Can EU enlargement really work?

Citation

Floyd, D. (2005), "Can EU enlargement really work?", European Business Review, Vol. 17 No. 6. https://doi.org/10.1108/ebr.2005.05417fab.003

Can EU enlargement really work?

Abstract Purpose–To present a reasoned critique of the process of European Union enlargement and offer a positive alternative strategy.Design/methodology/approach–Structured analysis of the EU enlargement process, the problems it has encountered, and the dilemmas facing EU policy makers in areas such as foreign policy, the environment and further expansion.Findings–Enlargement could benefit the European Union, but only if it takes place gradually, allowing for regional differences – economic and cultural – and without centralising blueprints that are doomed to failure. Further expansion should not take place until the new member states of the recent “wave” are better integrated.Originality/value–Highlights the problems with the EU enlargement process that must be addressed.Keywords European Union, Economic integrationPaper type Viewpoint

This paper sets out to examine the case for further expansion of the EU and the limitations of this at present in view of current difficulties amongst member states.

The recent no votes in France and Holland regarding the constitution have been blamed on misinformation as well as the proposed costs of further enlargement and the EUs disappointing growth rate leading to further fears of recession. The EU faces additional problems with external relations arising from the Iraq war and trade disputes in steel, aircraft manufacture, textiles and agriculture. The paper develops a critical perspective on the political social and economic factors that may influence the future success of the EU in improving both external relations as well as unity within itself.

The year 2005 saw the largest expansion of the EU to date from 15 to 25 members. This has not been easy due to the costs of an expanding agricultural and regional aid budget. Full membership rights have still not been achieved with restrictions on labour mobility as well as new members being offered 20 per cent of the agricultural subsidy aid for the first five years of EU membership. The budget is further complicated by the UK being offered a £3 billion per year rebate negotiated in 1984. There is a substantial disparity of income amongst existing member states. Additional concerns over enlargement have stemmed from the threat of jobs being outsourced from richer member countries to the lower cost eastern European countries.

Eastern European countries moreover have expressed concern over paying for additional negotiated rebates such as the UK case of agriculture cited in a recent London Times article (5 June 2005).The new members have also been given additional time to comply with all environmental and social policy legislation. This in turn can lead to higher costs and firms will need to more up the value chain in Eastern Europe as more low cost manufacturing moves to China. Other problems in transition countries have included high inflation, this may cause more short-term unemployment as inflation is brought down. The problems of corruption and property rights have been other concerns for the European Union.

Further concerns over enlargement

New members also need to contribute to the EU budget in the same way as other members and this accounts for between 1 and 2 per cent of their GDP. This may prove difficult for the new countries to find at a time when finances are limited. Rehn (2005) suggests that Europe needs to be more gradual now with the process of enlargement to ensure the support of citizens for the policy and maintain the ability of the EU to act more swiftly.

There have also been restrictions on labour migration for new member states.

On the positive side enlargement is a powerful foreign policy tool and expansion of free trade but needs the support of citizens especially when new constitutions are drawn up to ensure complete success. The EU has shown great commitment towards peace and this has been a major achievement. It is also likely that some people are less certain about enlargement at times of higher unemployment, indeed the EU has not achieved as favourable employment as in the USA at present. The transition in Eastern Europe has in some cases also led to more class divisions as well as nationalistic tendencies. However, others may see the positives of having a more diverse group of people that may improve the skill set across the EU as well as providing opportunities for greater product differentiation. Therefore social and cultural factors also need to be taken into account before expanding the enlargement process can be considered.

The introduction of the Euro has also proved to be controversial. Member states have indicated price rises initially and this has caused some to question the key benefits of this policy. The focus on low inflation may hamper growth and at present inflation has been of less concern particularly in the global context. Members joining the Euro also lose sovereignty and are unable to set their own interest rates, furthermore there has been concerns over further possible loss of sovereignty over border controls in the recently proposed constitution. There has also been concern about the movement towards a more flexible economy for some member states.

In addition, enlargement with countries that need to catch up in terms of per capita income may require policies that focus more on growth rather than low inflation.

Requirements

Countries wishing to join the EU need to show a commitment towards EU values. These include a democratic government and equality in the workplace, as is stipulated in the EU social chapter. The values define Europe, rather than its geographical borders, according to Rehn (2005). Furthermore, there needs to be the will of the people to support these values. EU values need to be respected and people need to live up to them. Legislation in the social, economic and environmental domains need to be followed by new member states, and at present some prospective new member countries may face difficulties doing so and may not be in a position to join at present as a consequence of this. Turkey for example needs to do more to improve human rights prior to join the European Union.

Improving the EU-US relationship

Recent political events have shown there to be differences in approaches to international politics on both sides. There are also differences in culture and history that can make things more difficult. However, it is necessary to look at the history that has brought Western Europe together in order to bridge the gap particularly in more recent times.

It is then possible to see if we then have common ground which can be built upon. Young (2004) states that EU trade policy is generally liberal and at the same time this has been the case for the US where in the past cheaper goods including cars and electronics have been allowed to be imported from Asia as well as more manufacturing jobs being outsourced. Also both the US and EU have been involved in high profile trade disputes including steel, textiles and agriculture. Both have also been important players for the WTO and have championed multilateralism. More needs to be made of expanding fair trade on a global basis. However, Young, 2004 also shows that the trading relationship becomes more difficult to maintain as the EU embarks on enlargement where more players are introduced to the negotiating table.

In the mid-1940s, the US encouraged European countries to establish the European Union and strive for no further wars. NATO has also played its part in promoting peace. More recently there has been cooperation between the US and EU in Afghanistan and the Balkans. Many EU nations and the US have all at some stage been super powers and know the limitations of this and that a degree of cooperation with the outside world needs to be maintained.

Conclusion

It has been shown that there are many problems with the enlargement process at present, which must be addressed at both practical and theoretical levels. Constraints are financial as well as political, for economic discrepancies accompany the problems of establishing democratic processes. There are huge benefits to be achieved by improving US relations with the EU, including free trade, working together instead of in conflict over environmental improvement and combating extreme ideologies at home and abroad. Recent improvements resulting from the G8 summit in July 2005 need to be built upon with policies to encourage freer global trade, the reduction of debt for developing countries as well as an acceptance that the problem of climate needs to be tackled, regionally and globally. Before expanding further, the EU needs to consolidate the integration of the new wave of member states from Central and Eastern Europe. By working gradually, rather than trying to impose radical and centralising blueprints, the EU will be able to regain the support and trust of its citizens.

Further readingMercado, S., Welford, R. and Presecott, K. (2001), European Business, FT Publications, Prentice Hall Madrid.Ashurst Seminar Series (2005), “Rivals or partners? Texas and Europe?”, Ashurst Seminar Series, London, 27 April.

David FloydLincoln Business School, University of Lincoln, Lincoln, UK