How Far Should the European Union Reach?
By Hans-Juergen Zahorka,
The
Director of LIBERTAS
– European Institute GmbH.,
Stuttgart-Sindelfingen, Germany
zahorka[at]gmx.de
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One of the most frequently discussed questions
in globalizing business is how far the European
Union Single Market should reach. Companies want
to expand, to open subsidiaries, to cooperate
with local partners, not only for mere expansion
reasons but also because their competitors are
active on a regional or global scale.
Questions
concerning the outreach of the Single Market often
focus on investment security and non-discrimination
as well as on basic rules of trade and commerce,
for example through jurisdiction. Following recent
trends, companies of various sizes are establishing
regional offices to reach foreign markets under
the safe umbrella of the Single Market (i.e. a
French company sets up an office in Romania for
the whole Black Sea region).
How
far will the Single Market, that is the European
Union, reach? I think that it is inevitable that
the EU will expand to include 40+ Member States.
This is contested by some politicians and citizens
alike, but the more information and background
available, the more people are in favor of this
vision.
One
of the “soft powers” of the EU is to attract countries
on its periphery, thanks to the uncontested economic
advantages and the political stability of being
part of the EU. However, it is clear that any
further enlargement of the European Union needs
a kind of “streamlining” of its internal organization.
A kind of constitutional arrangement in the direction
of the Constitution (ratified until now by 14
Member States, but not by France and the Netherlands
in their referendums in May/June 2005) will be
needed for any further development in the EU.
These constitution-like rules will surely come.
And while these developments are all but certain,
the form they will take is difficult to predict
at present.
According
to the EU Treaty (art. 49), each European state
can apply for EU accession. It is not clearly
defined whether this means European state according
to geographic criteria or European-mindedness.
Between these extremes a compromise can and will
be found; the pan-European vision of today’s EU
targets on the countries of the larger Council
of Europe. An application has to be directed to
the Council, which in turn asks the EU Commission
for an evaluation. This comes in the form of a
“Regular Report” every year. The current negotiations
are run by the Commission, which elaborates an
Accession Treaty with the acceding Member State.
This has to be approved by the European Parliament
(with the absolute majority of its members) and
by the Council, which has to approve this treaty
unanimously. Furthermore it has to be ratified
by the Member States and the relevant acceding
state. It is evident that these hurdles are now
more difficult to overcome with 25 Member States
than in former times.
The
“Copenhagen Criteria” were added in 1993, before
the latest round of enlargements to include Central
and Eastern European states; these criteria necessitate
a clear “yes” to the market economy system, to
active participation in the competition of the
EU, to a pluralist democracy, human rights, minority
protection and the general rule of law. They also
require a “yes” to the takeover of the whole “acquis
communautaire”, the whole set of rules operating
until now, including some 80.000 pages of EU Law
(however most of them concern agricultural law),
and the European Monetary Union (the Euro). This
means that new Member States do not have to have
the same economic strength as existing ones, though
the threshold of sustainable development in the
direction of the “average EU” country must be
passed. This is undoubtedly a political decision.
Though
the EU never uses force, not even in the sense
of economic or psychological force, on any state
to become a member, it exercises a geopolitical
gravity which attracts countries on its periphery,
which in turn augments its international power
and pull.
Regardless
of a country’s economic system, accession negotiations
last between 8 and 11 years, on average. The very
short negotiations with Austria, Finland and Sweden
before 1995 were due to the fact that all three
countries were already in the Single Market –
the core of the EU – and members of the EEA (European
Economic Area; EU Single Market plus EFTA countries
[minus Switzerland who had voted against being
in the EEA]) – so the Single Market laws had no
significance in these negotiations.
The
EU has the following system of external relations
within its (European) periphery:
-
European
Economic Area (EEA): this includes Norway, Iceland
and Liechtenstein. All these countries might
eventually join the EU, but at present no major
policy moves are visible. Norway has a large
percentage of rural population that doesn’t
favor the EU as joining would mean to shorten
the yearly farm subventions by 2/3, Iceland
depends on fish which is part of the Common
Agricultural Policy, and Liechtenstein will
do what Switzerland does. In Iceland there can
be expected a debate from 2007, due to the recent
announcements of the Prime Minister. If so,
this will also have consequences for Norway.
-
Bilateral
Agreements with Switzerland: Switzerland plays
a special role in EU policy, as the majority
of its population is not ready to join the EU
despite its extensive involvement in their economy.
Switzerland will also take part in the free
circulation of citizens as provided by the Schengen
Agreement (abolition of passport controls at
the EU borders).
-
European
Agreements (EA): the ten new Member States since
May 2004 (Estonia, Latvia, Lithuania, Poland,
Czech Republic, Slovak Republic, Hungary, Slovenia,
Cyprus and Malta) as well as Romania and Bulgaria
(these two will join in January 2008 at the
latest though probably as soon as January 2007).
