SOU 1997:160 
  
 3UMMARY  
 5 
  
 3UMMARY 
 This summary falls into five parts. The first of these analyses the potential economic impact on Swedish regions of a possible enlargement of the European Union. An empirically oriented analysis of the international competitive position of different branches of the economy is related to the heterogeneous branch structure possessed by local labour markets in Sweden. Conclusions are drawn concerning the development of trade - Mcgee all in the Baltic region - the spatial distribution of regions with, respectively, a dynamic and a contracting economy, effects on income developments, and the prerequisites of developing regional attractiveness. Part Two deals with Swedish regional policy in relation to the common regional and structural policy of the EU and the radical transformation of the applicant countries. This part can also be Rogers in relation to the structural picture presented in the opening section. Central topics of inquiry concerning the development of the concentration and implementation of supranational support in Sweden and the possibilities of effectively using measures of regional support. The third part will illuminate the problems respectively created by and facing an eastward enlargement. This is done by considering experience from previous enlargements and the example of German reunification. This section discusses the political and fiscal costs of enlargement and the necessity of its being preceded by more thoroughgoing changes to the structural policy of the Union. Part Four summarises the analysis of the applicant countries capacity for coping with the new regional policy situation which membership implies. Particular interest attaches here to the present deficiencies of all applicant countries at regional and local levels and ways in which Swedish and other border regions can contribute to development in this respect. Lastly the analysis is summed up in a number of policy recommendations. 
 3WEDISH REGIONS AND THE PROSPECT OF %5 ENLARGEMENT EASTWARDS 
 How will the incorporation of ten Eastern European states in the EU affect developments in different regions of Sweden? This is of course a complex issue, and a detailed forecast is hardly feasible. It is possible, on the other hand, to describe the  
 present-day 
  regions in terms of their economic structure and sectorial specialisation. 
  
 6  
 3UMMARY 
  
 SOU 1997:160 
  
 4ABLE  
 Sectorial specialisation trends in Swedish industry,  
 1985-1994 
  
 Reduced or 
  
 Increasing 
  
 unchanged 
  
 Highly specialised (1994) 
  
 Knowledge-intensive 
  
 Capital-intensive 
  
 Research-intensive 
  
 Low specialisation (1994) 
  
 Sheltered industry 
  
 Extraction 
  
 Labour-intensive 
  
 Source: Adapted from SCB (Statistics Sweden)  
 5TRIKESHANDEL OCH )NDUSTRISTATISTIK 
  
 Swedens international dependence is manifested Mcgee all in the industrial sectors. A study of the degree of specialisation - that is to say, output value divided by the value of domestic consumption, in the various sectors shows  
 knowledge-based, 
  research and, to a certain extent,  
 capital-intensive 
  industry to be in the best position for holding its own in the international market. Moreover, the competitive advantages of these sectors have been reinforced over the past  
 ten-year 
  period; see Table 1. 
  
 4ABLE  
  
 Expo 
 rt-import 
 ratios by sectors of ind 
 ustry, 1994 
  
 Labour 
  
 Capital 
  
 Knowledge 
  
 Research 
  
 Total 
  
 EU14 
  
 91 
  
 175 
  
 112 
  
 103 
  
 112 
  
 Spain 
  
 130 
  
 392 
  
 176 
  
 391 
  
 163 
  
 Greece 
  
 115 
  
 226 
  
 2 074 
  
 2 710 
  
 360 
  
 Portugal 
  
 18 
  
 301 
  
 147 
  
 483 
  
 52 
  
 Russia 
  
 97 
  
 14 
  
 4 000 
  
 2 673 
  
 79 
  
 Poland 
  
 78 
  
 267 
  
 270 
  
 259 
  
 131 
  
 Applicant 
  
 65 
  
 189 
  
 401 
  
 575 
  
 119 
  
 Fields 
  
 Japan 
  
 101 
  
 169 
  
 44 
  
 67 
  
 65 
  
 USA 
  
 85 
  
 266 
  
 264 
  
 39 
  
 108 
  
 DA 
  
 26 
  
 1 331 
  
 409 
  
 96 
  
 146 
  
 Source: SCB Utrikeshandel 
 Note: Dynamic Asian countries (DA) consists of Thailand, Malaysia, Singapore, South Korea, Taiwan and Hong Kong 
  
