Enlargement process of
the European Union
I. The enlargement of the European Union ....................3
Substantial benefits for the EU.................4
Benefits for New Member States................5
The “cost” of enlargement...................9
Reaching progress in political and economical criteria...... .11
II. The Baltic States in the European Union...............13
The trade policy in Baltic States.................13
The integration’s impact to Baltic societies............15
EU Enlargement is of highest priority...............16
Implementation of structural funds in the Baltic States ........18
I. The Enlargement of the European Union
Enlargement is one of the most important opportunities for the European Union at t the beginning of the 21st century. It is a unique, historic task to further integration of the continent by peaceful means, extending a zone of stability and prosperity to new members.
In March 1998 the EU formally launched the process that will make enlargement possible. It embraces the following thirteen applicant countries: Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, the Slovak Republic, Slovenia and Turkey.
The European Union comprises now 15 member States, with a total population in ex xcess of 375 million inhabitants. These member States have united for the purpose of economic and political cooperation. The EU can already look back on a history of successful enlargements. The Treaties of Paris (1951), establishing the European Coal and Steel Community (E
However, the enlargement facing the EU today poses a unique challenge, since it is without precedent in terms of scope and diversity: the number of candidates, the area (increase of 34%) and population (increase of 105 million), the wealth of different histories and cultures.
Third countries will significantly benefit from an enlarged Union. A single set of trade rules, a single tariff, and a single set of administrative procedures will apply not only just across the existing Me ember States but across the Single Market of the enlarged Union. This will simplify dealings for third-country operators within Europe and improve conditions for investment and trade.
Ten mentioned above countries will join the EU on 1 May 2004. As of their day of accession, the new member states will apply the EU’s Common Commercial Policy in its entirety, including the Common External Tariff, EU preferential trade agreements, WTO commitments and EU trade defence measures. They will also adopt internal market rules and be
The financial package for enlargement of the European Union, decided in Copenhagen in December 2002 and included in the accession treaties signed in Athens in April 2003, will take effect on 1 May 2004. The significant impact of enlargement on the Union finances was taken into account in the revision of the Financial Perspective decided by the European Parliament and the Council of the European Union in May 2003.
Substantial benefits for the EU
The EU consisting of 25 members will continue to speak with one voice in international trade fora. The addition of 10 Members will increase the EU’s authority and influence in trade talks.
The new Member States are young, dynamic and fast growing economies. This dynamism will benefit the whole of the EU.
Benefits for New Member States
An even larger market than before:
With a population of almost 455 million and a GDP of around €9231 billion, the enlarged EU will account for some 19% of world trade and be the source of 46% of world outward FDI and host to 24% of inward FDI.
The current European Union is already the largest single market in the world. There are no internal borders between the Member States and the harmonisation of regulations an
Third countries will benefit from an increased single market and a simplified and enhanced access to the current acceding countries’ markets.
A single set of rules for business:
Enlargement will extend the EU’s trade policy regime to the acceding countries. The current system, featuring a single trade regime for the EU and a different regime for each of the candidates, will disappear. A single set of trade rules, a single tariff, and a single set of administrative procedures will apply not just across the existing fifteen member states but across the enlarged Union of twenty-five. This will greatly simplify the dealings that third country operators have within Europe.
Beyond the simplification of procedures, enlargement will bring a range of immediate and tangible economic benefits to third countries. These will arise out of the acceding countries adopting the same open standard of treatment of third countries which the current EU applies.
A very open economy with a high standard of rules:
For trade in goods the new member states will have to adopt the Community Common Customs Tariff (C
In the case of services third countries’ services providers will benefit from the implementation of the single market in acceding countries, where they will get the same treatment as in the rest of the EU.
For investors the very high standards of treatment currently afforded by investors in the EU will be applicable throughout the enlarged Union. The national treatment provisions for inward investors as set out in the Treaty of Rome will be extended to the new Member States. For instance, the right of establishment and free movement of capitals entrenched in the Treaty will be applicable to all companies of the new Member States.
As regards technical regulations and their impact on the openness of an economy, the “one standard for all” principle of the single market will be extended to the acceding countries with the obvious advantages to third country suppliers. The advantages in terms of trade facilitation will accrue for the exporters of the third countries with which the Community has concluded mutual recognition agreements (or MRAs) as regards their exports to the new Member States.
