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EU: Candidate Countries Benefit From Globalization

An expert on globalization says the benefits of increased trade and investment in the past two decades have left behind much of the developing world. But he says that individual countries themselves can exercise some degree of control over whether the forces of globalization affect them positively or negatively. RFE/RL correspondent Breffni O'Rourke has the story.

Prague, 1 August 2001 (RFE/RL) -- Mansoob Murshed, a research fellow at the United Nations University in Helsinki, says the benefits of increased globalization of trade, investment, and financial flows have not been shared out equally. He says the benefits have mostly gone to the industrialized world, while much of the developing world -- including parts of Eastern Europe and the former Soviet Union -- have been left behind.

But he tells our correspondent that even developing countries can do a lot within their own borders to benefit from globalization.

A recent study he coordinated finds that economic growth depends, at least in part, on having good quality institutions. In other words, countries where people enjoy political rights, the rule of law, and capable government structures also enjoy higher economic growth.

He writes further that to increase the benefits of globalization, governments need to increase the skill level of the labor force, thus assisting the absorption of foreign technologies. Among other factors determining success is simply the willingness of a country to embrace globalization.

Turning to Eastern Europe, Murshed sees clear differences between those countries that are candidates to join the European Union and those that are not. Of the 10 Eastern European candidate countries, he says:

"They are in a very good position to cope with the process of globalization in terms of their skilled manpower, and they have had at least a certain period of market discipline, about 10 years of that, so they are well placed in that respect."

Just having the status of a candidate is valuable in that it helps improve internal stability and attract foreign investment. As Murshed puts it:

"I think the greatest benefits for accession countries is the fact that they are in the queue [for EU membership]. I know that they are getting frustrated with the timing [of the process] of accession, but the fact that they are in the queue means that they have had to accelerate institutional development, [and] that really [is] the key at the moment. And since they have to conform to best practice within the EU, or move toward best practice in the EU, that really helps -- [although] that does not mean that there have not been huge problems generated by, for instance, the privatization process."

Turning to countries that are not applicants for EU membership, Murshed sees their ability to cope with globalization as much lower:

"In the non-accession countries of the former Soviet Union, both market discipline as well as the development of institutions is not as good. And I think the emphasis has to be put on the development of the institutions of governance -- things like the enforcement of contracts, the rule of law, infrastructure and so on -- where the accession countries have a real advantage."

Murshed goes on to say that there are some CIS countries where the rule of law is lagging and the influence of powerful individuals is too great. But he says that Russia, for instance -- whatever its failings in institutional preparedness -- is just too big to ignore. He says some people are going to invest there no matter how badly governed the country is:

"Obviously, Russia is going to participate in the globalized economy because of its size, simply because it is a market of 150 million-plus people. But otherwise, if it was a smaller country, its institutional nature would probably marginalize it in terms of globalization."

Returning to the EU and the candidate countries, Murshed points to another benefit which he says is conferred on the candidates by proximity to the EU, namely implicit protection from currency crises.

His view is that currency speculators have to work on the assumption that Brussels and the euro-zone (members of the European Monetary Union that have adopted the euro currency) would not allow a full-blown currency collapse in an accession country, and thus refrain from attacking those currencies.

He contrasts this with the situation in Southeast Asia, where a currency crisis led to economic chaos in 1997, and with Russia, which suffered a similar fate in 1998.

As to the EU itself, Murshed says it would be a mistake to believe that it is insulated from globalization on the grounds that the majority of its trade is between member states. He said that despite the inward-looking trade pattern, the EU is open to the world, and thus to the pressures of globalization in terms of financial and investment flows.