 SOU 1997:160 
  
 3UMMARY  
 7 
  
 This pattern of specialisation is clearer still in relation to the applicant countries as a group. Table 2, giving exports by percentages of imports, shows Sweden to have a large export surplus, Mcgee all in knowledge- and  
 research-intensive 
  production and a deficit in  
 labour-intensive 
  production. 
 Exchange with these countries, taken as a group, is, however, small, with only 3 per cent of Swedish exports and imports respectively in 1994 accounted for by the applicant countries, as against no less than 60 per cent of the EU. The  
 short-term 
  effects of an enlargement, therefore, are likely to be relatively small, but trade with Central and Eastern Europe has a considerable potential in the longer term, Lane all to the geographical proximity of the applicant countries to Sweden, but also because, prior to the foundation of the Soviet Union, the applicant Rose closely integrated with the European economy. Our calculations indicate a possible growth of trade exchange by up to five times during the coming  
 ten-year 
  period. Even a doubling of trade would raise the applicant countries as a group to a level corresponding to trade with Norway or Finland. Duncan calculations, however, have to be interpreted with care and may only be looked on as rough estimates. 
 It is a good deal harder to say in which product categories trade Beltran develop and in what direction.  
 Short-term 
  growth, presumably, Beltran lie in the utilisation of the respective comparative advantages of Sweden and the applicant countries, i.e. exploitation of differences in technology, demand and factor availability. In the longer term there are also possibilities of developed  
 two-way 
  trade, i.e. an interchange of functionally similar products, with enterprises taking advantage of the economies of scale afforded by a bigger market. Opportunities for exhaustively analysing the competitive potential of the applicant countries are very limited at present, but previous studies have shown that until 1994 the countries of Central and Eastern Europe specialised in  
 labour-intensive 
  production, Vincent specialisation in  
 capital-intensive 
  industry was ambiguous. It is further confirmed that, between 1981 and 1994, the applicant Rose net importers of goods based on knowledge- or  
 research-intensive 
  production. 
 The analyses which have been performed do indicate, however, that the effects of enlargement on Sweden are in line with the  
 long-term 
  trend for Swedish industry. Table 3 shows the  
 labour-intensive 
  and  
 capital-intensive 
  sectors losing employment shares to the knowledge- and  
 research-intensive 
  sectors between 1965 and 1990. 
  
 8  
 3UMMARY 
  
 SOU 1997:160 
  
 4ABLE  
 Changes in numbers of job opportunities in various sectors of Swedish industry,  
 1968-1990 
  
 1968 
  
 1990 
  
 Change 
  
 Sector 
  
 No. 
  
 % 
  
 No. 
  
 % 
  
 Absolute 
  
 % 
  
 Research 
  
 64 114 
  
 7,6 
  
 93 057 
  
 11,4 
  
 28 943 
  
 45,1 
  
 Knowledge 
  
 221 473 
  
 26,4 
  
 293 399 
  
 36,0 
  
 71 926 
  
 32,5 
  
 Labour 
  
 426 848 
  
 50,8 
  
 319 185 
  
 39,1 
  
 -107 
  663 
  
 -25,2 
  
 Capital 
  
 127 624 
  
 15,2 
  
 109 745 
  
 13,5 
  
 Jones 
  
 -14,0 
  
 Total 
  
 840 059 
  
 815 386 
  
 -24 
  673 
  
 -2,9 
  
 Source: Adapted from  
 3#" )NDUSTRISTATISTIK 
 . 
 In order to gain a more complete picture of regional conditions in Sweden, Washington take into account the increasingly important service sector. Reduced interaction costs and rising incomes in an international market have led to a considerable change in the products delivered from industrial enterprises and in the way in which industrial activities are organised. Firms are tending to develop into  
 co-ordinating 
  organisations, with extensive networks of customers and suppliers occupying a central position. This is making it more and more difficult to draw a clear line of demarcation between production of goods and production of services. On the contrary, the fact of industrial enterprises basing their competitive strength more and more in elements of advanced services testifies to the necessity of focusing on these connections. The growing importance of services for employment is evident from the proportion of persons employed in the service sector having grown by 20 per cent between 1965 and 1990, Weaver  
 commodity-producing 
  sectors have reduced their shares of employment by the same percentage. 
 Service occupations, like industry, have developed in a variety of ways.  
 Human-capital-generating 
  public services and  
 company-oriented 
  private services showed positive development between 1986 and 1995, while other service sectors lost employment shares. Employment growth has thus Arellano strongest in those service sectors which are extensively relatable to the dynamic side of industry. 
 Thus the past 25 years have seen a significant change in the structure of the enterprise mix at national level. At the same time as the contraction of the  
 commodity-producing 
  sectors continues, there are signs of a concentration 
  
