EU packaging rules threaten Single Market access for small businesses

On 12 August 2026, a regulation quietly entered into force that may do more to fragment European trade than any policy in three decades. The Packaging and Packaging Waste Regulation requires any business shipping packaged goods to an EU member state where it is not established to appoint a local authorised representative. For a small online seller, compliance means registering in each national Extended Producer Responsibility system, filing annual reports and paying fees between €200 and €500 per country. There is no exemption based on sales volume.

The measure arrived without fanfare, yet its consequences are already visible. German company Copiaro suspended shipments to other EU member states while continuing to serve Switzerland, Norway and the United Kingdom, markets outside the EU regulatory framework. Other businesses are disabling shipping options to the EU altogether. What began as an environmental initiative is producing a different outcome: the re-emergence of national barriers that the Single Market was designed to eliminate.

The Single Market's original promise

After the Second World War, European governments pursued economic integration through the removal of customs tariffs and barriers to the movement of goods, people, services and capital. The Single Market became operational in 1993, allowing a business owner in any member state to sell across borders without facing new bureaucratic or financial obstacles at each frontier. The potential size of a company was no longer constrained by the population of its home country.

The European Commission estimates that the Single Market has increased the European Union's gross domestic product by 3 to 4 percent and created 3.6 million jobs since its creation. Research by Bertelsmann Stiftung calculated that integration raises European citizens' incomes by approximately €840 per person annually. These figures represent the cumulative benefit of removing friction from cross-border commerce over three decades.

The architecture relied on a simple principle: once a product legally entered one member state, it could move freely to all others. This mutual recognition reduced compliance costs for smaller operators who lacked the resources to navigate 27 different regulatory regimes. The PPWR reverses this logic by requiring separate national registrations for packaging compliance, effectively restoring the administrative borders that the Single Market removed.

Compliance costs favour large operators

The requirement to appoint a local representative in each destination country creates fixed costs that do not scale with sales volume. A business shipping to five member states faces representative fees of €1,000 to €2,500 annually before selling a single unit. Large brands can absorb these costs across high transaction volumes. A microenterprise selling a few hundred items per month cannot.

The regulation contains no volume-based threshold that would exempt small sellers from these obligations. This absence is consequential. When compliance costs are fixed regardless of business size, larger operators gain a competitive advantage not through efficiency or innovation but through regulatory capacity. The companies best positioned to absorb these expenses are those already dominant in their sectors.

Environmental policy often produces this distributional effect. Regulations intended to address market failures can inadvertently create barriers to entry that protect incumbent firms from competition. The PPWR may reduce packaging waste, but it also reduces the number of sellers able to participate in cross-border trade. The environmental gain comes with a commercial cost that falls disproportionately on smaller businesses.

Parallel developments across the Atlantic

Similar regulatory shifts are occurring in the United States, though with different stated objectives. Until 2025, packages valued below $800 could enter the American market with minimal bureaucracy and without customs duties under the de minimis exemption. This threshold enabled small sellers worldwide to reach US consumers through online platforms. The exemption's elimination affected large platforms such as SHEIN and Temu, but the burden fell most heavily on smaller operators.

American consumers now pay more for low-value goods, with estimated losses between $11 billion and $13 billion. Lower-income households are disproportionately affected because they rely more heavily on inexpensive imported products. The motivation differs from Europe's environmental rationale, yet the outcome converges: economic freedom for small sellers is being constrained on both continents through regulatory intervention.

These parallel developments suggest a broader trend. Advanced economies are increasingly willing to accept reduced market access in pursuit of other policy goals, whether environmental protection or domestic industry shielding. The question is whether the benefits justify the costs, and whether those costs are distributed fairly across different types of economic actors.

Europe's competitiveness challenge

The PPWR arrives as the European Union faces mounting pressure over its global economic position. A decade ago, European companies featured prominently among the world's largest publicly traded firms by market capitalisation. Today, only a handful remain in the global rankings. Almost none of the world's leading startups originate in the bloc. The regulatory burden is frequently cited as a contributing factor.

Technology and digital business represent particular areas of weakness. European firms struggle to scale beyond national markets, partly because regulatory fragmentation increases the cost of expansion. The Single Market was supposed to solve this problem by creating a continent-sized home market. When new regulations reintroduce national compliance requirements, they reverse that advantage.

The European Union aims to lead through regulation, setting global standards that others follow. This strategy has produced notable successes in data protection and competition policy. However, regulatory leadership carries risks when it undermines the economic base that supports it. A continent that becomes greener but poorer may find its regulatory influence diminished rather than enhanced.

The path forward

Businesses now face a choice: absorb the compliance costs, limit their market reach, or exit EU cross-border trade entirely. Some will consolidate operations through distributors who already maintain the required national registrations. Others will follow Copiaro's example and serve non-EU European markets where the rules do not apply. The regulation does not prohibit cross-border sales, but it makes them economically unviable for many small operators.

The European Commission could address these concerns through implementing guidance or future amendments. Volume-based exemptions exist in other regulatory contexts and could be introduced here without undermining the environmental objectives. Large producers generate most packaging waste and remain subject to the full requirements. Small sellers contribute minimally to the problem while facing disproportionate compliance burdens.

The tension between environmental protection and market access is not new, but the PPWR brings it into sharp focus. Europe built the Single Market to enable small businesses to compete across borders. The regulation now asks whether that achievement is worth preserving when it conflicts with other policy priorities. The answer will determine not only the fate of cross-border e-commerce but the broader trajectory of European economic integration.