1. The prospect of European enlargement touches the very core of
this sub-committee’s work on East-West cooperation and convergence. Enlargement will involve profound
adjustment, not only on the part of the candidate countries, but also for EU
states themselves. In this sense, the
process offers an important case study of co-operation and convergence.
2. The accession of these
states to the Union can also be seen as the final step in the continent’s
post-Cold War transformation, although membership in the EU will hardly mark
the end of the new members' economic and political evolution. Rather, it will provide a framework for
accelerated development and deeper integration with the core member
states. Indeed, widening and deepening
the Union are inextricably linked processes, and there is little doubt that
enlargement will, at the end of the day, likely have a strong political and
institutional impact on the Union itself.
If all goes as planned, the accession of new members will represent a
culmination of the grand strategy to transform Europe from a divided to a
united continent.
3. Yet for all the discussion about the
centrality of European enlargement to continental peace, stability and
prosperity, the only former Communist state so far to have joined the Union is
the territory of the former GDR, which automatically acceded as a result of
German reunification. Ten former
communist countries have applied for membership, and a number of Balkan states
have indicated an interest in eventually doing so. None of the candidates has completed enlargement negotiations,
which have yet to even tackle the most difficult and in some cases, intractable
issues, and Turkey has not even begun to negotiate with the EU.
4. Obviously,
the United States harbours a keen interest in the process, and, not
surprisingly, US officials have strongly supported the principle of
enlargement. Indeed, in some American
circles, there has even been a degree of frustration regarding the seemingly
slow pace of enlargement, particularly as NATO governments managed to bring
three new members into the Alliance relatively quickly. But this particular view underestimates the
complexities of building an economic Union - a process which involves not only
a high degree of economic, legislative and administrative convergence, but one
which at its end entails the “pooling” of sovereignty in certain critical if
limited areas of public policy. There
is therefore a natural tendency towards caution among the member states. NATO, by contrast, is a strictly
intergovernmental organization and covers a more narrow set of policy areas.
5. NATO was not the only international
organization that found it necessary to reinvent itself after the end of the
Cold War. In many ways, the European
Community had also been a creature of the Cold War. The sudden emergence of new democracies in Central and Eastern
Europe harbouring liberal economic ambitions quickly raised questions about the
very purpose of the European Community’s institutions and the role that they
could play in knitting together a continent that had been artificially and
tragically divided for nearly half a century.
Although the first steps in opening the process involved the
co-ordination of assistance to these fledgling democracies, it swiftly became
apparent that future accession was very much on the minds of Central and East
European leaders.
6. Not surprisingly, EU enlargement moved
promptly to the fore of the relationship between Western Europe and Central and
Eastern Europe. Accordingly, in 1993 at
the Copenhagen European Council, EU leaders announced that those countries in
Central and Eastern Europe willing and able to assume the economic and
political burdens of membership would be welcomed into the Union.
7. But that principle said little about the
modalities of getting from here to there.
The EU, in fact, still had to develop a strategy for managing
enlargement. Of course, this was not a
challenge fully without precedent. The
European Community had taken on new members as early as 1973 when the United Kingdom
acceded to the Union. And in the case
of Greece (’81), Spain (’86) and Portugal (’86), enlargement was undoubtedly a
central plank in Europe’s endeavour to reinforce the democratic order of those
new members. In that important sense, the EU’s “Mediterranean enlargement"
is the most approximate precedent to the current process. But while the Mediterranean states at the
time were emerging from authoritarian political experiences, they had at least
some experience with market economies.
For today’s candidates, enlargement has become very closely linked to
the broader economic transition process away from forty years of centrally
planned and administered economies.
8. Managing enlargement talks with a large
number of former Communist states has thus become an operation on a totally
different scale from past enlargements.
Not surprisingly, it has also strained the EU’s own administrative and
financial capacities at a time when it was already struggling to consolidate
the single market and the single currency, endow itself with an enhanced
foreign policy and security capacity, and devise strategies to cope with
various Balkan crises.
9. In December 1997, at the
Luxembourg summit, EU member governments officially recognised twelve countries
as candidates for admission to the EU, six of which were judged sufficiently
prepared to begin the pre-negotiation screening process. Those six were the Czech Republic, Estonia,
Hungary, Poland, Slovenia and Cyprus, otherwise known as the “Luxembourg
group”. These countries subsequently
underwent a general screening process designed to flag the key challenges they
would face in preparing for Union membership.
Bilateral negotiations between member governments on one side and
individual candidates on the other followed and are ongoing. These will ultimately address all 31
chapters of the Acquis Communitaire - that body of treaties, European
Court rulings, legislation, norms and principles which all member states must
adopt to participate in the life of the Union.[1] The Acquis thus includes European
rules and practices governing everything from basic banking standards to recent
regulations guiding the export of weapons.
10. At the Helsinki summit in 1999, European
Union leaders invited Bulgaria, Latvia, Lithuania, Romania, Slovakia and Malta
to begin formal negotiations, which began in March 2000. These countries are now also in the midst of
negotiating chapters, and some, like Slovakia, as this sub‑committee
learned on a recent trip to Bratislava, have moved very quickly through the
process to the point where they have almost caught up with the first group. At Helsinki, the European Union finally
officially acknowledged Turkey’s status as a candidate country, although
government heads made it clear that Turkey had yet to fulfill all the criteria
to embark upon the screening process.