The two latter countries face difficulties such
as fighting corruption and streamlining jurisdiction.
The EAs were individual and far-reaching association
agreements permitting asymmetrical market access,
according to the degree of progress in establishing
democracy and market economy, which finally
led to membership
-
Stabilisation
and Association Agreements (SAA) for the West
Balkan states (Croatia, Macedonia, Serbia [with
Montenegro and Kosovo – these two will probably
be independent states in 1-2 years], Bosnia-Herzegovina
and Albania). Similar to the EAs, the SAA also
offer a membership vision, which is predicted
by experts for the time between 2015 and 2020.
But it’s up to these countries to change their
policies (e.g. towards the International Court
of War Crimes in The Hague) and approximate
their legislation. These countries comprise
about 4.5% of the EU population (22 of 460 million),
but 26% of the number of Member States (7 of
27). It is evident that this will only be manageable
with a new constitution-like legal framework
of the EU. Although it is not too popular to
talk about now, these countries will have to
become a part of the EU, not only for economic
and social reasons, but also for political reasons;
another Srebrenica or Kosovo war are not thinkable.
-
With
the successor states of the former Soviet Union,
the EU has Partnership and Cooperation Agreements
(PCA): with Russia, Ukraine, Moldova, Georgia,
Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan,
Tajikistan and Uzbekistan. With Belarus and
Turkmenistan there are also PCAs, but they are
basically frozen now, as the leaders of these
countries are considered to be “village dictators”.
-
That
Russia will want to join the EU is unlikely
for several reasons. However, Ukraine, Moldova
and Georgia have already expressed their interest,
knowing that they will have to do their homework
(albeit with EU help in the form of financing
know-how and structural reforms). Likewise,
Armenia also wants to approach the EU; they
are just now establishing a Ministry of European
Integration. If Turkey continues to approach
the EU, then Georgia, for example, cannot be
refused as the population is evidently more
“Europe-minded” than many Turkish people. The
PCAs, however, have no membership vision as
such, having been written in the mid-90s.
-
Since
the recent enlargement in May 2004, the EU has
followed a new policy toward the “ring of friends”
around the new periphery: the European Neighbourhood
Policy (ENP), towards all the European CIS countries
(Ukraine, Moldova, Georgia, Armenia and Azerbaijan,
as well as Belarus [which has not really started]
and Russia [which has no ENP as such, but has
four “Common European Spaces” on economy, research,
internal and external security]), and also towards
Northern Africa (Morocco, Algeria, Tunisia,
Libya and Egypt) and the Middle East (Jordan,
Syria, Lebanon, Israel and the Palestine Authority).
Besides the CIS-stemming countries that have
an enlarged interest in EU accession, none of
the other countries has spoken in favor of EU
accession (although there have been some voices
heard from Israel as well as Tunisia). But the
EU wants a very wide and open exchange of goods,
services, investment, culture etc., and it wants
values like democracy, minority protection,
cultural dialogue, social market economy etc.
also in its neighborhood – a long task ahead!
-
Turkey
has many years of structural changes ahead,
which will take as many as 15-25 years. Turkey
has made a lot of progress, but needs to keep
the lane - despite all nationalist, Islamist,
“osmanic" tendencies. Once Turkey joins
the EU, it could be a model of joining core
European and moderate Muslim values and therefore
a model for future cooperation with the rest
of the Middle East. This might have a higher
impact than the invasion into countries of the
region that we see happening today. Of course,
the Turkey of the moment of accession will not
be the "old" Turkey even from today.
The
European microstates (Andorra, San Marino and
Monaco) will probably not join the EU, nor will
the Vatican. This leaves Switzerland, where with
the Bilateral Agreements the pressure is gone,
but in the period from 2010 it is not impossible
that the EU issue will play a big role again –
and this time the decisive one. Whatever will
come, Europe’s landscape is thrilling, including
the necessary constitutional discussion that it
will take to shape its ultimate form and size.
In the meantime, as companies evaluate appropriate
foreign markets for establishing subsidiaries
and reaching new customers, we can anticipate
that the growing EU will continue to diminish
barriers to global business and to foster the
principle of regional integration in the global
trade institutions (WTO, UNCTAD etc.). For company
strategies, the EU remains a positive challenge.
Hans-Juergen
Zahorka is Director of LIBERTAS
– European Institute GmbH, a think-tank
on European and international economy and policy
in Stuttgart-Sindelfingen/Germany. Formerly a
Member of European Parliament, Hans-Juergen teaches
European Affairs at various universities and MBA
schools. He also works extensively in Central
and Eastern Europe, the former Soviet Union succession
states and the Balkans. His e-mail address is
zahorka@gmx.de.
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