The Expansion of the EU into Eastern Europe
Created | Updated Mar 15, 2002
The president of the new European commission, Romano Prodi, talks of "a new European order" to embrace "all of us: the EU, the applicant countries and our neighbours in a wider Europe". He wants "a wider European area offering peace, stability and prosperity".
But will this expansion ultimately have a negative or positive or positive outcome on the European Union? This entry will endeavour to examine this.
BENEFITS
1. Economic
Companies operating in the European Union would have free access to markets of 129 million central Europeans. The Austrian government especially supports expansion because of their strong connections with the countries of central Europe. The resultant increase in trade would likely benefit them directly. Firms whose products are in the declining stages of their life cycle may find new markets for fresh expansion in these countries where before they had difficulty exporting to.
New investors from outside the European Union may be attracted to Central European countries if they join the EU. The investors would benefit from lower factor costs and favourable exchange rates while also having the advantages afforded by being based within the European Union.
The European Union would benefit from access to an increased supply of labour. Due to unfavourable trade balances with the EU, the Visegrad countries believe they are making a greater contribution to the creation of jobs in the EU than a reduction of them. The polish trade deficit alone accounts for 200,000 jobs in the EU. Hourly wages in the Czech Republic, Slovakia, Hungary and Poland are considerably lower than in Germany and a German government spokesman remarked that: "It is as if we had Hong Kong just 80 kilometres from Berlin."
Bargaining Power
An expanded European Union would have more bargaining power at international summits. The European Union would be in a position to challenge the US to gain more favourable outcomes in trade agreements. The European Union would also hope, in the Euro, to have a currency to challenge the US Dollar as the dominant currency in world trade.
.
Security
The Kosovo war came as a shock to some European Union politicians who were concentrating on implementing monetary union. It was argued then, that the only hope for a peaceful Europe was an inclusive one. A special Stability Pact was then established for this purpose. It aims to improve economic integration of the Balkan States with each other and with the European Union. Eastern European leaders are delighted with these developments, the state secretary in the Hungarian ministry, Peter Grottfried, says: "The Kosovo crisis has raised the whole importance of the enlargement process as a way of bringing Europe closer together, including south-east Europe."
Protection against Federalism
For some member states, the expansion of the European Union is seen as protection against the creation of a federal European state. Gunter Verheugen, the European Union's Enlargement Commissioner, says his job is to ensure that "the EU does not choke" on too many new members. If expansion occurs and changes are not made in European Union decision procedures, it will become more difficult to move towards federal union. The UK has resisted any attempts to reduce the areas of decision making that require unanimous consent of all member states. It wants to keep the power of veto in as many decision-making areas as possible to block any federalist moves.
COSTS
Introversion of the EU
The European Union may become more introverted if it expands. The Union would need to import less, as the Central European countries have many natural resources and a large agricultural sector. This may lead to trade wars with other countries, especially the United States. Tension between the US and the EU can already be seen. At the World Trade conference in Seattle, the US and other external suppliers to the EU are trying to have the Common Agricultural Policy (CAP) abolished or cut back. They see the CAP as a protective system designed to shut out their produce. The US will be worried about how the expansion of the EU will affect trade with Eastern Europe. Before Spain joined the EEC it was a grain importer from the US. Since it has joined, Spain now imports its grain from France. The Americans are worried about a similar occurrence in the East.
Competition from Eastern Goods
Some countries may face competition from goods where Central Europe has a competitive advantage. European Union governments are especially concerned at the impact of sensitive goods such as chemicals, textiles, clothing, coal, agricultural products and iron and steel. The EU currently indulges in safeguard measures to protect local producers from eastern imports. This was clearly seen in 1992. When the EU lifted steel quotas in March of that year, there resulted an increase in Eastern European exports. The EU then put restrictions on Czech steel and imposed anti-dumping duties on Croatian, Czech and polish steel tubes. Ultimately this will have to stop if these countries become EU members (Aldcroft and Morewood, 1995).
