After May’s hard Brexit speech on January 17, 2016, it is now clear that the United Kingdom will leave the EU fully. Yet many of us struggle with understanding what is the EU. Here we give a simplified definition of the Single Market and the European Union’s role within it. We also present some metrics. (This post was originally published in April 2015.)
The Single Market includes 32 countries* and the one aspect in common to all those countries is free trade of products and services. Within the Single Market there are three partly overlapping groups that go much further:
1. The European Union is a political and economic union.
2. The Schengen Area allows for free travel within the area and has a common visa policy.
3. The Eurozone are the countries using the euro as currency by treaty.
We now describe the members by level of integration within the Single Market, pre-Brexit.
17 countries representing 66% of Single Market GDP are members of all three groups. This can be seen as the core of the EU. Further, they do not have any opt-outs** so their memberships are full and unequivocal. 2 more countries are EU members and use the euro, but are outside Schengen: Cyprus and Ireland (with opt-outs).
9 countries are EU members using local currencies. 5 of them are within Schengen (2 with opt-outs), and 4 outside, most notably the UK (with opt-outs).
This gives the EU membership count of 28 countries representing 96% of Single Market GDP.
The European Economic Area (a free trade area) is made up of the 28 EU countries and 3 additional countries: Norway, Iceland, and Liechtenstein. They are also members of Schengen.
Finally, Switzerland has a special free trade agreement with the EEA and is a Schengen member.
This gives the total tally of 32 countries in the Single Market. It has (2015) 527 million inhabitants and a GDP of $20 trillion. In comparison, the US: 325 million — $18 trillion; China: 1.4 billion — $19 trillion.***
We now rank the countries ordinally by current level of intergration on a scale from 9 to 1.
Does such a change matter? Probably not to the EU, and maybe not even to the UK. The country is already an outsider and the extra step to leave is arguably small in the long term. However, the short- to medium-term repercussions may be severe as uncertainty spreads and new bilateral agreements take years to negotiate.
The Excel table below allows you to screen on the three dimensions of the current Single Market.
* We exclude 4 mini-states: Monaco, San Marino, Vatican City State, and Andorra which have various separate agreements with the Single Market. Lichtenstein is included because it has a direct agreement.
** Opt-outs allow individual countries to not participate in a policy area. Currently Denmark (3), Ireland (2), Poland (1) and the UK (4) have opt-outs.
*** GDP in Purchasing power parity dollars