From Labour Focus on Eastern Europe, No. 59, 1998|
EU Eastwards Enlargement:
the Uncertainties Remain
President Chirac has made the idea of Europe as a large family fashionable,
with his suggestion last year that all 10 of the East European states applying for membership should
be brought together for 'a family photograph' with their rich uncles, cousins and aunts in the West.
But if Europe is really in the process of preparing for a family reunion, at present the arrangements
look set to produce either embarrassments, or disappointments or even family recriminations. For the
EU's enlargement process is reminiscent of nothing so much as rich relatives who feel obliged to invite
distant and poor relatives to come to stay, but wishes they wouldn't come, is divided over how much hospitality
to provide, does not wish to incur extra expenses and is even toying with the idea of making the poor
cousins pay the entire cost of the stay. Meanwhile after a long and unpleasant journey, the poor cousins
wait on the cold doorstep while those inside claim unconvincingly that they are trying to open the door
but are being prevented, by one problem after another with the keys, from unbolting it.
On the face
of it, the Luxembourg EU Council meeting was a success for the applicants. A date was finally fixed for
starting negotiations with 5 of them plus, in principle, Cyprus: March 31st, 1998. The five are Poland,
Hungary, the Czech Republic, Slovenia and Estonia. And the applicants who had been placed at the back
of the queue were given seemingly more generous treatment than the Commission's opinion, published in
the summer of last year, could have led them to expect: their progress in meeting the so-called 'acquis
communautaire' will be reviewed annually and they could, as a resul5t, be brought forward to the front
of the queue and be offered actual negotiations for membership. This element of flexibility was pushed
for especially by Sweden and Denmark (with some German support) and gives hope especially to Lithuania's
government that it might join the top group of applicants.
Yet progress on all the main substantial
issues blocking Eastward enlargement -- issues which have now been on the agenda for nearly five years
(since the Copenhagen Council of May 1993) -- has been all but negligible. These are the problems of
reform within the EU itself.
EU spokespeople like to suggest that the great problem of enlargement
is to make sure that the applicant states have really managed to achieve the legal and institutional
changes necessary to harmonise with the 'acquis communautaires' -- the existing institutional and policy
arrangements of the EU. But this is best described as power discourse which is very far from reality.
In truth, the EU member states have no intention of granting the full acquis communautaires to the new
members in the East. Instead, and as a precondition for enlargement they are going to change the existing
acquis or try to ensure that the full rights contained in the existing acquis are not extended to the
new members. These issues are the really important obstacles to swift enlargement. And if anything, the
December Luxembourg Council marked a retreat from tackling these problems.
The question of EU
The first major problem here is the size and distribution of future EU expenditure. The
Eastern applicants are all very much poorer (especially after the large falls in GDP that they have experienced
in the 1990s) than the EU average. Slovenia, with the richest per capita GDP of all the applicants, stands
at only 59 per cent of the EU average. They should therefore have a very substantial slice of Structural
Fund money. The bulk of this money at present goes to so-called Objective 1 programmes which are devoted
to regions with the lowest per capita GDP. Without a change in the funding criteria or in the total funds
there would therefore by a very large transfer of funds from the Mediterranean and Ireland (as well as
from very poor regions in the UK) to the CEECs. Since the CEECs all have significant agricultures (especially
Poland and Hungary of the 5 states at the top of the queue) and their agricultural output is in sectors
on which the CAP spends heavily they should also gain a substantial chunk of the available CAP funding
if the system remains as it is. Thus settling the overall size of the budget simultaneously settles how
much policy reform there needs to be to prevent losses of income to existing budget recipients among
the member states. If the budget does not expand, there should be deeper reform; if it does expand, the
reforms could be less radical.
In its Agenda 2000 document relating to enlargement, the Commission
projected that the EU budget should remain governed by its present formula: 1.27 per cent of total EU
GDP. At the same time, the Commission hopes for 2.5 per cent GDP growth per annum thus providing some
additional budget funds from that growth. This approach would not supply sufficient revenue to fund the
adhesion of the first five applicants while maintaining the existing level of funding to existing recipient
member states. Yet even this Commission attempt to stick to the status quo in the Budgetary field was
not endorsed by the Luxembourg Council: it pointedly failed to confirm that the EU budget formula would
remain at 1.27 per cent. This should not be taken as a positive sign that the budget formula may be increased:
on the contrary it indicates that it may even be reduced since the German government is ever more reluctant
to maintain its level of spending on EU programmes. In this stance the German government is supported
by the UK and by most of the other net contributor states to the budget and their stance will only be
strengthened by the extreme fiscal strains caused within their own states by the convergence criteria
involved in Monetary Union. Thus enlargement means radical policy reform in the CAP and the Structural
Funds unless the new members are denied access to these policy areas (and their associated funds) for
a substantial transition period.