11. Finally the Helsinki summit also ratified a
broad outline for Europe’s future in the Agenda 2000 document, which, among
many other things, established budget targets to cover enlargement costs for
2002-2006, while setting strict limits on overall European Union spending.
12. According
to a recent Commission report, 12 candidate countries have fulfilled the EU’s
political criteria for membership outlined at the Helsinki summit, although
there are still some outstanding concerns regarding matters related to the protection
of minorities, and human rights issues.
According to the Commission, excessive state regulation of the economy
and low public salaries have also exacerbated corruption in several candidate
countries. The level of judicial
development poses yet another set of serious problems that virtually all
candidate countries in Central and Eastern Europe confront.[2] Without a strong, competent and independent
judiciary, it will be all but impossible to enforce Europe’s complex rules of
the game.
13. Candidate
countries have had more problems in meeting the economic criteria defined at
Copenhagen. These include the need to
have in place functioning market economies, liberalised prices, effective
competition and corporate governance rules, property rights, proper prudential
supervision of the financial system, intellectual property protection,
macroeconomic stability and a broad consensus on the legitimacy of market
structures.
14. From the outset, the EU
insisted that each country start the negotiating process from the same point,
and all have been extended equal treatment.
Negotiations are bilateral, with the member states on one side of the
table and individual applicants on the other.
Candidate countries can theoretically move at their own pace through the
process depending on their progress in meeting the conditions for membership
and their capacity to come to terms with member states on the various
chapters. This so called “regatta
approach” grants each candidate incentives and time to achieve the standards
and reach agreements on 31 chapters.
While there is no timetable for the completion of negotiations, the
Commission has acknowledged that the time horizon should not be seen as a
limitless, as this would potentially deprive countries of any incentive to
undertake difficult but essential reform, while weakening the resolve of member
governments to carry out their end of the bargain.
15. That said, negotiations
have moved more slowly that was originally anticipated. The slow pace of these
talks has generated some frustration, particularly among front-runner states
like Poland, Hungary and the Czech Republic.
Leaders from these countries have expressed concern that a long delay
makes it increasingly difficult to sustain public support for the myriad
sacrifices reform and structural adjustment entails. Yet, this past November, the EU made public its intention to
stretch out negotiations for another 18 months, making all but unreachable the
January 1, 2003 accession target date set by the governments of those three
countries. The Commission believes
talks will continue throughout 2002.
The bet, however, is that even for the most advanced candidates, talks
will most certainly run into 2003, particularly because negotiations are only
about to begin on the most intractable issues.
Negotiations on agriculture open only in the spring of 2001, while talks
on the free movement of people have yet to get underway. Given that that treaty ratification alone
will take roughly 18 months, accession for the front-runners is unlikely until
January 2005.[3]
16. In response to mounting criticism regarding
the slow pace of talks, the Commission recently laid out a road map for the
most advanced candidate countries. This
road map includes procedures to consider requests for so called transitional
measures i.e. delays in implementing part of the Acquis in well
justified cases, and a proposal to set aside chapters with a limited number of
outstanding problems. It should be
noted that the Commission has acknowledged 170 requests for transitional
measures in non‑agricultural fields and 340 in agriculture fields. Theoretically, these should be limited in
both scope and duration and accompanied by a plan to move to full adoption of
the Acquis.[4]
17. The proposed schedule calls for early
progress on outstanding internal market matters like the movement of goods,
persons, capital, company law, culture and audio-visual policy, environmental
and external relations, while putting off for later more difficult chapters
like competition policy, transport policy, energy taxation, the customs union,
agriculture, fisheries, justice and home affairs and financial controls. The priority for the first half of 2002
would finally include the toughest issues including agriculture, regional policy
and structural aid, financial and budgetary provisions and institutions.
18. The
Commission has stressed that some degree of macroeconomic convergence is an
essential precondition for enlargement.
Obviously accelerated growth rates in transition economies offer a fast
path to economic convergence. Many
candidate countries made substantial economic progress in 2000, with the
average real GDP growth rate for the ten Central and Eastern European countries
standing at 4% (the figure for 1999 was 2.2%) and just below 5% for all
thirteen candidate countries. Yet
economic development is not evenly spread; capital cities and region’s
bordering the EU tend to significantly outpace growth in outlying regions and
particularly eastern provinces. At the
same time, the level of overall economic development is significantly higher in
the front-runner states.[5]
19. Despite
recent improved employment outlooks in the leading candidates, the EU is
calling for these countries to redouble their efforts to increase labour market
flexibility and mobility in order to facilitate the rapid reduction of
structural unemployment. It holds out
the Hungarian case as a potential model for other candidates. Finally, the Commission argues that the
financial superstructures of the countries of Central and Eastern Europe need
to be further developed. It is
particularly concerned that there is insufficient investment capital funding
available for small and medium sized firms.
