Enlargement of the European Union, challenge and chance – an Austrian perspective

Citation

(2000), "Enlargement of the European Union, challenge and chance – an Austrian perspective", European Business Review, Vol. 12 No. 5. https://doi.org/10.1108/ebr.2000.05412eab.005

Enlargement of the European Union, challenge and chance – an Austrian perspective

Dr Erhard BusekDr Erhard Busek is Vice-Chancellor of Austria, Co-ordinator of SE European Co-operative Initiative and former Chairman of the Austrian People's Party

Keywords European Union, Austria

Enlargement is the greatest challenge for Europe in the years ahead. Our shared European identity is something that is all too easily taken for granted even in the present EU Member States. To make the best of our common European identity we have to continue to engage with the rest of Europe, we have to identify and seize the opportunities that Europe presents, and we together have to shape Europe in this new twenty-first century. We have to acknowledge and identify ourselves as fellow Europeans.

The key to that future is enlargement. The enlargement of the European Union towards the Central and Eastern European Countries (CEEC) represents a historic process which will help overcome the artificial separation of the continent. The area of stability, welfare and safety that was achieved by European cooperation after the devastating experience of the Second World War can now be expanded towards the East.

As Austria is situated in the heart of Europe, the continental dimension of the European model of a free and voluntary combination of free nations is of particular importance. Our country is moving more towards the centre, politically, economically and strategically. The Austrian government therefore wants to see the EU being enlarged rapidly, successfully. We want to see new members take on and implement the EU's body of laws and practices, to operate as fully-functioning members of the Single Market from day one.

But I am delighted that both they and we are in a position to take it seriously, work at it and further take forward the historic changes seen in our continent in the past decade. Obviously, in many of those countries which are now negotiating their entry to the EU there have already been momentous changes, including in the ways that governments relate to their citizens, and those citizens relate to each other.

Since 1989 we have witnessed profound social and political changes. The fall of the Berlin Wall in 1989 changed the politics of Europe, opening space for a Europe of the future. It meant the end of unnecessary, enforced divisions between national governments, between regional authorities, between towns, and between individuals. And it ended the exclusion of so many members of the European family of nations from the process of European development. Membership of the EU will rebuild the European family, because the EU is precisely about those relationships, at all levels, which are so vital to political, economic, cultural, and social growth and development.

Enlargement will extend the benefits of the single market to all of the new Member States, ensuring a level playing field for all participants. Economic transition has been difficult for the prospective Member States, there is no question of that. And together we have to make sure that when they do join, their economies are ready to withstand the pressures that competition in the single market will bring. But once that is done, there is no doubt that bringing in such dynamic economies, with so many resources and so much enthusiasm to offer, will benefit both old and new Member States.

Austrian industry has already concentrated heavily on the Eastern markets. In the area of foreign trade, Austria could considerably strengthen the positive balance it has obtained from business with the candidate countries from Eastern Europe since the opening of these states: e.g. the balance of trade surplus in 1999 equalled ATS +30 billion in comparison to ATS +7.4 billion in 1989. This represents the highest positive balance for Austria's exports in comparison to certain world regions. Between 1989 and 1999 Austria's exports to Hungary, the Czech Republic, Slovakia and Poland increased more than fourfold while imports only doubled. The CEEC's share of Austrian exports increased from 4.4 per cent in 1989 to 16 per cent in 1999.

Therefore, in relation to the Austrian economy, the Central and European Countries, especially the candidates of the first enlargement round, represent one of its most important markets outside of the EU, carrying with them economic welfare and the security of work places in our country. Measuring its share of the market Central and Eastern Europe is at the top of the Austrian balance of foreign trade. Of the export market that the Western industrial countries have in the East, our share amounts to 17 per cent in Hungary, 14 per cent in Slovakia, 13 per cent in Slovenia and 9 per cent in the Czech Republic. Compare these figures to our share in Germany, 6.4 per cent, in Italy 3.5 per cent and in the EU as a whole, 2.4 per cent, and it is very clear that Austria's economy profits from the growth of the candidate countries.

Since the opening up of the Eastern European markets Austrian firms have also held a very good position in the area of direct investment. Up to 1998 Austrian enterprises invested 7 billion USD in Eastern European countries totalling a market share of 9 per cent of existing investment capital. This has led to the establishment of approximately 14,000 Austrian subsidiaries and joint ventures in this area. In some countries like Hungary, Slovenia and Slovakia, Austria is one of the main foreign investors. This capital is insured and can carry interest only when the economic situation in the Eastern markets remains stable and shows further signs of development. It will be a considerable contribution to the entry of these countries into the EU.

With the increasing pressure of competition, the attractiveness of Austria's industrial location will depend particularly on the optimal use of cross border cooperation. This use of the optimal mix of locations can make a significant contribution to the improvement of the competitiveness of industry.

The main growth potential of the candidate countries (the growth forecasts of the first five candidates are above the EU average) promises further opportunities for Austria's export industry. It is expected that the inclusion of the CEECs in the single market will accelerate the growth rate of this region and increase its purchasing power. If Austrian products can hold on to their share of the market, it will bring a considerable improvement to the Austrian balance of trade and current account balance.

