New EU regulations on packaging materials have come into force this month, and they have accidentally broken the Single Market. Laws designed to regulate the content of packaging to increase recycling and reduce environmental waste have had dramatic unintended consequences, and they have landed the bloc in a state of paralysis.

All of a sudden, businesses across the continent have realised that it may be illegal for them to send parcels to customers based in different European countries. To comply with the new regulations, businesses must register with the packaging-regulation schemes in each EU member state and, in some cases, even appoint an authorised local agent before they can trade with customers in these countries. As there are 27 member states in the EU, exporters now need to comply with up to 26 different packaging-regulation schemes if they want to export their products.

This has been criticised as a bureaucratic monster by trade associations throughout Europe. While Europe’s large corporates are likely able to wear the costs of these regulations, especially those with offices in multiple member states, small traders like booksellers, wine merchants and arts suppliers – to name but a few examples – are about to be clobbered by a litany of new compliance costs. These will be so expensive and time-consuming to bear that many of their exports may become unviable.

European trade lawyers have said that appointing registered representatives may cost each business €2,000 per country. Non-compliance with these rules can lead to hefty fines of up to €200,000 and even bans from trading. By making compliance so expensive, the EU has made it highly likely that many small businesses will withdraw from exporting their products across Europe altogether. The EU’s Single Market was supposed to facilitate cross-border trade. This summer, the EU seems to have done the opposite: deliberately fragmenting the Single Market and preventing free trade within it.

In a moment of great embarrassment, the European Commission realised this – but only after the laws came into force. Last week, it told member states that they should not enforce these new laws or impose penalties for non-compliance. This is one of the flagship green regulations introduced by the previous European Commission and European Parliament, when they were committed to the European Green Deal. For the Commission to turn around and tell its members not to enforce one of its most prominent new laws, which has been years in the making, is a damning indictment of the EU’s incompetence.

For decades, the European Union claimed that the Single Market was its greatest economic achievement. Forged in 1992, it is said to have brought down trade barriers throughout Europe by harmonising regulations, overriding local protectionism and making it easy to do business across the continent.

While the Single Market was always more hype than reality, it did offer specific benefits to businesses. Consistent regulations helped to bring Europe’s poorer countries up to similar standards as their richer neighbours, and businesses trading in things like food and manufactured goods were able to enjoy significant economies of scale as their supply chains grew across the EU’s large market.

But there were always problems. Some of these were raised in 1992 by the infamous Maastricht Rebels – members of the Conservative Party who refused to support then UK prime minister John Major in implementing the Maastricht Treaty. The Single Market came with a significant democratic cost, imposing regulations on countries that had no say in whether they wanted them or not. And while trade barriers in the physical economy fell, the Single Market never extended to services, and it remains totally undeveloped in the digital and technological sectors.

While reduced trade friction is welcome, the Single Market imposed many costly regulations as a condition of access. For a long time, many felt those costs were outweighed by the benefits of trading in a large market. This summer’s packaging-regulation disaster shows how that trade-off will soon vanish. If the costs of complying with Single Market rules become too onerous to bear, do not be surprised if businesses move away from trying to trade across national borders entirely.

This affair should be a reminder to all British people that the EU we voted to leave in 2016 is very different to the EU of 2026. Its economic clout has declined, it is a diplomatic paper tiger, and its political class is burying its head in the sand when it comes to Europe’s poor demographics, productivity, innovation and living standards. Rejoining or realigning with the EU would mean British businesses are subject to European rules like the latest packaging regulations that the EU is incapable of implementing itself.

The EU has spent the 21st century trying to operate like a giant nation state. Ultimately, this runs up against the opinions of the people who form Europe’s real nation states, the European people themselves.

Recent polling by Public First found that European voters are hostile to the Commission’s ‘Buy European’ policies, preferring procurement decisions that prioritise businesses in their home countries, rather than Europe at large. This is hardly surprising.

Ultimately, national identity is far more tangible and meaningful than a continental one. Perhaps by accidentally fragmenting the EU Single Market with green packaging regulations, the EU may realise the limits of its supranational project. Better late than never.

Fred de Fossard is the director of strategy at the Prosperity Institute.