As a result, the most immediate political tensions over enlargement
fall in the area of Structural Funding. This whole policy area is in any case to be revalidated in 1999
because the present arrangements have force only until then. So already the battle is being joined over
the future of the Structural Funds and both the Spanish and Portuguese governments have made it very
clear at Luxembourg that they will block any enlargement that entails a loss of Structural Fund allocations
to their countries. The Irish government is also very concerned.
The current British Presidency is
attempting to push forward reform in this area with the aid of two (at least on the face of things contradictory)
guidelines: that all member states should share the burdens of reform equally; and that states which
will lose money should be provided with adequate transitional periods to enable them to adjust. But these
'principles' have not been enough for the Mediterranean countries and the expected agreement on guidelines
for Structural Fund Reform did not take place in Luxembourg: the final resolution simply remains silent
on the issue. British Foreign Secretary Robin Cook has indicated that he sees this as the most difficult
current issue affecting the enlargement process.
We can nevertheless expect that some reform in this
area will eventually be agreed over the next year. A much more difficult problem is likely to arise over
agriculture and CAP reform. Here the social groups directly affected within the EU are much more strongly
organised and more politically powerful than the end users of the Structural Funds. And they are concerned
not only about finance but also about the new competitive economic consequences of having Polish and
Hungarian producers within the EU. On the other hand, some further reform is called for as a consequence
of the completion of the Uruguay Round and the requirements of the WTO and efforts are being made by
the commission and a number of member states to enlist political muscle from environmental movements
for CAP reform. The broad approach to reform will be to replace price support with support for farmer
incomes and one effect of that should be to reduce food prices within the EU towards those in the world
market -- thus giving a basis for gaining consumer sympathy for the changes.
from some member states remained strong enough at Luxembourg to prevent agreement on even the most general
guidelines for reform. Instead, the final resolution talks rather ominously about the necessity to preserve
the so-called "European agricultural model" -- which implies a weakening of the existing system rather
than basic structural reform. While there is broad support across the political spectrum in the UK for
radical CAP reform, strong opposition can be expected not only from France but also from Germany and
other countries (including Spain). It is extremely unlikely that any significant movement towards reform
will be initiated until after the German elections towards the end of 1998. And the outcome of the campaign
for CAP reform cannot be predicted.
Yet although attention in the
enlargement debates is currently mainly focused upon these financially-related policy issues, the most
serious and intractable problem to be overcome before enlargement occurs is almost certainly that of
reform of the European Union's political institutions. The Maastricht Treaty had envisaged that institutional
streamlining would be achieved at the 1996 Intergovernmental Conference. This has taken place and has
given birth to the Amsterdam Treaty signed last year. Yet the Amsterdam Treaty has side-stepped the central
issues it was supposed to have addressed.
The institutional problem at its most basic level is about
how much political clout each member state should have in decision-making. This in turn involves both
decision-rules and voting strengths: should decision making in the Council of Ministers and in the European
Council become overwhelmingly by qualified majority voting rather than reserving all the big questions
for a unanimity decision-rule? How much voting strength in qualified majority voting should each member
state have? And how big should the blocking minority be when qualified majority votes are taken?
the possibility of 11 extra members of the Union -- and even with the possibility of 5 -- these issues
cannot be evaded. And they will be addressed in a context in which the existing rules give larger weight
to the small member states than their population size should merit and give smaller weight to Germany
than its population size (not to mention its budgetary contribution) would justify. Eastward enlargement
will bring into the union another large batch of small states and if they demanded the same voting rights
as the existing small members, the disparity between size and clout would be overwhelmingly strong. enlargement
without reform of the decision-making institutions will mean gridlock.
Thus, enlargement poses a direct
and inescapable challenge to the EU to define its constitutional identity. If major institutional reform
does not take place, the EU will in effect become a Monetary Union and Single Market, with power passing
out of the Council of Ministers into whatever body steers the politics and economics of the Monetary/security
zone. Normal EU business in the Council of ministers will be confined to matters of market management.
