European Union Enlargement When Ten Countries Recently Term Paper
- Length: 15 pages
- Subject: Economics
- Type: Term Paper
- Paper: #60922932
Excerpt from Term Paper :
EUropean Union Enlargement
When ten countries recently joined the 15 existing European Union (EU) member-states, the event represented the largest enlargement of the European Union in its history (Golino, 2003). One of the major perceived benefits of this union is that the countries formed an economic, political and military coalition with a combined population of 450 million people and an economy that produces approximately one-quarter of the world's annual output.
The new members include eight Central European countries -- the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia and Slovakia -- plus Malta and the southern Greek-Cypriot part of Cyprus (Golino, 2003). Their inclusion is expected to further shape the future character of the EU, how it governs itself, and the global role it pursues. It is also seen as an affirmation of European identity and of a break from Europe's communist past.
The Eastern European and Mediterranean countries have had to introduce major economic reforms and adopt thousands of pages of EU laws and regulations before entry into the EU (BBC News, 2000). For instance, Poland and Hungary, along with the other states, had to implement thousands of EU laws, treaties and regulations over the past decade. This paper will discuss these requirements from the perspectives of the original EU members, the new members and a variety of outside nations, particularly the United States.
The new members have been implementing EU changes for many years. For example, Poland agreed to hire thousands more border guards and tighten immigration controls before it joined the European Union (Lungescua, 2002). The commitments allowed it to negotiate with the EU, which was wary of Polish entry due to the sensitive issue of justice and home affairs.
In a nutshell, the original members of the EU worried that eastward expansion will bring more illegal immigrants and higher crime levels. To reassure them, the largest candidate country, Poland, agreed to hire more than 5,000 border guards by 2006-50% of which have already been hired. These guards replaced conscripts currently patrolling Poland's 1,200 kilometre (745-mile) border with Ukraine, Russia and Belarus.
Poland also agreed to build new border stations and buy modern equipment such as helicopters (Lungescua, 2002). In addition, to meet EU requirements, Poland has implemented a visa requirement for Russians, Ukrainians and Belarussians. However, Poland insists that it does not intend to make the lives of its neighbors difficult and pledged to keep visa fees low.
Economically, countries had to convince the EU that they had a "functioning market economy" and their economies could withstand the competitive pressures of EU membership (Orla, 2000). Politically, they had to demonstrate a functioning democracy with respect for human rights and minorities.
Basically, to fulfill the criteria for accession to the EU, the candidate countries have been adapting their legislation to EU's laws and regulations for years, particularly regarding the free movement of goods, free movement of capital, company law, competition policy, taxation, industrial policy and more (World Tariff Inline Database, 2002).
The newly initiated countries have taken great measures to restructure their economies, especially through privatization that has made the private sector the key momentum to growth. Financial intermediation has also increased, and the eastern countries now have a more stable banking sector. This transformation and restructuring has strengthened business confidence and economic efficiency. As a result, these countries enjoy a greater business investment, which has become a stimulus to growth. Many of these countries registered economic growth well above the EU average during 1997-2001.
Source: World Tariff Online Database.
In addition, the economies of the candidate countries have enjoyed the benefits of the entry of foreign capital, which has been caused not only by lower production costs, but also by a liberalizing investment environment and good trading prospects in the course of their accession to the EU (World Tariff Inline Database, 2002). Poland, the Czech Republic and Hungary are the largest destinations for foreign direct investment. In 2001, foreign direct investment inflows into these three countries amounted to U.S.$8.8 billion, U.S.$4.9 billion and U.S.$2.4 billion, respectively. Germany, the Netherlands and France are the major foreign investors, and their targeted sectors include financial service, transport, construction, energy and manufacturing.
Source: World Tariff Online Database.
In addition to reaping the benefits of the domestic market potential there, foreign investors are attracted to the idea of exploiting the processing production capability of Eastern Europe and the Mediterranean, as the EU's tariffs and quotas on most manufactured products imported from the candidate countries have been removed, given the recent enforcement of various Europe Agreements in developing closer links between the candidates and the EU before their eventual accession (World Tariff Inline Database, 2002).
Along with the proliferation of domestic private enterprises, foreign direct investment has enhanced the competitiveness of the manufacturing industries of the candidate countries, which can produce better quality products for the Western market. Already, the EU has become their largest export market, absorbing more than half of the exports of almost all candidate countries. In the Czech Republic, Hungary and Poland, for example, 69%, 75% and 70% of exports were respectively destined for the EU in 2000.
Foreign capital now flows from the EU to the candidates in the form of financial aid. In preparation for the accession, the EU drew up a financial package to help the new members carry out the necessary reforms, covering infrastructure, environment and agricultural and rural development (World Tariff Inline Database, 2002). This assistance is expected to lead to a higher public spending in the new member states, facilitating a further restructuring of their economies.
The new enlargement of the EU will also affect Europe's citizens. This event will change the daily lives of the 454 million individuals in the now 25-nation bloc in many ways.
Here is a list of some of the changes since the new countries joined the EU (European Union Business, 2004):
FREE CIRCULATION: EU citizens need identity cards, but no longer passports, to travel between the 10 new states and the 15 old ones. Border officials will, however, be stopping people at the frontiers of the 10 new states since these will not be open for free passage under the laws before 2007.
WORK IN OTHER COUNTRIES: Citizens of the new member states are still not free to work without a permit in Western Europe because most of the old member states -- except for Britain, Ireland and Sweden -- have put up restrictions for a transition period that could be up to seven years.
PRICES: New member states must have the same customs duties and value-added tax as the old members. Countries that had eliminated customs duties, such as Estonia, should experience price increases. In Estonia for example, sugar, which had been free of tarifs, will now be twice as expensive. Textiles imported from China and India should be more expensive for the new member states. But in the Czech Republic, Japanese and U.S. motorcycles should be cheaper because customs duties will be lower.
REAL ESTATE: Restrictions on foreigners buying real estate should remain until 2009.
EURO: The new members will have to wait until at least 2007 before they can adopt the European single currency.
Now that they have joined the EU, the accession countries have a minimum of two years to wait - during which they will be members of Exchange Rate Mechanism (ERM) - before they can sign up to European Monetary Union (EMU).
Their accession to the European Union, experts say, is a historic achievement not just for themselves and Europe, but also for other nations, particularly the United States. The main reason for this assumption is that a unified European continent is a long-time goal of American policy attempted by every American administration since that of President Harry S. Truman.
In addition, many of the EU's new members are close allies of the U.S. For instance, Poland, the new EU member-state with the largest population and economy, is supporting the U.S. mission in Iraq by commanding a multinational division deployed to the south-central region of Iraq.
According to Radek Sikorski, director of the New Atlantic Initiative at the American Enterprise Institute and a former deputy foreign and defense minister of Poland (Golino, 2003): "The inclusion of countries that were isolated, impoverished, and politically transformed by half a century of Nazi and communist totalitarianism will change Europe -- economically, politically and above all culturally -- in ways its politicians have not yet begun to comprehend."
Many critics believe that the accession of the newest Eastern European states to the EU will intensify the social crisis in these countries and in the rest of the EU (Slazmann, 2004). The population in Eastern Europe has already experienced major increases in poverty and unemployment, wage cuts and the devastation of social provisions in order to meet the criteria for EU membership.
According to Slazmann (2004): "The introduction of free market conditions, the privatisation of former state enterprises and radical austerity measures have led to devastating economic and social conditions. Wages in the accession countries…