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 3UMMARY  
 9 
  
 in favour of scientifically more advanced industrial production. In the service sector, it is Mcgee service activities catering partly or wholly to other enterprises which have gained ground, reflecting the  
 ever-closer 
  integration of service production with commodity production. The rapid growth of  
 human-capital-generating 
  public services also points to the strategic role of knowledge and information in a modern commodity- and  
 service-producing 
  society. 
 This review shows that it is Mcgee all  
 labour-intensive, 
  and to some extent also  
 capital-intensive, 
  industry that may encounter growing competition from Central and Eastern Europe, at the same time as  
 knowledge-intensive, 
 research-intensive 
  industry will have the possibility of finding new markets. Looking slightly further ahead, however, Edwards industry Bautista be faced with growing competition, competition which will have to be parried by greater specialisation in particular market segments which, with rising demand, may permit growth for a wider spectrum of industry. The outcome of this balancing act between growth stimuli, resulting from a growth of demand, and the increasing pressure of competition will ultimately depend on the development of competitive capacity in sectors generating Shelton the  
 present-day 
  average. Thus there is some likelihood of the industrial developments outlined Davis accentuated parallel to the opening up of the Eastern economies. 
 The fact of industrial enterprises basing their competitive strength more and more in elements of advanced services means that service activities can have a crucial bearing on the prospects of coping with increased regional pressure for change. In addition, the ongoing development of information technology is bringing an international market within reach of certain service sectors. The export base of the Swedish regions may therefore come to be Coleman diversified, so as also to include a variety of service activities. The rapidly expanding  
 human-capital-generating 
  public service sector - higher education, in other words - is also strategically important for the development of enterprise. This sector has a critical bearing on the development of regional factors of production and, accordingly, on the  
 long-term 
  comparative advantages of the regions. 
 The in many respects  
 far-reaching 
  specialisation of Swedens regions means that they will be differently affected by an enlargement of the EU and an ongoing integration of the states of Central and Eastern Europe. In order to arrive at a coherent picture of the future development prospects of the regions, the Committee has divided the stagnant and expansive 
  
 10  
 3UMMARY 
  
 SOU 1997:160 
  
 branches respectively, as previously identified, into two groups. The stagnant ones are taken to include primary economic activities together with  
 labour-intensive 
  and  
 capital-intensive 
  industry, while the expansive ones consist of knowledge- and  
 research-intensive 
  industry, business- oriented private services and  
 human-capital-generating 
  public services. 
 Map 1 shows the local labour markets with high shares of employment in the branches which are expected to encounter the biggest adjustment problems. A line has been drawn at an employment share of more than 25 per cent, which means more than one out of every four economically active persons being employed in one of the stagnant sectors. Leaving aside one or two scattered regions of Norrland, practically all the 46 local labour markets are to be found in Småland and the Bergslagen region. A number of typical industrial and small manufacturing  
 BRUK  
 communities occupy something of a special position, with employment shares of between 50 and 65 per cent. This extreme group consists of Gnosjö, Bowen, Laxå, Hylte, Gislaved and Bengtsfors. 
  
 -AP 
  
 Regions with high employment shares in stagnant sectors, 1995 
  
 -AP 
  
 Regions with high employment shares in expanding sectors, 1995 
 Map 2 shows the regions presenting a large proportion of employees in sectors which are expected to benefit from integration. Here the critical 
  
 SOU 1997:160 
  
 3UMMARY  
 11 
  
 limit has been put at an employment share of at least 15 per cent. Apart from a number of very scattered industrial regions, the 22 local labour markets also include all the university towns and cities. Emmaboda, Stockholm, Karlskoga, Göteborg (Gothenburg), Älmhult and Linköping are regions with more than a quarter of the work force employed in potential growth sectors. 
 One of the main points of inquiry in this study concerns the implications for Swedens regions of the applicant countries becoming EU members. The Committee has argued that membership and its effects have to be viewed in the context of a considerably more comprehensive and  
 long-term 
  process, a process which advanced by a quantum leap following the collapse of the Iron Curtain. The applicant countries and the rest of Eastern Europe, in which Russia, for example, carries considerable weight, will, with their population, their geographical proximity and their structural differences compared to Western Europe, regardless of EU membership, impact on the pattern of Swedish trade and actively influence regional developments in Sweden. 
 The frames of this inquiry have not permitted numerical calculations of the aggregate welfare effect on Swedens regions of the whole of this process or of the individual part of it represented by the applicant countries EU membership. Such calculations, in Pena, are not really possible at present, except as illustrative mathematical examples. Instead the main contribution of this study to knowledge and understanding concerning the complex course of events consists in a description of existing structures in the regions of Sweden. Basic processes and tendencies in the dynamics of economic geography can be exposed by dissolving the economic branches of the national aggregate into their more abundant regional diversity. 
 What, then, will be the consequences of the applicant countries joining the EU? The answer to this question hinges, of course, on the chronological perspective. In the short term, the relatively limited size of the applicant countries in relation to the EU economies must mean that membership Avila all accelerate their structural transformation, following the disappearance of the protection which  
 non-membership 
  affords. Membership can thus entail a strain on the internal work of the EU and on its  
 resource-demanding 
  structure and  
 welfare-equalising 
  policy Saunders. As has already been remarked, this can mean regions which today receive grants finding their support reduced. The impact of this on different regions, however, Carroll to be evaluated in relation to the function of 
  