20. Although
most of the burden of adjustment in the transition process falls on the
countries of Central and Eastern Europe, Western countries including the United
Sates and Canada have provided critical financial and “in-kind” assistance over
the past decade. The development of an
enlargement strategy for the region has resulted in a more focused framework
for EU aid. Helping candidate countries
build the infrastructure, and legal frameworks needed to join the Union has
concentrated the minds of donor and recipients alike. That said, there are numerous complaints that EU aid invariably
lines the pockets of EU-based consultants, and there are frequent complaints
that too much bureaucracy is gumming up the works. In recent years the Commission has worked to streamline its aid
efforts, and undoubtedly as the enlargement process has advanced, it has become
easier to target aid those sectors in greatest need.
21. In March
1997 the European Council established Accession Partnerships, which the
Commission had designed to introduce the Acquis into the candidate
countries’ legal structures. PHARE
funding was also made available to candidates to help implement these changes;
70% of these funds were allocated for infrastructure development, while the
remainder was targeted for institution building. Through the Technical Assistance Information Exchange Office, the
PHARE programme has orchestrated an exchange programme that brings officials
from national ministries, regional governments and professional organisations
to work with their counterparts in candidate countries. The idea is to convey member government
know-how to candidate countries as they align national administrative practices
with EU norms.[6]
22. In 2000,
the EU doubled pre-accession aid levels to over €3 billion a year.[7] Two new aid programmes were devised to
support infrastructure improvements and to prepare countries for the task of
managing structural funds for which they will be eligible upon accession. The Pre-Accession Structural Instrument
(ISPA) allocates €1 billion a year for environmental and transport
infrastructure projects which the candidate countries themselves must
develop. The Commission has recently
approved a range of projects such as a wastewater treatment facility in Poland,
a waste management facility in Romania and road rehabilitation project in
Lithuania. A second programme, the
Structural Adjustment Programme for Agriculture and Rural Development (SAPARD),
allocates over €500 million a year to agricultural and rural development
projects. Here again, candidate
countries are encouraged to develop specific rural development projects and set
up a SAPARD agency responsible for project management and payment. The Commission must accredit these agencies
before they become operational, and this process is not yet completed in all
the candidate countries.
23. The
European Investment Bank (EIB) has supplemented the region's financial
base. In 1999 its loans to Central and
Eastern Europe amounted to €2.173 billion.
The bank has a potential capital pool for the region of €16 billion for
2000-2007.
24. Finally,
financial assistance to Turkey has nearly doubled, and €50 million annually
will be set aside for various pre-accession efforts. The Commission will propose a new financial assistance regulation
in early 2001 to bring management and procedures for aid disbursement to Turkey
close to those of the PHARE programme.
The Commission has also called for a € 450 million EIB loan to
strengthen the EU-Turkey customs union.
25. An economic Union requires not
only the free flow of goods and capital but also the unhindered movement of
people. If there are restrictions on
capital and labour mobility, the full economic benefits of an open trading
system cannot be fully realised. This
is particularly the case in a common currency area where capital is perfectly
mobile. If labour is not made mobile,
some regions will suffer worse unemployment than they would in a system
characterised by free labour movement, while other regions could find existing
labour shortages exacerbated. Despite
this strong economic rationale for the unfettered movement of people within an
enlarged European Union, the idea poses some political dilemmas for EU member
governments.
26. Some fear that extending
the right of free movement to new EU members would result in a flood of
job-seeking immigrants from those countries and drive wages in the Union
downward. But there are several
fallacies in this assumption. First of
all, many workers in the candidate countries simply will not leave their home
regions even for the prospect of better employment. Recent surveys in Hungary and Poland, for example, reveal that
very few inhabitants of those countries would countenance a move to Western
Europe, even if that were legally possible.
Secondly, accession of new member states hinges on their meeting certain
fundamental economic criteria, and it is unlikely that the Union will fully
open the door to countries riddled with structural unemployment.
27. All that said, demographic
trends in EU member countries point to a changing balance between the working
population and pensioners. Western
Europe is rapidly aging, and many demographers and economists argue that
current member countries will eventually need to import labour in order to
generate contributions to beleaguered welfare systems. The great political challenge may well lie
in enticing legal immigration rather than raising barriers to it. Obviously new EU members could provide some
of this needed labour to the benefit of both the old members and the acceding
states.
28. Although, EU member
governments have yet to forge a common position on the free movement of labour,
in December the German Chancellor Mr Schroeder called for a transition period
of seven years, which for that duration would effectively restrict the movement
of workers from new member states to the rest of the Union. Austria is expected to support this
position, while member governments like Spain want no post‑accession
restrictions. Poland’s Prime Minister
Jerzy Buzek quickly responded to Chancellor Schroeder’s comments, arguing that
Poland’s “position is that labour markets should be opened for Poles at the
moment when we join the European Union.”[8] The Commission is currently carrying out
studies on the potential impact of the free movement of people associated with
enlargement on the border member states like Germany and Austria and only then
will it pass on to a position paper with proposals.[9]
29. The issue has yet to be
resolved, but Chancellor Schroeder’s remarks have sparked an intense debate
about the labour rights to be accorded to new members. The Enlargement Commissioner,
Mr Gunter Verheugen, has said that under the Swedish Presidency, the
Commission will likely propose a joint negotiating position on the free
movement of people. He argues that any
transitional period should be limited.
It is certainly difficult to foresee the political acceptability of a
transition period as long as that proposed by Chancellor Schroeder.
