The free movement of goods is one of the cornerstones of the European Single Market.

The removal of national barriers to the free movement of goods within the EU is one of the principles enshrined in the EU Treaties. From a traditionally protectionist starting point, the countries of the EU have continuously been lifting restrictions to form a ‘common’ or single market. This commitment to create a European trading area without frontiers has led to the creation of more wealth and new jobs, and has globally established the EU as a world trading player alongside the United States and Japan.

Despite Europe’s commitment to breaking down all internal trade barriers, not all sectors of the economy have been harmonised. The European Union decided to regulate at a European level sectors which might impose a higher risk for Europe’s citizens – such as pharmaceuticals or construction products. The majority of products (considered a ‘lower risk’) are subject to the application of the so-called principle of mutual recognition, which means that essentially every product legally manufactured or marketed in one of the Member States can be freely moved and traded within the EU internal market.

Limits to the free movement of goods

The EU Treaty gives Member States the right to set limits to the free movement of goods when there is a specific common interest such as protection of the environment, citizens’ health, or public policy, to name a few. This means for example that if the import of a product is seen by a Member State’s national authorities as a potential threat to public health, public morality or public policy, it can deny or restrict access to its market. Examples of such products are genetically modified food or certain energy drinks.

Even though there are generally no limitations for the purchase of goods in another Member State, as long as they are for personal use, there is a series of European restrictions for specific categories of products, such as alcohol and tobacco.

Free movement of capital

Another essential condition for the functioning of the internal market is the free movement of capital. It is one of the four basic freedoms guaranteed by EU legislation and represents the basis of the integration of European financial markets. Europeans can now manage and invest their money in any EU Member State.

The liberalisation of capital markets has marked a crucial point in the process of economic and monetary integration in the EU. It was the first step towards the establishment of our European Economic and Monetary Union (EMU) and the common currency, the Euro.

Advantage

The principle of the free movement of capital not only increases the efficiency of financial markets within the Union, it also brings a series of advantages to EU citizens. Individuals can carry out a broad number of financial operations within the EU without major restrictions. For instance, individuals with few restrictions can

1. easily open a bank account,
2. buy shares
3. invest, or
4. purchase real estate

in another Member State. EU Companies can invest in, own and manage other European enterprises.

Exceptions

Certain exceptions to this principle apply both within the Member States and with third countries. They are mainly related to taxation, prudential supervision, public policy considerations, money laundering and financial sanctions agreed under the EU Common Foreign and Security Policy.

The European Commission is continuing to work on the completion of the free market for financial services, by implementing new strategies for financial integration in order to make it even easier for citizens and companies to manage their money within the EU.