Introduction
The European Union also known as EU is a large group of countries consisting of 28 members, established to promote economic, and political stability. Founded in 1957 by six countries, the aims and objectives of the group were to collaborate and combat issues together such as welfare, security and the movement of people. (Europa,2018)
After the Second World War, leaders of European countries that were involved presented the idea that they would rather have peace and work out respective differences by coming together to solve common issues. It was and still is regarded as the biggest form of integration between countries.
Being in the European Union has proven to be beneficial for those member states, such as the increase in communication surrounding the safety and security of people, with Terrorism attacks and cross-national criminal attacks thwarted, it also allows freedom of movement which gives people the right to travel to different countries for residency, short-term or business.
In order to delve deeper into the discussion, it is primordial to understand the meaning of Enlargement in the EU. Enlargement connotes the process in which countries in Europe would like to apply for membership within the EU and the institution accepting the application, therefore adding another nation into the institution. Since the inception of the EU, there have been six major phases of enlargement within the EU: Denmark, Ireland and the United Kingdom in 1973, Greece in 1981, Spain and Portugal in 1986, Austria, Finland and Sweden in 1995, a wave of countries such as Cyprus and Poland in 2004 and 2007 with the latest phase being Croatia joining in 2013. There are currently several countries that are in accession. (European Commission, n.d)
Benefits of EU on Members
Joining the EU has its benefits and its downsides, however, it has aided member states in a variety of ways. One of them is that it has brought Peace and stability in Europe. This was crucial especially after the Second World War due to the reasoning that several European countries were on opposing sides with West Germany, Italy, Bulgaria and a host of Slavic countries on one side and Britain France and Belgium with allies on another side. Heightened tensions due to the war had to be settled in order to increase the likeliness of a repeat situation which caused negative effects on the economy and the standard of living for people. (Hedinger,2017)
Another benefit of joining the EU has been the increase in employment opportunities as there are more countries to work in. A huge sector that has become part of this trend is the healthcare sector, with an influx of Nurses and Doctors from around the European Union working in the British National Health Service(NHS), their registration in the UK is a straightforward and inclusive one as it automatically recognises their skills and qualification from their home EU states without having to require or complete further assessments or condition in order to work in the EU due to the integration between EU countries(Ling and Belcher,2014).
Being in the EU also allows for a larger geographic area to trade in an equal field, being able to conduct trade with countries across the union where certain monetary or political opportunities arise to be taken advantage of. Freedom of Goods, for example, allows Farmers and Fishermen from Eastern parts of Europe are able to receive financial support as EU policies are in place in order to aid farmers to export their products across the union to other member states (Agriculture and Environment, n.d).
Impact of the Enlargement process on member states
The European Union currently has 28 member states; this will soon go down to 27 due to the withdrawal of the United Kingdom as Article 50 was triggered by Prime Minister Theresa due to the results of the referendum in which the British public voted to leave the European Union(Parker, Allen and Beesley,2017). Due to what is informally known as ‘Brexit’ and the subject of Great Britain leaving being a topical subject in news outlets and in society, it is only right to analyse the benefits and risks of enlarging the European Union can have on member states, Industries and People.
Foreign Direct Investment (FDI)
With several countries being recently involved in the enlargement of the EU it poses the question of what kind of impact countries joining the EU has on member states, in specific the benefits reaped from them. One of the impacts would be the rise in Foreign Direct Investment (FDI). FDI is the process in which Multinational Enterprises decide to invest capital and resources into a foreign country in the view of gaining monetary benefits that would be enforced through cost benefit. With the enlargement over the years, it has allowed firms to conduct FDI in different states around Europe (Morgan and Katsikeas,1997). Looking at the energy sector, for example, France is one of the leading countries in the industry with EDF Energy being at the forefront of the country’s energy prowess. With the United Kingdom still being in the European Union for the moment pending the outcome of Brexit, EDF had invested heavily into the Hinkley Point Power Station in the town of Somerset which would build the local economy through more jobs and extensive training at newly founded centres and educational institutions. In return, the company would, therefore, benefit from skilled labour, modernised plants in a modernised location and cost benefits due to the ease in regulation, tariffs and quotas due to being part of the EU as supposed to a state outside the EU (Sedgemoor Investment Prospectus, 2018).
The Four Freedoms
One of the main characteristics with being in the EU is the use of the Single European Market. This is a form of trade cooperation that eliminates any form of barrier to trade and movement. This is grouped by the Four Freedoms, the freedom of Goods, Capital, Services and Labour (Bloom,2017). Those four aspects of the Single Market model are allowed to circulate around the EU without restrictions or and tariffs legislated by individual member states. Being in the Single Market contain obdurate benefits for a variety of stakeholders. With regards to the last few waves of enlargement in predominantly the eastern and central European countries Edwards (2004), believes that the single market will foster more trade between those countries and the old member states within the EU producing more wealth for those countries as a result of rising competition and economies of scale which would mean a lower price. Edwards (2004) also suggests that welfare in central European countries “could rise by 11.5-20%”.