30. Currently the citizens of
10 of the 12 candidates for membership do not require such visas for entering
the EU. Only Bulgarians and Romanians
need visas, and this is because of residual concerns about those countries'
capacity to fight illegal immigration and human trafficking.[10] Bulgaria has been pressuring the Commission
to change its status, but it currently remains on this so-called
blacklist.
31. Several countries have made
progress in adopting the Acquis in agriculture, although they are not
required to introduce common market organisation policy instruments before
accession. The current Common
Agricultural Policy (CAP) structure would be financially untenable in a
significantly enlarged Union, particularly given that countries such as Poland
have such large agriculture sectors and so many farmers.[11] EU governments have generally acknowledged
the need to reform the current system, but have not yet mustered the political
will to do so. The prospect of
enlargement combined with the burgeoning mad cow and foot and mouth crises,
both of which have potentially huge budgetary implications, and the fact that
agriculture will be a central subject of coming global trade talks, have
galvanised the discussion outside of EU circles. Yet, EU member governments are nervous about the potential
political fall-out of reducing the benefits that well-organised farmer groups
have come to expect. The French
government and others have strongly resisted Commission efforts to begin a
discussion about fundamentally altering the CAP system and insist that no
fundamental change be contemplated until 2006.[12] The Agenda 2000 programme fixed EU budgets
until the year 2006. While it factored
in certain enlargement costs, budget projections for the CAP were based on the
premise that the candidates would not be fully participating in the programme.[13] The problem is that farming issues remain
the single greatest stumbling block to enlargement and delaying this discussion
will do little to resolve the very real dilemmas that must be confronted head
on. Until terms can be agreed, Europe’s
current agricultural system will greatly complicate the enlargement process,
particularly for large farming states like Poland that will have an impact on
the system.
32. The EU enjoys a very large
trade surplus in agricultural products with the candidate countries from
Central and Eastern Europe. Although
this surplus is partly due to a gap in quality and standards, high tariff
boundaries in the EU as well as support policies are also to blame and have
been the subject of no small amount of complaint. The EU, however, recently negotiated a set of agricultural trade
concessions with these countries, several of which entered into force on
1 July, 2000. The Commission
claims that these should double the proportion of bilateral agricultural trade
exempted from duty from 35% to 81% for EU imports and 18% to 39% for EU
exports. Further talks are underway to
achieve an even deeper degree of liberalisation.[14] This is a good start, but more is needed if
the goal is to build an open continent-wide agriculture market.
33. Central and Eastern Europe
once played an important role in continental food markets, and this is a sector
in which these regions, with proper reform and appropriate capital injections,
can do so again. This is particularly
the case in the light of the lower population densities and abundant land of
the East. At a time when European
consumers are beginning to question the wisdom of highly intensive farming
techniques in Western Europe, developing a new agricultural division of labour
with the candidate countries might prove an important element of a long-term
solution. It is time to begin thinking creatively about this division of
labour. One can imagine, for example, a
European system in which Western European farms were more focused on specialty
farming and more prevalent use of organic farming techniques, while certain
Central and Eastern Europe regions might be well positioned to exploit their
more abundant space to pursue the kinds of extensive farming that many in
Europe are now seeing as a desirable alternative to “factory farming”
methods. Of course, getting from here
to there does not preclude the imperative of continued agricultural reform and
development in the candidate countries, including rationalising land use,
upgrading ownership laws, improving veterinary and processing standards, and
honing marketing skills.
34. The Union must reconfigure
regional funding as it enlarges, because new members will also qualify for
cohesion or regional funds, and as the Irish case suggests, this aid can be
crucial to economic development. Given
current fiscal constraints and the potentially large number of new members, the
share of funds for undeveloped regions is unlikely to be overwhelming. Agenda 2000 fixed regional funding at 30% of
the EU budget or roughly €30 billion until the year 2006, at which point broad
budgetary commitments will be reassessed.
But the accession of states that are significantly less wealthy than the
current members will result in significant new demands for regional
funding. Commissioner Michel Barier has
noted that if the Union were to grow to 27, “the gap between the richest and
poorest regions will double...”. He has
called for a significant increase in regional funding in order to cope with
inevitable divergence.[15] In political terms this could well put the
current recipients of regional funding against potential new recipients,
particularly if the pot is not increased.
35. Spain currently expects an
inflow of €11 billion in cohesion funds between 2000 and 2006,[16]
and has insisted that the rules of unanimity be applied to regional funding
until 2007 - which will obviously make it easier for the current net recipients
of regional aid to defend their position in the face of the obvious competition
that will come from new members.[17]
36. But such positions, on the
face of it, do not accord well with the need for an elevated sense of European
solidarity. Enlargement promises great
political, security and economic benefits to Europe, but it does come with a
price tag. One of those is the
legitimate claim that the poor regions of new members will have on EU cohesion
funds. Those countries that have
benefited so markedly from these funds in the past may lose some funding as a
result. If anything, this should be
seen as marking the success of EU policies in putting certain regions on a
self-sustaining basis. It may soon be
time to focus a greater share of these resources on the least well off regions
in the candidate countries.
37. On the monetary front,
candidate countries are not expected to adopt the euro upon accession. Convergence criteria are distinct from
accession criteria, and the Commission argues that monetary convergence should
follow from rather than lead structural economic change (Estonia is one
country, however, that has used monetary convergence through its currency board
as a primary transition tool). After
accession and once the new members are participating in the Single Market, the process
of monetary integration with the euro zone can begin with participation in the
exchange rate mechanism. Only at that
point would the adoption of the euro become an option.
