助成

Institute forInternational Policy Studies
・Tokyo・

IIPS International Conference“Enlargement and Future of Europe 2002”
Tokyo, 12-14 November“EU ENLARGEMENT:EXTERNAL IMPLICATIONS FORECONOMIES & SOCIETIES”
byJacques PELKMANS
Norsk-Hydro / Jan Tinbergen Chair,Dept. of Economics,
College of Europe,
Bruges;WRR Council Member, The Hague

EU ENLARGEMENT:EXTERNAL IMPLICATIONS FORECONOMIES & SOCIETIESJacques PELKMANS*(revised)

Paper prepared for the conference:
Enlargement and the future of Europe, 2002,
Tokyo, Institute for International Policy Studies,12-14 November 2002
* Norsk-Hydro / Jan Tinbergen Chair, Dept. of Economics, College of Europe, Bruges;
WRR Council Member, The Hague

EU enlargement is already making headlines in Europe for at least 10 years. Recently,
in the realisation that political decision-makers face the moment of truth, debates have greatly
intensified around issues such as the finalisation of negotiations in agriculture and its funding
and the formulation of package deals which should prevent non-ratification in a Member State.
The big-bang decision of taking in ten candidates by 2004 has meanwhile reduced lingering
fears of a spectre of endless quarrelling between Member States, shifting the final decision
again and again while poisoning the ‘end-game’. It has also become more likely that, aftersome additional years of acquis adoption and catch-up growth, Romania and Bulgaria will
accede in 2008 or so.
This fifth enlargement of the EU is no doubt the most spectacular one. This is due tothe sheer number of countries (12, if not 13 sooner or later) and (for 10 of them) theiremergence out of transition. It will render the Union pan-European and almost certainly
increase the incentives for other European countries to join later.
For all these reasons, one would expect the rest of the world to watch the process
carefully. Surely, trading partners could be presumed to be pro-active in ensuring that theexternal implications are benign or be corrected in the right direction. International economic
organisations might be thought to draft competing reports about the external economic
implications of enlargement, or analytical and policy briefings for others. Not least, one
might venture some hope that the EU itself, remembering the misleading campaign about
Fortress Europe in the wake of EC-1992, would be sensible and diplomatic enough to set therecord straight while anticipating the trouble spots.
Amazingly, however, none of these expectations turn out to be correct. When it
comes to the external economic implications, this is a ‘silent enlargement’. There is virtually
no debate on the external implications, in sharp contrast with the enlargement of 1973 (theUK, Denmark and Ireland) and 1986 (Spain and Portugal). There are no strong overallaccusations of Fortress Europe and, at most, few and minor diplomatic skirmishes on theeconomic impact of the candidates adopting the acquis wholesale.
The present paper will deal with a range of external economic effects of enlargement,
other than monetary (dealt with by other speakers). It will briefly venture into non-economic
territory as well in touching upon social, institutional and cultural consequences. The
structure of the paper is as follows. Section 1 attempts to understand the reason for the‘silence’ in the world of economic policy makers elsewhere. Section 2 discusses the threemain topics of the external economic impact: industrial trade effects, the likely impact on
FDI and agricultural trade effects. Section 3 assumes a more important longer term
perspective in addressing the prospects for secular catch-up growth for the candidates inCentral Europe and the deeper economic reform issues in an EMU of 25 and a steadily
expanding Euroland. Section 4 briefly discusses social, institutional and cultural aspects so as
to preempt misunderstandings in other parts of the world.
1.

Does ‘silence’ mean external support?

