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European Affairs
European Perspectives
New EU Members Still Have Much to Do
By Frits Bolkestein
The Accession Treaty providing for the entry of ten new member states into the European Union, signed in Athens on April 16, is an enormous economic and political milestone. But it is far from the end of the story.
The acceding countries – Poland, Hungary, the Czech Republic, Slovenia, Slovakia, Lithuania, Latvia, Estonia, Cyprus and Malta – have covered a remarkable amount of ground in drawing closer to the European Union economically over the past decade. For all of them, the European Union is now by far the most important trading partner, and their entry will have positive economic effects throughout the Union.
Much, however, remains to be done to complete their economic integration into the EU single market. There are legitimate doubts as to whether everything will be working perfectly by May 2004, when they are due to become full members.
First, of course, the commitments made by the acceding countries during their entry negotiations, for example to adopt legislation or to establish the appropriate administrative infrastructures, must be implemented by the time they officially join the Union.
It is clear that legislative alignment by the new member states will be only a first step. Just as important is the need to ensure the effective enforcement of legislation. Here, additional efforts are required.
Adequate administrative structures with proven capacity to function must also be in place by the date of accession, if not before. We have identified a number of areas that still require urgent action in some acceding countries.
The free flow of goods and rights of establishment are sometimes still hindered by administrative obstacles or technical requirements that are in conflict with EU law. A stable financial services system, subject to internationally agreed standards of prudential supervision, is a precondition for the acceding countries to attract new investment.
It will also be indispensable if Polish or Hungarian banks, for instance, are to be allowed to offer their services throughout the European Union. Significant progress is being made in this field, but more needs to be done – for example to guarantee the independence of those who supervise financial services from political interference.
Similarly, in the sensitive area of health care, we have identified problems related to lower standards of professional qualifications in a number of acceding countries. These are just a few examples that demonstrate that continued efforts are required.
Overall, however, it is my firm belief that enlargement will be a dynamic and positive factor for growth, investment and job creation across the entire European Union over the coming years. The trade effects, outside certain specific sectors, have largely been realized.
We must look at enlargement as a long term contribution to higher prosperity through restructuring, the reallocation of resources, the upgrading of products and skills, industrial specialization, the development of services and increased labor mobility among different economic sectors.
While any quantification of these benefits remains speculative, the Centre for European Reform, a policy group in London, estimates that enlargement will accelerate growth in the new member states by one to two percent per year, as a result of increased foreign investment and trade. In the current member states, enlargement is likely to boost economic output by €60 billion to €80 billion and create about 1.5 million jobs, the Centre forecasts.
Other studies suggest that the Gross Domestic Product of the European Union as a whole will grow by 0.7 percent a year over the next ten years as a result of the macro-economic impact of enlargement.
Quite regardless of enlargement, of course, the EU internal market continues to be a work in progress, and the existing member states still have much to do as well. Our current work, for example, includes: creating a truly open market in services, including financial services; improving the EU tax environment for businesses; opening public sector contracts to goods and service providers from all member states; trying to create an affordable Community patent and working on harmonized EU-wide rules for business takeovers.
But the single internal market is not just about rules and regulations for businesses. It has also had important spill-over effects by fostering integration in other areas, such as the introduction of the euro, capital market integration and the Schengen Agreement on the free movement of people across internal EU borders.
As a result, doctors, for example, may practice in any member state without major obstacles, citizens can travel throughout the Union without border controls, consumers are enjoying lower prices, and construction companies may bid for contracts in other member states, driving down the cost of public works for the taxpayer.
Americans take many of these economies of scale for granted, but they have brought enormous new benefits for EU citizens and businesses. Americans also enjoy the benefits of these European achievements. The EU internal market and the euro have simplified the business environment for European and non-European investors alike.
Against this background, enlargement will benefit existing and new member states alike, as well as U.S. businesses, provided that the rules and principles that we have established are respected by all members, including the acceding states. Even if it is correct to say that the point of no return has been reached, the enlargement process is nevertheless far from over. It will not end with accession.
Frits Bolkestein is the European Commissioner for the Internal Market.