Danger of Alienating Russia
Russia cannot be left out of the European Union integration process. A Russia isolated from the EU and an enlarged Nato is a recipe for tension and possibly a new Cold War. Russia is opposed to further Nato expansion. In an effort to ease tensions, Nato offered Russia a consultation role on major security issues. Russia has indicated that it has no objection to Slovenia joining "as long as it was the only country to do so." The war in Serbia may change attitudes and result in an offer of Nato membership being made to Slovakia, Slovenia, Romania and Bulgaria, all former Warsaw Pact members.
The treatment of Russian-speaking minorities in the Baltic States, if they are going to join the EU, is also a cause for Russian concern. Estonian legislation on aliens, citizenship, language, local elections and education are perceived to discriminate against the Russian-speaking minority. Criteria for entry to the EU set down by the European council in June 1993 included: "protection for human rights" and "respect for and protection of minorities." These measures may allay the fears of the Russians.
Environment
As there is less relevant legislation in place, Central Europe generates enormous amounts of pollution. This is more a matter of cost than principle for these countries. It is accepted that they must modernise everything from industrial waste disposal to water supplies to homes, but argument may focus on how much aid the European Union might provide and on the length of time given to implement it.
Transfers of Budget
Relative to the European Union, the Central European countries are all fairly poor. A high proportion of their workforce is employed in agriculture. This would make these countries eligible for large grants from the Common Agricultural Policy (CAP), which would have a massive effect on the peripheral regions of the current EU members. They would also receive large grants from the Structural Fund which would leave less funding for Greece, Ireland, Portugal and Spain, leaving these countries lagging behind the richer members of the EU.
The budget of the European Union is fixed at 1.27% of the European Gross Domestic Product (GDP). As the Central European countries have relatively low GDPs in comparison to current member states, this expansion would inevitably lead to a dilution of EU spending.
CONCLUSION
It would seem that expanding the European Union would have a lot of benefits for business within Europe. Trade between East and West would become freer and this would generate more wealth in the entire area.
Yet, the Union must be careful not to over stretch itself financially by taking on countries that are not ready for membership. The EU must not choke on to many new members at once. It would seem that the sensible solution would be to allow those countries to enter the European Economic Area (EEA), until such time as they are ready for full membership to the EU.
But will this expansion ultimately have a negative or positive or positive outcome on the European Union? This entry will endeavour to examine this.
BENEFITS
1. Economic
Companies operating in the European Union would have free access to markets of 129 million central Europeans. The Austrian government especially supports expansion because of their strong connections with the countries of central Europe. The resultant increase in trade would likely benefit them directly. Firms whose products are in the declining stages of their life cycle may find new markets for fresh expansion in these countries where before they had difficulty exporting to.
New investors from outside the European Union may be attracted to Central European countries if they join the EU. The investors would benefit from lower factor costs and favourable exchange rates while also having the advantages afforded by being based within the European Union.
The European Union would benefit from access to an increased supply of labour. Due to unfavourable trade balances with the EU, the Visegrad countries believe they are making a greater contribution to the creation of jobs in the EU than a reduction of them. The polish trade deficit alone accounts for 200,000 jobs in the EU. Hourly wages in the Czech Republic, Slovakia, Hungary and Poland are considerably lower than in Germany and a German government spokesman remarked that: "It is as if we had Hong Kong just 80 kilometres from Berlin."
Bargaining Power
An expanded European Union would have more bargaining power at international summits. The European Union would be in a position to challenge the US to gain more favourable outcomes in trade agreements. The European Union would also hope, in the Euro, to have a currency to challenge the US Dollar as the dominant currency in world trade.
.
Security
The Kosovo war came as a shock to some European Union politicians who were concentrating on implementing monetary union. It was argued then, that the only hope for a peaceful Europe was an inclusive one. A special Stability Pact was then established for this purpose. It aims to improve economic integration of the Balkan States with each other and with the European Union. Eastern European leaders are delighted with these developments, the state secretary in the Hungarian ministry, Peter Grottfried, says: "The Kosovo crisis has raised the whole importance of the enlargement process as a way of bringing Europe closer together, including south-east Europe."
