EU enlargement: external economic implications

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This policy briefing discusses the main economic aspects of the external dimension, in particular whether there is a threat of trade diversion.

EU enlargement: external economic implications

Abstract

Unlike some previous EU enlargements (e.g. with the UK and with Spain/Portugal) the present EU enlargement to Central Europe has not prompted much, let alone a fierce, debate about the external dimension. This policy briefing discusses the main economic aspects of the external dimension, in particular whether there is a threat of (how much) trade diversion. Attention is paid to the three main topics of interest for third countries: industrial trade effects, impact on foreign direct investment (FDI) and agricultural trade effects.

Agriculture is arguably the most sensitive of the three, given the very high CAP border protection, and although large-scale trade diversion may eventually occur under certain scenarios (such as an unreformed CAP), these fears are greatly exaggerated in the short to medium term (5-7 years): the time frame considered is therefore all-important.

This conclusion becomes less surprising if one takes a closer look at the current sorry state of agriculture in the CEECs. Separate sections treat the somewhat sensitive subject of U.S.-CEEC Bilateral Investment Treaties, as well as the longterm development perspective, which addresses the prospects for catch-up growth by the accession countries. In the end, non-European stakeholders in the accession process will greatly benefit from sustained catch-up growth by the CEECs, which are locking-in deep reforms due to EU accession.

Read the complete

Bruges European Economic Policy briefing, on the College of Europe’s web site.  

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