Is the EU Reaching the Limits of Enlargement - Essay Example

Is the EU reaching the limits of enlargement Introduction European Union (EU) enlargement process has received much wider attention in thecurrent period due to two main reasons. In the first place the East European countries have sought to live on the EU's farm subsidies as an inevitable consequence of their neglected economies for decades under communism. Secondly structural constraints associated with enlargement have forced the member countries to adopt more flexible ways of adjustment. The rapid expansion of the EU in the recent years after the collapse of the former Soviet bloc has created a series of problems. These problems such as the ever increasing size of the subsidy programs and additional payments to keep countries in line with the overall EU policy have imposed some limits on the current enlargement process. Despite an ever increasing degree of interest shown by these East European countries in joining the EU the organization has almost come to a stretching point where there is little or no room for further expansion. This dilemma is basically attributed to the very structural constraints experienced by the former communist economies in Eastern Europe (Jacobsen, 1997). For instance when countries like Poland, Hungary and Rumania joined the EU during the initial stage following the collapse of Communism in Eastern Europe there was much greater hope about the future of the EU as an economic union. Subsequently with further enlargement and monetary union the organization began to develop first the structural constraints and next trade related problems on the allocation of subsidy funds. The future of the EU now is more or less determined by how best the organization would be able to absorb those new entrants and how best the structural problems arising from its subsidy programs would be handled. Various writers have pointed out that the EU is basically a behemoth that is much less likely to absorb the remaining East European countries in to the fold with any degree of success. Analysis The rapid transformation of the EU from a simple regional trade agreement in to a monetary union was characterized by many setbacks, though they were successfully overcome in the process of the transformation. However what the EU could do as a customs union and then as an economic union is no more possible under the present dispensation. Primarily the EU has been evolving on unbridled largesse in the form of farm and agricultural subsidies. When all these subsidy programs culminated in the Common Agricultural Policy (CAP) the organization did little realize what was ahead. In fact it is the CAP that caused the current impasse between the US government and the EU on international trade. The World Trade Organization (WTO) and other international trade forums have almost failed to reconcile the two sides to the conflict. Similarly Japan and the Association of South East Asian Nations (ASEAN) have objected to the presence of CAP in the EU. Despite these disputes the EU has been compelled by an ever increasing necessity to maintain a minimum level of subsidies to the new member countries. The net result of this commitment is the further aggravation of trade relations with the US in particular and other countries in general. The EU has come a long way in giving farm and agricultural subsidies to its powerful community of farm producers who demand the continuation of the programs irrespective of the global pressure to wind them up. These trade related outcomes have compelled the EU to adopt some new programs and to redesign the existing programs in keeping with the adjustments required by its member countries' commitments to the WTO. This paper would particularly focus attention on the current phase of EU enlargement arising from the post-communism developments in Eastern Europe while the theoretical considerations of enlargement related structural constraints would be discussed with reference to the empirical evidence on the EU's inability to absorb new members (Lambsdroff, 2009). The enlargement process has been characterized by three unique sets of developments. a) The geography related developments Geography related developments are essentially associated with the happenings in Eastern Europe. The substantial progress made by the Polish, Czech and Slovakian economies after joining the EU has had a tremendous impact on the subsequent decision of many Eastern European countries to join the EU (Balfour, 2009). With the new admission of ten member countries the EU's enlargement process has come to a decisive phase. The newly admitted ten member countries from Eastern Europe have taken the total membership to 25. Right now there are 27 member states with the two recent additions. Even within the geographical limits the EU can be regarded as an awfully bigger organization that is faced with the biggest obstacles in its historical process of evolution. In fact the organization has developed cracks despite the fact that there are only 27 member states. Those aspiring states wanting to become members are required to make still bigger commitments by way of preparation for the full membership. In other words the preadmission requirements have become stiffer for new members. Apart from the structural changes required to be made to the domestic economy, there are other regulatory mechanisms that have to be put in place by potential members before actually joining the organization. Geography related developments have had a negative impact on the enlargement process due to the Eastern European economic characteristics. For example almost every member state from Eastern Europe had a communist economic structure which was highly characterized by chronic shortages and structural deficiencies. When they were required to satisfy the preadmission requirements these countries adopted haphazard reorientation programs which in turn were no more than patch work. The net result was seen in the post admission difficulties faced by the entire organization in allocating funding resources for common programs of development (www.chathamhouse.org.uk). The above implication arising from the structural deficiencies of Eastern European economies affected the chances of further EU enlargement to such an extent that the current efforts to admit new members are much less likely to succeed. Despite EU's financial commitments to new members there is a huge gap between the latter's requirements for funds including subsidies and the domestic government revenues. This dilemma has led to further constraints on the admission of further enlargement. EU enlargement process has been characterized by this type of haphazard admission policies. In fact any country wishing to join the EU can do so by simply submitting an application to the EU Council. The subsequent process is taken for granted. Finally geography related developments have given rise to a set of more complicated implications. In the first place the geography related qualification to join the EU has imposed a burden with far reaching consequences on the organization. For example the hurry with which Eastern European states applied for membership after the collapse of the cold war world order, did not actually show the real problems for both the organization and the member states. EU enlargement was necessitated in large