Transcript Enlargement of the European Union

Enlargement of the European
Union
Ref: EUenlargement332cbs2010
Feb10
Introduction
• Any European country can join
– Treaty of Rome art 232
• First 4 enlargements
• 5th enlargement issues
– central and eastern European countries (CEECs),
plus Malta & Cyprus
– optimum size of EU?
• Enlargement and business
Candidates for EU membership
• Accession countries assessed by EU
– must be able to operate within the EU framework
• Pre-accession agreements
• 5th enlargement - a new challenge
– CEECs
• former centrally planned economies (CPEs) in
transition to market economies
– significantly changing the nature of EU
• generally small, poor countries
p 87
• Copenhagen Summit 1993 set out criteria,
– functioning market economy
– democratic political system
– acceptance of acquis communautaire
Forces behind enlargement
• Benefits of economic integration incl.
– comparative advantage
– trade creation ( but possibly trade diversion)
– investment & other dynamic economic benefits
from integration
– Papazoglou et al (2006):
• Gravity models suggests New 10 increased imports
from EU15 > rise exports to EU15
• Reorientation of trade to EU15
•
Papazoglou, Pentecost, Marques, ‘A gravity model forecast of the potential trade effects of EU enlargement:
Lessons from 2004 and path-dependency in integration’. The World Economy(2006)
REVIEW: Competitive pressures & efficiency in
the single market (note: you can use other theories)
euros
price
Home market only
Mark-up
BE
D
BE
p’
p”
E’
E’
p’
E”
p”
W
m'
E’
A
1
E”
E”
pA
mA
A
AC
COMP
MC
x’ x”
Sales
per firm
FT
n’
C’ C”
Total
sales
n”
2n’
Number
of firms
Euro/L
Review: Growth effects of integration
in the single market
Y/L1
Medium term growth bonus
Y/Lc
C
E
GDP/L 1
Allocation effect
Y/L*
B
D
Depreciation / worker
d (K/L)
s(GDP/L)1
A
K/L* K/L1
K/L
• Political benefits
Widening v deepening debate
• Since 1st enlargement
• EU15 optimum size? EU27 beyond optimum
size? THEORY OF CLUBS – see later
• Two approaches to enlargement
– traditional ‘classical’ method
– adaptive method
• Can widening & deepening be mutually
complementary?
p7a
• 5th enlargement - adaptive perspective
• Is EU currently progressing at 1 rate?
– Schengen Agreement / EMU/ Tax ?
• Variable geometry
– multi-speed EU
– Multi-tier EU
• EU of concentric circles
• Enlargement - even more variable geometry
• Widening v deepening debate outdated???
Theory of Clubs: summary
• See handout & references
• Assume M* optimal size of EU
– Was EU 15 optimal?
• Institutional changes (eg move to QMV)
can shift MC & increase optimal size (to
Mx)
• Consequences for enlargement & Depth of
integration
Theory of Clubs
Benefits and costs
MC
MB
M*
No. of members
Theory of Clubs
Benefits and costs
MC
MC1
MB
M* Mx
No. of members
Subsidiarity principle
• Subsidiarity important
• Task allocation in EU guided by subsidiarity principle
(Maastricht Treaty)
– Decisions should be made as close to the people as possible,
– EU should not take action unless doing so is more effective
than action taken at national, regional or local level.
– Background: “creeping compentencies”
• Range of tasks where EU policy matters was expanding.
• Some Member States wanted to limit this spread.
• Similar analysis for Depth of integration
– see handout
Enlargement issues for the EU
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•
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•
•
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Agriculture
Structural funds
Budget
Migration
Voting – see later
Poor new members
– 20% rise in EU population, BUT
– New 10’s GDP equivalent to Netherlands
Sources: Eurostat and EU Commission 2003.
Voting rules
• Since 1993 Eastern enlargement was inevitable &
EU institutional reform required.
– 3 C’s: CAP, Cohesion & Control.
– Here the focus is on Control, i.e. decision making.
• Nice Treaty (2000) and & LISBON (Reform)
TREATY 2007 (in force 1 Dec 2009)
– Nice Treaty; temporary until new Treaty was ratified
• No final decision made re: voting after enlargement
• Focus on Council of Ministers voting
rules.
Voting rules
• Voting rules can be complex, especially as number of
voters rises.
• Number of yes-no coalitions is 2n.
• EU9
– 512 possible coalitions.
• EU 27
– 134 million coalitions.
Voting rules over time
• Council of Ministers voting rule changes
Pre-Nice rules (from the SEA)
Nice rules (1Nov 2004)
Lisbon Reform Treaty Rules (1 Dec 2009)
Pre-Nice Treaty Voting Rules
• No longer used since 1 November 2004, but
important as a basis of comparison.
• “Qualified Majority Voting” (QMV):
– ‘weighted voting’ in place since 1958,
– Each member has number of votes,
– Populous members more votes, but far less than
population-proportional.
• e.g. Germany 10, Luxembourg 2
– Majority threshold about 71% of votes to win.
Nice Treaty Voting Rules
• 3 main changes for Council of Ministers:
• Majority threshold raised
• Votes re-weighted.
– Big & ‘near-big’ members gain a lot of weight.
• Added 2 new majority criteria:
– Population (62%) and members (50%).
Winners & Losers from Nice
“Aznar bonus”
Poland
Spain
Italy
France
UK
Germany
•Source: Baldwin & Widgren (2005)
•
Nice reforms: 1 step forward, 2 steps
backward
Step Forward:
– Re-weighting improves decision-making efficiency.
• 2 Steps Backwards: EU decision-making extremely difficult.
– 2 new majority criteria worsens efficiency.
– raising vote threshold worsens efficiency.
• Main point is Vote Threshold raised.
– Pop & member criteria almost never matter.
• About 20 times out of 2.7 million winning coalitions.
– Even small increases in threshold around 70% lowers passage
probability
• The number of blocking coalitions expands rapidly compared to the number of
winning coalitions.
Lisbon Treaty rules
• Lisbon Reform : Double Majority.
• Approve requires ‘yes’ votes of a coalition of members
that represent at least:
– 55% of members,
– 65% of EU population.
Lisbon Treaty rules very efficient
25
Passage probability
20
15
10
5
0
Historical
EU6
EU9
EU10
EU12
EU15
21.9
14.7
13.7
9.8
7.8
EU25
EU27
EU29
Status quo: May 04 to Nov 04
2.8
Nice rules: Nov 04 to Nov 09
3.6
2.8
2.3
Lisbon rules Dec’09 onwards
10.1
12.9
12.2
•Source: Baldwin & Widgren (2005)
Budget Share/Population Share
Do power measures matter?
4.5
Ireland
4
3.5
Greece
3
2.5
Belgium
2
Spain
y = 0.9966x + 0.0323
R2 = 0.7807
Portugal
Denmark
1.5
France
Germany
1
0.5
Finland
Italy
Austria
NL
UK
Sweden
0
0
1
2
3
Vote Share/Population Share
4
5th enlargement and business
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•
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•
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Increased trade
Larger internal (single) market
Opportunites and threats
Does this impact on certain EU15 States?
Pre-accession benefits may ‘reduce’ initial
impact of enlargement
Other European countries
•
•
•
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EEA - includes Norway
Switzerland
Will Turkey ever join?
Further eastern enlargement?
Conclusion
• Economic and political motivations for
enlargement
• Has the EU exceeded its optimum size?
• Are reforms sufficient to accommodate the
5th enlargement?
• Implications for business must be
considered