38. There are
countless potential benefits to membership in the Union. Above all, enlargement will grant the new
members access to a very large internal market. This will dramatically augment the “home” market for local
industries, which will nevertheless confront new competitive challenges from
industries based in member countries.
39. Clearly, the promise of
enlargement has also provided a framework to discipline the transition process
and has politically reinforced national leaders charged with undertaking
difficult and sometimes unpopular reforms.
While macroeconomic retrenchment and privatisation rarely garner much
political sympathy over the short term, the goal of joining the EU is largely
shared by the public in candidate countries.
This can make essential sacrifices palatable. Yet if progress is not made in moving toward enlargement, then
frustrated publics in candidate countries could well begin to turn their backs
both on the grand project of European integration and the reform process which that
project has helped inspire. There have
been some signs of this happening already in Poland and the Czech Republic, and
the passage of time could see this tendency gather momentum.[18]
40. There is a running
assumption that adopting the Acquis will represent a huge improvement in
the administrative and legal structures of the candidate countries, and in many
instances that is certainly likely to be the case. But there is some evidence to suggest that the candidate
countries could also be taking on board a large amount of administrative red
tape which is hardly consistent with open market principles and which seem
largely premised on protecting special interests in member governments.[19] To take one example, the Czech Republic has
introduced a fairly liberal and unfettered agriculture system. Accession, however, will mean replacing that
system with the CAP which few would characterise as unfettered and which fewer
still recognise as efficient in strictly economic terms. The hope is that in agriculture as in
several other areas, the member governments will be able to accommodate
candidate country concerns through EU reform.
41. Another
potential problem with implications for pan-European relations involves the
states not invited to join the Union and with few prospects of being invited
over the near term. In some instances,
enlargement will require new members to break special trade and visa
arrangements that they have made with these countries. The danger here is that this profound
reorientation of commercial, human and political ties could result in further
isolating countries which are already struggling economically and
politically. The EU hopes to remedy
this situation by forging special relations with countries like Ukraine and
Russia as well as the countries of the Western Balkans.[20] It obviously has developed highly
articulated relations with all the candidate countries, some of which may not
be positioned to join the EU in the near future. The hope is that the enlargement process will not simply generate
new divisions in the European continent.
The best remedy for that is to make the Union as open as possible to
commercial and political ties with those European states that are left out, and
this seems to have become a guiding principal for the Union.
42. Finally, the new members
will have to learn to let failing industries live or die by the market. The EU Competition Commissioner, Mr. Mario
Monti has made it clear that the candidates must stop subsidising failing companies
if they want to join the EU.[21] This will clearly have important short-term
economic and political costs, but there is little room in the EU to allow for
such subsidisation, which in many cases violates not only EU law but also WTO
principles.
43. Beyond the obvious benefit
of consolidating democratic and market reforms in neighbouring states, member
governments stand to benefit economically from an enlarged Union. First of all, EU‑based industries and
investors have already forged close commercial and financial relations with
many of the candidate countries, and they generally enjoy large trade surpluses
with them. Of course, this partly
reflects the need for capital goods in countries that were long starved of
investment. Nevertheless, eliminating
the remaining barriers to trade and freeing up the movement of capital and
labour will be wealth-enhancing for current EU members as well as the
candidates. Of course, that is not to
say that there will not be losers over the short term. Trade and financial liberalisation are
dynamic processes with important short- and long-term effects. Certain industries or categories of labour
are likely to face increased competition as a result of market opening. But at the same time, other EU-based
industries and sectors will experience benefits as a result of the same
process. The capacity to adjust to new
market conditions will shape the final impact they have on EU markets. That said, one must recognise that with the
exception of a few sensitive sectors like agriculture and steel, the trading
relationship between the EU and the candidates has already been largely
liberalised. Obviously member
governments themselves will have a role to play in ameliorating the burden of
adjustment. But again, the overall
impact will likely be positive.
44. One of the fundamental
principles of international trade theory is that under normal competitive
conditions trade brings benefits to both sides. If it did not, there would be no incentive to trade. Judging from the trend in commercial
exchange between the European Union and the candidate countries, significant
gains from trade are being reaped. The
total value of commercial exchange tripled between 1993 and 1999 to €210
billion. That is roughly 13.7% of the
EU’s total trade. These trends
accelerated in the first half of 2000 with a 26% increase of overall trade
between the EU and the candidate countries.