measure by the fact that the Western European member states were more concerned about creating a cohesive body for entire Europe. However this intention failed to take in to account the fact that Eastern European countries were economic laggards that would take more time to adjust to the new situation. b) Global economic developments The final phase of admission of new members actually took place before the signs of the current global economic downturn were clear enough. The current global economic recession and the financial crisis have forced the EU to adopt more and more programs targeting redistribution of resources. Therefore new member states have benefited unfairly at the expense of the tax payer in the organization before the current enlargement phase. In addition to the sophisticated institutional environment of the EU there is also a very complex process of integration (Laffan, 1997). Assuming that the new member countries are able to integrate in to the system without much difficulty, the enlargement process might continue. However it is the opposite that is happening right now. Global economic developments have shown a dichotomous process. For example the North American Free Trade Agreement (NAFTA) has particularly been vociferous about the developments within the EU in the recent past. NAFTA has cited the CAP as one of the most unacceptable barriers against international free trade. While Japan and other member countries of the WTO have also questioned the real intention behind the CAP, the EU argues that the CAP is not intended to give free subsidies to member countries on farm and agricultural products as it was in the past. Despite this argument, critics have pointed out that the EU enlargement process invariably imposes constraints on the system and therefore the EU is compelled to put in place CAP - like mechanisms in order to ensure that the enlargement process would continue without hindrance. Economic developments have forced the EU to rethink its policy of enlargement. Against the backdrop of evolving global economic developments the EU has been critically examined with reference to its enlargement process. New member states have been compelled to adopt all institutional reforms required for admission. These reforms require wide support from the citizens of those new member countries. However such support is less coming forth due to the eroded economic benefits that become available after becoming a member state. The economic benefits that are available to member countries have acted as a positive influence on enlargement up to now. The erosion of benefits has been the result of EU's commitments to the WTO agreements. According to researchers there is an equally substantial argument against the current EU enlargement process arising from the fact that the EU economic integration process has come to a peak where there are no more spill over benefits to be handed out to the new member countries (www.europa.eu/bulletin/). If this argument were accepted there would be much less theoretical support for further enlargement because integration is diverse. For example it is not only the economic integration that matters to member states; there are other aspects like political, legal and monetary integration. Political integration is equally desirable from the EU's viewpoint because the Eastern European member states were exposed to Communism which is anathema to capitalism. Both at the level of economic and political integration the EU enlargement process has considerable promise though political structures of the Eastern European countries have not developed to readily realign themselves with capitalist economic institutions. Therefore enlargement process both politically and economically might encounter structural problems as is already evident. Very few new member countries from Eastern Europe have been able to change the way in which their economic institutions are run. In other words the old techniques of economic governance associated with a corrupt bureaucracy have not been removed completely. Legal reforms as are recommended by the Council to new member countries can be far reaching in scope and application (Manners & Allen, 2000). Therefore the level of difficulty experienced by new member countries in the process of transformation can be too daunting. Despite these difficulties many new member countries have adopted new legal and regulatory mechanisms to go along with the EU's overall requirements. Legal structural reforms in the former Soviet bloc countries have also encountered some difficulties though. These difficulties have been attributed to the existence of institutional impediments against reforms. For example both in Poland and Czech Republic initially trade union rights stood as a barrier against the introduction of highly liberal termination of employment clauses of the EU. Therefore critics have pointed out that the current enlargement process would similarly encounter barriers in the future. Monetary integration requires still more difficult reforms. Though reforms are undertaken at different progressive stages, the EU enlargement process is characterized by a degree of methodical replacement in which the domestic institutions, processes and practices are systematically removed and replaced with EU ones. Monetary integration is the final stage of the whole integration process. Countries that wish to enroll as new members need not bother about monetary integration though such integration might benefit weaker economies with weaker currencies. In order to satisfy the requirements for monetary integration new member countries cannot adopt faster reforms and therefore naturally it takes a number of years for a new member country to become a member of the Euro Zone. Monetary Union has been cited as the most difficult phase for any member country though Britain has not been affected by its not becoming a member of the Euro Zone. According to researchers it is the Monetary Union that has posed a real threat to further EU enlargement because enlargement is meaningless if many member countries are unable to achieve Monetary Union membership. Economic developments at the WTO level have also compelled the EU to reconsider the current enlargement process (www.eiop.or.at/eiop). In the first place enlargement increases numbers but there is a question mark on the amount of economic benefits that would accrue to the member countries. Finally the recent bilateral trade disputes between the US and the EU on one hand and Japan and the EU on the other hand have brought in to focus the relative merits of further EU enlargement. For example some recent research works have suggested that Eastward enlargement of the EU has particularly affected the organization's credibility in WTO negotiations. In fact the main allegation has been leveled at the latest EU practice of granting farm and agricultural subsidies to the new member countries on the basis of the latter's ability to integrate fast in to the EU system. Critics have pointed out that such a policy would have a negative impact on the domestic scene of the individual member country. For instance many new member countries have almost completely cut down on their domestic welfare programs thus creating a new class of wealthy entrepreneurs in the domestic agricultural sector. The above argument is perhaps one of the strongest