Legal Definitions - common market

A common market represents a significant stage of economic integration among several countries. It goes beyond simply removing tariffs and quotas on goods and services traded between member states (which defines a free trade area) and often establishing a common external tariff for trade with non-member countries (which defines a customs union).

The defining characteristic of a common market is the additional allowance for the free movement of factors of production across the borders of its member states. This means:

• Free movement of goods: Products can be bought and sold across borders without tariffs or other trade barriers.
• Free movement of services: Companies and individuals can offer services (e.g., consulting, banking, transportation) in any member state.
• Free movement of capital: Money, investments, and financial assets can move freely between member states.
• Free movement of labor: People can live, work, and seek employment in any member state without needing special visas or permits.

The aim is to create a single, larger economic area where resources can be allocated efficiently, fostering deeper economic cooperation and growth among participating nations.

Here are some examples to illustrate the concept of a common market:

• Example 1: Cross-Border Business Expansion and Employment
  Imagine a hypothetical "Andean Economic Zone" that operates as a common market. A software development company based in Country A within this zone wants to expand its operations. Under a common market agreement, it can easily open a new office in Country B, hire skilled programmers from Country C, and offer its services to clients throughout the entire zone without facing significant regulatory hurdles, tariffs on its software products, or restrictions on moving its profits back to Country A. Furthermore, an architect from Country D could freely move to Country B to work on a new construction project, having their professional qualifications recognized across the zone.

  This illustrates the free movement of services (the software company operating across borders), labor (the architect moving for work), and capital (the company moving profits), alongside the free movement of goods (if the software were a physical product).

• Example 2: Investment and Capital Flow
  Consider the "Baltic Sea Common Market," a fictional economic bloc. An investor in one member country, say Estonia, identifies a promising startup company in another member country, Latvia, that needs funding. In a common market, the Estonian investor can freely transfer capital to Latvia to invest in the startup without encountering currency controls, excessive taxes on cross-border investments, or complex bureaucratic procedures that would hinder the flow of funds. This encourages investment where it is most productive, benefiting the entire region.

  This example highlights the principle of the free movement of capital, showing how investment can flow easily between member states to support economic development.

• Example 3: Professional Mobility and Service Provision
  Let's envision a "Great Lakes Common Market" comprising several nations bordering a large freshwater system. A qualified dentist from one member state, say Canada, decides to relocate and open a practice in another member state, like the United States, within this common market. They would not need to navigate complex immigration processes for work visas, and their professional license would likely be recognized or easily transferable across the borders, allowing them to provide their services to patients in the new country with minimal administrative barriers. Similarly, a trucking company based in one member state could transport goods between any two points within the common market without needing separate permits for each border crossing.

  This demonstrates the free movement of labor (the dentist relocating for work) and services (the dentist providing care, or the trucking company offering transport), showcasing how professionals and businesses can operate seamlessly across member states.