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East: Expert Says Slow-Track EU Applicants May Be Disadvantaged

Prague, 25 February 1999 (RFE/RL) -- An expert on eastward expansion of the European Union says the EU policy of differentiating between fast-track and slow-track applicant countries could be economically damaging.

Paul Brenton, a senior researcher with the Brussels-based Centre for European Policy Studies, says most of the attention in the enlargement process so far has been on the difficulties of adjustment for the EU's 15 present members.

But he says that in fact, the impact of enlargement is likely to be felt most acutely between the two groups of the applicants themselves. At present, the fast-track applicants are Poland, Hungary, the Czech Republic, Slovenia, and Estonia. The slower group consists of Latvia, Lithuania, Slovakia, Romania and Bulgaria. Negotiations have already opened between the EU and the frontrunners, which are expected to accede to the EU sometime early next century.

In remarks to RFE/RL from Brussels, Brenton said the problem lies in the fact that the industrial and economic structures of the 10 applicants are very similar to one another, so that they are each other's main competitors:

"Therefore there is a danger in providing one group of eastern applicants with better access to the main [EU] market than the other countries. The one could be at the expense of the other, and that could be important, particularly if that has an impact on business expectations and investment intentions."

Brenton says that if investors avoid second tier countries viewed as on a very slow track toward EU membership, that could make it even harder for those countries to converge toward EU standards.

Giving an example, he says that if, for instance, Polish or Czech textile or clothing producers have improved market access to the EU because of open borders, this would slightly cut the cost of exporting to other EU members. The price difference might be only one or two percent.

"But in standardized products like that, it might be enough to divert sales away from companies which are not receiving that level of access to the EU. In that sense, producers of clothing in Romania and Bulgaria might lose out."

Brenton has just published a book on the subject of eastward expansion of the EU. In it, he says fears of a surge in imports of products into the EU from the east appear groundless. He says that for some time now, the applicants have been linked to the EU through Association Agreements, and most of the conditions for free trade have already been established. The result so far, he says, has been neither disruptive nor dramatic, and there's no reason to suppose it will be in future either.

Another major fear of the West when considering eastward expansion has been the possibility of a major wave of immigration, particularly of Poles, seeking jobs. The EU's Commissioner for Social Affairs, Padraig Flynn, told the European Parliament in Brussels last month that these fears are also unjustified.

Flynn said that in all previous enlargements, such as the one in the 1980s involving Spain, Portugal and Greece, the same concerns had existed -- but they had proved groundless. In fact, the number of Spanish, Portuguese and Greeks in the other EU countries had decreased as people went home.

In the Eastern applicant countries themselves, the emphasis has mainly been on the long-term advantages to be gained from EU membership. But for industry in those countries, the full opening of markets will provide a further transition shock. Particularly vulnerable is the Czech Republic, with its long-established light and heavy engineering sectors and wide range of general manufactures. The Czech economy is in trouble. Restructuring of companies has faltered, industrial production and retail sales are down, and unemployment is rising.

The head of the Czech team negotiating EU membership, Pavel Telicka, says the government of Prime Minister Milos Zeman is now preparing a revitalization package which will aim to help struggling Czech companies over the next five years or so, up to EU accession.

Telicka told RFE/RL in Prague that the package will include not only limited state help, but also assistance in restructuring, training, re-qualification and help with privatization or re-privatization. Telicka is guardedly optimistic, saying that many companies will survive in free market conditions. But he acknowledges that others will collapse:

"I have no doubt that in a few years there will be more and more companies that will be able to survive the exposure to more direct competition from EU companies. Let's not forget that many of them are already today exposed to that competition, to a greater or lesser extent, depending on what the customs duties are, and what markets they are operating in. On the other hand, that does not mean that everyone will make it."

He says that in the final analysis survival depends on the companies themselves, and on their will to be competitive in the new environment.