Reasons for Small States Wanting to Join the EU

Many small states wish to join the EU as they see it as a body that can better the lives of their citizens and deliver a better standard of living for all. The perception is that EU membership can bring about economic growth, employment, better social conditions and the opportunity to live in a community where there is peace, security and social justice.

Member states on the other hand have sometimes conflicting views about prospective membership of some smaller states. There are worries about the economic impact of taking on some of the poorer countries and concerns about immigration and security issues arising from smaller states on the boundaries of the EU. This dissertation will examine the three main reasons that small states wish to join. Chapter one looks at the economic issues and the benefits that the single market can bring, Chapter two looks at issues around security, in particular the desire of smaller stats to combine EU membership with NATO membership and chapter three looks at the aspects of EU social policy and its overall culture that attract small states. Chapter four and five are cases studies of the Czech Republic and Estonia – why they wished to join the EU and how membership has affected them to date.

There is some debate as to what actually defines a small state. Some definitions will base the description on population alone and define a small state as one with a population of less than 1.5 million. Other definitions pay more attention to economic and political status. For the purpose of this dissertation, a small state is understood to be one within Europe deemed to have a small amount of economic and political influence in comparison to influential EU member states such as Britain, France and Germany.

Economic Reasons for Joining the EU

Economic growth is the primary reason for small states joining the EU. It is emerging into a huge commercial force and is now the largest internal single market as well as the largest trader of goods in the world. The year 2000 saw the EU account for 24 per cent of the total world trade in services, ahead of nearest competitors the US (with 22per cent) and Japan (8 per cent) (p61, Jeremy Rifkin – The European Dream, Polity Press, Cambridge 2004).. Importantly the EU exports more than it imports, unlike the US, which runs on a trade deficit. The EU’s GDP is also exceeding that of the US – $10.5 in 2003 against $10.4and in total accounts for 30 per cent of GDP in the world.

Quite simply, small states in Europe want to be a part of this economic powerhouse, and although debates about sovereignty, security and national identity may rage in all member states and amongst the politicians and citizens of prospective member states, the bottom line is the economy – many smaller states feel that unless they become part of the EU, they will be left behind economically.

Many small states will argue, quite rightly, that the enlargement of the EU to accommodate them will bring benefits across the Union. The enlargement in 2004 to include a further 10 states (Cyprus, Czech Republic, Estonia, Hungary, Poland, Slovenia, Latvia, Lithuania, Malta and Slovakia) has added over 100 million people to the EU’s market and will boost economic growth and create jobs. A study in 1997 by the Centre for Economic Research estimated that the accession of the countries of Eastern and Central Europe would bring and economic gain of 10 billion Euros for existing member states and 23 billion Euros for the new members. A further study by the European Commission also suggests that the accession of the new member states could increase the growth of GDP of the acceding countries by between 1.3 and 2.1percentage points annually, whilst for the existing members it could increase the level of GDP by 0.7 percentage points on a cumulative basis.. Certainly for small states, there is a perception that remaining outside of the EU denies them economic benefits, reduces the possibilities for growth and weakens their incentive for economic reform as well as discouraging foreign investment.

Figures on national GDPs in the 1990s explain why the smaller states see EU membership as economically beneficial. The Economist reported the following levels for 1994 at purchasing-power parity exchange rates: Czech Republic £7,910, Latvia $5,170, Malta $7,460, Cyprus$10,260, Estonia $5,519 and Lithuania $3,240. This can be compared against a GDP of $18,170 for the 15 member states at the time – roughly the average GDP of the smaller states was one third that of the averaged of existing members.