The ‘silence’ in worldwide economic diplomacy about enlargement may have several
grounds. Most probably, enlargement is widely supported because it is considered as themost ‘deep’ and secure form of stabilising this once so bloody continent, of precluding any
temptation to go back to a form of planned economies or totalitarianism and, not least, of2

locking-in economic reforms and incentive structures promising to deliver prosperity. This
support would seem to be implicit in many parts of the world and explicit in numerous
declarations by the US and Japan, or OECD countries more generally as well as in ASEM.
Interestingly, the de-facto support from international economic institutions such as the OECD,
IMF and the World Bank, and of course, the EBRD, is expressed openly in many technicalpolicy documents as supportive of transition, reforms and/or growth. To my knowledge there
is no WTO document on enlargement and the recent WTO Trade Policy Review on the EU(not yet published)1 scarcely pays attention to it.
There is a business corollary. Business was quick, through prudent , in venturing into
Central Europe right after the ‘winds of change’ had turned away from communism. US
business followed suit and is now present throughout the region. Japanese business has taken
more of a wait-and-see attitude but in some strongholds of Japanese industry such as cars thisreticence has now been replaced by entry and expansion. European big business (asrepresented in the ERT, the European Round Table of Industrialists) has been highly
supportive of the pre-accession process, even providing flanking business initiatives as
helpful corporate citizens in all candidate countries (see ERT, 2001). Irrespective of
numerous concerns about corruption, fledging market institutions and infrastructure, global
business looks at enlargement mainly in terms of opportunities.
Perhaps more of a speculative rationale to explain ‘silence’ as support is the TINA
argument, TINA standing for There Is No Alternative. Emerging out of a difficult and fragiletransition process, in itself aided by open market access (for industry and most services) in theEurope (association) Agreements, the prospect of EU membership has prompted an
astounding discipline and determination on the part of the candidates. It is little known that
the Europe Agreements (usually with some 120-130 articles) have only a single and brief,
substantive article on the adoption of the regulatory part of the internal market acquis.2 It
merely consists of a list of headings of regulatory areas without any detail, or time-table.
Similar lists can be found in some other association or FTA agreements with the EU. In thelatter cases the follow-up tended to be weak, selective and shallow. In the case of the Europe
Agreements, however, the follow-up was almost as steadfast as if the associates were EU
members already, with extraordinary detail, large-scale technical assistance (in the PHARE
programme), meticulous monitoring, widely-published annual (so-called ‘Regular’) reports
This hegemonicand permanent feedbacks to governments and other public agents. 3
approach does not, therefore, follow from the Europe Agreements and can only be explainedby the strong desire to prepare for membership. It goes without saying that there was nocomparable alternative to this kind of lock-in and stimulus. Nowadays, on the other hand,
having accomplished the adoption of the acquis, with many favourable consequences fortransition too, the Europe Agreements can serve as a reasonable fall-back position in caseratification might somehow fail. This is so because of the ratchet-effects incorporated in theAgreements, in other words, the de-facto sharing of a good deal of the internal market
opportunities can be maintained. Nevertheless, this fall-back position would not be understrict EC compliance systems (up to the EC Court of Justice ) and would not provide for free1

The (accompanying ) EU report is published (WT/ TRP/ G/ 02 of 26 June 2002), but the official WTO TPR is
not yet de-restricted.
2
See Pelkmans, 1998, for detail.
3
See the 1995 White Paper (COM (95) 163 of 10 May 1995 and its Annex specifying 899 directives anddecisions in 23 chapters of the acquis; and the Regular Reports, published in the autumn of every year, this year
published as SEC (2002) 1400 until 1412, attached to the Strategy paper of the Commission of 9th October(COM (2002) 700). These regular Reports, 2002, together add up to more than 1800 pages!

3

agricultural trade, migration, cohesion-type transfers or access to Euroland. The fall-backposition is far superior to what other transition countries enjoy – as the economics oftransition literature has amply shown – but it clearly does not satisfy the ambitions of thecandidates. If the TINA argument is right, it should raise the credibility of the pre-accession
process – and the credibility of the substantive negotiations. One is led to conclude that theworld community has come to trust the EU in bringing about an enlargement which, on thewhole, is seen as a win-win strategy for Europeans and non-Europeans.
2.