There are some sectors where the European Union maintains some limited quantitative restrictions with third countries, notably in the cases of textiles and steel. Although the new member states will apply these restrictions as of their accession, the effect on third countries will be limited. Indeed, WTO rules foresee that all textiles and clothing quotas shall be phased out by 31 December 2004. As far as steel is concerned, the two EC agreements which foresee quotas run until 31 December 2004 and would disappear if the countries concerned joined the WTO before then.
Third countries will receive enhanced levels of intellectual property rights (IPR) protection in the acceding countries due to their adoption of EU directives in this field upon accession. The Europe Agreements already contain an obligation for the acceding countries to join the relevant international conventions in this area and bring levels of IPR to a similar level to that afforded in the EU.
At present no candidate countries is a member of the WTO’s Government Procurement Agreement (GPA). Upon accession, all will have to apply the EC directives on public procurement, which go beyond commitments in the GPA. In terms of the direct impact on market access for third countries, the application of EU public procurement rules, especially directive 93/38 which opened up procurement in the water, energy, transport and telecom sectors, will bring major benefits.
Likewise for subsidies: new member states’ subsidies will be brought within EU rules, which are in line with OECD and WTO disciplines. Once again this will benefit third countries by imposing stricter standards than the rules currently applied by the candidate countries. With accession, the new member states will lose their transition economy status.
The single currency and free border crossing
Single currency of all Member States is a great advantage primarily for peoples of those countries, because when crossing the borders of countries of the EU people wouldn’t have to worry about changing currency. As for entering another European country, people wouldn’t have to have such problems as preparing visa and other necessary documents.
Educational and working opportunities
After enlargement citizens of member States will receive the right to work in any European country as well as to increase their qualification abroad. Many people were waiting for such decision from the European Parliament, as a lot of people at present work not in their home-countries, due to that they had to gather many documents to get the working permit. But from the 2004, May 1 it will be much easier. Primarily this will be a benefit for third countries, which don’t have such rich market as in other more developed European countries, and can’t offer so many working vacancies for their own citizens. The same situation refers to students, who will get the right to study in any European university without additional payment as foreigners did before.
The “cost” of enlargement
Expenditure for the 10 new Member States, around € 11.8 billion in commitments, is to be entered into the EU budget to make it ready for 1 May. For 25 Member States, the budget stands at less than 1% of EU Gross National Income (GNI). These figures will obviously have to rise in the coming years to take account of the new funding challenges the EU faces. Budget Commissioner Michaele Schreyer stated that with this move the budget was ready for enlargement. The year 2004 will see the phasing in of all expenditures agreed and the opening on equal grounds of all EU programmes for 75 million new citizens.
The budget volume for the new Member States
The additional expenditure for the 10 new Member States is about € 5.105 billion in payments and € 11.771 billion in commitments. The new Member States will receive in the current year about € 1.7 billion of pre-accession aid because the projects of the PHARE, SAPARD and ISPA programmes will have to be completed in the following years.
The total volume of the Budget 2004 for the EU-25 after enlargement
The total volume of the budget for EU- 25 is € 99.724 billion in payments and € 111.3 billion in commitments. EU expenditure for 2004 is at 0.98% of EU Gross National Income. But there is still a considerable margin of € 11.8 billion under the financial perspectives ceiling for the EU budget even after enlargement.
This Preliminary Draft Amending Budget responds to the call by the European Parliament and the Council to decide early in 2004 on an amending budget to cover the amounts for the ten new member States. This amending budget concerns only the headings agriculture, structural actions, internal policies and the lump-sum compensation payments to ensure a net beneficiary position for the new member States. For administrative expenditure, the enlargement related amounts have been included from January, 1 to allow preparations to go ahead.
The additional appropriations proposed for agriculture expenditure amount to € 287 million. These credits are, first and foremost, to cover market measures, such as export refunds and intervention measures. Direct aids for the new Member States will be gradually phased in, and will only have a budgetary effect from 2005.
