The Challenge of EU Enlargement


Ladies and Gentlemen,
dear Mr. Chairman,

Before we landed in Copenhagen the "Estonian Air" plane made a wide turn over the beautiful Öresund bridge which within a year's time will unite the Nordic countries with the European mainland. It is a beautiful symbol, which also fits as a symbol for the Baltic Development Forum: the market creates new demands, the meeting of demands in turn opens up new markets. The bridge, as I said, was beautiful. We could add that demands create as a by-product also aesthetics and art, in other words: a more intense interaction and better understanding of each other, which may be difficult to describe but which in turn brings nations closer and can produce security.

Bridges are for me indeed the symbols of today's forum. Also in the sense that the forum has brought together politicians and entrepreneurs. As an Estonian I consider this a particular achievement. As you know Estonia immediately following the reestablishment of its independence adopted the ideology of the free market. All governments have remained true to this and by today it has formed the two foreign policy priorities of Estonia: joining the European Union and membership of NATO. Naturally these are also the priorities of Latvia and Lithuania, which shared our fate. I use the occasion to repeat Dr. Brzezinski's statement of yesterday in a somewhat expanded fashion: Lithuania has been somewhat more advanced in its NATO policies, Estonia has successfully commenced accession negotiations with the EU and Latvia has been successful on both fronts.

The title of my speech is supposed to be "The Challenge of EU Enlargement".

Is it really a challenge?

And if so, to whom is it a challenge?

I believe that when debating the difficulty of enlargement we proceed from some Marshall Plan-era philosophy: If instead of 15 eaters 20 want to eat from the same pot everyone's stomach will simply be a third more empty.

Allow me to return to the symbol of the bridge. Enlargement will not cost much at all to the present member states. Enlargement has to be managed carefully, both in the west and in the east, but it can be managed in a manner which will bring a net-benefit to all concerned.

This is not the first time this point has been made. The European Commission made the same point in its Agenda 2000 when it was published in 1997. It stressed that EU enlargement - despite the unquestionable difficulties associated with it - will be a financially viable undertaking which can be carried through without increasing the budget contributions of member states. This view was affirmed by the March EU Summit in Berlin. Of course it is true that the applicant countries are still poorer than the EU average, but economists often emphasize that it is much more important to look at the structure and performance of an economy than at its present numbers. Speaking about Estonia I can but say that our numbers, our GDP, is a result of 50 years of Soviet occupation and central planning. The structure of our economy today and its performance during the past seven or eight years shows what we are capable of. The same is true for most post-soviet - I don't like to use the word "socialist", as this might rightly offend some socialist among us - for most post-soviet Central European economies. All of these numbers taken together provide a picture which on the one hand does show a significant difference in GDP between the applicants and the present EU members, but on the other hand displays a phenomenon, which can be observed in comparison with the present members. This phenomenon is convergence. Just as the interest rates of the EU states are converging, the GDPs and economic structures of the EU and of the applicants are on a convergence course. This will be helped by many important economic benefits of enlargement. I will but mention a few:

Enlargement will expand the EU’s internal market to include more than 100 million additional consumers with rising incomes. Economic growth in Central European countries - after their joining the EU - is expected to be between 4 and 7% annually;
Enlargement will support the newly liberalised market economies in Central Europe by opening up markets in goods and services between east and west, north and south;
Increased trade will stimulate economic, and thereby also job-growth in Europe as a whole.

This is not an exhaustive list of benefits arising from enlargement. There are several non-economic bonuses as well, such as increased co-operation in the fields of justice and home affairs, improved environmental protection and last - but certainly not least - an increased feeling of security and stability in Central Europe arising from EU membership.

Ladies and Gentlemen,

some of you may now look at me and say that I paint the picture in very rosy colours indeed. Are there no difficulties then at all with enlargement? Is the accession of new countries to the European Union not after all a complicated process, which will demand considerable sacrifices from all concerned? And I will answer your question by repeating that of course the process is difficult. I didn't say that it wasn't. But it is manageable and it does bring with it benefits which weigh up the costs - which to the greatest extent are borne by the applicants themselves.

After all, it is us who have to comply with the EU acquis in everything from wastewater management to the upkeep of cattle. Despite EU assistance the applicants still have to bear most of the financial burden themselves - and rightly so.

It is true that there will still be a certain shift in assistance funds from west to east as the EU enlarges. There will also be a shift in jobs - I don't think that there is any particular point in denying this, although this shift will probably be rather small. The unemployment rate in Estonia and most other probable early entrants has stayed low throughout the 1990s and there are simply not many free hands available. Labour intensive production will to an extent be shifted to the lower-income countries of Central Europe. But in return the resulting increased purchasing power in Central Europe will result in high-end jobs being created in the present EU members. The shift in jobs will be rather qualitative than quantitative. We have a perfect example in the relationship between Estonia and Finland: Finnish clothing manufacturers have shifted a considerable amount of their production to Estonia, thereby causing the loss of some jobs in Finland. However - and this is the big However - Estonians have in turn become big customers for Nokia products, thus in turn creating high-tech jobs in Finland.

In short, enlargement does cost something: it costs logistics. This price is manageable and associated with tangible benefits. The net result is a benefit for all concerned.

