The common market is the highest stage of trade integration, which is characterised by a wide range of liberalisation of economic flows including goods, services and factors of production (capital and labour), all within a single regime of competition rules. As a result, we have a more efficient allocation of production factors as well as many other benefits. These benefits can be considered as resulting from liberalisation of economic flows (e.g. a more fierce market competition, a decline in unit costs of production, a better quality of products, economies of scale, an increase in trade and foreign direct investment flows, technology spillover effects, a rise in productivity of production factors, an acceleration of economic convergence process within the regional bloc etc.) and may contribute to the accumulation effects like GDP growth as well as to an increase in economic power and competitive advantage of the group of integrating countries in the world economy. The aim of this paper is: 1) to compare theoretical gains from market integration with its real outcomes in the European Union and to assess the extent to which actual effects differ from potential benefits; 2) to identify the areas within the EU internal market where an integration process is not complete and the market does not deliver potential benefits; 3) to explain the reasons of the EU common market's sub-optimal performance, i.e. why it does not produce all the benefits that were expected from trade integration. The following research methods have been used: review of literature, empirical studies, reports of international organisations and EU documents concerning the subject as well as an empirical analysis of economic indicators measuring the internal market performance and its impact on the whole EU economy. The analysis was mainly based on statistical data from the European Commission and OECD. The analysis conducted reveals that real outcomes of market integration process in the European Union differ significantly from those expected both in theory of economic integration as well as in empirical studies aimed at estimating potential gains from the EU common market. Empirical analyses confirm that creating an internal market has realistically increased GDP in the EU by some 2-3% instead of 4.25-6.5% or more assumed in ex ante studies in the late 1980s. There is little evidence to support the claim that market integration allowed EU firms to be more productive, made it possible to exploit untapped economies of scale or contributed to substantial improvement in allocative efficiency. Nevertheless, some positive effects can be confirmed including increased competition, lower and more converged prices as well as higher exports and imports in the goods market, i.e. mainly in industrial sectors. In the freedom of services and labour there is still some potential available. The main obstacles to effective functioning of the EU internal market are: the lack of fully integrated market for services as well as of elastic labour markets, low labour mobility, less developed capital markets and low ICT-related capital expenditures as compared to the US, the lack of effective embracement of ICT technologies, fragmented public procurement markets, various tax administration burdens in member states, insufficient use of the principle of mutual recognition, underdeveloped infrastructure across the EU, but also structural problems of EMU and bad economic situation in the euro area.
