After the fall of the Berlin Wall in 1989, the countries of Central
and Eastern Europe began a long process of economic integration
with Western Europe by progressively increasing their trade
and investment links. The eight new EU member countries from
the region have worked hard to adapt their economies to the
modern era and to the realities of market economics.
They still have some way to go before they catch up with their
Western neighbors in terms of prosperity, but the results of their
efforts in such a relatively short time are nevertheless remarkable.
Indeed, many of the new member countries compare very favorably
with Western Europe in terms of their economic growth rates and fiscal balances.
Clearly, there are lessons to be learned on both sides.
The wealth gap between Western
and Eastern Europe has prompted a
number of often unfounded reservations
about the latest round of EU enlargement,
the first to include countries from
behind the former Iron Curtain. There
are fears of mass migration from East to
West, possibly placing pressure on social
security systems.
These fears are largely misplaced.
First of all,Western Europe needs workers
in order to respond to demographic
changes. Furthermore, enlargement
could force Western countries to examine
why many of them have unacceptably
high levels of unemployment while
job vacancies are also at very high levels
with acute labor shortages in some
sectors.
High unemployment can be traced
back to laws that offer disproportionate
protection to those already working
while simultaneously discouraging potential
employers from taking the expensive
risk of expanding their workforces.
Labor shortages result, in part, from the
failure of education and training systems
to provide lifelong learning in an age
when skill requirements are rapidly
evolving.
Another concern is that production
facilities may relocate to Eastern Europe,
thereby depressing employment in the
West. Again, this is largely exaggerated. It
is true that many Western companies
have been quick to spot the potential of
the well-educated populations to the
East. It is a fallacy, however, to believe
that the number of potential jobs in Europe
is static. Economic growth and demographic
changes should be able to
create enough new jobs for all Europeans,
if companies are given the opportunity
to develop in a pro-competitive
regulatory framework.
We need to maintain a sense of perspective.
It is clear that some companies
will want to take advantage of lower
costs and expanding markets in the new
member states, just as companies in the
new member states hope to expand even
further into the Western European market.
But isn't that what we should be
striving for open competition, expanding
markets, and more jobs in a growing
EU economy?
In any event, enlargement will enable
European-based companies to organize
their production on a larger scale
and will increase competition on the European
market. The economic stimulus
this will provide should create a virtuous
circle of greater prosperity translating
into among other things more wealth
and jobs.
The enlarged EU market will also
offer tremendous opportunities for the
European Union's trade and investment
partners. Third country exporters have
now gained access to a much larger market
of 450 million people. Strong growth
in foreign direct investment in the new
member countries exemplifies the
tremendous potential of the enlarged EU
market.Many American companies have
already invested in the new member
states and I am certain that more will do
so in the future when they realize the full
economic potential of the enlarged European
Union.
Good governance in an enlarged Europe
is also important how will the EU
cope with 25 members instead of 15? In
order to give the new members a chance
to digest the corpus of EU law, UNICE
has called for a moratorium on new legislation.
It will not be enough, however,
to stem the flood of legislative activity in
Brussels. The focus must be placed on a
thorough assessment of the impact of
proposed legislation as early as possible
in the legislative process, in order to ensure
quality. Well thought-out rules
shorn of unnecessary administrative
procedures are conducive to a business friendly
climate.
To sum up, enlargement will require
change, and change creates challenges.
On the issues of migration, restructuring
and the regulatory environment, enlargement
also presents opportunities to
rethink how our markets and companies
are organized and to adopt political
and economic reforms aimed at improving
competitiveness and well-being in
Europe.
Philippe de Buck is Secretary General of UNICE, the Union of Industrial
and Employers' Confederations of Europe, which represents more than 16 million
small, medium and large companies in
Europe. Before his appointment in 2002, he spent 30 years at AGORIA, a Belgian
federation for the technology industry, where he served in a number of positions,
including Chief Executive Officer,
Director General and member of the Board, and Secretary General and member of
the General
Management.
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