Eastern Europe Has Potential for Powerful Trade Alliance

Article excerpt

As Russia slips ever deeper into economic and political chaos, many in the West despair of its future. But perhaps they need not do so - if they take first things first.

Developing Russia's so-called "near abroad," the former East bloc states, is the essential step now.

The prospects of doing so successfully are much better than saving Russia. The Eastern European countries are, after all, relatively small, while Russia is discouragingly large.

The European Economic Community, in particular, appears ready to try to help its immediate neighbors.

Until now, the EC has offered the former East bloc states mere "association" status, which in practice has amounted to very little. High EC tariffs keep most East European goods out of the common market.

Investment by Western Europe has been nearly as paltry in relation to Eastern needs as worldwide investment has been in Russia.

But this may now change. Hungary and Poland are on the point of formally applying for membership in the European Economic Community - and will not be told no.

Indeed, EC leaders plan a summit on March 23 to review their entire approach to Eastern Europe.

The Czech Republic, Slovakia, even Bulgaria and Romania, are probably not far from asking for membership in the EC, as well.

While Europe isn't about to become a union of nations from the Atlantic to the Urals, it is no longer unthinkable to imagine an eventual collection of like-minded economies stretching from Ireland to Poland.

Such an economic union, if it can be made to work, would add at least a third to Europe's economic power, and much more in the long run when development really takes off.

It would represent one of the world's major free trade areas, rivaling the new American trade union from the Yukon to the Yucatan.

But the problems of getting from here to there are immense.

While Western Europe finally seems ready to embrace its Eastern neighbors, actually integrating them into the EC will be one of the coming decades' most daunting enterprises.

First, while the Eastern economies are generally in better condition than Russia's, they are woefully far behind Western Europe's level of economic development. Effective free markets have yet to be fully developed in any of them.

Only Poland, Hungary and the Czech Republic show promise of developing them any time soon - and even they have a great distance to go. The rest have hardly started.

As well, all of them need oceans of foreign capital, as well as stronger political institutions to force the privatization and budget discipline necessary to make them useful partners for Western Europe. …