all four freedoms can provide a fair and stable European "community" market. It appears simply impossible to me to take away one of the four freedoms without jeopardizing the whole edifice. Last, one can obviously trade between countries and move goods and services as well as capital with countries that are not part of the EU. However, this is much harder to do and there are obstacles nearly everywhere along the way.

Rudo Roemer : 09 Jan 2017 22:31 |  Tags: Brexit Eu Four Freedomes Of The Eu Free Movement |  Comments (0) |  Report a problem