Göteborg must set a firm date for first accessions

Date: 07/06/01

By Heather Grabbe

IN THE run-up to next week's Göteborg European Council, many small-minded concerns are distracting attention from the gains that enlargement would undoubtedly bring.

EU leaders are preoccupied with exaggerated claims about labour market disruption and the budgetary implications of taking in poorer countries. But long-term benefits will outweigh adjustment costs. The risk is that any delay will make the process much harder to manage, if the EU waits until the economic climate turns more hostile.

The leaders need to develop a strategy to explain the benefits of enlargement to the public. The Centre for European Reform is supplying ammunition. Its new pamphlet Profiting from EU Enlargement analyses costs and benefits for both sides - dispelling myths and showing how the existing EU will gain as well as the applicants.

There are four main arguments for this.

First, enlargement will be good for Europe's economy. It will add more than 100 million consumers to the single market, and it could create more than 300,000 jobs in the EU-15, plus many more in the applicant countries. The central European economies are currently small, but many regions are growing faster than mature EU markets. Front-runner candidates are rapidly transforming their economies through trade with the single market and foreign direct investment.

Next, enlargement need not be expensive. Constraints on the EU budget mean there will be few financial transfers to new members compared with those given to Greece, Ireland, Portugal and Spain.

The cost of new accessions to the 2000-06 EU budget is very small. The maximum allocation to central and eastern Europe amounts to €67 billion - just one thousandth of EU GDP per year. It's a tiny price to pay for reuniting Europe, and a fraction of the amount spent by the West on defence during the Cold War. It is only a tenth of the amount spent by the German federal government on integrating the eastern Länder over the past decade.

In the longer term, however, public funds will be needed to help bring environmental and other standards up to EU levels. The next budget after 2006 will have to take a more rational approach to the needs of richer and poorer parts of the Union.

Thirdly, enlargement is the most effective way to avoid mass migration. Offering full access to the single market will provide job opportunities to keep central European workers employed in their own countries. Closing the door to those in the East would encourage people to move because of the consequent loss of future prospects to study and work abroad. Moreover, illegal migration will grow if legal routes are shut off.

Likewise, wage competition will not be cut by abandoning enlargement. Business is already exposed to global competition, not just regional cost differentials. EU businesses can stay profitable by using central Europe for low-cost production and by selling into the region's growing markets.

Finally, there are high opportunity costs to delaying the first accessions. Stalling the entry of the best-prepared candidates would cause foreign direct investment inflows into central Europe to drop. The candidates' markets would become more difficult operating environments without the levelling effect of common rules under the single market. The resultant decline in investment and trade would slow down the process of industrial restructuring that is essential to improving the applicants' competitiveness.

If the prospect of membership recedes, the incentive to reform would wane, increasing protectionism and reducing support for reformist governments. Resultant political instability and economic decline on the EU's borders will be a far bigger threat than enlargement.

The safest course of action is often the boldest: the EU needs to set a date for the first accessions at Göteborg. The history of European integration shows that important and difficult projects are achievable only if there is a firm timetable. Without a deadline, member states will go on fiddling with the institutions and bickering about budgets forever.

Opponents of a fixed date usually argue that the applicant countries will slow down their preparations if they think entry will be automatic. But, in fact, the opposite is true. Front-runners are aiming for 2003, but it is hard for their governments to persuade legislatures and ministries to hurry up when there is no clear evidence of a commitment from the EU to let them in soon.

Also, a date for the first accessions would not bind the EU to letting in any particular country first: the best-prepared applicants can compete for seats on the first train to Brussels.

But the Union should be ready to greet them with generosity, because the EU-15 will be economic winners from Europe's reunification.

Heather Grabbe is research director at the Centre for European Reform, a London-based think-tank. Copies of Profiting from EU Enlargement will be available for €15: email info@cer.org.uk, or visit the website www.cer.org.uk.

Article forms part of a survey on enlargement.