In short, European integration is motivated by Political, Economic and Security consideration and it is the union’s intention to be ready for enlargement by the end of 2002. The most significant power in respect of enlargement is to give its assent to the final treaty of accession.
The main aims is to have institutional stability, respect for human rights, the existence of a functioning market economy, the capacity to cope with competitive pressures of market forces and the ability to take on all the obligations of economic and monetary union.
The Enlargement process involves:
* Free movement of goods
* Freedom to provide services
* Free movement of capital
* Free movement of persons
* Company law
* Social and employment policy
* Regional and structural policy
* External relations
* Competition policy
* Transport policy
* Financial control
* Financial and budgetary provisions
The countries of Eastern & Central Europe are not only of interest due to their market potential but also because they can be expected to attract interest in relation to investments in the future. Even without membership, the Eastern European states are building a stronger trading relationship with the EU.
There will be no limits to the opportunities presented when the development of the markets in these countries takes place. The interest from EU and other companies in buying up companies in some of the Eastern European countries and establishing joint ventures with others has been to establish contacts and serving the local markets. The production from Eastern and Central Europe will be competitive; this might be a major factor in attracting investments funds.
The significance of these developments for businesses within Europe lies in the extra opportunities for trade in new markets and the effects they have on existing markets. The immediate effects are a dramatic improvement in the security situation in Europe and the opening up of a huge potential for economic development.
Help is needed from the west to assist and mitigate some of the hardships faced by the Eastern European states in establishing a free market economy and political stability, and this help is arrived through various organisations. The west’s concern is to build a free market infrastructure and retain political stability.
Between 1989 – 1993, exports to the EU rose by 22% per year. Imports from the EU, went up by 30% per year. About 40% of their exports are in sensitive sectors such as food, agriculture, textiles, steel and chemicals and there have been calls of EU member states for tariffs and quotas to protect EU domestic markets.
Exports must primarily come from areas where high EU standards do not constitute a barrier. Agreements in major areas like textiles, steel and agricultural products, have been expected from the EU. There are few restrictions in producing parts for the automotive industry or other industries, or consumer products, where high standards are not important in the Central European countries. A commitment was also made to phase out customs, duties on products such as cars and chemicals over a 2 year period and for sensitive products such as textiles and steel over 4-5 years.
In the field of industrial policy, the candidate countries (Seen in appendix 1) essentially faces two challenges, which is aligning their law with community law otherwise known as the acquis communautaire and increasing the competitiveness of their industries.
Measures needed to be taken to improve and simplify the legal framework, incorporating rules on product specification, market access, competition, financing, environmental standards, appropriate measures complementary to industrial policy, such as the provision of a stable macroeconomic environment, increasing human resources, social dialogue, active labour market policies and adequate infrastructure.
The completion of the European internal market should achieve one main objective and that is significant reduction in costs to the consumer and is achieved in three ways:
1) Through economies of scale in product and business rationalising their own organisations.
2) The more open market competitiveness will result in greater requirement to achieve and retain market share.
3) There will be increased innovation to match consumer’s needs.
Companies themselves can look forward to healthier profits for the following reasons:
> Lower input costs
> Responsiveness to profit through utilisation of production capacity and the use of best practice production techniques
> Removal of non-tariff barriers
> Cross-frontier research & development
The industrial sectors, which are most likely to be affected and stand to win, is:
* Telecommunications and High Technology
* Pharmaceuticals & Chemicals
* Food & Drink
* Financial Services
The commission intends also intends to make proposals to reduce price barriers to stimulate free trade while taking account of the need to encourage the future development of innovation.
The EU’s food harmonisation programme concentrates on establishing a more informative system of food labelling & on setting general food safety and hygiene standards. The alcoholic drink sector will also be affected by changes not only in manufacturing but also in the harmonisation of VAT and excise duties.
The single market should allow more British clothes to be sold in member states and more clothes to be sold in the UK. Increased competition will encourage better quality, style and lower prices.
Completion of the single market in transport is particularly significant for the UK, where direct road and rail freight access to the European network will open up a major new opportunity for British manufactures to compete with their EU rivals on more equal terms
Restrictions on purchasing financial products outside the home will be removed. This will benefit British financial institutions, which is already efficient and aggressive.