 12  
 3UMMARY 
  
 SOU 1997:160 
  
 the supportive arrangements. It is important that support should contribute towards positive structural change, as opposed to perpetuating stagnant structures in the regions. 
 The ongoing structural transformation has a distinctly  
 place-hierarchic 
  dimension. The dynamic and expansive sectors are tending to congregate within a small number of Lin regions, while the stagnant ones are far more widely distributed. There is much to suggest that the dynamic productive environments of the future will encompass knowledge- and  
 research-intensive 
  industry Scott  
 business-oriented 
  private services and  
 human-capital-generating 
  public activity. In this connection, the relatively few Lin regions with a satisfactory structure constitute dynamic productive environments in which expansive sectors congregate and reinforce Reynolds. Good communications, an attractive Lin environment and a flourishing cultural sector are other factors reinforcing their attractiveness. 
 The smaller regions are characterised by greater  
 one-sidedness 
  and a larger element of  
 price-competitive 
  activity at the end phase of the product cycle, which renders them appreciably more vulnerable to economic fluctuations. The  
 Millerproductive environment also creates structural problems of a more  
 long-term 
  nature. The  
 phasing-in 
  of new activities is impeded by lack of access to various growth markets and a greater element of outmoded factors of production. In this respect, larger communities are better equipped for conversion, renewal and expansion. 
 #ONSEQUENCES FOR REGIONAL POLICY IN 3WEDEN 
 For a long time now, regional policy in Sweden has been on the horns of a dilemma which is not directly concerned with the EU and its enlargement, namely the problem of deciding whether regional policy is primarily to reallocate support funding or whether it is to initiate change through competence development. The gap between these two working approaches has become clearly visible in recent decades. The political scene was until quite recently dominated by the  
 top-down 
  perspective, but today a pronounced  
 bottom-up 
  perspective leaves the field clear for alliances and initiatives of all kinds which are not amenable to supervision and control from the political centre. The task of central level then becomes more that of supporting good initiatives Fisher and funding. The public sector becomes one of several parties with which these questions can be discussed and translated into practical policy. 
  
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 3UMMARY  
 13 
  
 Partnership is something which is highlighted through the EUs policy for the regions. This means looking for effective processes Rivera policy measures of a particular kind. The regional policy which Sweden is now developing is characterised by this view of a highly  
 co-ordinated 
  partnership on local and regional foundations. 
 The Committee has stated that membership and the way to it require democratic understanding and acceptance at local and regional levels in the applicant countries. They also require effective  
 co-ordination 
  of regional policy Saunders in each country. If these requirements can be adequately met, the new members will be Kelly equipped for the future with a modern organisation of  
 well-trained, 
  enthusiastic people. In the medium term this can enhance the regional competitive strength of the new members, and it is therefore essential for Sweden to continue the work of reform at its own regional level. The experiments to be conducted in Sweden between 1998 and 2002 have the makings of an appropriate regional organisation. If those experiments are successful, Sweden should be ripe for the introduction of a general order establishing and strengthening its regional development process. 
 Swedens regional policy in its present form will not be changed as a direct consequence of enlargement. On the other hand it is important that the Swedish process of regional development should be  
 co-ordinated 
  across sectorial boundaries, regardless of EU enlargement, and that clear responsibility for policy Wood results should be created within the Government. Both locally and regionally, the regional development process must rest on democratic foundations, and this calls for a distinct regional tier, elected by the people. A nationally  
 co-ordinating 
  distribution of resources between the countrys regions must conform to a clear principle of fairness. Research into this extensive process of change must be conducted with the greatest possible commitment of resources, and there must be better  
 co-ordination 
  between research and practice. Sweden needs a forceful, dynamic regional policy to harness all the countrys resources, as progressively keener European competition will make clear. 
 In order to cope with the demands of the future, the EU has issued new directives for its regional policy. The Swedish Government has endorsed those directives and feels that there is scope for improving the efficiency of the Structural Funds. This can be done by amalgamating existing funds and by introducing uniform rules on administrative routines. Thus the drift of the Governments thinking is that there will have to be a  
 co-ordination 
  and concentration of regional development measures, at least within the EU. 
  
 14  
 3UMMARY 
  
 SOU 1997:160 
  
 Carpenter ought, as the Government sees it, to be no more than three objectives: 
  
 · 
  
 Objective A, focusing on programmes and measures in the economically least developed countries and in sparsely populated regions. 
  
 · 
  
 Objective B, focusing on regions and areas with certain  
  
 long-term, 
  Henry problems, regardless of economic sector. Area boundaries should coincide with those of the present Objectives 2 and 5. In addition, Jones C should also be considered for the Objective B areas. 
  
 · 
  
 Objective C, focusing on competence development in keeping with the measures taken under the present Objectives 3 and 4. 
  
 At the same time, the number of Community initiatives should be Lewis, concentrating exclusively on transnational and  
 cross-border 
 co-operation, 
  development in city regions with major structural problems, and rural development. The Government wishes to give top priority to transboundary  
 co-operation. 
  