Ladies and Gentlemen,

having challenged the negative assumptions often associated with EU enlargement, let me now turn to the future and to the prospects for Europe offered by the upcoming inclusion of Central European countries, such as Estonia, into the Union. I will focus on three points:

Enlargement as catalyst for the reform of EU institutions and policies;
The role of applicant countries;
And finally, I will give you my vision where Europe can go from here.

First, enlargement as a catalyst for reform.

While it would be difficult to clearly link the prospect of enlargement and the reform processes underway within the Union, I believe that you will nonetheless agree that a certain correlation does exist. While an EU constructed for six nations and housing by now 15 was in need to reform itself even without any external pressure from Central Europe, the imminent enlargement to the east undoubtedly helped focus peoples` minds. The prospect of five or ten or even fifteen new members joining has acted as a catalyst for the relatively rapid development we have seen within the Union during the past few years.

After all, the EU was founded 50 years ago in completely different circumstances, in what for all its insecurity was a very certain world. The West was the West and the East was the East, and never the twain were going to meet, to paraphrase Kipling. This secure world lasted forty years - and then the Berlin Wall came tumbling down. All of a sudden the East was standing there and demanding entry. It was a challenge and the EC member states rose to the occasion. It required agility and a show of political finesse, and above all it required a new agility to address and resolve the new issues. This resolve is reflected in the Copenhagen Summit Document of 1993, a child which at least partly belongs to my good friend Uffe Ellemann-Jensen, and which officially opened the door to enlargement. Even the Maastricht and Amsterdam Treaties can be traced back - albeit more indirectly - to the pressures arising from imminent enlargement.

As we all know, even before the fall of the Berlin Wall the EC was in need of reform. It was clear to many that the member states simply don't have resources to continue existing financing policies in perpetuity. As Sweden, Finland and Austria entered the EU it was realised that a Union with 15 member states needed to reform structures and working methods that were established for a Community of 6. However, the immediate prospect of having an additional 10 members in the Union certainly acted as a catalyst. If structures built for 6 might with some slight, albeit not always elegant, modifications still work for a Union of 15 they would certainly not work for a Union of 25 or more.

The enlargement process focused minds, but what of the future members themselves? This brings me to my second point.

Estonia has been a vocal advocate of changes in the EU's decision-making process and of the need to strengthen the European Union. This is an opinion shared by most, if not all, Central European applicants. Our own recent past convinces us of the need to move forward with political union as a means to strengthen Europe's capacity for action in what is still a very uncertain world. The history of the countries of Central Europe gives us a different perspective of the world than that which comes out of 50 years of security under a NATO umbrella. We do not believe in the "End of History", because we have seen history happen around us. We are, and the Kosovars are, the history of Europe. Europe is not a finished project and never will be. What is essential is that it continuously expanded and improved. Central Europe has had the misfortune of being the marching ground for many armies over the ages. We have also experienced ethnic cleansing on a scale unknown in the West. For Estonia, the pictures from Kosovo are eerily reminiscent of our own not-too-distant past when women and children were shipped of in cattle-cars to Siberia and men were tortured and shot. And this is - unfortunately - not a uniquely Estonian experience. The same experience was also shared - to some extent - by the newly independent Russia.

This is why I am convinced that Central Europe has a great deal to offer the present members. We believe. We believe in freedom. We believe in justice. Above all we believe that everything is possible. We will bring this idealism, this conviction into the European Union.

Ladies and Gentlemen,

I have arrived at my last point: where do we - where can we, where can Europe - go from here.

The European Union already is the most important trading bloc in the world. New members will add to this weight. The advent of new members also has the potential of increasing EU competitiveness by diversifying the wage structure and by bringing into the Union this fresh spirit of entrepreneurship which has arisen in the east. Nonetheless, an oft-cited lament is that Europe may be a giant economically but it is a midget politically and militarily. That Europe is not pulling its weight.

I believe we all agree that things are evolving. The Kosovo crisis has seen significant European participation and while a great deal may still need to be done to make Europe into an equal partner of the United States I see a great deal of movement in this direction. The recent WEU ministerial in Bremen is but one example. And here once again the enlargement of the Union presents an opportunity: the applicant countries all want to be a part of building these structures. I outlined some of the reasons above. But it is certain that with the entry of the first new countries from Central Europe we will see a substantial strengthening of pro-Community sentiment within the EU Council. We tried to go it alone and did not succeed. Now we want to do things together.

To conclude, allow me to return to the beginning. The European Union enlargement process is an opportunity. It is not an expensive burden, but a chance for the European Union to renew itself and to boldly face the challenges of the new Millenium. I did not talk about the need to include the public in the enlargement debate. For me it would be to state the obvious.

I do however urge all of you to highlight the positive aspects of enlargement. It is not only untrue, it is patently dangerous to blame necessary economic and structural adjustments on enlargement or to claim that enlargement incurs massive costs, which it does not do. This kind of rhetoric builds up - unfounded - anti-enlargement sentiment. Enlargement of the European Union is an opportunity for Europe, for all of us, both in east and west. It is something which is beneficial in itself, regardless and also because of other issues, any other concerns - such as Kosovo - that may also be occupying our domestic and foreign policy agendas. And it is our common duty to grasp this possibility to revitalise Europe. To make it stronger and a better place for us all.

And allow me to assure you from this podium: When the Danish presidency ends on 31 December 2002 Estonia will stand ready to assume the duties of a full member of the European Union.

Thank you!

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