The European Commission’s 2024 Annual Single Market and Competitiveness Report marks a significant milestone in evaluating the integration of digital adoption and sustainability within the EU’s single market. Established in 1993, the European single market facilitates the unrestricted movement of people, goods, services, and capital across 27 EU member states, alongside Liechtenstein, Iceland, and Norway through the EEA Agreement, and Switzerland via bilateral agreements. This expansive market serves over 440 million consumers, positioning it as the world’s largest trading bloc.
The single market has been instrumental in diversifying supply sources, expanding demand, and fostering innovation and production growth within the EU. It upholds strong labor conditions, social rights, and enhances the EU’s leverage on the global stage. Despite these achievements, the market faces challenges in rule complexity and implementation.
The latest report, commissioned by the March 2023 European Council, aims to enhance competitiveness monitoring within the single market. It identifies nine pivotal competitive drivers, including public investment, energy, education, innovation, circularity, capital access, market functionality, trade autonomy, and digitalization. These elements are critical in assessing the market’s annual progress and addressing setbacks.
Navigating Challenges for a Resilient Single Market
The European Commission has responded to challenges like the COVID-19 pandemic and the Russia-Ukraine conflict by reducing energy reliance on Russia, diversifying supply chains, and prioritizing digital and green transitions. The focus on digital advancement and sustainability aims to achieve climate goals like net zero and emissions reduction more prominently. However, geopolitical tensions, technological risks, labor shortages, and economic pressures such as inflation and interest rate hikes present ongoing threats. The dominance of countries like China in key sectors like electric vehicles and semiconductors also poses significant challenges.
Despite financial struggles impacting capital investments, the EU boasts robust infrastructure, research capabilities, manufacturing excellence, and a lead in clean technology. Initiatives like the Recovery and Resilience Facility (RRF) and EU Cohesion Policy funds support the digital and green transition, enhancing resilience and innovation.
Expanding the European Union and Market Scope
Efforts to expand the EU and, consequently, the single market are underway, with plans to include more candidate countries and improve trade agreements with Moldova and Ukraine. These expansions aim to bolster the market’s reach and competitiveness.
Focusing on Green and Digital Transitions
The accompanying staff working document, the first annual report from the European Monitor of Industrial Ecosystems (EMI), highlights the progress and challenges in the EU’s twin transition. In 2022, only 69% of SMEs reached a basic level of digital intensity, short of the EU’s 2030 target of 90%. The report emphasizes the need for increased digital and green skills across various sectors to meet future demands.
Despite these challenges, there is a positive trend in investment in digital technologies, particularly in sectors like aerospace, green technology, and agrifood. However, the EU still lags behind the US in private financing and scale-up development, highlighting areas for growth and improvement.
The 2024 report underscores the EU’s commitment to a sustainable and digitally competitive single market, outlining the achievements, challenges, and strategic directions necessary for continued growth and resilience in an evolving global landscape.