presented by critics against the further EU enlargement. This argument has greater substance when it is taken to its logical conclusion. As one researcher has pointed out there is a considerable amount of pressure on member governments to toe the line or forgo benefits associated with reforms (Moreau & Marie-Ange, 2009). While economic reforms such as the removal of government subsidies to government corporations and a near total termination of social welfare programs have been implemented with great zeal by these new member governments, the consequences have proved to be disastrous to these countries. For instance the first sign of integration was seen in an uncontrollable brain drain from the East European countries to Western Europe. Many educated and skilled workers left in search of better paid jobs in the West. This in turn mounted a substantial quantum of pressure on Western governments and economies. Domestic opposition to such huge influxes of immigrants could be seen at work places throughout Western Europe. Enlargement should have come at little or no economic loss, especially to the older member countries. The resentment among local populations against immigrant workers in the Western part of the EU boiled down to a very intractable situation for the domestic governments. These governments were forced to implement a planned repatriation program of immigrant workers, especially with the current economic recession. This argument has been put forward by the critics of further EU enlargement. c) WTO related developments WTO related developments have played a very significant role in determining both the direction and the thrust of EU enlargement. The most obvious impact of such developments can be seen in the sphere of trade related disputes and their settlement terms. The EU had to face a number of trade wars, particularly against the US. Even before the enlargement idea had acquired full currency the EU had to contend with the huge amount of US government subsidies given to its farm producers, especially cotton growers. The worst trade dispute scenario between the two occurred almost a decade ago when the American government threatened to impose prohibitive tariffs on steel exports by EU manufacturers. In fact the settlement came one year later when the US government had voluntarily abandoned the continuation of the policy. These trade disputes favor either individual countries or trade blocs though a singular effort to overcome the real negative impact of such disputes might not succeed because the settlement process at the WTO is tediously slow. Against this backdrop further EU enlargement would weaken the negotiating strength of the EU simply because there are many member countries with high cost production plants. WTO member countries are mostly the member countries of other organizations, especially free trade agreements. Therefore when it comes to multilateral trade disputes individual WTO member countries happen to identify themselves with the trade blocs in which they have the membership. EU members over the years have been influenced by this collective mentality. As a result trade negotiations at the WTO have been more or less biased in favor of member countries of trade blocs. While in theory every individual member country of the WTO is bound by the same rules, practically those member countries already belonging to trade blocs have benefited from collective resources such as legal expertise and funds. EU enlargement would essentially create a set of dependent states (Riemer & Stivachtis, 2002). This is because of the fact that new members in the EU cannot structurally push the borders of economic development in the region further than where they are. In other words the EU has reached some limits in its enlargement process. Broader economic perspectives associated with enlargement can be discussed with referenced to the WTO process. For example the current economic downturn has forced WTO member countries to adopt restrictive trade practices such as higher tariffs, import quotas and non-tariff barriers like currency manipulations. The US government has accused China of the latter offence. However the real impact of trade related responses by economically affected WTO member countries can be seen on trade relations between free trade areas and individual importing countries. Particularly when the EU member countries happened to trade among themselves in order to benefit from tariff free trade the trade patterns develop an inward looking nature. Thus real benefits associated with free trade might not be available to the new member countries of the EU. This argument goes against further EU enlargement. Finally WTO related developments have helped the critics of further EU enlargement by way of a much more desirable logical outcome related to trade disputes between the EU and the developing world. Many developing countries including the low income member states have argued that though theoretically the CAP is dead in practice the EU pursues a similar policy of benefiting the new EU members with large amounts of free tax money. Their argument is centered on the premise that new member countries of the EU have been denied access to direct subsidies by WTO rules but nevertheless they benefit from so called development funds that are literally subsidies given in the name of compliance with membership requirements. Thus critics of further EU enlargement point out that effectively the EU has reached limits in every sphere of enlargement and therefore it is high time that the EU thought about its current phase of enlargement taking place with new members other than the Eastern European countries knocking on its doors. Conclusion A series of arguments have been put forward by critics of the further enlargement of the EU. Their arguments are based on a number of factors ranging from structural to economic. In the first instance they cite the structural argument based on the deficiencies in the economies of the Eastern European countries. Secondly they point out that these new EU member countries from Eastern Europe have weaker currencies and equally weaker economies. Therefore they might altogether erode the bargaining strength of the EU at international trade forums including the WTO. Above all these countries would need structural support along with huge amounts of subsidies. They point out to the existence of the CAP in one form or the other as one of the most undesirable practices. Further the recent global economic developments suggest any further EU enlargement would most likely have a very negative impact on the organization's ability to come to terms with such economic crises like the current global economic downturn because the existing member countries with strong economies and a larger tax payer base would be compelled to contribute to funds intended to support subsidy programs in these new member countries. Finally the WTO related developments suggest that further EU enlargement would necessarily affect the organization's credibility in negotiations with parties to trade disputes. Therefore the critics suggest that any further EU enlargement would not be in the best interest of the organization and its existing member countries. In other words the EU has reached the very limits of enlargement right now. REFERENCES 1. 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