Enlargement process of the European Union

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Enlargement process of

the European Union

Contents:

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

Social consequences.....................21

Conclusion.............................22

Bibliographical references......................26

I. The Enlargement of the European Union

Enlargement is one of the most important opportunities for the European Union att 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 exxcess 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

ECSC), and Rome (1957), establishing the European Economic Community (EEC) and EURATOM, were signed by six founding members: Belgium, France, Germany, Italy, Luxembourg and the Netherlands. The EU then underwent four successive enlargements: 1973 – Denmark, Ireland and the United Kingdom; 1981 – Greece; 1986 – Portugal and Spain; 1995 – Austria, Finland and Sweden.

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 Meember 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
enefit from the four freedoms set out in the Treaty.

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

nd standards ensures a freer circulation of goods and services than is possible within some countries. Enlargement will extend these characteristics to the acceding countries.

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
CCT) upon accession. The average weighted industrial tariffs of the acceding countries are in general higher than the 3.6% average for the EU; the same applies to agricultural tariffs. Thus, in most cases, third countries’ business will benefit from lower tariffs in their trade with new member states.

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.

Agriculture

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.

Internal Policies

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).

Compensation

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 t

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