The economic effects of membership in the EU for Malta

The paper assesses the overall economic effects of Malta's accession to the European Union. It states that there are both benefits and costs associated to the membership. The main benefits relate to the new opportunities, such as better access of Malta's exports to foreign markets, enhanced competitive structures and improvements in efficiency. These will strengthen the competitiveness of the Maltese economy in the long run.

The run-up to the accession has already shown that a more liberalised environment is beneficial to the economy. The costs arise mostly from the changeover from a protected economy to an open competitive one, which could lead to a loss of income and employment. The authors point out that a considerable part of Maltese companies are used to a sheltered environment with a captive market, and many of these may not be able to cope when exposed to international competition.

The paper also states that Malta does not have much choice between free trade and protection. It will have to open up its markets even if it does not join the EU, since obligations under the World Trade Organisation regime require progressive removal of trade barriers that could eventually also include agricultural protection. However, if Malta joins the EU, the opening up of the domestic market will be quicker and more extensive and will definitely include agriculture.

The paper assesses the direct, indirect and induced impacts on the Gross Domestic Product and on other macroeconomic variables, such as employment, inflation and the fiscal and external balances.

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