EU Unveils Plan to Eliminate 44% Internal Tariffs, Boost Competitiveness

The European Commission has unveiled a plan to eliminate internal commercial barriers within the European Union, aiming to enhance competitiveness and mitigate the impact of U.S. tariffs. The International Monetary Fund estimates that these barriers are equivalent to imposing a 44% tariff on goods and a 110% tariff on services, far exceeding the tariff levels set by Donald Trump.

The European Commission will propose relevant measures over the next two years to encourage businesses to choose Europe and expand their operations across the entire EU, helping small and medium-sized enterprises achieve scale. However, the implementation of this plan will depend on EU member states enacting laws and adhering to the recommendations to open sectors dominated by domestic vested interests.

The Commission has identified "ten major barriers," including limited recognition of professional qualifications from other member states, lack of common standards, and fragmented packaging rules. The Commission will promote the use of more QR codes on labels to enable consumers to access product information and take action against manufacturers that prevent certain retailers from selling their products in specific countries.

The Commission notes that cross-border service trade within the EU is currently stagnant and is committed to opening up sectors such as construction, postal services, telecommunications, energy, transportation, and financial services. This will include issuing guidelines to allow businesses to temporarily provide services in another EU country.

The Commission will also encourage willing EU member states to relax restrictions on regulated professions such as caregivers or mechanics. On average, EU member states regulate 212 professions, and in some cases, require fees, making it difficult for individuals qualified in one EU country to work in another. In Germany, up to one-third of the workforce is engaged in regulated professions.

Additionally, the Commission proposes reducing a series of reporting requirements, such as those related to data privacy and battery supply chains, to help 38,000 medium-sized enterprises with 250 to 750 employees save 400 million euros (450 million USD) annually. Current rules classify enterprises with more than 250 employees as large, increasing their compliance obligations and hindering their growth.

This initiative by the European Commission is a strategic response to the economic challenges posed by U.S. tariffs. By addressing internal barriers, the EU aims to create a more integrated and competitive market, which could help offset the negative impacts of external trade policies. The focus on reducing regulatory burdens and promoting cross-border services aligns with the EU's broader goals of fostering economic growth and innovation.

The plan's success will hinge on the cooperation and commitment of EU member states. While the Commission has outlined clear objectives and proposed measures, the actual implementation will require coordinated efforts and political will from all member states. The EU's ability to overcome internal barriers and enhance its competitiveness will be crucial in navigating the complex global trade landscape and responding to external pressures, such as those from the U.S.