Impact on trade and direct investment

Industrial trade
From an analytical point of view, enlargement is the change from an industrial free
trade area (the Europe Agreements) to a customs union. However, the candidates enter theinternal market and this introduces additional potential benefits which are hard to model
properly. If tariff differentials in a free trade area are modest and tariffs are absolutely low,
the change-over to a low-CET customs union should not be expected to cause large changes.
Thus, for industry, most of the adjustment driven by the free access to the EU goods market
will be over before 2004. What then follows might be characterised by further deepening ofspecialisation and vertical intra-industry trade, stimulated by foreign direct investment andsub-contracting. So the positive effects for third countries will primarily depend on this longrun deepening and upgrading of specialisation. The early signs demonstrate a very dynamic
adjustment process. After the massive shift towards trade with the EU (up to 1994), the initial
dominance of labour-intensive final goods has reduced, and the share of technology andskilled-labour intensive products moved up from 37% in 1993 to 50% in 1997 (Kaminsky,2001). Quality upgrading is also found by Nielsen (2001), at a very high level ofdisaggregation, but the CEEC quality levels still lag greatly behind those of the EU. Verticalintra-industry trade dominates East-West industrial trade (Aturupane, Djankov & Hoekman,
1999) , with the CEECs invariably supplying the low unit-cost goods. The import side ofCentral Europe is extremely dynamic for capital goods (not including motor vehicles and theirparts), nearly a tripling between 1993 and 1998. These and other studies, combined with theflows of foreign direct investment, point to ongoing forceful restructuring and upgrading. It is
guesswork to make inferences about the quality of factor endowments and applied technology
in 2004 but there are good reasons to expect the starting position in the larger customs union
to be radically different from the empirical basis of most of the meanwhile publishedliterature on trade effects. If correct, it is good news for competitiveness, and ultimately
catch-up growth. In any event, a reasonable guess would be that the candidates’ share in EU15 imports (already gone up from 3.4% in 1992 to 9.8% in 1999) would rise to 13% - 14% by
the time of entry. Central Europe will begin to matter in EU trade.
At a disaggregated level, the (short-run) positive effects for outsiders hinge on the
reduction of trade protection. The accession to the EU (industrial) customs union will on thewhole be beneficial to outsiders since tariffs of all candidates (except Estonia, which has no
industrial tariffs) will fall to the EU rates which, on average, amount to 5.3% (applied rates).
As is known, few countries actually pay these tariffs due to many preferential agreements or
GSP. But for Japan and the US, it means that the average tariff reduction is often half thecurrent rate or more. Customs union theory amounts to a warning that a shift from tariffridden trade to a customs union, even with low tariffs can still (sometimes) lead to trade
diversion. But in Europe, intra-trade is already tariff free and hence the tariff reductions will4

