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Map of Europe |
European Affairs
The Effects of Enlargement
Different Voices Should Be Heard in Brussels
By Eric Stewart
The enlargement of the European Union has led to a tremendous amount of economic reform in the Central and Eastern European countries, which, in turn, has provoked some beneficial changes in the 15 older EU member states. In some areas, the new EU member states have not only set a strong example for their European partners, they have also aroused a good deal of interest in the United States. A number of American business leaders are asking why the United States does not have a low flat tax like Slovakia or lower corporate taxes like some of the other new member states.
The success of EU enlargement bears out America's belief that a strong and united Europe is important for the prosperity and security of the United States, a point emphasized by President George W. Bush at the latest U.S.-EU summit meeting in June. The U.S. interest in a united Europe is equally strong in both political and economic terms. So it is very important that we continue to have very frank and open dialogues about what needs to be done for our relationship to continue to be successful.
The entry of the ten new member states into the European Union in May 2004 has been tremendously beneficial for U.S. companies and industries. U.S. exports to the new member states have grown by an average of 26 percent, and there has been particularly impressive growth in Lithuania (81 percent), Slovenia (37 percent), and the Czech Republic (22 percent.) Particularly notable have been sales of iron and steel to Slovenia, agricultural goods and chemicals to the Czech Republic and meat products to Lithuania.
The precise development of this new business has been a little hard to track because the new members accomplished so much in the way of tariff reductions and economic reforms well before their actual date of accession. The process was many years in the making, and U.S. companies took note of it early on. Now, we are taking note of other opportunities that have been created, and we believe this is only the beginning.
There are still tremendous business opportunities available. An enormous amount of privatization has yet to take place, and there are certainly still some significant areas where other improvements can be made. We will continue to discuss these issues with interested countries that want to add to their
competitive advantage.
"Countries that actively seek competitive advantage will have great success"
Intellectual property rights are something that we need to spend a great deal of time discussing. As former Secretary of Commerce Donald Evans used to say, "Capital is a coward;" companies are only going to invest where they feel comfortable and believe that their investments and innovations will be protected. As a former global CEO, the current Secretary, Carlos Gutierrez, is also extremely focused on this issue. When we see the potential of some countries taking a more aggressive approach than required by Brussels, whether in pharmaceuticals or software, it opens up opportunities.
A lot of American companies, particularly those involved in pharmaceuticals, are asking where the best investment opportunities are in Europe, and where there is the least amount of regulation. It is not the Department of Commerce's job to tell them which country to go to - only to identify where the problems and opportunities exist. But I find that, especially with pharmaceuticals, many European health ministries just want to comply with EU regulations, rather than investigate what they can do to make their countries more competitive in attracting new investment.
Talking about investment to a health minister is not the easiest conversation, as their focus is obviously very different from that of economic or trade ministers. But countries that actively seek to create competitive advantages will have a great deal of success. Unfortunately for Europe, a lot of American companies ultimately decide to make their investments in the United States, in Ohio or in South Carolina. That is obviously good for the United States, because it means that we continue to add to our jobs, our growth, and our productivity. It means, however, that Europe loses out, because these companies were looking for opportunities there, but ran into difficulties with the non-tariff barriers, such as regulations.
While the new EU member states have made great progress, we look forward to them making their voices heard even more loudly in Brussels in the future. We hope to hear more of their ideas and see their proposals taken up in EU policies and decisions, because we believe very much that their presence will continue to strengthen a united Europe. When Romania and Bulgaria join the European Union in 2007, the influence of the new member states in Central and Eastern Europe will increase further in EU decision-making.
Eric Stewart is Deputy Assistant Secretary for Europe, International Trade Administration, U.S. Department of Commerce. He directs activities on trade, commerce, compliance and investment policies for 50 countries, including Russia and the Newly Independent States. He was previously Chief of Staff to Assistant Secretary for Market and Compliance William H. Lash. Before that, he served as Director of External Affairs for the telecommunications company Ameritech/SBC. He was Political Director of the National Federation of Independent Business (NFIB/Ohio) representing more than 36,000 small-business owners.