By July, 1987, the Single European Act (SEA) had been ratified by all the Parliaments of European Union member states and drafted into law. The SEA was directed at creating a single, unified European marketplace, in which local economic barriers would be broken down and the internal frontiers that separated member states would no longer serve as impediments to free trade. Its main provisions came into full effect starting in 1992. The SEA has had both positive and negative results.
On the positive side, the specific provisions that EU members states enacted helped reduce a number of different trade barriers, including the following:
Physical barriers prevent the flow of material goods and people. Such barriers include border checkpoints and the like.
Technical barriers include laws surrounding the movement of food, pharmaceuticals, and other specialty goods.
Fiscal barriers include things like excise laws.
The negative aspects of the SEA were more indirect, and tied to the growing discordance between EU members states regarding the role of the centralization of a European government that would manage a barrier-free trade agreement. Representatives to the Congresses that debated the specifics of the SEA, such as the one at Maastricht, concluded that in order to eliminate trade barriers completely, the EU would have to adopt a universal currency.
The costs associated with this were high because, on the one hand, it was difficult for the less-affluent EU member to provide enough up-front capital to fully convert their currency, and, on the other hand, it required a tremendous level of political integration, which included things like forming administrations to set values on European currency, providing international agents to defend the flow of international trade, and much else. The administrative and bureaucratic costs associated with the level of political integration associated with the SEA were enormous, thus limiting the total output that could be expected from breaking down trade barriers completely.
Thus, while in large part the SEA contributed to an increased EU output, the administration of this vastly integrated and complex system had costs, which diminished projected revenue considerably.
The European Union's output significantly improved. The elimination of trade barriers promoted trade to countries in the European Union, as businesses had access to millions of potential customers from different nations. In addition, companies could realize economies of scale by sourcing for raw materials from the cheapest markets without having to pay duty. Moreover, consumers enjoyed a wide variety of goods and services at affordable prices from competitive markets.
The single market improved the European Union’s gross domestic product (GDP). Furthermore, millions of jobs were created, which increased employment rates. Moreover, the increased output by the EU, because of lifting the trade barriers, made it an attractive trading partner to other countries that were not in the EU. Consequently, more goods and services were exported, which contributed to the GDP.
In 1993, the single market became a reality for twelve member countries: Italy, Germany, Ireland, the United Kingdom, Portugal, Greece, Belgium, Denmark, France, Luxembourg, the Netherlands, and Spain. Generally, the elimination of trade barriers increased EU output after 1993.
In Economics, output is defined as the total value of all the goods and services produced by a country's economy during a specified time period. As such, output measures the health of an economy. After the elimination of trade barriers in 1993, the free movement of goods and services led to significant growth in output. By 1999, the single-market EU grew from 12 million companies to 21 million companies. Trade between EU countries grew from between 800 billion Euro in 1992 to 2800 billion Euro in 2011. Similarly, trade between EU countries and the rest of the world grew from between 500 billion Euro in 1992 to 1500 billion Euro in 2011.
GDP (Gross Domestic Product) is a measure of economic output: it is the monetary value of all the goods and services produced in a country within a specified time period. Generally, GDP can be calculated in three ways:
1) The production approach, which calculates GDP as the "value added" at each stage of production. Value-added is calculated as total sales minus the value of intermediate inputs. Intermediate inputs is defined as the raw products or materials used during production. For example, a final output such as cake has flour, sugar, butter, and other raw materials as intermediate inputs.
2) The expenditure approach, which adds up the total value of all goods and services purchased by all users (at the individual, corporate, or governmental level).
3) The income approach, which calculates GDP based on consumer and corporate income.
So, after the elimination of trade barriers in 1993, output increased: by 2008, the GDP was 33 billion Euro higher or 2.13% higher than in 1992. Also, by 2008, the average income-per-person rose by about 500 Euro (the income approach).
The elimination of trade barriers greatly benefited EU consumers in terms of increased choices for goods and services. Growth within the telecommunications industry is one example of how the elimination of trade barriers increased EU output. By 1998, 100% of EU consumers had access to mobile phones. Consumer use of cellphones rose from 1 million in 1994 to more than 100 million in 1998 (the expenditure approach). In fact, today, the EU represents the second largest region (after Asia) in terms of consumer access to the Internet. As a result of increased choice in Internet providers, 73% of EU consumers enjoy weekly access to Internet content.
So, to recap, the elimination of trade barriers affected EU output positively after 1993.