generally boil down to a pure improvement of market access for the US and Japan (andothers).
Cases of trade diversion can be suspected in cars and possibly in textiles and clothing.
Both sectors show extremely buoyant intra-European trade. Both are driven by fragmentationof the production process, a search for differentiated location according to comparativeadvantage, outsourcing and massive direct investment. Appendix ‘Eastern enlargement and T& C II’ shows the phenomenal success in intra-European adjustment expressed in clothing
and textiles trade growth. To some degree this must be due to trade diversion, made possible
behind relatively high tariffs and MFA quotas. With enlargement this trade diversion willtend to reduce because EU tariffs (9% - 12%) are generally lower than those of candidates.
This tendency is reinforced by the abolition of the last tranches of MFA quotas one year after
accession.
The case of cars has recently been characterized by considerable protectionism on thepart of some candidates (notably, Hungary, Poland and Romania), presumably as a form ofindustrial policy. Enlargement will amount to a cold shower for these candidate countries
because the EU car tariff is 10% (higher for trucks). Some one-fifth of the FDI stock incandidate countries is in the car industry. Forward and backward linkages, upgrading of
numerous suppliers, technological modernisation of equipment suppliers and JIT management
will be crucial to achieve competitiveness in a low-tariff environment vis-à-vis third countries
and pan-European free trade. So far, third country producers (Korea, Japan, US) havepreferred to invest rather than to export to Central Europe. Expectations for exports from thecandidates to Western Europe, once quality is ensured, remain high. Also, local demand forcars is expected to grow faster in Central Europe than economic growth. It would thus seemthat the car sector offers substantial opportunities while becoming exposed to global
competition.
Foreign direct investment
FDI flows have been quite strong during the second half of the 1990s. As Brenton & di Mauro( 1999) have shown , FDI in the more advanced candidates was greater than one should
expect given the actual level of income , market size and relative proximity . The
determinants of future FDI flows into Central Europe are perhaps even more difficult toestablish than elsewhere. Bevan & Estrin (2000) find as key determinants country risk , unit
labour cost , host country size and other gravity factors . In turn , country risk is influenced byprivate sector development , industrial development , budget (im)balance , reserves and thedegree of corruption . They show that more FDI boosts credit ratings with a lag , which inturn boost FDI again . This suggests virtuous circles but also rivalry in attracting FDI between
the lagging and advanced candidates. The perception or expectation that chances for long-run
catch-up growth are good will act as a major stimulus for FDI which in turn will contribute to
the realisation of that economic growth. It is for this reason that business attaches so muchsignificance to actual, not possible, EU membership ( ERT (1999) ; ERT (2001 ) ) . They
regard the EU as a credible – even when far from perfect - enforcer and stabiliser of theregime change and wish to see the seal of approval . The Spanish and Portuguese accession
led to a true explosion of FDI inflows for about four years, before returning to 1986 levels.
One might add that the subsequent entry into Euroland would further boost FDI although little
hard empirical work seems to underpin this expectation. Soft indications for this statement
include the massive business support for the euro precisely on the grounds of predictability
and low long term interest rates. An additional argument that tends to be overlooked is the5stability of market access and of currencies inside Central Europe. FDI is known to respondpositively to such regional facilitation of market access , since critical mass for scale might
now be accomplished by sales to a subset of CEECs rather than from Western Europe.
World FDI flows declined sharply in 2001. The 2002 World Investment Report(UNCTAD, 2002) notes a fall of 59% (!) for developed destinations and 14% for developing
countries. However, the inflows to Central Europe remained stable (+2%), and this testifies
to the confidence business has in enlargement. It is widely expected that, after 2004, FDI
flows to Central Europe will go up sharply, at least for a number of years, and this despite thedrying-up of privatisation projects.
A potential commercial dispute between the US and the EU together with thecandidates, is simmering with respect to the bilateral investment treaties (= BITs) the US has
concluded with Central European countries. These BITs have to be cancelled by thecandidates and the US is protesting. It is not easy to understand why. Surely, the EUinvestment regime (with national treatment and a strict prohibition to introduce restrictive,
national measures) is appreciated by US business. Perhaps some benefits is special free-trade,
processing zones might be at stake.
Agricultural trade
Here the picture is complicated. Although in temperate zone products, EU protection isextremely high, so that one should expect a range of agro-products to receive higher
protection after 2004, there are also products for which protection in candidate countries turns
out to be higher. Moreover, in the Doha round, EU agro-tariffs are bound to fall considerably– the question is rather one of timing. Other complicating factors are that the CAP mid-term
review is likely to lead to changes (e.g. decoupling) and that candidates’ farmers will get(slowly rising) income payments. Finally, the planned milk reform (2005-2007) will be
implemented, whilst sugar protection will be undermined by the EU all-but-arms initiative forthe 48 poorest countries of the world.
There is substantial academic literature on the impact of enlargement on third
countries’ agriculture and the EU’s agro-commitments of the Uruguay Round.4 Its thrust isthat there are real risks of violating the WTO constraints and that there will be trade diversion
in several product groups, such as bovine meat (seriously negative for the US and Argentina)
and grains other than wheat (idem). However, the current state of flux creates considerable
uncertainty. For one thing, the post-transition restructuring in agriculture in Central Europe isfar from over, hence, the medium-term effects of extending the CAP are not generally
worrying (for outsiders) as one might have expected given a healthy agro-food sector. (seee.g. European Commission, 2002a; 2002b).
A more radical CAP reform has not been implemented, although attempts to commit
the Council to it by 2006 have not been rejected. Also the budget ceilings after 2006 havebeen tightened. The question now is whether future reform can combine a constrained budget(for income payments) and (much) lower trade protection. History and political economy
teach that third countries better not be optimistic.
4

See, for instance, Swinnen (2002), Fuller et. al (2002), Weyerbrock (1998) and Frandsen, Jensen & Vanzetti(2000).