45. The candidate countries
collectively constitute the EU’s second largest trade partner after the United
States, and candidate trade is increasingly directed towards EU countries;
76.7% of Hungary’s exports, for example, go to the Union, and similarly high
rates hold for several candidate countries as well. Even the Baltic states, which were previously less integrated
with the EU, are increasingly redirecting their trade westward. According to Kalev Kukk, for example,
Estonian exports to the EU rose from 3.9% of the total in 1991 to 55% in 1998. [22]
46. The EU’s trade surplus with
the candidate countries fell significantly in 1999, but at €25.8 billion
it remained very high indeed.[23] This is unlikely to be sustainable. But
again, it partly reflects high growth rates in Central and Eastern Europe and
significant capital goods imports to those countries, which will ultimately
increase productivity, and presumably exports as well. Obviously the opening of the EU market to
the ten Central and Eastern European candidate countries as mandated in the
Europe Agreements has led to this fundamental reorientation in trade. Liberalisation measures are still being
introduced. For example, the EU has
signed framework agreements for a Protocol to the Europe Agreement on Conformity
assessment and Acceptance of industrial products (PECA) with the Czech Republic
and Hungary and negotiations are underway with Latvia and Estonia. PECA agreements extend internal market rules
for industrial goods to candidate countries and make it possible for the EU and
candidate countries to accept rulings from each other’s technical bodies
responsible for assessing whether goods meet required standards. The goal is to ensure more rapid passage of
goods across borders by lowering regulatory borders.
47. Another
problem is that there has been a proliferation of regional trade agreements
among the candidates, and some of these may move into the EU faster than
others. There is, for example, a
customs union between the Czech and Slovak Republics, a Baltic free trade area
involving Estonia, Latvia and Lithuania and special trading relations between
Bulgaria and Slovenia. In all these
cases, there is the potential that accession of one party to the EU will result
in falling commercial links with the non-acceding member(s). Some have argued that this situation
requires rapid accession of the candidate countries, while others look to the
creation of a pan-European trading system characterised by
non-discrimination. In essence, this
would involve the extension of a regional “most favoured nation” clause among
all Europe’s trading states, or even a European-wide customs union, which would
remove the need for origin rules inside the area. But this would not lower pressure for rapid accession because by
participating in such a structure, non-member countries would de facto
surrender commercial policy-making to the EU without any means to shape that
policy. The EU, however, should
encourage strong regional economic co-operation and provide market incentives
to advance these types of relations. Here its policy in the Balkans could be a
model for its relations with other regions.
48. The
American position on EU enlargement is generally very favourable. In countless statements, American officials
have expressed their view that deepening Central and Eastern Europe’s relations
with the Union is critical to reintegrating a long-divided continent. Enlargement, they note, will not only
advance continental prosperity but reinforce peace and stability. American companies, moreover, will find it
far easier dealing with a single set of market rules after enlargement. US firms have invested in Central and
Eastern Europe oftentimes based on the assumption that these countries will
eventually join the EU.
49. American
officials have tended not to comment on the pace of enlargement and are well
aware of the complexity of the negotiating process. They are mindful not to interfere in a process that, while in
America’s broad interest, is clearly a bilateral affair between the candidates
and the member states. Occasionally,
however, there are expressions of impatience with the process from some in
Washington. The argument goes something
like this: NATO has done its part to integrate these states into the
Euro-Atlantic Community, and now it is time for the Union to act. But this view fails to acknowledge the
significant role the EU is already playing in the region and the difficulties
involved in pooling sovereignty in certain critical policy areas. Of course, NATO is a purely
inter-governmental body governed by consensus, so such comparisons are not
particularly fair. That said, the
American argument that every effort must be made to ensure enlargement happen
quickly is certainly valid.
50. On specific trade-related matters though,
the U.S. has been more forthcoming.
Past EC enlargements have precipitated some rather nasty trade disputes
between the US and Europe. When new
members adopt the EU’s Common External Tariff (CET), they can suddenly reduce
the level of goods imported from the US.
American officials are prepared to challenge such cases of trade
diversion in which they lose market share as a result of new member accession
to the CET.[24]
51. Alternatively, the US has also had a
problem with the Europe agreements because they have not required the candidate
countries to adopt EU regimes on imports from non-EU states. In 1999 American officials threatened to
apply sanctions against candidate countries in cases where they felt that US
products were being discriminated against unfairly because these countries were
extended better than most-favoured nation status.[25] The US has pressed Hungary and Poland to
reduce tariffs on certain industrial products to the level of EU’s common
external tariff in advance of joining the EU.
Those countries apply lower tariff rates on EU products, which the US
believes is disadvantageous to US exporters, and may violate world trade rules.
In this particular case, the United States has threatened to withdraw certain
duty-free benefits.[26]
52. In recent years, Russia has focused far
more diplomatic attention on NATO enlargement than on EU enlargement. The admission of Hungary, Poland and the
Czech Republic into NATO suggests that this tactic was not particularly
successful. Moreover, because the EU is
also adopting a higher profile on security matters, the Russians are beginning
to pay greater attention to developments within the EU and are hinting that
they should have a say in a process which has important implications for their
country. For its part, the EU is
unwilling to countenance granting Russia any role in the accession
negotiations. [27]
53. Russian leaders do not yet
see the EU as a potential military rival, but they have, at times, seemed to
recognise its potential value as a wedge between the United States and Europe. Russia is also increasingly worried that EU
enlargement will put up yet more barriers to their commercial and political
links to states with which they were once closely integrated. Even in the wake of the Cold War’s end,
Russia has had strong trading relations with many of the candidate countries as
well as fairly lax visa requirements and a rather porous border. The Russians are concerned that enlargement
could hasten the process already underway in the candidate countries of trade
reorientation toward the West and away from Russia. High EU product, environmental and safety standards could also
cut Russian goods out of these traditional markets in everything from food to
automobiles. The EU, moreover, will not
countenance special trade relations between Russia and new member states
because accession demands adoption of the Common External Tariff.