For rural development, commitments are set at € 1.733 billion for the new Member States. The most important innovation here is that commitments under the EAGGF-Guarantee are not automatically equal to payments. Thus, payments for 2004 are set at € 645 million. This allows more time for the execution of available credits.
A total amount of € 1.633 billion is now foreseen for the integration of the new member States in existing and in new Community programmes. Most programmes had already been extended to the acceding countries in past years. Three new actions have been decided at the European Council in Copenhagen concerning the Schengen facility (€ 317 million), transition facility for institution building measures after accession (€ 221 million) and nuclear safety in Lithuania and Slovakia (€ 138 million).
According to the political agreement that the new Member States should not become net-payers at the beginning of their membership, about € 1.409 billion will be paid as lump-sum transfers to the new member States. This fact wouldn’t make the authorities of new members feel like being in debt to the Union, and thus, would give the opportunity to make their own economy stable.
Reaching progress in political and economical criteria
All candidate countries continue to meet the political criteria, except Turkey (although this country is also beginning to make progress as demonstrated by the recent important constitutional reforms). The past year has generally seen further positive developments in the countries meeting the political criteria, and the overall record in strengthening democratic institutions, in respecting the rule of law and protecting human rights has improved.
However, some issues of concern remain — reform and strengthening of the judiciary should be further accelerated. The fight against corruption should be further stepped up. The trafficking of women and children remains a serious cause of concern, requiring vigorous measures. And finally, Turkey should take the necessary measures to ensure that the recent important constitutional amendments translate into concrete progress concerning human rights.
This year’s assessment of progress made by candidate countries in meeting the economic criteria takes place at a time of rapidly deteriorating global economic conditions. However, over 2000, and the first half of 2001, growth in the candidate countries was relatively strong.
Overall, on the two economic criteria (existence of a functioning market economy, and the capacity to withstand competitive pressure and market forces within the Union) the conclusion is as follows:
• Cyprus and Malta have confirmed that they are functioning market economies and should be able to cope with competitive pressure and market forces in the Union
• Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia are functioning market economies. There are substantial economic differences among these countries, but provided these countries continue with a number of measures detailed in each specific regular report, they should be able to cope with competitive pressure and market forces within the Union in the near term.
• Bulgaria is close to being a functioning market economy. Provided it continues implementing reforms and intensifies the reform effort to remove persistent difficulties, it should be able to cope with competitive pressure and market forces within the Union in the medium term.
• Romania does not yet meet either criterion but has, for the first time, made decisive progress towards this objective.
• Turkey has been unable to make further progress towards achieving a functioning market economy. Considerable parts of its economy are, however, already competing in the EU market, under the framework of the customs union.
II. The Baltic States in the European Union
Three Baltic States declared their independence in 1989 and 1990 and their independence was recognized by the Soviet Union on September 6, 1991. Instead of declaring themselves as new states, they are in fact a re-establishment of the pre-war republics that had existed between the first and second world wars. This further emphasized the statement that Soviet domination during the Cold War period as an illegal occupation. The Baltic States are today liberal democracies, parliamentary republic, and quickly growing market economies.
The Baltic States in 2002 achieved the opportunity to realize a long standing political goal, integration with Western Europe. The main political objective since their independence from the Soviet Union, more than a decade ago has been to gain rights of membership to both the European Union and NATO.
Enlargement has already effectively taken place in terms of opening trade between the EU and Estonia, Latvia and Lithuania, resulting from the Europe Agreements between the EU and candidate countries. Moreover, joining a 25 member club will give a stronger leverage to the three countries’ business communities on the world scene. The EU and the three Baltic states are also fully in line when it comes to the basic understanding on the objectives of the EU trade policy.
The trade policy in Baltic States
Since April 2003 Estonia, Latvia and Lithuania, as well as all other accession countries, already participate in the definition of the EU’s trade policy. In 2002 Estonia ranked 7th on trade with the EU among acceding countries and second among the three Baltic States. The EU accounts for 56% of Estonia’s total external trade. Bilateral trade with Estonia consists of machinery, agricultural products, transport equipment, chemical products and textiles and clothing. In 2002, the EU imported goods worth € 3 billion and exported goods for € 3.5 billion, with a resulting trade surplus of approximately € 0.5 billion.