6

3.

The long-term economic perspective

In the longer run, and given the accomplished ‘new security architecture of Europe’,enlargement is about prosperity. A successful enlargement is one which stimulates a catch-up
economic growth rate, higher and better sustained than in other scenarios. Such a successful
enlargement clearly would be a win-win result for Europeans and non-Europeans alike.
Let us first celebrate the good news. After the large output falls of the beginning oftransition , the candidates have shown that rather basic recommendations about soundeconomic policy , combined with the gradual introduction of the acquis communautaire andthe access to the EU markets , does bring catch-up growth . Between 1995 and 2000 , 7 of the
10 CEECs were catching up despite Russian turbulence and lingering transition problems.
And the cases of retrogression were clearly countries paying the price of half-baked reforms
and/or very sloppy macro-economic policies ( Bulgaria , Romania and the Czech Republic ).
All three are in the process of overcoming these setbacks , with Romania and Bulgaria
currently on a catch-up rate of 2 % - 3 % points or more ( if the EU remains trapped at amiserable 1 % this year ). However, the real issue is a long-run one : does the Union welcome
the growth dynamo’s of the near future or must it face the risk of getting stuck with a bunchof new Mezzogiorno’s ? In other words : how to escape from catch-22 and foster catch-up
with the West ? Recent extrapolations of the post – 1995 experience suggests that catch-up to
only 75 % of the GDP per capita of the EU-15 will take one , two or three decades dependent
on the country and ignoring the relatively high income case of Slovenia.
The mighty combination of “lock in “ and policy stimulus , not to speak of the
dynamic benefits of market access and competitive exposure in an EU – 25 , generates a progrowth environment . It is not comparable to East Germany where irresponsible wage
increases far ahead of productivity and a lack of local ownership , combined with what Rudy
Dornbusch called both the ‘good’ and ‘bad’ institutions of Germany , have prolonged
structural unemployment and deterred investors . It is not comparable to industrializing
developing countries in general as they cannot hope to enjoy such forceful ‘lock in ‘ ( noteven Mexico in NAFTA) , such strong guidance in economic policy , such powerful and longterm assistance and such market access , indeed free movement ( implying a right toaccess ) .
Nevertheless , the favourable environment notwithstanding , there are lingering doubts
about catch-up growth. They have both practical and deep analytical grounds. Practicalarguments include the egalitarian inclination in the domestic politics of the transition
countries , which has caused intolerably high social mark-ups on wages ( not seldomly higher
than in Western Europe , which used to be the highest in the OECD) and considerable deficits
in the pensions systems today ( i.e. before ageing is beginning to hit ) . Other worrying
observations include the hesitation to go all the way in restructuring of ailing sectors in thepresence of high structural unemployment , the deep skill mismatches of many long-term
unemployed in a rapidly changing labour market and the expected exit from agriculture witha questionable absorption capacity of industry and services , the alternative being a too
generous CAP keeping far too many human resources in subsistence agriculture , dragging
down growth . Last but not least , one could add the weaknesses in financial services andcapital markets in actually serving the needs of local investors at low interest rates and theoverall fear that implementation and market related institutions in Central Europe are so
feeble that markets suffer from uncertainty , hence less growth.