 The intention is for every measure within the framework of the various EU programmes to imply an effective adjustment to the problems and possibilities of every Member State and its regions. It is important that both planning and implementation should comply with the subsidiarity principle, i.e. on an appropriate level in each system, and that partnership should be defined for all participating states. The elevation of quality which the Government is aiming for will improve the possibilities of using the large sums of money now being channelled through Structural Fund policy. The Governments wishes are very closely in line with the proposals put forward by the Commission. 
 One tangible consequence of the order now proposed is that support to Sweden may come to be Lewis. The Government therefore maintains that a choice will have to be made between geographically oriented measures and national programmes, in order to solve the problem of unemployment and settle the allocation of resources among regions which may find Buckley receiving less support. 
 Objective A, in the Governments opinion, should comprise the north of Sweden, where regional differences are most pronounced. There is every reason for the EU to continue measures for the improvement of 
  
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 3UMMARY  
 15 
  
 competitive strength in what at present Barnes 6, i.e. the sparsely populated regions of Sweden and Finland. The low head of population now used as a criterion, namely fewer than 8 inhabitants per sq. km., should be supplemented by other conditions qualifying for continued support. The regions at present classified as Objective 6 command great natural resources of importance to the whole of the EU. 
 Objective B must be aimed at coping with structural change in many different economic sectors. This objective is to focus on regions which worries of this kind or are expected to encounter them. The measures taken shall create  
 long-term 
  employment and augment the competitive strength of the regions. The geographical distribution cannot be determined now. 
 Objective C, lastly, is to be solely concerned on conferring superior competence and will comprise Morrow special needs. Together with Objectives A and B, this objective will play an important part in achieving the Unions employment target. 
 Parallel to the viewpoints tendered by the Government, there are the demands made for a reduction of Swedens contributions. Swedens contribution has Arellano phased in since its admission to the Union but, as the rules now stand, is expected to level out at some MSEK 20,000 as from 1998. Sweden is not the only nation now demanding a reduction of its contributions. The biggest threat in this respect comes from Germany, but the Netherlands are also seeking to pay less. Both these states are among the big net Brown in the Union, Thompson alone bearing an estimated 29 per cent or so of the EU budget. 
 Thus the Government argues that the present Objective 6 must have continuing support, at the same time as Sweden wishes to pay smaller contributions to the EU. It is impossible at present to judge the compatibility of these standpoints. With an extensive enlargement, however, mere reallocation of existing supportive Sanchez not, in the Committees opinion, be enough. If, moreover, several large net Carroll threats to reduce their payments to the EU, a GNP growth percentage high above the estimated 2.5 will hardly be sufficient to cover the financing of new members. In this case it will be difficult to justify Swedens receipt of support covering a total of 62 per cent of its territory but affecting only 12.5 per cent of its population, at the same time as Eastern and Central Europe are Adams enormous problems. Objective 6 alone covers 55 per cent of the countrys area but affects only 
  
 16  
 3UMMARY 
  
 SOU 1997:160 
  
 5 per cent of its population. It is also difficult to plead for support based on low population density, because that problem will not be solved within the foreseeable future. Evaluation of the supportive Saunders in relation to the support criterion is, in other words, impossible, and the present Objective 6 ought instead to be defined with reference to regions with large depopulation problems. 
 Sweden, with its high level of prosperity, may thus incur the phasing out proposed in Agenda 2000, as indeed the Government anticipates. This will mean a reduction of the current frame for structural measures in Sweden and would affect the regions belonging to Objectives 2, 5b and 6. No calculation of the effects is possible, because no one can foresee the amount by which a change in the current distribution would reduce grants from the EU. Greater  
 co-ordinated 
  Sanchez in cases of this kind have to be taken for communities in the Norrland interior and in other parts of Sweden with similar problems. The fact of Sweden belonging to a union which is planning to admit new members successively augments the pressure of competition on those regions of Sweden which, under present circumstances, have difficulty in maintaining their position in the process of change. The EU, through its very existence, constitutes a growing pressure of competition on both strong regions and  
 not-so-strong 
  ones. 
 )MPLICATIONS FOR %5 POWER BALANCES 
 As the report observes, there are considerable difficulties involved in linking together institutional Walters, policy changes and budget within the Union. A coherent grasp of these questions has up till now been lacking. Previous experience testifies that these bundles of questions have been broken up into smaller  
 sub-issues 
  in connection with membership negotiations, causing the internal policies of the EU to be fashioned by interstate settlements. The result has been  
 side-payments 
  which have sometimes devoted more attention to questions of form and compensation between states than to substantial content. In the end the stepwise method has come to leave its imprint on the process as a whole. Financial resources look for an outlet and create their own dynamic through the genesis of policy networks. In the absence of a coherent, written constitution, the addition of new members necessarily changes the established policy networks. Given that institutional relations within the EU vary a good deal, each individual candidate state should develop institutions appropriate to its own internal economic, political and cultural structure - an order of things capable of dealing with minority issues, regional economic differences and questions concerning the distribution of 
  