The EU accounts for 55% of Latvia’s external trade. Latvia ranks 8th among acceding countries and is the EU’s smallest trading partner among the three Baltic states. Bilateral trade consists mainly of agricultural products, power-generating machinery, energy and textiles. In 2002, the EU imported goods worth € 1.9 billion and exported goods for € 2.6 billion, with a resulting trade surplus of approximately € 0.6 billion.
In 2002 Lithuania ranked 6th among acceding countries and first among the three Baltic States. The EU accounts for almost 50% of Lithuania’s external trade, making it Lithuania’s first trading partner. Bilateral trade is mainly made of textiles, transport material, chemical products, energy and machinery. In 2002, EU imports amounted to € 2.7 billion and exports to € 4 billion, with a resulting trade surplus of € 1.3 billion.
The main benefit, which The Baltic States could derive from the integration into the EU, would be the appearance of new markets, demonopolization, rise of effectiveness, increase of supply of goods and services. Thus, users would derive the greatest benefit.
The integration’s impact to Baltic societies
When the Baltic States declared their independence in 1991, they did not become equal members of the international community in one day. Although the fall of the Berlin wall and the collapse of the Soviet Union declared the end to the Cold War, ideas, beliefs, prejudices and discourses were much harder to trigger.
Co-presenters Donal O’Herlihy and Katriona McFadden have visited and talked to members of the public about their feelings on joining the EU. Donal says people in the accession countries are generally looking forward to joining the EU, although the level of enthusiasm varies between the younger and older generations: “What we are seeing is that the new generation is travelling. They are out there; they are seeing more of the world. They are far more open-minded, very different from their parents.” However, many people have fears about their national identity and whether it will survive in an expanded Europe. And there are problems stemming from the pressure to modernise old Soviet-style economies. For instance, suicide rates are high in the Baltic countries, where many people depended on coal-mining for a living. “There is a problem with male roles. In the old regime, men had very strong roles. They got up in the morning, they knew what they were doing. In the Baltic countries, it is a young person’s game,” says O’Herlihy, who was impressed by the buzz of the capital cities of the Baltic countries – Riga, capital of Latvia, Tallinn, capital of Estonia, and Vilnius, capital of Lithuania. “They are great cities for a weekend. Joining the EU is going to turn these places into party capitals.”
EU Enlargement is of highest priority
According to Leif’s Pagrotsky article a decade ago the Baltic States faced the huge challenge of having to rebuild their societies. The outcome is impressive. Development has been unprecedented—the like of it has never been seen before. Democratic governments have been established around the Baltic Rim, human rights have been vigorously promoted, the former command economies have been successfully transformed into market economies.
It is the Baltic States themselves who are responsible for their achievements. The courage and vision of their people and leaders are the foundations on which this process is built. But the outside world is responsible for showing that their visions can become reality. Its task is to muster its forces and offer political, practical and financial support.
This can be achieved principally by ensuring that the door to the Euro-Atlantic community is kept open. In the Baltic region this open door is represented primarily by the impending enlargement of the European Union. It is now up to the EU to consolidate the tremendous efforts of the neighbours and to undertake its share of the work. It is essential to maintain the momentum and dynamism of the negotiation process, and to avoid any delays in the enlargement process.
The progress of the Baltic States is not only impressive in terms of their transition to stable democracies and market economies, but also in terms of adapting to the acquis communautaire. Furthermore, ambitious efforts in both Estonia and Latvia to integrate their Russian-speaking population merit respect and might serve as a model for addressing the sensitive issue of integrating minorities
In enlargement discussion the predominant view is often that the candidate countries will reap the main benefits. The Baltic region is a dynamic engine of growth with enormous potentials that will serve to benefit the economy of the entire Union.
It could be considered that today’s candidate countries are tomorrow’s member states.
The EU membership of the Baltic States will help create the conditions for closer and more extensive co-operation with Russia. This in itself will have a favourable effect on economy and security, which will benefit the whole of the EU. New big markets will open up. A large share of Russian trade will continue to be channelled through the Baltic area (at present this amounts to 60% of seaborne foreign trade). We can expect to see more trade, higher growth and intensified people-to-people contacts. And Europe will be an even better place to live in.