7

The analytical reasons boil down to the controversies in economics about the longterm determinants of growth. The empirical convergence literature has brought quite some
confusion (see for a rich survey in the context of enlargement , UN-ECE , 2001). A careful
application with parameters taken directly from Central Europe shows that these empiricalmodels are not at all robust ( e.g. Campos , 2000). In any event these determinants are rather
rough , such as simple enrolment rates as a measure of human capital and ( as a negative )the share of government consumption in GDP . Broader development strategies a la Porter( Porter & Christensen (1999) ) may be more insightful , yet tend to have a less rigorous
basis. Also the debate on the East Asian miracle has ended in controversy on several major
determinants ( IBRD (1993) ; Eggleton (1997) ; Morrisey & Nelson (1998) ; ADB (1997) ;ADB ( 1999 , part III ) ) such as the nature and degree of government intervention ( including
the quality of economic institutions ) and the relevance of intensive versus extensive ( i.e.
based on volume expansion of factor input ) growth. The consensus on a strong emphasis on
human capital development and macro-economic stability is not particularly helpful because
this is a widespread conviction anyway in Europe. Finally , the recent analyticalunderpinnings of the convergence /divergence debate for the reform of cohesion policy in theUnion have led to great theoretical advances in the new economic geography ( see Fujita ,Krugman & Venables (1999) and Neary (2001) ) but significant difficulties remain intranslating it into policy recommendations as the authors themselves admit. In other words ,as the Romanian economist ( and former finance minister) Daniel Daianu (2002) has put it ,should we rely on “an apparent mythical belief “ in EU circles that a well functioning
competitive market economy will ensure a catch-up growth trajectory ? Can Ireland be
imitated by all or will many mimic the Greek tragedy before 1997 or are they capable ofpursuing the reasonable Iberian middle-road? It seems obvious to this author that the EU cansimply no longer tolerate the pre-1997 Greek underperformance combined with opportunism
and bad implementation . EMU is a huge improvement in that respect and Greece has
responded in kind.
But economic growth and a healthy enlargement cannot be limited to the Central
Europeans. The entire new EMU of 25 faces a need for economic reform, in particular microeconomic reform in agricultural, services and labour markets. These reforms would also help
in reducing the costs of shocks in Euroland than can no longer be cushioned by (national)
currency realignments.
Japan and much of Europe share a low capacity of economic reform nowadays. CAP
reform over the next two decades seems likely to come back every five / six years or so until
decoupling and (sufficient) decentralisation of income payments is accomplished and external
protection has become low. The reforms in services, including network services, go slow and,beyond squeezing out the worst elements of cost inefficiency, progress becomes very difficult.
This is even true for the critical sector of business services (despite its higher than average
growth rate).5
The reforms of labour markets are an evergreen amongst European economists . It
ranges from Giersch’ ‘eurosclerose’ of 20 years ago until the recent , sensational call by a
CEPR team led by prof. Boeri ( CEPR ( 2002) ) to make accession conditional upon theexistence of a decent social safety net while at the same time letting the EU contribute to thisnet via the structural funds . The Boeri group goes even further and argues for a European
safety net (!) , based on a European minimum guaranteed-income scheme (which would be
5

See the Commission report on the internal market for services, COM (2002) 441 of 30 July 2002.

8

differentiated , to be sure ) so that systems competition would only take place above that level.
I shall not go into the merits and financing of those systems nor into the details of all kindsof labour market flexibility proposals floated by many economists , the EU and the OECD.
The Luxemburg process , dealing with the so-called European employment strategy since1998 , has attempted to approach it via the so-called ‘open method of coordination ‘ . One
observes that all the hard reform issues remain excluded from this work. The benchmarking
has done little to convince German or Italian vested (labour) interests to mend their ways.
Would enlargement make the difference ? The answer is that only a combination of threechanges might get Europe somewhere : making intra-EU labour mobility across borders easier( a topic carefully neglected until in 2001 the Commission finally came with serious
suggestions to remove barriers to cross-border labour mobility - see European Commission ,2001 ) , greater flexibility with the host country control principle , and some acceptance ofthe fundamental idea that the cumulation of regulatory protection in the labour market and agenerous safety net without any trade – off between the two can be excessive and hence
hinder the attainment of goals that the EU (hence its Member States ! ) have set. If thistriptych is not accepted - and it will be an uphill struggle - chances are that , gradually ,Central Europe will transform into a copy of Western Europe. The upshot will be sluggish
growth in the continent while labour markets will fail to clear. If this agenda could even bepartially implemented , as about half of the EU countries are favouring and are already doing
to a degree , enlargement might infuse some extra dynamism.
4.

