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The EU was originally created as a customs union. The oldest and largest constituent organisation, the European Community, was founded as the European Economic Community. The creating and maintaining the EU's single market has been a prominent goal of the Community since its inception in 1957. It seeks to guarantee freedom of the four factors of production within the internal market. These relate to ensuring the free movement of goods, services and establishment and capital around the EU's internal market as well as the flow of persons within the area.

The principle of free movement of goods ensures ensures goods can be taken anywhere within the whole market without being subject to barriers or obstacles. This freedom has both an internal and external dimension. Internally, goods must not be subjected to customs dutes, discriminatory taxes or measures restricting import quantities. Externally, goods entering the internal market will be granted freedom after paying the Common Customs Tariff.

The free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries. Until the drive towards Economic and Monetary Union the development of the capital provisions had been slow. Post-Maastricht there has been a rapidly developing corpus of ECJ judgments regarding this initially neglected freedom. The free movement of capital is unique insofar as that it is granted equally to non-member countries.

The free movement of persons means citizens can move freely between member states to live, work, study or retire in another country. Traditionally the economically active were granted a much greater level of freedom. This required the lowering of administrative formalities and recognition of professional qualifications of other states. The extension to the non-econmically active was first recognised in 1999 when the concept of Community Citizenship was introduced to the EU. In addition to extending the scope of the free movement of persons, it also grants certain social and political rights to the citizens of the EU.

The free movement of services and establishment allows self-employed persons to move between member states in order to provide services on a temporary or permanent basis. Services account for between sixty and seventy percent of GDP, although legislation permitting free movement is not as established as in other sectors. This is addressed by the recently passed Directive on services in the internal market which aims to liberalise this area of the market. According to the Treaty the provison of services is a residual freedom that only applies if no other freedom is being exercised.

The freedoms are not absolute in nature. Member states may interfere with their exercise on the specific grounds laid down in the Treaty, or can rely on the case law of the European Courts for more general justifications. For example, the Treaty allows member states to restrict movements that would pose a real threat to public policy or public security. In the absence of Community legislation it is for the member states to decide the scope of the exceptions. The European Courts will arbitrate as to whether the actions of the member state are proportionate and in conformity with Community law.