Russia’s road to constructive development goes via Europe and the EU. Following the enlargement of the Union, 50% of Russian trade will be with EU countries. Only 5% of Russia’s trade is with the United States. Russian leaders and experts realize this, and a pro-European orientation is increasingly evident in Russian politics. It is understandable that Russia today realizes that it stands to gain from the forthcoming enlargement of the EU.
To sum up, the Baltic States will be an asset to the European Union. Pursuing EU enlargement to its conclusion is a matter of highest priority.
Implementation of structural funds in the Baltic States
The strategy to implement Structural Funds in Lithuania, Latvia and Estonia for 2004-2006; and the priorities seek to promote development and structural adjustment in Lithuania consists of programme, which is based on four priorities:
• social and economic infrastructure: almost 39% of the whole budget is allocated to improve Lithuania’s infrastructure, not only in transport, but also in energy, health, education, research institutions, labour market institutions and related social affairs sectors with a Community contribution of € 347.1 million;
• human resources development: such as upgrading of education and training, return into the labour market of socially excluded groups, training and retraining of researchers to increase the knowledge base of the country with a Community contribution of € 163.8 million;
• strengthening competitiveness of enterprises: such as the business environment, the competitiveness of enterprises, measures to support information technologies and the tourism sector with a Community contribution of € 222.4 million;
• rural development, agriculture and fisheries: such as the promotion of sustainable development in rural areas, and the diversification and restructuring of agriculture and fisheries with a Community contribution of € 135 million.
In addition an amount of € 26.9 million will be made available for technical assistance.
• promotion of territorial cohesion: almost 33% of the whole budget is allocated to improve Latvia’s infrastructure, not only in transport, but also in environment, tourism, information and communication technologies, health care, education, and social sectors when related to labour market with a Community contribution of € 203.8 million;
• enterprises and innovation: such as supporting development of innovation and business infrastructure, business support to small and medium-sized enterprises as well as facilitating their access to finance, development of public research with a Community contribution of € 156.4 million;
• human resources and promotion of employment: such as improvement of education and training, return into the labour market of socially excluded groups with a Community contribution of € 132.7 million;
• development of rural areas and fisheries: diversification and restructuring of agriculture and fisheries as well as development in rural areas with a Community contribution of € 115.7 million.
An amount of € 17 million will be made available for technical assistance.
• human resources development: such as supporting the educational system, lifelong learning for all and enhancing administrative capacity with a Community contribution of € 76.1 million;
• enterprise competitiveness: such as financing possibilities and infrastructure of businesses, research, technology development and innovation, tourism at national level with a Community contribution of € 73.2 million;
• agriculture, fisheries and rural development: such as improvement of the processing and marketing of agricultural products, diversified economic activities in rural areas, land improvement, forestry, regulation of fishing capacity, modernisation and renewal of fishing fleet, social measures accompanying restructuring in fisheries with a Community contribution of € 69.3 million;
• infrastructure and local development: such as transport infrastructure, projects of environmental infrastructure, reorganisation of the hospital network, information society (e-government, e-citizen), local development projects with socioeconomic impact with a Community contribution of € 138.1 million.
In addition, € 14.6 million in Community contribution will be available for technical assistance.
It is impossible to see such an important step as Lithuania’s, Latvia’s and Estonia’s integration into the European Union in only one perspective. Undoubtedly, this historical fact would have brought both positive and negative results, which are often closely interrelated. Moreover, the integration into the European Union is a long process not confining itself only into signing and validity of the agreement. It includes changes happening both before and after conclusion of the agreement. Therefore it is necessary to talk about the results not only of the integration into the EU, but also of the preparation to the membership.
These consequences are the most difficult to be discussed in on perspective. As they are difficult to forecast and can develop in one or another direction depending on different factors.