What impact on society

The fifth enlargement is much ‘bigger’ in terms of the added population to the Union (nearly
30%, or 105 million people for the 12, or even more when the 70 million Turks would becounted too) than in terms of ‘economic’ size (5% of EU GDP for the 12).
A very important aspect of enlargement is therefore its impact on society at large. For
Central Europeans this means first of all, a “return to Europe”, its cultural heritage andoutlook, its underlying values and, to some ill-defined extent, its institutions. The EU,
following on from the old Helsinki process, has defined a core set of political conditions suchas democracy, human rights, and the rule of law, including the proper protection of minorities( a difficult issue in Central Europe). Beyond these however, little is directly influenced by
the Union. The EU is not a federal state and will not become one soon. The influence on
many types of institutions is at most informal, and via imitation of examples from one or theother Member State, unless the acquis is directly involved. In many respects social issues are
decided at the Member State level and indeed in a whole variety of ways. The so-called“European social model” is much more clear in its rejection of the US (“a-social”) model –and indeed of many “harsh” alternatives in Asia – than in what it exactly means in Europe.
Social regulation is largely national and nothing in the (tiny) EU budget resembles an
expenditure for the ‘welfare state’. And cultural questions have – rightly – remained outside
the EU competences, be it that EU can, when there is explicit agreement, pursue joint cultural
policies if, and only if, they “contribute to the flowering of the cultures of the Member States”.
It is thus somewhat misleading to expect a direct influence of enlargement on society
at large. The enormous turbulence of societies in Central Europe is primarily due to thedisappearance of communism and its severe restraints on education, information, mobility,
freedom of speech and press, choice, change and variety, The process of transition and the
choices made have also deeply impacted on the predicament and conduct of the peoples ofEurope. The larger EU cannot expect but to exert a minor, largely indirect influence, via the9setting and enforcement of standards, the appeal of reputation mechanisms and via a few
policies relevant to society at large, such as audio-visual services (the TV without frontiers
directive). One can also argue that the intensity and quality of business and official contacts
and big programmes such as Erasmus and other exchanges might be expected to contribute toa renewed sense of European identity, over a period of a generation or so. It should, however,not be forgotten than the next enlargement (the 12 plus Romania and Bulgaria) adds the same
number of languages. Many of the language areas are small to very small. Although thiscreates tremendous and costly complications in the Brussels and Strasbourg machineries, one
can also regard it as a telling demonstration of Europe’s great diversity. With as many as fiveor six more countries waiting in the wings to apply for EU membership6, the EU will finditself dealing with 30 languages in a decade or so. Like ASEAN 30 years ago and the USA
200 years ago, a single communication language will eventually become inevitable. Unlike
the US, and much like the ASEAN, however, there ought to be no ‘cannibalisation’ of thelocal cultures.
For non- Europeans the impact of enlargement on societies will therefore remain too
subtle to be noticeable. This does not mean that Europe’s societies will not change. Quite thecontrary, change is rampant and deep, especially in Central Europe, but it is largely driven byother forces than EU membership stricto sensu. The larger EU will very much remain ‘united
in diversity’, even if the Convention would lead to genuine treaty changes. Much to the reliefof Dr. Kissinger, the EU has now a phone number, but European society has not.

References
ADB (1997) , Emerging Asia , changes and challenges , Manila , Asian Development
Bank
ADB (1999) , Asian Development Outlook 1999 , Oxford/New York (Oxford
University Press )Aturupane , C. ,Djankov, S. & Hoekman , B, (1999) , Horizontal and vertical intraindustry trade between Eastern Europe and the EU , Weltwirtschaftliches Archiv , Vol .
135 , Heft 1
Bevan, A. & Estrin , S. (2000) , The determinants of foreign direct investment intransition economies , London , CEPR Discussion Paper no. 2638 , December
Brenton , P. & di Mauro , F. (1999) , The potential magnitude and impact of FDI
inflows to CEECs , Journal of Economic Integration , Vol. 14 , 1Campos, N. (2000) , The growth prospects of transition economies reconsidered ,Bonn , Center for European Integration Studies , ZEI Working Paper B00-13
CEPR (2002) , Who’s afraid of the Big Enlargement ? , London , CEPR Policy Paper
no. 7 , June

6

Croatia, Macedonia, Albania, Georgia, Moldova, not to speak of Turkey of course. Compare with the readingof this ‘domino’ effect in my ‘The Pan-European flux’, Singapore, SIIA, 1992, pp. 26-29.

