What is the untapped potential of the EU Single Market?

The European Union (EU) Single Market has significantly enhanced economic welfare, competitiveness and resilience by facilitating the free movement of goods, services, capital and labour. Its achievements notwithstanding, the Single Market still has untapped potential, as persistent structural barriers hinder deeper integration, particularly in the cross-border trade of goods and services. Using a gravity model, this paper quantifies the economic impact of these barriers. The findings reveal that barriers could be reduced by 8 percentage points for goods and 9 percentage points for services if all EU countries were to achieve the same degree of trade integration as the Netherlands, a country estimated to be one of the most integrated EU Member States. In the long term, this would lead to significant welfare, i.e. real income, gains of up to 1.3% and 1.8%, respectively, compared with a baseline of no further integration. Furthermore, simulation results suggest that a modest 2% reduction in Single Market barriers could offset projected GDP losses from higher US tariffs. The study emphasises that these estimates are conservative and that deeper integration, particularly in the services sector, could unlock even greater economic benefits. JEL Classification: F13, F14, F15, O52, F17, E61