enlargement of the european union
DESCRIPTION
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? - PowerPoint PPT PresentationTRANSCRIPT
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)
Sales per firm
AC
price
Totalsales
D
Number of firms
Mark-up
euros
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Home market only
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Depreciation / workerd (K/L)
K/L* K/L
Euro/L
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BY/L*
GDP/L 1Y/Lc C
s(GDP/L)1D
EY/L1
K/L1
Allocation effect
Medium term growth bonus
Review: Growth effects of integration in the single market
• 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
No. of members
Benefits and costs
MC
MB
M*
Theory of Clubs
No. of members
Benefits and costs
MC
MB
M*
MC1
Mx
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• 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
Lisbon Reform Treaty Rules (1 Dec 2009)
Pre-Nice rules (from the SEA)
Nice rules (1Nov 2004)
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
Poland
Spain
ItalyF
ranceU
KG
erman
y
“Aznar bonus”
•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
•Source: Baldwin & Widgren (2005)
0
5
10
15
20
25
Pas
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pro
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lity
Historical 21.9 14.7 13.7 9.8 7.8
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
EU6 EU9 EU10 EU12 EU15 EU25 EU27 EU29
Do power measures matter?
y = 0.9966x + 0.0323R2 = 0.7807
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0.5
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1.5
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2.5
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4.5
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Vote Share/Population Share
Bud
get S
hare
/Pop
ulat
ion
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e
Ireland
Greece
BelgiumPortugal
DenmarkSpain
Finland
AustriaSwedenNL
France
Italy
UK
Germany
5th enlargement and business
• 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
• 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