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How Far Should the European Union Reach?
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:
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. This article
was originally published by GALA: The Globalization
and Localization Association (http://www.gala-global.org).
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