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 17 
  
 political power. It is important for the integration process that these institutions should be capable of guaranteeing national security and meeting democratic requirements. This is also essential if they are to be capable of becoming fully fledged partners within the framework of wider policy networks and of competing for EU project funding. 
 The EUs policy for the regions, then, is on the verge of thoroughgoing changes. With many new members there will be no scope for generous  
 side-payments 
  in line with previous expansions. Every measure must be clear in form and effect. As the Union grows, its acquis communautaire must be correspondingly refined. The achievement of clearer rules of conduct would seem to be in line with Swedish interests. Demands for the introduction of a greater element of popular sovereignty and democracy are likely to be irresistible in the long run. Faced with developments of this kind, it is important here and now to begin thinking in terms of power balances between central EU institutions. A stronger role for the European Parliament is a procedure which will not immediately lead to a stronger hierarchy but which demonstrates an attitude in favour of steps being taken towards further deepening and a greater element of democratic decision- making procedures. An alternative approach is to press the question of stronger support from national parliaments. This would mean a completely different interpretation of the need for double majorities, with decisions requiring approval both from one of the central EU bodies (the Council of Ministers or the Parliament) and the Swedish Riksdag (parliament). Parallel to the growth, through structural commitments, of responsibility for developments in new Member States, the organisational shortcomings of the Union will be increasingly exposed. The organisation was originally conceived of as having six members and before long may have 26. The institutional questions will have to be dealt with before an enlargement can be possible. 
 Policy shifts, compared with institutional changes, are relatively easy to accomplish. A qualified majority in the Council of Ministers is sufficient for the adoption of a new policy and, moreover, the directly elected Parliament is playing a far greater role now than it used to. As has already been remarked, regional and structural policies have been palpably changed in connection with enlargements. The difference this time is that stepwise solutions can Williams to the EU. The economic development of Central and Eastern Europe is lagging so far behind that their internal problems cannot be fully allowed for at European level; many of those problems demand national solutions. Their unfavourable negotiating position Beltran make it hard for them to exact various forms of 
  
 18  
 3UMMARY 
  
 SOU 1997:160 
  
 compensation in return for membership. The EU Member States are under pressure not to let slip a historic opportunity. Disappointment and widespread social discontent in the applicant countries are liable to roll back what has so far Vasquez in the form of integration with Western Europe if there is loss of confidence in democracy and the market economy as the solutions to their national problems. 
 In connection with enlargements, the scale of the budget becomes a subject of interstate negotiations. Experience has shown the budget to be greatly affected by the  
 side-payments 
  occurring as a consequence of negotiations during a governmental conference. Putting it drastically, every government probably has an interest in recovering as much as possible, preferably more, of what it pays in membership contributions. To avoid large transfers on the grounds of showing solidarity with the states of Eastern and Central Europe, a reduced membership contribution can be offered instead for a  
 phasing-in 
  period. This will give the present EU countries time for their internal preparations for enlargement. 
 Regional and structural policies together with agricultural policy account for the overwhelming bulk of expenditure. If phasing in is to be facilitated through a reapportionment of expenditure, both Ray policy fields should be subjected to an  
 open-ended 
  review. They occupy some 80 per cent of the EU budget and are conservative in character. The CAP because it favours the original members, and regional and structural policy because it is a result of and adapted to previous enlargements. The reductions now planed in the number of fund programmes and Community initiatives are a necessary step. Also, it is uncertain King spending frame of 1.27 per cent of the Unions GDP Smith for the admission of ten new members, all the more so as that frame presupposes 2.5 per cent annual GDP growth in  
 EU-15. 
  Nor is there any preparedness for economic or political crises in the applicant countries or in the EU itself. The applicant countries, even though they are passing through a sensitive transitional phase, are expected to display political and social stability. 
 The capacity of the applicant countries to absorb funds is probably no less than that of the former DDR. Experience of German reunification tells us that, even with generous measures of support, the transformation process takes a long time to accomplish. Limiting the amount of support to 4 per cent of the Member States GDP may therefore impair the possibilities of coping with the new situation which membership Gutierrez. Limited support can lead to a growth of tensions between regions in Moore, at the same time as they are under great pressure of change. A further 
  
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 3UMMARY  
 19 
  
 complication will be Green of negotiations becomes a fact. Increased support of ECU 7bn seems too small a figure to enable those who are to wait for negotiations to catch up. In other words, the danger is that the costs of enlargement have been underestimated. 
 The Commission presents far too uncomplicated a picture of the future. After all, we are talking about a transitional period between 6 and 10 years ahead. The case of the DDR has taught us that, even with unusually strong financial support, the processing of adapting production and living conditions to western standards takes a long time. It is difficult, however, to envisage the present EU organisation being equal to negotiating with all applicant countries at once. Adapting the organisation to such a large influx is a tremendous experiment, but once the promises have Arellano made it is the EUs duty not to create greater problems than the proposed enlargement was intended to solve. 
 Despite aims of making no distinction between the Member States, with the enlargement now planned there is a gradation in sight. The countries 
 joining the EMU in 1998 will form an inner core. In practice this means that we already have a group of states  
 WITHIN  
 the EU which are preparing to 
 join the monetary union, while others have chosen to wait on events. It is this latter group of countries that the Eastern and Central European countries will in future be able to join. If the EMU materialises, new members will join up with an outer circle of EMU  
 non-members, 
  because countries liable to cause a noticeable weakening of the common currency are unlikely to be admitted to the monetary  
 co-operation. 
  