Various Treaties over the years
Over the timespan that the European Union has been running, there have been various treaties that have been signed to further support economic integration within the countries that are in the European Union and make it easier for countries to join the institution. The Treaty of Paris was the first treaty signed by the European leaders in 1951 to create the European Coal and Steel Community which were the first steps taken to integrate European countries into a Union. The Treaty of Rome in 1957 however, became the birth of the customs union were countries became even more integrated discussing and debating on several issues that could affect them such as employment rights, education etc.
EU enlargement’s effects or consequences on various industries
Increase in Capital Investment
The enlargement of the EU can hold both positive and negative effects on the Industries that participate in trade. Various businesses seek to conduct business abroad in order to gain competitive advantages. The accession of more countries into the EU can create an increase in Capital investment due to the fact the removal of trade barriers will help firms economise capital which would’ve been used on paying trade tariffs had
An example of FDI within the European Union is German car manufacturer Volkswagen that has heavily invested in Europe in the form of Joint Ventures, the opening of manufacturing plants or acquisitions of domestic car companies in EU member states such as Poland and Slovakia(Jakubiak,2008). One of the main reasons for VW investing their capital and resources in those countries is due to the cheap costs that are associated with those countries as labour, cost of material and constructing infrastructure would equate at a cheaper amount compared to western European countries. FDI also comes with benefits for the host nation as it increases employment in the country and creates an environment of knowledge sharing there leading to employees in the country learning new skills and characteristics aiding their jobs (Liptakova,2015).
Exposure to new Markets
By being part of the EU, Businesses can benefit from more market exposure in territories where they wouldn’t have thought of investing capital or setting up a market for selling a product or service. The last huge wave of Enlargement in 2004 opened up a plethora of opportunities for businesses in old member states to provide their products or services to a new economy.
The transport industry is one of the major industries that can be analysed in terms of the effect that enlargement will have. With the single market being in effect, it will allow for competition to be on an equal platform and will encourage EU nations to trade within the Union rather than in external European countries or nations outside the continent. An example in the Transport sector would be the national Train service of Germany called Deutsche Bahn, which not only operates and manufactures trains domestically but also in fellow EU countries such as the Czech Republic, Poland, Portugal and Sweden (Deutsche Bahn International Operation,2018). Enlargement allows transport companies such as Deutsche Bahn to receive access to those markets in order to source more sales, therefore, more profitability.
The risks and potential hazards around EU Enlargement
Although the enlargement of the EU can bring several positive into the fray, increasing the amount of accession into the European Union can increase a few risks or create shortcomings in the process of EU Enlargement.
There is a fear that old member states will see a decrease in monetary gains due to the risk that enlargement can augment budgetary costs for existing members. Linking this with the Agricultural industry, in France, Farmers receive the biggest net amount of subsidies than any other member state in the European Union. The support allows independent farmers or groups to ease costs in order to make exports for the country much easier. With the eastern enlargement of 2004, the influx of farmers from eastern European countries has forced the European Union in redistributing the number of subsidies, causing the French farmers to receive less than before the enlargement. This could play a part in the country’s agriculture industry losing valuable resources in order to export more smoothly as supposed to their eastern counterparts (The Economist,2018).
Suitability of some Accessing Nations
The countries joining the European Union are nations with a low GDP compared to the existing member states. With the latest enlargements coming from the east of Europe, their economies aren’t as powerful as these in the western parts of Europe such as Germany, France and the United Kingdom. In addition, western countries such as the ones mentioned previously are sceptical about the value that accessing countries will have on the overall growth and prosperity of the European Union as countries such as Albania, Montenegro and Serbia being riddled with bad Governance, corruption and organised crime. According to the current President of France Emmanuel Macron, it would be a risk if the European Union did not look at any further enlargement with “great prudence and rigour” further stating that if the European Union were to consider further enlargement with Balkan countries, preconditions should be added before application(Peel,2018).
The political rise in rejection of Enlargement
Although the accession of more countries into the European Union has created employment and trade opportunities around the continent for people of new member states, there has been a continuing rise in right-wing populism around western Europe which through the ideology of Euroscepticism reject the idea of European integration as domestic employment has been filled by EU migrants rather than those that live in the country and are nationals. The rise of Le Front Nationale in France, Alternative fur Deutschland in Germany and UKIP in the UK have further emphasised the disagreements and frustrations that a group of a population has regarding the enlargement of the EU and the institution itself. The rise in the number of politicians from these parties joining the European Parliament has increased which will create more exposure to their beliefs against Enlargement itself proving to be difficult when passing legislation(Ilazi,2017).
Conclusion
Looking back at the arguments made for and against the enlargement of the European Union and the variety of effects it brings into the fray is interesting to understand. The European Union as an institution would like to be the instrument in having more states within the continent working together on issues that can affect all stakeholders, whether that may be environmental issues such as climate change and solar missions, security in order to thwart criminal attacks wherever it may be in the continent. Being part of the EU has shown to be commercially and economically viable to both sets of member countries with the inception of the single market giving everyone an equal opportunity to trade or the four freedoms where capital, goods, services, people can move freely around the Union. However, there may also some setback that come with being part of the biggest form of economic integration in the world, such as alterations that may have to be made once more countries join the EU, such as budget costs that would accommodate leaning toward new members which do not politically sit well with old member states. But also there is a risk that the enthusiasm the European displays in having further enlargements can prove damaging to the institution if accessing countries are not economically ready to join.
11.12.2018