What it means
The single market side covers the movement of goods, services, capital and people, together with the right of establishment, which is the right to set up and run a business in another member state on the same terms as a local. The single economy side, which is much less advanced, is about coordinating monetary, fiscal and sectoral policy.
It was given legal shape by the revised Treaty of Chaguaramas at the start of the 2000s, which restated the community's rules and created arrangements for regional dispute settlement. The revised treaty is the document a business or its lawyers actually refer to when a right is challenged.
Free movement of labour is partial rather than general. It operates through categories of skilled workers who can apply for a certificate recognising their qualification, and the list of qualifying categories has been extended over time by agreement between members.
For a company the commercial attraction is treating several small markets as one. A single regional entity can sell across member states without separate local partners, duty does not apply to qualifying regional goods, and capital can be moved to fund expansion where members have removed exchange controls.
The limits are administrative rather than legal. Many rights require national legislation, licensing bodies and immigration systems to implement them, so the gap between what the treaty permits and what a frontline official will accept can be wide.
The sensible approach for a finance team is to budget for the region as one market on revenue and for each state separately on compliance. Corporate tax, payroll, value added tax registration and professional licensing all remain national obligations even where trade itself is free.
In practice
Real-world examples.
Example
An accountancy practice in one member state opens an office in another using the right of establishment, with two of its qualified staff moving under the skilled worker arrangements. It budgets separately for professional registration in the new market, because licensing remains a national matter.
Example
A furniture maker consolidates three small national subsidiaries into one regional company and supplies all markets from a single factory. Duty-free treatment on qualifying regional goods makes the single-factory model cheaper than local assembly in each market.
Example
A regional insurer raises capital in one member state and deploys it to fund growth in two others. Its treasury team maps which members have removed exchange controls on capital movements, because the position is not uniform across the community.
Formula
Calculation
Saving from regional treatment = (duty rate avoided x customs value) + duplicated compliance and licensing costs avoided
A manufacturer sells $500,000 of qualifying regional goods into another member state where the common external tariff on that category is 15%. Duty avoided is 500,000 x 0.15 = $75,000. If operating through one regional entity instead of a separate local company also avoids about $18,000 a year of audit, filing and local director costs, the total benefit on that trade flow is 75,000 + 18,000 = $93,000 a year, against roughly $4,000 a year to obtain and maintain the certificates of origin the duty-free treatment depends on.Case study
Seen in the real world.
Anchor Line Logistics is an illustrative, fictional freight forwarder with operations in two CARICOM member states and plans for a third.
Anchor Line's earlier expansions had used local joint venture partners, which cost it 30% of the profit in each market. Reading the revised treaty, its finance director concluded that the right of establishment allowed a wholly owned branch instead, so the company set one up with two senior staff moving under the skilled worker categories.
The expansion worked, but not smoothly. The customs brokerage licence in the new market took seven months because the national licensing body applied its own residency practice, and payroll had to be run locally from day one. In this illustrative case the lesson was that regional rights can remove the need for a partner while leaving every national compliance obligation firmly in place.
Watch out
Common mistakes.
- Reading the single market as a single tax system, when corporate tax, value added tax and payroll remain the responsibility of each member state.
- Assuming any employee can work anywhere in the region, when free movement operates through defined categories of skilled workers and a certificate process.
- Treating the arrangement as fully implemented, when many rights still depend on national legislation and on the practice of local licensing bodies.
Questions
People also ask.
What is the right of establishment?
The right to set up and operate a business in another member state on the same terms as a national of that state, rather than through a local partner.
How does a worker qualify for free movement?
By falling within one of the agreed skilled categories and obtaining a certificate recognising the qualification, which is then presented to the receiving member state.
Is the single economy part in force?
It is the least advanced element, covering coordination of monetary and fiscal policy, and is better treated as an objective than as a current operating rule.
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