European Round Table The Economics of the Widening and Deepening of the EU Tim Josling Stanford Institute for International Studies

Outline The Economics of Enlargement The Impact on new members The Impact on existing members Widening and Deepening The Economic Future of the EU

The Economics of Enlargement Open up internal market to goods and services Adopt common external tariff Allow free movement of labor and capital Adopt common policies (e.g: CAP) Adapt and adopt regulations Contribute to (and benefit from) common budget Align exchange rates, interest rates Accept discipline on fiscal policy

The Impact on new members Depends on their own size, economic policy, and competitive position Small economies gain more because of larger market Liberal economies have fewer problems facing new competitive pressures For some, the free movement of labor is important For some, the access to capital markets is beneficial

Experiences UK, Denmark, Ireland Greece, Spain, Portugal Austria, Sweden, Finland Visigrad 4 Slovenia Baltics Islands

Future Members? Romania, Bulgaria Other FY states Turkey

The Impact on existing members Large new members have an impact on market size Small new members add little to market Liberal economies and competitive economies pose fewer economic problems Labor surplus economies pose threats of migration Rich new members welcomed to take financial burden

The Impact on existing members, contd. Large agricultural countries pose problems for CAP – Add to surpluses of sugar, grain, milk – Add to budget cost for direct payments – Complicate trade problems with US, etc. – Complicate administrative problems Low income countries add to regional policy problems – Increased demand for funds – Reduction of funds for current recipients

Widening and Deepening Deepening of EU increases desirability of accession for neighboring countries Deepening is slower with more heterogeneous membership So deepening encourages widening which then puts a break on further deepening Multi-speed Europe is usual answer to this problem

The Economic Future of the EU Facing significant challenges – Slow population growth – Ageing population – Need for immigrants Restoring competitiveness – Introducing labor market flexibility – Encouraging innovation, entrepreneurship – Making use of scale economies