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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