But if a rationally justifiable and workable institutional reform does take place it will entail majoritarian
voting principles which will make the EU more than ever a centre of political authority over the member
states. For this very reason, as well as because of the immense tensions involved in shifting power balances
between big and small states to achieve rational solutions, this issue of institutional reform is enormously
difficult. There is little wonder that it was completely ignored in the IGC that was supposed to tackle
The Luxembourg Council meeting confirmed what was already indicated in the Amsterdam Treaty: before
any enlargement eastwards can occur there has to be yet another IGC on institutional reform. No date
has yet been set. It will surely be a fateful IGC and if it occurs against the current background of
the long economic stagnation and rising xenophobia and far right nationalism in many West European states,
no positive outcome can be assured. Much will also, of course, depend upon how Monetary Union is faring
when the IGC is at work. At Luxembourg, the French government was the most insistent upon making this
IGC's successful outcome a precondition for Eastward enlargement. The UK government is likely, under
Blair as under Major, to resist a rational constitutional solution. And it is unlikely to be alone.
These question marks over basic issues on the future nature of the EU create major problems for the
CEECs in the negotiations which are due to start on 31st March: they can hardly negotiate a deal on agriculture
or the structural funds when the EU has not decided what these policy pillars of the EU are going to
be. They cannot discuss their place in the institutions when these are also going into the melting pot.
Indeed, the EU itself has so far failed to produce a definitive list of the acquis communautaires when
the applicants will have to meet in order to be able to join. As a result, the applicants risk imagining
that they have met the acquis only to be confronted sometime during the negotiations with extra acquis
to be achieved to pass the entrance examination.
Yet at the same time, the EU has
now produced a new 'acqui' which is not yet actually an EU acqui but is at least a new precondition
for membership: namely that Poland and the other first group of applicant states accept the Schengen
regime and restrict border crossings from countries further East, by requiring visas from Ukrainians,
Belarussians, and presumably Romanians, Bulgarians and others. Only some of the current EU member states
currently adhere to the Schengen framework, but this is goal of restricting migration into Germany from
the East is a very important German requirement. Thus, in this field politics is more important than
legal notions of 'acquis' and the German government points out that these requirements are should form
part of the EU's acquis by 1999. This is a difficult issue: for Poland and other first rank applicants
to restrict traffic across their Eastern borders would have a serious economic impact because of the
very large cross-border trade involving thousands of small traders and businesses. The restriction also
entrenches a political gulf between first rank applicants and the others and will generate serious political
resentments in the excluded countries.
31st March is thus the start of a rather peculiar set of accession
negotiations whereby most of the real advantages of membership which the CEECs would want to fight for
in the negotiations will not actually be available for negotiation. Instead, the negotiations will be
swung round to all the things the EU wants the CEECs to do before it will allow them in. And in this
context, the Luxembourg summit has produced another hare for the CEECs to chase in the form of a new
'screening process' to check just how well the CEECs have harmonised with the acquis. The applicant states
can be forgiven for thinking that such screening was exactly what the Commission had been doing during
1996-97 before producing its opinion in Agenda 2000, indicating the 5 countries ready for negotiations
on membership. But perhaps the Commission's screening was to see whether the applicants really meet the
acquis. The new screening will determine whether they really, really meet them! And in the meantime,
we await from the EU the actual list of acquis! But the form of the proposed screening process suggests
that its purpose is as much delay as enlightenment: it is proposed to conduct it collectively, with each
applicant government being offered the opportunity, presumably, to explain how much more it has done
to fulfil and perhaps over-fulfil its harmonisation with the acquis in comparison with the other applicant
governments present. In such a setting, there is no danger that one of the governments could complete
this screening process early and thus demand a swift conclusion to its negotiation. It will have to sit
through the speechifying and interrogation of all the others.
In this context, the main issues on
which negotiations can concentrate during 1998 will be adherence with the Single Market -- something
which is being left out of the screening process (on the grounds that the Commission did look thoroughly
at this aspect in its earlier screening procedure). The Polish government has already indicated that
it is going to place one aspect of the Single Market at the top of its negotiating agenda: the principle
of free movement of labour. Yet extending this principle to the CEECs is causing concern to EU member
states. The Austrian government has insisted Austria should be exempted from implementing free movement
of labour. On the other hand, the Polish government is demanding that free movement should be fully granted
without qualification at the start of negotiations.
The applicants' weak hand
In trying to
tackle these problems, the CEEC applicants have a very weak negotiating hand. They have already given
away two of their main high cards. First, market access has been granted through the Europe Agreements.
