Further Enlargement of the European Community: The Cases of the European Peripheral States

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Six members in 1952, nine in 1973, ten in 1980, and twelve in 1986: the European Community (EC), the world's largest trading bloc, brings together more than 325 million people. The twelve member states of the EC are Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom. Today, the entire world is watching with great interest as the EC moves rapidly to integrate the economies of its member states and expand its influence in global affairs. The EC efforts have caught the attention of several countries on the periphery of the Community: the European Free Trade Area (EFTA) states, new democracies in Eastern Europe, the Baltic states, Russia, Ukraine, and the non-member Mediterranean countries. Almost all of these countries have shown interest in improving their relations with the Community, and some of them have applied for full membership in the EC. Turkey applied for membership in 1987 and Austria followed suit in 1988. Since then, Cyprus and Malta submitted their applications in 1990, and Sweden followed in 1991. Others, such as Hungary, Poland, and Norway, may soon apply as well. It is crucial to note that the EC has associational or cooperative trade agreements with most of the countries on its periphery, and similar agreements are to be signed with the emerging democracies of East-central Europe. Recently, the EC and EFTA (Austria, Finland, Iceland, Liechtenstein, Norway, Sweden, and Switzerland) agreed to create a trade region, larger than the EC, known as the European Economic Area (EEA). The speed at which the EC is moving along with economic integration, expanding its economic and political influence in the region, and the reciprocal attention it receives from the peripheral states have not been unnoticed by the other important powers of the world. Already, the United States is trying to create a counter-trade area in the Americas, and Japan is working on a similar plan in Asia.

Expansion of the European Community. Expanding the membership of the EC is beneficial to the current members and to those peripheral countries that aspire to join the Community. The EC is interested in expansion because this would enhance Community influence in Europe. Those who want to join the Community do so because of the expected economic benefits of Project 1992. As the Cecchini Report indicates, the EC stands to make significant economic gains from achieving the common market. The Cecchini analysis projects that

* The potential economic gain to the Community as a whole from the single market is estimated to be in the region of ECU 200 billion or more, in 1988 prices. This is equal to a 5-percent increase in the EC's gross domestic product (GDP).

* Total savings from the abolition of administrative normalities and order controls is estimated to be around 13-24 billion ECUs.

* Savings from increasing the scale of production of manufactured products will be around 2 percent of the EC's GDP.

* It will deflate consumer prices by an average of 6 percent while contributing to output, employment, and improved living standards.

* Integration will provide 2-5 million new jobs, depending on the macroeconomic policies accompanying the 1992 program.

* It will boost the EC's trade with other countries on a scale of around l percent of the EC's GDP.

* Aggregate cost savings from improved economies of scale will amount to something on the order of 2 percent of GDP.

The Cecchini Report findings are viewed as conservative estimates by Richard Baldwin of Columbia University, who argues that the net long-term effects of Project 1992 on European economies might be as much as five times greater.

The view of EC officials on expansion is reflected in an opinion paper prepared by the Economic and Social Committee of the EC on 25 January 1989. This report specifically states that the Community is in a global competition with the United States and Japan:

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