10

Daianu , D. (2002) , Is catching up possible in Europe ? , Romanian Journal of
European Affairs , Vol. 2 , 1
Eggleston, K, (1997) , The sustainability of East Asian growth , ASEAN Economic
Bulletin , Vol, 14 , 1 , July
ERT (1999) , The East-West win-win business experience , Brussels , European Round
Table of Industrialists
ERT (2001) , Opening up the business opportunities of EU enlargement , Brussels ,European Round Table of Industrialists , ERT position paper and analysis
European Commission (2001), New European labour markets , open to all , withaccess for all , COM (2001) 106 of 1 March 2001
European Commission (2002a) , Enlargement and agriculture : successfully
integrating the new Member States into the CAP , Issues Paper , SEC (2002) 95 of 30
January 2002
European Commission (2002b), Analysis of the impact on agricultural markets andincomes of EU enlargement to the CEECs, Brussels, March.
Frandsen, S. ,Jensen, H . & Vanzetti , D. (2000), Expanding Fortress Europe :agricultural trade and welfare implications of European enlargement for non- Member
regions , The World Economy , March ( Vol. 23 , 3 )Fujita , M. , Krugman, P. & Venables , A. (1999) , The spatial economy , Cambridge(US) and London , MIT Press
Fuller , F. , Beghin , J. , Fabiosa , J. , Mohanty , S. , Fang , C. & Kaus , P. (2002) ,Accession of the Czech Republic , Hungary and Poland to the European Union :impacts on agricultural markets , The World Economy , March ( Vol. 25 , 3 )IBRD (1993) , The East Asian Miracle , New York , Oxford University Press , for theWorld Bank
Kaminsky , B. (2001) , How accession to the EU has affected external trade andforeign direct investment in Central European economies , World Bank , Washington
D.C. , Working Paper
Morrisey , O. & Nelson , D. (1998) , East Asian economic performance : miracle orjust a pleasant surprise ? , The World Economy , Vol. 21 , 7 , September
Neary , P. (2001) , Of hype and hyperboles : introducing the new economic
geography , Journal of Economic Literature , Vol. 39 , 2 (June ) , pp. 536 - 561
Nielsen , J. (2000) , Price – quality competition in the exports of the CEECs ,Intereconomics , March/April , Vol. 35 , 2 , pp. 94 – 101
Pelkmans, J. (1998), Approximation before accession, CEPS Review, no. 5.

11Porter, M. & Christensen, C. (1999) , Microeconomic competitiveness : findings fromthe 1999 executive survey , Davos/ Geneva , World Economic Forum Competitiveness
Report 1999 , pp. 30 – 52
Swinnen , J. (2002) , Transition and integration in Europe : implications for
agricultural and food markets , policy and trade agreements , The World Economy ,April ( Vol. 25 , 2 )UN-ECE (2001) , Economic Survey Of Europe , 2001 no 1 , Geneva , UN Economic
Commission for Europe
UNCTAD (2002), World Investment Report 2002, New York & Geneva, September.
Weyerbrock , S. (1998) , Reform of the EU’s CAP : how to reach GATT
compatibility? , European Economic Review , February (Vol. 42 , 2 )12Appendix:

Eastern Enlargement and T & C II
CEECs SHARE EU
imports

growthp.a (in euro)

CEECs SHARE

growthEU imports

p.a. (euro)

70
60
50
40
30
20
10
0
88

95

2000

textiles

88

95

2000

clothing

MEMO ITEMS:
Q
growth p.a. of competitors in textiles: Turkey 16%. China 16%. India 18%
Q
growth p.a. of competitors in clothing: China 54%, Turkey 30%, HK 3%,
Bangladesh 161%
Q
shares of competitors in textiles (2000): Turkey 10.7%, China 10.4%, India
10.1%
Q
shares of competitors in clothing (2000): China, 15.6%, Turkey 11.2%,
Turkey 11.2%, Maghreb 10.3%

13