These essentially harmonise the CEECs with the EU single market rules and provide very full access for
EU goods and investment, without giving the CEECs any influence over the design or implementation guidelines
of the rules of the Single Market. Thus EU business operators already have most of what they want in
the CEECs. The EU now exports to the CEECs -- 69.5 billion ECU-worth in 1996 and 39.7 billion for the
first half of 1997 -- double its exports to Japan and Latin America combined and enjoys a substantial
surplus in that trade: 20billion ECU's-worth in 1996 and 11.7 billion in the first half of 1997. Germany
alone now exports more to the CEECs than it exports to the USA. Business is unlikely to make further
significant gains from trade through accession itself.
Secondly, the EU member states' security requirements
(above all for Germany) have largely been settled through NATO's enlargement. As that proceeds, the external
policies of the CEECs will be harmonised on all important issues with the objectives of the main Western
states. A third card might have been a measure of solidarity amongst the applicants themselves, but,
because this is almost non-existent, any single applicant trying to bargain toughly with the EU risks
being put to the back of the queue.
But the greatest weakness of these countries lies in the fact
that they have nowhere else to go other than the EU, because of the continuing economic and political
weakness and instability further East. They are already overwhelmingly dependent upon the German economy
for their trade and payments and this situation is unlikely to change dramatically in the near future.
Thus they enter the negotiations only with two major assets: the EU member states know that a rejection
of membership or a long postponement would cause a political upheaval within the CEECs themselves; and
secondly, they can hope for support from the Clinton administration, since the US government has been
a consistent supporter of EU enlargement. Yet neither of these strengths gives them much leverage in
the negotiating process. The EU is not likely to give an outright rejection -- it will simply shift the
costs onto the new members and restrict or delay the full rights of membership through transitional derogations.
And as for the Clinton administration, it may be willing to use its influence in relation to Polish concerns
to seek derogations to ensure that its Western territories are not subject to too strong a German influence
(eg by maintaining control over foreign direct investment -- a very sensitive political issue for Polish-German
relations. But otherwise it is unlikely to be focused upon the detailed substance of the negotiations.
Enlargement and the social model
Furthermore US pressure for swift enlargement is linked
to the Clinton administration's bipartisan drive to use enlargement to undermine the European social
model. In this it has an ally not only in the Blairite British government with its drive for 'flexible
labour market', but also from business lobbies in the EU, such as the European Round Table of multinational
companies and UNICE, the European Employers' Federation. Both have expressed themselves strongly in favour
of rapid enlargement. But their motives seem to be connected to using the CEECs as site for social dumping
and Maquilladora-style assembly operations, using cheap labour and low levels of social protection to
strengthen their profitability at the expense of West European labour.
And this business drive is
generating widespread concern amongst EU trade unions and socialist parties that enlargement could lead
to a strong trend for business to relocate investment in the Visegrad countries, making use of very low
wages, weak labour rights and inadequate environmental standards, thus engaging in what is known in
Western Europe as 'social dumping'.
Thus a rather broad coalition of interests is ranged against
a swift and successful enlargement that would strengthen the unity of Europe, while those forces in Western
Europe favouring rapid enlargement are dedicated, in the main to undermining the social and political
cohesion of the European Union.
An alternative approach
Breaking this log-jam could nevertheless
be possible through a policy that reconfigured these cleavages. Labour across the union has everything
to gain from a larger EU budget and a stronger element of redistributed spending. |It has also a great
deal to gain from a reformed CAP that supplied decent pension rights and income support for the poorer
small farmers in the Union while cheapening the costs of food. And a form of enlargement which is geared
to raising employee incomes, social protection and environmental standards among the applicant states
could command majoritarian support both in the EU and among applicant states. The Maquilladora-style
of dual economy will be no better for Poland or Hungary than it is for Mexico. And a greater development-orientation
for the enlargement project could also be achieved at zero financial cost to the EU by allowing derogations
from a number of aspects of the Single Market for the new entrants, until their GDP per capita has reached,
say, 80 per cent of the EU average: derogations on limits to state aid for industries, derogations on
competition policy, and on the rapid deregulation of banking systems, financial services and international
movements of hot money. Measures to tackle the serious payments problems without having to do so through
deflationary retrenchment could also easily be found.
Of course, the efforts of the Commission are
geared to ensuring that the Single Market is treated like the holiest of holies. But a viable, sustainable
enlargement in the interests of the populations of Europe should take precedence over the mindless drive
for every larger oligopolistic scale economies. Of course, this change of direction will require political
leadership. No doubt it is naive to hope that a social democratic victory in Germany, combined with the
centre left governments in Italy and France, could re-orient the EU's enlargement strategy by the end
of this year. But at least naiveté is more energising than cynicism.