Firstly, when Baltic States will become members of the EU, all the residents of membership countries will at the same time be the residents of the EU. Every citizen of the EU has:
• The right to move freely and live on the territory of the EU membership countries;
• The right to vote and be proposed as a candidate during local or European elections in the resided country;
• The right to be protected by diplomatic and consular institutions of every membership country;
• The right to petition the European Parliament;
Consequently, citizens of the Baltic States will receive the same rights. And after that we can suppose that the following things will occur:
1. Migration consequences – when Lithuania and two other states become members of the EU their citizens will be able to travel freely all the membership countries of the EU. This could be thought both that the volume of migration would rise, and on the contrary, will decrease. It is possible that emigration would become lower because of bigger employment possibilities and economical growth in Baltic States. Or it will rise generally because of the opportunity to cross freely the borders. This could be expected mainly of youth, as they always try to seek something new, especially abroad.
2. The problem of nationalism and cosmopolitanism. Some of scientists think that the integration would cause the growth of nationalism. However, the others think that the integration into the European Union, on the contrary, would mean developing cosmopolitanism, which would weaken nationalism.
3. According to economists and social scientists, the growth of economy will create the necessary prerequisites for development of middle classes, which will reduce the gap between the lowest and highest profit groups and will add to the growth of social and economical stability of the state.
In conclusion, it should be noted that the process of the EU development is the greatest throughout the history of both the European Community and the European Unity. High demands are made of joining countries; however at the same time membership countries help those who are going to join the EU. At the moment, the integration of Baltic countries into the EU is the most important priority of their foreign policy.
Membership in the EU is usually connected with safety guarantees. Especially this safety is waited in Baltic countries, as they are small and comparably young. It should be noted that membership in the European Union does not give any formal safety guarantees; however the very fact of membership may operate as a certain protection from outer aggression. Furthermore, the membership also strengthens the inner safety, for the growth of economy reduces social contradictions of the society, increases social stability, which strengthens democracy and state’s inner safety.
Moreover, the participation in home and legal affairs of the EU will increase the possibility to fight against such international problems as illegal migration, organised crime and terrorism.
Enlargement has already effectively taken place in terms of opening trade between the EU and Estonia, Latvia and Lithuania, resulting from the Europe Agreements between the EU and candidate countries. Moreover, joining a 25 member club will give a stronger leverage to the three countries’ business communities on the world scene. The EU and the three Baltic states are also fully in line when it comes to the basic understanding on the objectives of the EU trade policy, both regionally and in the WTO.
There are plusses as well as minuses to joining the European Union. The main advantages for the existing members of the European Union are generally thought to be export potential – commercial opportunities. In spite of that accession countries are small, they have grown more quickly than EU-15 in recent years and have much faster growth potential. Other advantages are free trade and more diverse European labour market, more jobs, higher EU economic growth, a single currency and others. But the main disadvantage is that some businesses of small member countries, such as The Baltic States may not be able to compete and some jobs will be lost. But others will survive and grow.
Hence, enlargement will considerably increase heterogeneity in the EU, not only in sociocultural terms but also economically and institutionally. Enlargement may challenge the European welfare states in several ways in terms of coverage and financing, but also with regard to the development of social structures at the EU level. More specifically, the admission of countries with substantially lower labour costs may give the fears of social dumping new impetus. On the one hand, it is expected that these countries may attract substantial foreign direct investment, thereby increasing the pressure exerted on the social security systems of the rich EU countries by the lower-income member countries and making the two groups of countries immediate competitors. On the other hand, the huge differences in living standards are expected to induce labour migration, thereby increasing the pressure in particular on the more generous welfare systems.
The long-term inequality of living standards is expected to lead to substantial labour migration from the CEEC to the EU.
The migration effects of the upcoming round of enlargement cannot be compared to previous admissions of lower-income countries to the EU because of the considerably larger gap in living standards and the much closer proximity of centres of very high living standards in current EU countries and regions of comparatively lower living standards in the candidate countries.
However, not every citizen of third countries is eager to join the European Union. Especially people of the Baltics are afraid to loose their national identity, as for many years they have been under Russians and Nazi Germany, they have restored their independency comparably recently and this fact makes gloomy moods in the masses. The older generation tends to disagree with innovations and are afraid of changes as it is hard for them to believe that life will become better. On the contrary, youth is waiting for the enlargement as they believe in bright future with great opportunities in the European Union.
The new members of the European Union, namely the Baltic States will bring with them a different history and a different way of looking at the world — not only because they once were part of the Soviet Union, but also because the economic legacy of those 50 years is not easily erased.