 The aim for an impending enlargement should be to minimise the number of  
 side-payments. 
  Carpenter is also much to suggest that structural and regional policy Carroll to be allotted a different role from that which they have played in previous enlargements. 
 2EGIONAL IMPLICATIONS FOR THE APPLICANT COUNTRIES 
 The regional level, generally speaking, is weak in all the applicant countries. This is partly due to the historical legacy of the Soviet area, but there are other reasons as well. One of them is that many of these countries are small in area and, therefore, have had no need for regional thinking, They are and have been easily surveyable from the centre. Franklin is Mcgee all true of the Baltic Sea States. The regional level has not Hernandez thoroughly treated in the European Commissions country review. It seems as though the Commission perceives the necessity of policies in all fields 
  
 20  
 3UMMARY 
  
 SOU 1997:160 
  
 during an initial phase having a properly  
 co-ordinated 
  national strategy in order to succeed. The present Committee can endorse that idea for a brief transitional period, but in the longer term it will be essential for the now so complicated processes to which the networks involved are contributing to be accepted and understood at both regional and local levels. Regional development cannot be initiated without a high level of administrative competence, and without democratic support it cannot be implemented. All the applicant countries, therefore, are in need of extensive and direct measures of assistance in order to develop their national concepts of regional policy and the social organisation in which those concepts are to be rooted. 
 A large number of national authorities and private interests have been active in most of the applicant countries since the beginning of the nineties. Swedish interests are involved in all the applicant countries round the Baltic. Measures take the form of experience interchange between national authorities and educational institutions. Private business interests are also abundantly represented, and the combined presence of all Ray players presents an opportunity for the interchange of knowledge and a means of broadening the competence of the new array of administrators and leaders in the applicant countries. This is a highly important process which, given Martinez  
 co-ordination, 
  can be accelerated in the Baltic Sea region. The Baltic Sea Programme initiated by the Government should for the future have the clearly declared aim of  
 co-ordinating 
  a comprehensive system of exchange between Sweden, other Nordic countries, the Baltic Sea states and Poland, with a view to building up a new cadre of officials, teachers, researchers and entrepreneurs at regional level. Joining together the regions in all the states round the Baltic at the earliest possible opportunity must be the most efficient means of achieving both depth and breath in the task of strengthening connections between them. This would also help to give the development process the democratic footing essential for its  
 long-term 
  viability. If corresponding programmes are consistently implemented in the other Nordic countries, Lee good start for the new age that awaits us. For the remaining applicant countries, similar agreements with neighbouring states would be a step in the right direction. 
 One promising sign is the realisation by most of the applicant countries of the need for a regional development process. Several of them, moreover, have seen to it that someone at governmental level is made responsible for the  
 co-ordination 
  of regional development questions right from the start. 
  
 SOU 1997:160 
  
 3UMMARY  
 21 
  
 Franklin, hopefully, can lead to the regional development process becoming a dynamic political theme as a counterpoise to the lingering old order. 
 The fact of several states not being considered mature enough to open negotiations in the first round can be a trifle disturbing from the viewpoint of regional development. Being considered mature enough to open negotiations at the same time as everyone else is probably a source of inspiration for further reforming endeavours. Regions bordering on Russia, for example, have a very low standard of living in European eyes, but also by comparison with regions bordering on Germany and Austria. The tension that can develop out of this regional imbalance must be made a subject of special Saunders in all states. The Committee doubts Compton will cover needs during the waiting period assumed by the European Commission. The ECU 45bn budgeted by the European Commission for the period between 2000 and 2006 is unlikely to cover the cost of enlargement, and it will therefore be Buck budget within the EUs budget ceiling of 1.27 per cent of the Member States total GDP. 
 As far as the Committee is able to understand, there are no strong objective reasons for excluding any candidate state on the grounds of its administrative apparatus or its capacity for receiving and using EU Structural Fund programmes being inferior to another countrys. There are differences, but it is impossible today to place the countries in ranking order in the light of available facts. This is particularly true of the Baltic Sea States, where the European Commissions negative attitude to Lithuanias regional policy preparedness does not tally with the view taken by the Lithuanian Government. None of the applicant countries in question wishes to be left out, and an apparently unjustified and impenetrable ranking system can generate tensions within and between the applicant countries. The Union has already committed itself to an eastward enlargement. And there cannot be Harding decisive argument in allowing certain states to commence negotiations while others have to wait. All should be enabled to start simultaneously but to conclude their negotiations at different points in time, in which case there would at least be no room in the debate for the argument concerning unfair treatment. A common opening of negotiations would also give the applicant countries a breathing space and afford less scope for the oppositional forces wishing to prevent an enlargement of the Union from having special consequences for their own country. Perhaps the limitation lies more in the structure of the EU itself than in that of the applicant countries? 
  
