EU Internal Market: Phases, Principles, and Free Movement Rights

Posted on Oct 23, 2025 in Law

The EU Internal Market: Phases and Principles

Phases of Economic Integration

The process of EU economic integration follows distinct phases:

1. Free Trade Zone: Elimination of tariffs between Member States (MS).
2. Customs Union: Adds a common external tariff.
3. Common Market: Ensures free movement of goods, persons, services, and capital.
4. Economic Union: Coordinates economic policies.
5. Economic Integration: Deepest level, often leading to political integration.

Historical Evolution of the Internal Market

• 1957 Treaties: The original objective envisaged a common market, leading to a liberalized economic area in the 1960s.
• 1968: Elimination of tariffs and customs duties achieved. The elimination of non-tariff (technical) barriers remained pending (Common Market in the 1970s).
• 1985 White Paper: Proposed the complete abolition of physical, technical, and fiscal frontiers within the Community.
• 1986 Single European Act (SEA): Defined the Internal Market as an “area without internal frontiers, in which the free movement of goods, persons, services and capital is ensured” (Internal Market, 1985–1990s).
• 1992 Maastricht Treaty: Established the path toward Economic and Monetary Union (EMU).

Limitations of Integration

Construction and integration are limited primarily to economic areas. Exceptions to the free movement rules are permitted on grounds of public order, public health, and public security.

Basic Principles of the Internal Market (IM)

The functioning of the Internal Market relies on core legal principles:

Progressiveness

Integration was not immediate; it developed step-by-step, involving the gradual harmonization of laws, the creation of the Euro, shifting to majority voting, and increasing the powers of the European Parliament (EP).

Non-Discrimination on Grounds of Nationality

This principle prohibits less favorable treatment for nationals or goods/services originating from other Member States. It applies to laws, practices, and administrative decisions, covering both direct and indirect discrimination (e.g., a rule that appears neutral but disadvantages foreigners).

Equivalence of Conditions for Market Access

All companies and individuals must have equal opportunities to enter markets across Member States. This is achieved through two main mechanisms: Mutual Recognition and Harmonization.

Key Community Policies Supporting the IM

Common Commercial Policy (CCP)

The CCP ensures a unified EU trade approach with non-EU countries, enhancing global economic integration. Key elements include exclusive EU competence, tools (tariff regimes, trade agreements, anti-dumping measures), and a recent focus on strategic autonomy and digital trade rules. The CCP prevents trade distortions and ensures uniform external trade rules, linking directly to the Internal Market.

Common Agricultural Policy (CAP)

The CAP supports farmers, stabilizes markets, and promotes sustainable agriculture. Key mechanisms include direct payments, market measures, and rural development. Its role in the Internal Market is crucial as it prevents national subsidies from distorting competition in agri-food trade, thereby preventing national subsidy wars.

Common Fisheries Policy (CFP)

The CFP aims for sustainable fishing via science-based quotas and ecosystem protection. Core rules include Total Allowable Catches (TACs), the discard ban, and regional management. The CFP ensures equal access to EU fishing waters and harmonized standards, guaranteeing shared access to fishing zones.

Common Transport Policy (CTP)

The CTP promotes seamless, green, and efficient cross-border mobility. Initiatives include the Single European Sky, rail freight corridors, and the Alternative Fuels Infrastructure Regulation. Internal Market synergy is achieved by removing physical and technical barriers and promoting cross-border infrastructure harmony.

Competition Policy

This policy maintains fair competition by targeting anti-competitive practices. Enforcement areas include antitrust, merger control, and State aid. Internal Market protection ensures a level playing field for businesses across borders and bans abuses of market dominance.

Free Movement of Goods (Article 26 TFEU)

Article 26 TFEU states that the Internal Market shall comprise an area without internal frontiers in which the free movement of goods, persons, services, and capital is ensured in accordance with the provisions of the Treaties.

Scope and Definition of Goods

The scope of application covers products coming from one Member State and commercialized in another Member State.

A good or product is defined as: Products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions.

Products Benefiting from Free Movement

Free movement applies to:

• Products of EU origin.
• Third-country products that:
  • Entered through legal import channels.
  • Paid all customs duties.
  • Did not benefit from duty refunds.

Legal Content: External and Internal Dimensions

External Dimension (Customs Union)

• A Common Customs Tariff is applied to imports from outside the EU.
• Customs rules are harmonized across all Member States.
• Goods legally imported into one MS can move freely across the EU.

Internal Dimension (Elimination of Barriers)

The internal dimension focuses on the elimination of internal barriers. The Treaties prohibit:

• Customs duties between Member States.
• Charges having equivalent effect (CEEs).
• Quantitative restrictions (QRs), such as import/export quotas.
• Measures having Equivalent Effect (MEEs) – national rules (like packaging rules or safety standards) that may hinder trade, unless they are justified under specific exceptions.

EU Customs Regulatory Regime and Prohibitions

This regime enforces the prohibitions of duties and charges, the quantitative restriction prohibition, and supplementary prohibitions necessary to ensure the smooth functioning of the market.

Free Movement of Persons

The free movement of persons ensures that individuals from any EU Member State have the right to move, work, and reside in another Member State without discrimination.

Free Movement of Workers

The right applies to Workers, job seekers, and their families.

Definition and Scope of a Worker

Subjective Scope (The Person): A person who provides services that have economic value in favor of another person, under the direction of that person, and in return receives remuneration.

Material Scope (The Work): Covers all forms of work with real economic value, including permanent, temporary, and occasional work, border crossing, and travel to provide services (e.g., tourists, doctors, business trips, studies).

Exceptions and Justifications

• Exception: Public administration roles, if they involve the exercise of public authority or protect national interests (Article 45(4) TFEU).
• Discriminatory Restrictions: Allowed only on grounds of Public Order, Public Health, or Public Security.
• Non-Discriminatory Restrictions: Must serve a legitimate public interest and be necessary and proportionate.

EU Citizenship and Free Movement

Status of EU Citizens

Article 20 TFEU establishes EU citizenship for anyone who holds the nationality of an EU Member State. This citizenship is additional to national citizenship (it does not replace it).

Article 21 TFEU grants every EU citizen the right to move and reside freely in any EU Member State, subject to certain conditions.

Who Benefits?

• Anyone who holds the nationality of an EU Member State (defined by national law).
• Family members of the EU citizen: spouse or registered partner, children under 21 or dependent, and dependent parents.

Rights and Conditions of Residence

Citizens have the right of entry, exit, and stay in another MS, requiring only an identity card or passport.

• Stays less than 3 months: Only the identification document is required.
• Stays longer than 3 months: The citizen must justify sufficient economic capacity, typically by proving:
  1. Employment or self-employment contract, or
  2. Sufficient resources and comprehensive health insurance, or
  3. Enrollment as a student with sufficient resources and insurance.
• Permanent Residence: Once 5 years of continuous legal residence have been completed, the citizen acquires the right to permanent residence.

General Exceptions

The right to residence is subject to exceptions based on Public Order, Public Security, and Public Health. These exceptions must be exercised in a proportionate and non-discriminatory manner.

Key Differences: Workers vs. Citizens