| Abstract: | Calendar time has passed the 31.12.1992 deadline for completion of the EC internal market and although a voluminous body of literature has accumulated over recent years, the predictive assessment of the economic consequences of the Single European Market cannot be considered as a settled issue. The widely quoted estimates of the welfare gains from ‘Europe 1992’ suggested in the Cecchini Report of the European Commission have failed to find the unanimous approval of the economics profession. The controversial academic discourse concerning the validity of these estimates has at least shown the need for further research in this direction. Moreover, in the face of the envisaged establishment of the Single European Area, which extends the internal market regime to the EFTA group, as well as in view of the imminent EC membership applications by several Community neighbours, the refinement of the tools for the analysis of further European integration retains a high ranking on the research agenda for future years. As a contribution to the ongoing exploration of the economics of the Single Market, this article summarises the main results of a recently concluded London Business School research project to quantify the net gains from completing the EC internal market for the UK. The analytical approach adopted for the purpose is an applied computable general equilibrium (CGE) model which incorporates recent advances in international trade theory by allowing for the presence of imperfect competition, intra-industry product differentiation and economies of scale. The approach overcomes various shortcomings of previous evaluations of regional integration programmes. The quantitative results suggest in particular that the UK is a net winner of the Single Market programme, yet the aggregate welfare gain remains well below 0.5 per cent of benchmark GDP. The analysis furthermore indicates that the long-tern industrial restructuring processes induced by the programme are likely to be far more moderate than is widely believed. |