54. The Russians also have
particular concerns for Kaliningrad, Russia’s Baltic province, which is
surrounded by the EU candidate states Poland and Lithuania. Russian officials fear that should
Kaliningrad’s impoverished inhabitants lose their freedom to travel to Poland
and Lithuania as a result of those countries adopting the Schengen agreements,
their considerable hardships will only be further exacerbated. The EU has recognised the validity of these
concerns, and while arguing that Kaliningrad is ultimately a Russian
responsibility, it is nonetheless pursing several special programmes for the
region.[28]
55. The current Swedish
Presidency has made EU-Russian relations a priority. The EU must continually clarify that EU enlargement is not a
threat to Russia, but rather an opportunity.
It must make every effort to ensure that its own markets are open to
Russia and use this access as a means to encourage deeper structural reform
there. Indeed, the EU can be very
helpful in using its own experience with the countries of Central and Eastern
Europe to assist Russia in its still daunting transition task.
56. Indeed,
insofar as enlargement extends the sphere of prosperity in Europe to new
members, neighbouring states stand to benefit.
Ukraine, for example, holds a high stake in Polish economic growth. Along these lines, the EU is working to
shore up relations with states that, while unlikely to join the Union in the
medium term, are nevertheless important players in the broad effort to secure a
more stable and prosperous continent. A
number of programmes have been designed to reach out to these countries, and
the Commission has proposed using the Partnership and Cooperation framework for
dealing with a wide range of issues with Ukraine. Efforts have also been made to extend special trading
concessions, although these concessions often omit sensitive sectors where these
countries might enjoy certain potential comparative advantages. It is precisely
in these sectors where more opening could make a real economic difference.
57. Finally, EU policy in the
Western Balkans has now been framed in the context of future enlargement and
the countries in that region are recognised as potential candidates through the
Stabilisation and Association process, which provides a mixture of support for
liberalisation, financial assistance and deeper co-operation.[29]
58. The enlargement process is not only a
matter of candidate countries preparing for full exposure to European
commercial competition and the administrative challenges of enforcing the
complex and exacting rules of the game.
It also demands important adjustment on the part of EU states. In some respects, and certainly from a
political perspective, these changes are perhaps as daunting as those faced by
the candidate countries. Preparing
Europe’s agriculture system is no doubt the most serious of these. There are also important budgetary
constraints. In Berlin in March 2000,
member government heads agreed to a budget increase of 10% for the enlargement
process but many analysts believe this is not sufficient to underwrite the many
costs that will be involved. Nor did
the Berlin agreement factor in the potential costs of enlargement to the CAP
system.
59. At the Helsinki European Council meeting in
1999, government heads agreed that institutional changes would have to be
introduced before the end of 2000 in order to welcome new members by the end of
2002. Among the problems that had to be
worked out were the number of members in the Commission, the re-weighting of
votes in the Council and the use of majority voting on critical decisions and
institutionalised "enhanced co-operation". All of these matters were left to an Intergovernmental Conference
(IGC) that began in February 2000 and was adopted at the Nice Summit this past
December.
60. Pundits and diplomats alike
are now engaged in a debate as to whether the Nice summit introduced the
changes that the Union will need in order to accommodate new members. It certainly reinforced the growing power of
the member states over the Commission.
Mr Charles Grant, the Director of the Centre of European Reform, has
argued that the classic notion that Europe, driven by the Franco-German engine,
is moving toward ever tighter Union has been replaced by the idea of an
enlarged Union in which the states themselves play the predominant role.[30]
61. The decisions taken at Nice
seemed to strike a blow at the Federalist ideal while increasing the leverage
of the larger states, in part by protecting the right of veto in key sectors
like taxation, social security, borders, defence, treaty changes and EU
budgets.[31] The large countries further strengthened
their power vis-à-vis the smaller members by raising the threshold for
qualified majority voting and by introducing a criterion requiring all
decisions to be approved by votes representing at least 62% of EU citizens.[32] Strong French pressure proved decisive in
blocking any re-weighting of German and French votes in the Council. The Commission’s own leverage was further
reduced, and many in the European Parliament also felt their powers had been
unjustifiably limited.
62. The Nice Treaty also established
the Council voting weights that would be extended to candidate countries with
Poland, for example, to be given 27 votes like Spain, the Czech Republic and
Hungary granted 12, and Latvia, Slovenia and Estonia granted four each. Although qualified majority voting was
expanded to new fields, Spain and several other EU countries receiving
significant infusions of regional aid were able to preserve the principle of
unanimity.
63. The French analyst Mr
Dominique Moisi believes that the Nice Summit demonstrated that enlargement has
lost political steam in recent years.
The entire process, he argues, is posing fundamental questions about the
traditional prerogatives of Europe’s great powers and the role of Europe’s
institutions. This is unfolding at a
time when globalisation is raising critical sovereignty concerns. This is not only sparking confusion about
enlargement, but about the future character of the Union itself. [33]
64. At the very least, the EU
is now positioned to set concrete target dates for enlargement, and it has
reinvented itself just enough to prevent paralysis after enlargement. Again,
these changes include a small increase in majority voting, a re-weighting of
votes in favour of larger countries and a commitment to reduce the number of
commissioners. But the cost of this is
that decision-making itself has grown more complex. The “European Constitution” Intergroup of 130 Euro-MPs has called
the Nice Treaty “not only unsatisfactory and insufficient,” but also in key
areas, “a major obstacle to the EU’s ability to act.” Many in the Parliament feel that their authority has been
curtailed and this will only increase the EU’s democratic deficit.[34]
Obviously further reform is needed, not the least in the agricultural sector,
if enlargement is to be a source of EU strength and vitality.