The additional options for financing the enlargement both before and after accession, made possible by structural funds, will bring new opportunities for European industry. The strengthening of East European infrastructure particularly in the transport, energy and environmental sectors should give rise to more business opportunities.

But enlargement is not just about economics. Enlargement is the only right and sensible response to the changing pressures and circumstances of the past decade and the new century. Enlargement will cement the sense of stability, the respect for democracy, the promotion of human rights and cultural diversity which candidate countries have themselves worked so hard for. These are issues and values that cut across national boundaries, issues that need us to co-operate with and talk to each other. Similarly, there are issues on which we need to take action together, where the European Union is uniquely well placed to provide common solutions, implemented by national governments. As well as the profound political shock brought about by the fall of Communism, the last decade has also seen a revolution in the ways that we think about social and economic policy. The EU is a forum for us to explore, to share and to promote that thinking.

And enlargement is a way for us to extend that process. The countries of Central and Eastern Europe have already made great strides in the policy areas that crucially affect all our citizens' lives. The Commission's latest progress reports on the applicants for membership, issued in October last year, showed how far they have come in a short space of time. But there is still work to be done, and significant investments to be made, both financially and in terms of government time and effort. We all need to prepare well for enlargement.

When taking on a project of this dimension there are bound to be a number of risks involved. There are fears of added strain on the job market, danger along the border areas, disadvantages for agriculture and excessive financial demands.

These anxieties are not to be dismissed but one must also avoid exaggerated horror scenarios. I am convinced that all problems could be coped with once the necessary precautions are taken by the EU and by the candidate countries themselves. The institutions of the EU, as well as the member states, show responsible and planned involvement with the enlargement project. As a result, the Council of the EU heads of state and governments agreed that the accession agreements would come into effect once the internal EU requirements have been met. These include reforms of the agricultural and structural policies, management of public finances and decision making procedures.

In Austria a special attention has been given to the problems of migration and border regions.

Econometric studies from the late 1990s have shown that the number of people willing to migrate from four of the candidate countries, namely from the Czech Republic, Slovakia, Poland and Hungary to the EU totals 700,000. Of those would-be migrants, 150,000 have indicated that Austria would be their preferred target country. It has been estimated that as far as Austria is concerned yearly migration flows would amount to 23,000-40,000 people from the day of accession of the CEECs to the EU. These estimates are all based on figures from the late 1990s, their relevance, though, for projections for the first two decades of this century is basically undisputed. Other factors such as the tightening of migration policies of the EU member states from the early/mid 1990s onwards, the unique geographical location of Austria as well as Austria's strong cultural and historical ties with the neighbouring CEECs, and the fact that most "transition economies" are still unsettled, add a great momentum of uncertainty to any forecasts.

As regards "commuting potential" the situation is even more difficult and unpredictable. As stated, there are very large nominal earnings gaps between Austria and CEEC border regions (at times of the order 15-25:100) There are important uncertainties as to the extent to which the discrepancy between current real income and nominal earnings gaps might be closed over the coming decade. Furthermore, the geographic closeness of large conurbations on both sides of the current Austrian-CEEC borders provide a specificum. Existing estimates of the commuting potential between Austria and its CEE neighbours (between 50,000-70,000 over the first five years after liberalisation with some estimates going up to 150,000 over a ten year period) apply a similar framework to that used for estimating the migration potential. Important explanatory variables are left out of existing studies such as the dependence of commuting on traffic infrastructure and conditions with respect to housing (for weekly, monthly or seasonal commuters). Given the uncertainty surrounding the quantitative potential of migration and commuting flows in the case of full liberalisation of labour market access between Austria and the CEE candidate countries, there is a case for maintaining some type of regulatory framework so that adjustment processes initiated by such liberalisation can be phased in over a certain time horizon.

But we are also playing our part in helping the candidate countries to prepare themselves for enlargement. I am glad to say that our bilateral relations with all of the candidates are excellent. EU programmes mean that over 830,000 young people from across the EU have studied, trained or worked in another Member State. Building the agenda for the next generation: so they are not afraid to say "we are European". And when people's working lives have finished, they can choose to retire and draw their pensions anywhere in the EU. Travel between current Member States is already enriching the lives of millions of people.

I am confident that enlargement will increase travel between the old and new Member States of the EU. The prospect of enlargement is already doing so.

Enlargement can only increase the traffic in both directions.

By doing so, with personal connections, it will finally bring Europe together. The foundations for co-operation were laid by the revolt against Communist rule in Central Europe. It is up to all of us now to build on that co-operation. We have the tools: the EU and the candidate countries have a wealth of resources to offer each other – human, financial, knowledge-based and physical. Successive European Councils have set out the path which both sides must follow towards wider membership. The benefits are clear, and the obligations too.

Our government is working hard towards the common goal of enlargement, and our people are beginning to see the rewards on offer. A step on the way – not an end point.