Eu Enlargement

EU Enlargement Background The European Union (EU) is an economic and political union of 27 member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), formed by six countries in 1958. In 1967 they merged into European Community. The Maastricht Treaty established the EU under its current name in 1993. The EU has grown its size by the accession of new member states. For example, on May 1st 2004, 10 new members joined the EU and EU-15 became EU-25. In 2007 it became EU-27 when Romania and Bulgaria joined.It seems that the enlargement will continue and many people begin to consider whether the EU should admit more members. Countries should obey the accession rules if they want to join the EU. According to the ‘Copenhagen Criteria’, a member state must be a stable democracy, respect human rights and have the rules of law and the protection of minority. In terms of t he economic aspect, it should have a functioning market economy. In addition, the country needs to adopt the common rules, standards and policies that make up the body of EU law. Body Commission: regarded enlargement as the â€Å"Union’s most successful foreign policy instrument. Following? the? enlargements? of? 2004? and? 2007,? the? EU? is? now? the? largest? integrated? economic? area? in? the? world,? accounting? for? more? than? 30%? of? world? GDP? and? more? than? 17%? of? world? trade. New members can benefit more from enlargement than existing member states (Neuder, 2003) * Benefit of new members * Strong economic growth: * Benefit from the EU budget and access? to? EU? funds? * The 10 new members can expect to receive up to 4% per annum of their GDP from the EU’s structural and cohesion funds for projects aimed at improving their economic tructures. * e. g.? net? inflow? of? structural? funds? to? help? finance? infrastructure? projects and? environmental? projects. * Increase in GDP from 3. 7% to 5% on average in the first two years since accession. * In the long time, the acceding states could enjoy a rate of growth some 2% higher than that of the existing states (Neueder, 2003). * East slowly catch up with the west. * Increase in trade * Most? of? the? new? EU? countries? were? already? closely? linked? in? trade? and? investment? terms? with? their? western? European? neighbors.? Joining? the? single? market? as? deepened? this in? 2007,? almost? 80%? of? exports? of? the? new? EU? states? went to? the? rest? of? the? EU. * Increase in Foreign Direct Investment * For the new member states, FDI is a key factor in the process of economic modernization. New members can receive funds from foreign countries and use the money to boost economy. * Enlargementlarger market and openness to trade. * Baldwin, Francois and Portes (1997) argue that joining the EU will make the region substantially less risky from the point of view of domestic a nd foreign investors. * 191 billion euro by 2004 However, they seem to over rely on FDI. FDI accounts for too large part (e. g. Hungary: 70%). Once there is something wrong with some investors and do not invest them, for instance the financial crisis, they will suffer tremendously. * The? 2009? crisis? may? persuade? Central and East European? Countries? to? reduce? their? dependence? on? foreign? direct? investments and? build? an? economic? growth? model? on? different? grounds. * Welfare * Farmers began to receive agricultural subsidies * Structural funds directed towards poorer regions (investment in infrastructure) * Benefit of existing members Enlargementmore people more consumersobtain more than 450 million consumers from Single European Marketcompanies could expand their businesses and benefit from experience and location economies scale * Larger labor market fill labor shortage in existing states with low-cost and highly-skilled workforce, for example, UK and Ireland Howeve r, these skilled workers may replace the indigenous employeesincrease the unemployment * High growthincrease the purchasing powerstimulate the import demand of acceding states and export of member states * Imports and exports between new and existing members have increased considerablethe EU15 share of total EU12 trade increased from 56% in 1993 to 62% in 2005 * Because of theseGDP increase * Costs of enlargement * Drawback for new member state * Difficulties in complying with EU law restrict development of business especially Small and Medium-size Entrepreneurs * Push many producers out of business due to their incompliance with EU environment policies * Tax harmonization e. g.Estonia: was forced to introduce new tariff against imports from outside of the EU, adopt a number of non-tariff barrierssuch protectionisms increase the food price and lowered Estonians’ standard of living * High unemployment still exists in many new member states (8% EU-15; 14% EU-10, 2005) * Some hi gh skilled workers or people with higher degree will move from east to the west, this brain drain damages the host countries. * Drawback for EU-15 * Volume of enlargement costs will amount to about 15% of the EU budget (Germany: 2. 3bn from its federal budget) * Migration: Concern about too much migration from east to west social problems and pressure on social/medical/educational services. (e. g. ome countries even carried out policies to limit the volume of migration) * Actually: the percentage of EU-12 nationals and the resident population of each EU-15 Member state were relatively stable before and after enlargement. * Too many countries will decrease the efficiency of EU. * Conclusion Enlargement of EU has been the most successful policy. Although it has some negative effects on both existing and new member states, its positive influences far outweigh its negative aspects. Process EFTA (European Free Trade Association) afraid that the Single Market Program would increase compet itioncreate EEA (European Economic Area)1995, Austria, Sweden, Finland opted for European Accession, joined (growth+, unemployment-, inflation- Finland(1991-2000, 2006,%): growth 2. 0-5. 0; unemployment 12. 5-7. 7; inflation 2. 1-1. 3 †¦