Protection against Federalism
For some member states, the expansion of the European Union is seen as protection against the creation of a federal European state. Gunter Verheugen, the European Union's Enlargement Commissioner, says his job is to ensure that "the EU does not choke" on too many new members. If expansion occurs and changes are not made in European Union decision procedures, it will become more difficult to move towards federal union. The UK has resisted any attempts to reduce the areas of decision making that require unanimous consent of all member states. It wants to keep the power of veto in as many decision-making areas as possible to block any federalist moves.
COSTS
Introversion of the EU
The European Union may become more introverted if it expands. The Union would need to import less, as the Central European countries have many natural resources and a large agricultural sector. This may lead to trade wars with other countries, especially the United States. Tension between the US and the EU can already be seen. At the World Trade conference in Seattle, the US and other external suppliers to the EU are trying to have the Common Agricultural Policy (CAP) abolished or cut back. They see the CAP as a protective system designed to shut out their produce. The US will be worried about how the expansion of the EU will affect trade with Eastern Europe. Before Spain joined the EEC it was a grain importer from the US. Since it has joined, Spain now imports its grain from France. The Americans are worried about a similar occurrence in the East.
Competition from Eastern Goods
Some countries may face competition from goods where Central Europe has a competitive advantage. European Union governments are especially concerned at the impact of sensitive goods such as chemicals, textiles, clothing, coal, agricultural products and iron and steel. The EU currently indulges in safeguard measures to protect local producers from eastern imports. This was clearly seen in 1992. When the EU lifted steel quotas in March of that year, there resulted an increase in Eastern European exports. The EU then put restrictions on Czech steel and imposed anti-dumping duties on Croatian, Czech and polish steel tubes. Ultimately this will have to stop if these countries become EU members (Aldcroft and Morewood, 1995).
Danger of Alienating Russia
Russia cannot be left out of the European Union integration process. A Russia isolated from the EU and an enlarged Nato is a recipe for tension and possibly a new Cold War. Russia is opposed to further Nato expansion. In an effort to ease tensions, Nato offered Russia a consultation role on major security issues. Russia has indicated that it has no objection to Slovenia joining "as long as it was the only country to do so." The war in Serbia may change attitudes and result in an offer of Nato membership being made to Slovakia, Slovenia, Romania and Bulgaria, all former Warsaw Pact members.
The treatment of Russian-speaking minorities in the Baltic States, if they are going to join the EU, is also a cause for Russian concern. Estonian legislation on aliens, citizenship, language, local elections and education are perceived to discriminate against the Russian-speaking minority. Criteria for entry to the EU set down by the European council in June 1993 included: "protection for human rights" and "respect for and protection of minorities." These measures may allay the fears of the Russians.
Environment
As there is less relevant legislation in place, Central Europe generates enormous amounts of pollution. This is more a matter of cost than principle for these countries. It is accepted that they must modernise everything from industrial waste disposal to water supplies to homes, but argument may focus on how much aid the European Union might provide and on the length of time given to implement it.
Transfers of Budget
Relative to the European Union, the Central European countries are all fairly poor. A high proportion of their workforce is employed in agriculture. This would make these countries eligible for large grants from the Common Agricultural Policy (CAP), which would have a massive effect on the peripheral regions of the current EU members. They would also receive large grants from the Structural Fund which would leave less funding for Greece, Ireland, Portugal and Spain, leaving these countries lagging behind the richer members of the EU.
The budget of the European Union is fixed at 1.27% of the European Gross Domestic Product (GDP). As the Central European countries have relatively low GDPs in comparison to current member states, this expansion would inevitably lead to a dilution of EU spending.
CONCLUSION
It would seem that expanding the European Union would have a lot of benefits for business within Europe. Trade between East and West would become freer and this would generate more wealth in the entire area.
Yet, the Union must be careful not to over stretch itself financially by taking on countries that are not ready for membership. The EU must not choke on to many new members at once. It would seem that the sensible solution would be to allow those countries to enter the European Economic Area (EEA), until such time as they are ready for full membership to the EU.
