By 1993, nations in the European Union (EU) had eliminated all barriers to the flow of goods, services, labor, and capital across their borders. Even such things as consumer protection laws and the...

By 1993, nations in the European Union (EU) had eliminated all barriers to the flow of goods, services, labor, and capital across their borders. Even such things as consumer protection laws and the types of plugs required to plug in appliances were standardized to ensure that there would be no barriers to trade. How do you think this elimination of trade barriers affected EU output?

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teachsuccess eNotes educator| Certified Educator

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.