Select Committee on European Union Written Evidence


Memorandum by the Stockholm Network

  1.  Further enlargement of the European Union is imperative for the economic and political prospects of both the current EU membership and of its aspirant members. It is not without its risks, and much reform will be needed from both sides of the present EU borders. Yet the gains from such expansion are innumerable. This submission highlights the most important of them.

  2.  The removal of remaining trade barriers constitutes the single most significant outstanding reform. The ability of producers in potential Member States to reach the vast and wealthy markets of the EU without artificial price alterations will facilitate a substantial degree of wealth creation in these areas. That the competitive products among these are liable to be cheaper than their presently EU-produced counterparts is no bad thing either—the consumer gains from cheaper prices.

  3.  Of course, the inverse is also true. EU producers will gain freer access to a sizable new market, and likewise, without having to pay premiums to protect uncompetitive local enterprises from the global marketplace, consumers in future accession countries should see prices fall as well.

  4.  As has been demonstrated among the 2004 entrants, EU membership proves a huge lure for overseas foreign direct investment, bringing further prosperity to the recipient countries. Outside companies see access to the entirety of the European market as a decisive factor in choosing which countries to locate in. By barring the door to new members, we would also be stifling their ability to attract necessary and valuable investment from elsewhere.

  5.  Meanwhile, the incentive of acceptance into the EU, and the perceived financial gains it will provide, also helps encourage reform in other areas. Liberalisation and democratisation have historically gone hand in hand. The reformist movement in these countries is at a delicate stage of development. The potential for EU accession provides a great incentive for these movements. To withdraw that prospect could destroy the momentum these groups have built up. Many of the reforms are in areas "western Europe" takes for granted, such as making the system of law fair, clean, and honestly administered, and having the various governments and all their associates also subject to it. This means, for example, providing real incentives for Croatia to unravel the bureaucratic tangle that has burdened its business arbitration process with a 1.4 million case backlog. In a country of only 4 million people, the disruptive influence on wealth creation and employment could not be more evident. Romania, after facing similar concerns early in its transition, has been enabled, with the technical assistance and political backing of the EU, to make great strides, led by Minister of Justice Monica Macovei.[7]

  6.  This logic applies also in social, as well as economic matters. Instances such as Turkish moves to recognize the language and basic rights of its Kurdish minority, or the progress of the human rights movement in the 2004 entrants, particularly the former Czechoslovakia and Hungary, demonstrate clear instances of the EU's ability to act as a catalyst for reform, merely by offering possible membership as a very large carrot.

  7.  The "must try harder" disdain for Turkey's advances which has been shown by some more established European leaders has been insulting and foolish. Between 1999, when candidate status was announced, and today, Turkey has deregulated its economy, simplified its tax code and brought its fiscal house in order, resulting in 8.2 per cent growth rates and a 10 per cent rise in productivity. It has passed nine packages of major reforms that have reduced the military's influence in government, enshrined political dissent and religious pluralism, passed strict laws against torture, abolished the death penalty and given substantial rights to a long-oppressed minority. The European Commission duly complained about all of them.[8]

  8.  At a more fundamental level, the modest rekindling of democracy, and the subsequent election of ostensibly more pro-European than pro-Russian governments in parts of the former USSR (notably Georgia and Ukraine) signify a willingness of the peoples in that part of the continent to embrace "European ideals', and, perhaps more pragmatically, EU accession. They recognise the changes their countries will need to go through to get there, and are, for the most part, keen to encourage them. Ultimately, this is perceived as being a step towards greater prosperity, both through trade and investment, and, to a lesser, but not negligible extent, through migration potential. That it will also bring greater personal freedoms, democratic rights, and lower legal and bureaucratic corruption is an additional benefit.[9]

  9.  Europe's best strategic device for achieving revolutionary improvements in social and economic conditions in its near-abroad is its ability to offer EU membership to struggling societies. New members have proven themselves willing to take extraordinary measures to gain entry. It is in both the EU and its neighbours' utmost interests that we avail ourselves of this remarkable reform-creating tool whenever possible.

  10.  The rest of the EU will also witness corresponding benefits of expansion. The UK, Ireland, and Sweden, the select group which decided to allow free migration from the 2004 entrants, have already witnessed economic successes unmatched in those who would not deign to drop their restrictions. More detailed evidence for this can be found in the European Commission report of February 2006.[10] For instance, in the UK, Ireland and Spain, migrant populations from the new EU-10 have higher rates of employment than the domestic populations.[11] Employers overwhelmingly welcomed the availability of a larger labour pool to draw from. Vacancies are being filled with qualified and willing workers, meaning productivity is maintained or increased.

  11.  Furthermore, further expansion should provide the impetus for much-needed reform of the EU's current workings. The Treaty of Nice obligates institutional reform once the 27-member mark is reached (presumably when Romania and Bulgaria join). This is a key part of the process, but by no means all. With much of Eastern European development accompanying diminishing state roles in the economy, the fear exists that, if EU membership accompanies excessive or heavy-handed regulation, these economic advances may be negated to some extent. If the EU is serious about reaching Europe's maximum economic potential, it should seek to deregulate individual and business activity. This would not only aid new members, but also release current members from the microeconomic straitjackets their businesses find themselves in.

  12.  Greater expansion must also prove the final death knell for the EU's agricultural subsidy system. The CAP is untenable as it stands; expensive, market-distorting, and guilty of horrendous misallocation of resources. This must not be used as an excuse for preventing EU, and by extension, CAP expansion. Rather, expansion should become a necessary spur for the complete overhaul, if not abandonment, of this grotesquely unjust, wasteful and unnecessary relic of the 1950s.

Simon Moore

Research Officer

The Stockholm Network

20 June 2006

ABOUT THE STOCKHOLM NETWORK

  The Stockholm Network is a forum for sharing, exchanging and developing pan-European research and best practice. Interested in ideas which stimulate economic growth and help people to help themselves, we promote and raise awareness of policies which create the social and economic conditions for a free society. These include:

    —  Reforming European welfare states and creating a more flexible labour market.

    —  Updating European pension systems to empower individuals.

    —  Ensuring more consumer-driven healthcare, through reform of European health systems and markets.

    —  Encouraging an informed debate on intellectual property rights as an incentive to innovate and develop new knowledge in the future, whilst ensuring wide public access to such products in the present.

    —  Reforming European energy markets to ensure the most beneficial balance between economic growth and environmental quality.

    —  Emphasising the benefits of globalisation, trade and competition and creating an understanding of free market ideas and institutions.

    —  www.stockholm-network.org






7   The Stockholm Network; Beyond the Borders; 2006; pp 13, 29. Back

8   Cf http://www.fareedzakaria.com/articles/newsweek/112502.html and http://www.msnbc.msn.com/id/6039153/site/newsweek Back

9   The Stockholm Network; Beyond the Borders; pp 14. Back

10   http://eur-lex.europa.eu/LexUriServ/site/en/com/2006/com2006-0048en01.pdf Back

11   http://eur-lex.europa.eu/LexUriServ/site/en/com/2006/com2006-0048en01.pdf, pp 14. Back


 
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