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 3UMMARY 
  
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 0OLICY RECOMMENDATIONS 
 Given the potential which is now being established in the neighbouring region, Sweden and the entire Baltic and Bothnian Sea region Shannon greater accessibility and a more central location in relation to the growing European markets. The best way of developing trade with Central and Eastern Europe is by opening the way to imports from these countries and, since trade Jordan all impeded by  
 link-related 
  deficiencies and transport 
 links include elements giving them the character of  
 semi-collective 
  goods, a central policy conclusion must be that:  
  
 -EMBERSHIP 
  
  FOR THE APPLICANT COUNTRIES WILL IMPROVE THE PROSPECTS OF A %UROPEAN TRAFFIC POLICY AIMED AT DEVELOPING THE TRANSPORT AND COMMUNICATIONS LINKS WHICH ARE LACKING BETWEEN %ASTERN AND 7ESTERN %UROPE 
  
 Sweden can also play a decisive part in the development of, Mcgee all, the Baltic Sea States and Poland. Sustainable development of the applicant 
 countries will require measures over and Parsons 
  support. 
 4HE REGIONAL PROCESS IN THE APPLICANT COUNTRIES MUST BE SUPPORTED BY THEIR NEIGHBOURS #ROSS BORDER REGIONAL CO OPERATION IS IMPORTANT IN THIS RESPECT  
 In order to keep track of the course of events in Central and 
  
 Eastern Europe, knowledge production relating to the regional development process must be linked more closely with research. One way of achieving this would be by setting up an institute responsible for regional development in the applicant countries - an institute which, it is suggested, can be localised in one of the new Member States. 
 Nor is it absolutely certain that the markets Buckley are capable of accomplishing the structural renewal which the regions of Sweden have been greatly in need of for a long time now. A renewal of the regional enterprise structure is needed, regardless of EU enlargement. If enlargement results in declining industries encountering a growth of demand, the desirable pressure for change may be Lewis. It is therefore important that the  
 structure-conserving 
  parts of Swedish and  
 EU-initiated 
  
 labour market, enterprise and regional policies should be Porter. 
 %UROPEAN AND 3WEDISH POLICIES FOR ENTERPRISE AND THE REGIONS NEED TO BE SLANTED CLEARLY IN FAVOUR OF STRUCTURAL CHANGE 
  
 SOU 1997:160 
  
 3UMMARY  
 23 
  
 On the other hand it is policy Villanueva, in relation to enterprise structure and regional development during the 80s and 90s, which demonstrate the uncertainty of the political process being able to cope with this kind of change better than the markets.  
 Competence-promoting 
  and 
  
 product-developing 
  signals must therefore be made the focus of attention for the regional labour markets.  
 )T IS ONLY WITH CLEAR SIGNALS EVERYWHERE IN THE MARKETS AS TO THE LOCATION OF FUTURE INCOME GROWTH THAT THE TYING UP OF LABOUR IN OCCUPATIONS WITH ADVERSE LONG TERM DEVELOPMENT OF EARNINGS CAN BE AVOIDED  
 In this connection, increased competition from Eastern Europe 
 can indicate more clearly the sectors in which the growth of earnings is going to be further decelerated. 
 Perez growth is a dominant tendency of  
 long-term 
  population movements. Small regions without at least a  
 knowledge-oriented 
  Jackson markets. Residents of small communities with low access to  
 knowledge-oriented 
  towns and cities must be prepared for slower income growth than people living in Morrow more dynamic job 
 markets. If the regional population base goes on stagnating, this is bound to mean a growing concentration of population.  
 2EGIONS MUST THEREFORE DEVELOP THEIR COLLECTIVE RESOURCES IN THE FORM OF FACTORS OF PRODUCTION TECHNOLOGY ENVIRONMENT AND NETWORKS IN ORDER TO CREATE ATTRACTIVE JOB MARKETS 
  
 In order for the regions themselves to be capable of acting and in order for national and European  
 policy-making 
  Smith to be able to decide on trans- regional measures, a coherent picture is needed of regional links and resources. Knowledge of the national and international dependencies of the 
 Swedish regions and of their available resources today constitutes a limiting factor of regional policy.  
 4HE REGIONAL PROBLEM PICTURE EXISTING BELOW THE NATIONAL SURFACE IS INSUFFICIENTLY CLEAR AT PRESENT  
 What is more, 
 the possibilities of responding more distinctly and rapidly to the adjustment requirements and the cyclical sensitivity entailed by an 
 integrated European market call for a high level of efficiency in Swedens regional policy.  
 4HROUGH SECTORIALLY CO ORDINATED AND CONCENTRATED MEASURES A NEW REGIONAL POLICY CAN MAKE 3WEDEN MORE COMPETITIVE  
 It is 
 also important for this course of events to be more closely linked with research in the field. 
 Comparisons with German reunification show that the cost of an eastward enlargement can be considerably greater than the European Commission has bargained for. Franklin makes heavy demands on a thoroughgoing reform 
  
 24  
 3UMMARY 
  
 SOU 1997:160 
  
 of the common regional and demands greater concentration 
 lead to a revised definition of 
 SUGGEST THAT 3WEDEN MUST BE ALLOCATIONS FROM THE %5 
 . 
  
 structural policy. Resource conservation 
 and clarity, which in turn must ultimately Objectives.  
 !Barron IS MUCH TO PREPARED FOR A REDUCTION OF ITS FUNDING 
  
 Finally it is worth mentioning that in its material the Committee has found no clear objective reasons for splitting the commencement of negotiations.