Preparing for Enlargement in the European Union: The Tensions Between Economic and Political Integration
| Date | 01 July 2002 |
| Author | Susan Senior Nello |
| DOI | 10.1177/0192512102023003005 |
| Published date | 01 July 2002 |
| Subject Matter | Articles |
Preparing for Enlargement in the European Union:
The Tensions between Economic and Political
Integration
SUSAN SENIOR NELLO
ABSTRACT. Since 1989 an extremely rapid process of integration through
the market has been taking place between the EU and Central and
Eastern Europe. This operates through the three vehicles of integration:
trade, foreign direct investment, and outward-processing trade, and has
been encouraged by trade concessions and the process of legal
approximation. In contrast, many of the political questions relating to
enlargement in areas such as the Common Agricultural Policy, the
Structural Funds, and Economic and Monetary Union still have not been
resolved definitively. There remains a binomial asymmetry between the
economic (market) and political aspects of integration.
Keywords:•EU enlargement • EU policies • EU-CEEC trade • Integration
•Transition
Introduction
One of the more surprising features of relations between the European Union
(EU) and Central and East European countries (CEECs) is how quickly the latter
have managed to redirect their trade away from other transition economies and
towards the EU market. The EU is now the main trading partner for all ten of the
CEECs which have applied for membership.1At the same time, after a sluggish start,
foreign direct investment (FDI) in the applicant countries, in particular, on the
part of EU firms has been increasing fast. In part this is linked to the opportunities
provided by the privatization process, but it also reflects the tendency of foreign
investors to anticipate enlargement and the participation of the CEECs in the single
European market.
What has been experienced since 1989 is therefore an extremely rapid process
of integration through the market. This has been assisted by the creation of a free
International Political Science Review (2002), Vol 23, No. 3, 291–317
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trade area for manufactured goods between the EU and CEECs, and also by the
process of legal approximation which entails the applicant countries taking on the
acquis communautaire.2
The economic benefits from opening markets are therefore already being
experienced. Economic integration (or integration through the market) is
proceeding before the formal step of actually joining the European Union. EU
firms which are trading or investing in CEECs are already reaping the benefits of
increased prosperity, as are the applicant countries themselves insofar as this is
reflected in the process of catching up, with higher average per capita incomes.
Also in the case of the two Western European countries which opted against EU
membership, Norway and Switzerland, the level of trade integration and legal
approximation to the Union is extremely high. For these countries, legal
approximation is dictated by considerations of market access,3as differences in
standards and regulations are now the main barrier in trade between developed
industrial countries.
So where does that leave enlargement? From an economic point of view, when
the CEECs join the Union they will be passing from a free trade area for
manufactured products to a single market, and, as will be argued here, many of
the concessions agreed prior to enlargement reduce the scale of this change.
From a political point of view, actually joining the European Union raises a
number of complex questions which still have to be resolved. The most
controversial of these questions include extending the cost-intensive EU policies
(the Common Agricultural Policy [CAP] and the Structural Funds) to the new
member states; reconciling the twin objectives of Economic and Monetary Union
(EMU) and enlargement; allowing freedom of labour movement in an enlarged
single market; controlling crime, ensuring adequate environmental standards, and
dealing the arrears on institutional reform left by the Nice Treaty. On each of
these issues political decisions have to be taken, and hence the term “political
integration” is used here, though these decisions clearly have economic
consequences.
The March 1999 Berlin Agreement on Agenda 2000 was supposed to introduce
the necessary reforms to the Structural Funds and the CAP to enable enlargement
to take place. However, as will be shown here, the reforms agreed are not
acceptable to the applicant countries or even to all the present member states, and
so are likely to be challenged.
To date it has proved unexpectedly difficult to establish confidence in the euro
and its institutions, and extending the task to more countries, some of which are
still undergoing transition, is likely to render the process even more complex.
Many key questions as to when and how the applicant countries adopt the euro
remain open.
These political choices involve costs and trade-offs between members of an
enlarged Union so could lead to delays in enlargement, and are unlikely to be
resolved to the satisfaction of all parties even when enlargement takes place. Any
enlargement requires ratification by the existing member states, the European
Parliament, and the applicant country in question, and the Irish experience
suggests that the ratification process might not be as straightforward as is
sometimes assumed.
The aim here is to illustrate the tension between economic and “political”
integration. This will first entail assessing how far progress in economic integra-
tion (or integration of markets) has advanced. For this purpose three vehicles of
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