The economic impact of enlargement on the European economy: problems and perspectives

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The economic impact of enlargement on the European economy:
problems and perspectives

Abstract

Much of the attention on the economic aspects of
the forthcoming enlargement of the EU have concentrated upon the
high-profile issues which are linked to the level of relative
economic development in the acceding countries; the perceived
threat of large-scale migration and the budgetary costs arising
from implementation of EU agricultural and regional policies. This
paper briefly discusses that these are not insurmountable problems
and stresses that the main difficulties from the next enlargement
may arise from the effective inclusion of the acceding countries
into the Single Market, the microeconomic hub of the EU. We discuss
that the process of regulatory harmonisation will become more
difficult in an EU of 25 or more members, which entails greater
emphasis on the principle of mutual recognition as the main tool
for ensuring freedom of movement of goods and services. However,
mutual recognition has its limits and is likely to be less
effective the more diverse the countries involved.

Conclusions

Most discussions of the problems that will arise
from the next enlargement focus on the high profile issues that are
related to the level of income in the applicant countries;
migration, agriculture and the budget. However, none of these
issues appears to create insurmountable problems for the current 15
members as a group. The difficulties arise because they are likely
to be significant for some members and not others. Equally relevant
is the extent to which enlargement will affect the ability of the
EU to achieve its key objectives. Here we have briefly considered
the impact of enlargement on the integrity of the Single Market and
at least raised the issue of how enlargement will affect the key
principle of the Single Market, that of mutual recognition. If
enlargement makes the Single Market less effective through erosion
of this basic principle then the achievement of the Lisbon strategy
will be compromised.

In addition, mutual recognition has its limits,
in terms of the level of integration that it can provide for, which
in turns has implications for the future direction of the EU. On
the one hand mutual recognition is a powerful tool for undermining
barriers to trade in goods and services whilst avoiding the need
for detailed harmonisation and extensive EU level intrusion into
national policy making. On the other hand, mutual recognition
preserves a degree of national differentiation and allows national
governments to implement specific policies to protect ‘the national
good’. It is unlikely that the EU could have achieved the level of
integration that it has attained today without the use of the
principle of mutual recognition as the main tool for undermining
national segmentation in Europe.

Now EU policy makers want to enhance the Single
Market to achieve the bold objectives defined at Lisbon. Clearly,
there is scope to make the Single Market work more effectively.
This is particularly true for the service sectors, where enhanced
integration will not only generate direct economic benefits but
will also lead to gains in manufacturing and agricultural sectors
where services are a vital input into modern processes.
Nevertheless, there are limits to the extent that mutual
recognition can integrate the markets of different countries.
Whether efforts to increase the effectiveness of mutual recognition
will be sufficient, particularly in the light of enlargement, to
achieve the Lisbon objectives remains to be seen.


 

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full textof this analysis
on the CEPS website.  

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