European Union Enlargement: An Historic Milestone in the Process of European Integration

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NICHOLAS C. BALTAS [*]

Ten European countries with economies in transition and two market economies are negotiating full membership with the European Union. This paper considers the economic dimension of the forthcoming enlargement of the European Union, especially on the characteristics of the economies in transition and on the economic implications of the enlargement for European Union agriculture. The transition of the central and eastern European countries from a centrally planned to a market economy, although already in progress for a decade, is far from complete. Uneven macroeconomic developments in the various countries can be attributed to some extent to their individual situation at the start of the transformation. However, they also reflect the varying extent to which institutional reform programs have been implemented in these countries. (JEL F15, O52, E63, Q18)

Introduction

Enlargement is the most important issue facing the European Union today. The traditional enlargement model was based on certain principles linked to the rights and duties of both applicant countries and current members. These principles have been applied successfully in previous enlargement procedures and may serve as a sound model for the future. However, the next enlargement will call for more radical solutions. The method traditionally applied when countries wish to join the European Union requires alignment with the guidelines and institutions of the European organization and participation in its policies, unless exempt through derogation or for transition periods. This procedure for accession is very much like joining a club with preestablished membership rules. [1]

Ten countries with economies in transition (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia) and two market economies (Cyprus and Malta) are negotiating full membership with the European Union. Turkey became a candidate country and will carry out a wide range of political reforms before going further in the accession process. While there is no question about Cyprus and Malta being market economies, there are still serious concerns about the central and eastern European countries (CEECs), whose economies are in a long transition process. Applicant countries must be able to cope with the European market and reform their internal structures where necessary, particularly in industry, agriculture, the labor market, and legislation regarding social and environmental issues. Chief among them are the increasingly demanding standards that come from the ever-growing acquis communautaire which are costly to introduce, implement, and enforce [Jovanovic, 2000]. Moreov er, major adjustments must be made regarding budgetary expenditure and its financing, given that 88 percent of the European Union budget is currently tied up in the common agricultural policy (CAP) and structural funds.

This paper considers the economic dimension of the forthcoming enlargement of the European Union, especially on the characteristics of the economies in transition and on the economic implications of the enlargement for European Union agriculture. The second section of this paper examines the economic structure in the acceding countries, and the third section presents the main macroeconomic developments in the CEECs. The fourth section presents an overview of agriculture policy in the CEECs, and the fifth section examines the adjustment process in the CEECs. The sixth section presents the implications of the enlargement regarding agriculture, and the seventh section draws conclusions with respect to the main problems that will arise from the application of the CAP in the acceding countries.

Economic Structure of the Candidate Countries

The entry of the thirteen countries (including Turkey) would increase the European Union population by 45 percent, but its gross domestic product (GDP) would increase only by 6. …