65. Another problem lies in the
area of public relations. Although
support for enlargement is consistently strong throughout Central and Eastern
Europe, that support cannot be guaranteed over the medium to long term without
a sense that accession is within the realm of possibility. In member states, support is lukewarm at
best although overall those favouring enlargement tend to outnumber those that
oppose it. But according to the
Commission, there are important differences across regions, and only in a few
member states is enlargement seen as a top priority. Moreover, certain groups like farmers are particularly concerned
that enlargement could result in less financial support. The same might be seen in those
less-developed regions that have benefited from EU aid. There are also prevalent concerns in certain
regions and among certain groups about the potential impact of enlargement on
immigration, environment, and crime, and these concerns tend to be strongest in
border regions.
66. Thus the EU and its member
states as well as the candidate countries confront a rather massive
communications policy challenge if they are to justify the kinds of changes
that are being countenanced. The hope
is that the negotiation process will reassure publics on both sides. Presumably both sides are fully considering
public opinion and will need to produce results that can generate and sustain
public support. But the Commission has
also engaged member and candidate states in a communications strategy that
gives a great deal of leeway to the states themselves to craft a strategy for
raising public awareness of the enlargement process. The new enlarged Europe
will certainly be a Europe of nation states and not a federation, and this too
makes it essential that national governments and not the Commission lead the
public debate on enlargement. Yet, the
message so far appears not to have gotten out.
This will be a major challenge that parliamentarians must help to meet.
67. Enlargement is today
Europe’s greatest economic and strategic challenge, and if it is successful, it
will result in the unification of the continent under liberal democratic
principles. One could argue that at
this juncture that this process could never be derailed. The stakes are simply too high and
expectations have been raised to a point where an extended delay would have
such devastating political and diplomatic consequences as to give Europe’s
leaders no choice but to go forward. Yet
there are clearly dangers that something could go awry. At the very least, public support is not
firm in Western Europe and there have been signs of flagging support in some
key candidate countries as well.
Enlargement must therefore be a catalyst for further EU reform that
creates institutions that can work with many new member states, yet which leave
plenty of room to national governments to shape policy. If reform is
insufficient, then we are courting a disaster that could set the whole European
project back.
68. Public opinion in several
key member (Germany and France) and candidate countries (Poland and the Czech
Republic) are beginning to grow wary of enlargement and in Austria and Italy,
political movements opposed to enlargement have gained a significant amount of
support in recent years. This dynamic
must be put to a stop, and the best way to do so is to move more quickly in
eradicating the final barriers to the first enlargement eastwards.
69. But these developments also
suggest that a more sustained and serious dialogue on the benefits of
enlargement is needed both in member and aspirant countries. For both sides, the potential economic,
political and strategic benefits clearly outweigh the potential costs. Yet the costs and the benefits must be
frankly acknowledged in the public discourse of national leaders. This is the
only way to gird our societies for the burdens that are involved here. [35]
70. Current members must also
ensure that current structures are sufficiently resilient to withstand the
impact of enlargement. Most critically, efforts to revamp the ailing
agricultural system must begin in earnest. At the same time, the member states
must clarify that enlargement is a reality that will transpire within the next
three to five years and that every effort will be made to accommodate not just
the small candidate countries, but also the large one’s whose accession will no
doubt introduce notable change in the dynamics of the Union. [36]
71. The Union must also make
every effort not to impose a draconian restriction on the movement of workers
from new member states and not to impose an exceedingly long transition period
on worker movement. To do either would not only exact an economic cost on both
member and candidate countries, but would also take an important psychological
and political toll on the candidates while mocking the very notion of European
solidarity. The fears of a massive
westward migration are simply untenable, and Parliamentarians must make every
effort not to give in to the demagogic temptation to play to this unwarranted
concern.
72. The Union should also
endeavour to explore areas where candidate countries can work more closely
within EU structures even when they have not become formal members. A great deal of progress has been made in
opening some EU markets to candidate country exports, but the real test will be
if this provision can be extended to sensitive sectors like steel and
agriculture. Enhanced co‑operation
in the area of defence and security policy should also be considered,
particularly for those countries like Turkey, the Czech Republic, Hungary and
Poland, which are already members of NATO.
73. Europe’s American partners
harbour legitimate concerns that EU enlargement should not effectively cut US
firms out of new member markets. This,
of course, means that enlargement should be unfolding in the context of general
multilateral trade liberalisation and honest dialogue with Europe’s North
American partners.
74. Finally, enlargement serves
both an economic and a political purpose with important security
implications. The ultimate goal is to
consolidate European continental unity on a foundation of democracy and
prosperity. This ambition is ultimately
very close to that of NATO, and for this reason, the Parliamentarians of this
Assembly should lend their support to a rapid and well‑orchestrated EU
enlargement.
NOTES AND REFERENCES