The existing members states obviously want to see new members add to the economic success of the EU. Andrew Moravcsik writes “enlargement rests on the convergent interests of existing and prospective members. EU leaders promote accession because they consider enlargement to have longer-term economic and geopolitical benefits – the creation of commercial opportunities and the stabilisation of neighbouring countries (Andrew Moravcsik and Milada Anna Vachudova – Bargaining Among Equals 2002). Moravcsik further makes the valid point that smaller states, particularly those from Eastern Europe will even accept less favourable terms on accession simply due to the fact that the economic consequences of non-membership are unpalatable – for the likes of Poland and the Czech Republic the EU gives them something that was a distant dream fifteen years ago – access to the worlds largest single market, strengthening of political ties with the West and the stabilisation of democracy and their own capitalist economies.

The financial aid available to prospective member states is a huge incentive for small states to apply for EU membership. The Union’s pre-accession strategy provides aid for applicants to carry out their forms required for membership and the Phare Programme which is open to prospective countries from Central and Eastern Europe involves institution building measures with accompanying investment as well as measures designed to promote economic and social cohesion. Eight of the new member states that joined the EU in May 2004 had been eligible for the Phare Programme and pre-accession aid has been substantially increased to remaining candidate countries. Bulgaria and Romania for example have been allocated 4.5 billion euros in pre-accession aid for2004 to 2006.

The Instrument for Structural Policies for Pre-Accession (ISPA) is financial assistance aimed at addressing environmental and transport infrastructure priorities identified in accession partnerships with applicants from Central and Eastern Europe. Coming under the remit of the Directorate General for Regional Policy, ISPA only finances major transport and environmental projects. Up until 2003 its overall budget for Central and Eastern European countries was 1.1 billion Euros and/or 2004 it had a budget of 452 million Euros for Bulgaria and Romania.

A further type of assistance for candidate countries is the Special Accession Programme for Agricultural and Rural Development (SAPARD).This programme, again aimed at beneficiary countries from Central and Eastern Europe offers aid to help deal with problems in the infrastructure in agricultural and rural sectors. SAPARD had a budget of 560 Euros for the ten candidate countries from the region in 2003and a further 225.2 million Euros for Bulgaria and Romania for 2004.

Slovenia serves as a good example of a small state that has particularly benefited from pre-accession assistance – from 2000onwards it received a total of around 65 million euros annually from the financial aid programmes. It was allocated large amounts of money form the PHARE programme: in the period 1992 to 1999 it was allocated191 million euros, for 2000 33.3 million, 28.5 million in 2001 and 41.9million in 2002. In addition there were payments totalling 19.6 million Euros from ISPA in 2000, and 17 million in 2001. 60 per cent of the support was directed at environmental projects and 40 per cent at transport projects. Finally the Slovenian SAPARD programme has given the state 6.6 million euros annually since 2000. Such financial assistance is obviously an attraction to governments of small states and it is also something that sways the populations of the states in favour of EU membership. A referendum held on EU accession in Slovenian 2003 showed a 90 per cent vote in favour of accession, influenced largely by the amount of aid that it had received. A referendum held on NATO membership at the same time was in favour, but with only a majority of 66 per cent.

Attracting business with its comparatively cheap labour force is a further objective of the smaller states in seeking EU membership. Certainly for the larger, established members, the thought of cheap labour from 75 million new citizens from Eastern and Southern Europe isa fear for their own economies as is the prospect of companies in Western Europe relocating more of their manufacturing and service operations to the East where labour costs are cheaper.

Happily, for the small states in Eastern Europe at least, there is evidence that this has already begun to happen. The consulting firm Gartner states that The Czech Republic, Poland, Slovakia and Hungary are especially attractive options as sites for Western European companies looking to outsource some of their operations to cheaper labour markets. Logistics Company DHL set up an IT operation centre in Prague in 2004 and Gillette has announced plans to set up a $148million plant in Poland, moving its manufacturing and distribution out of Germany and England (p63 Rifkin 2004). The consequences are as worrying for Britain and Germany as they are positive for Poland -Gillette will close two plants in England and cut production and its workforce in its Berlin factory.

Poland serves as an example of a country feeling the economic benefits of EU membership. Prior to joining, many Poles were sceptical and vociferously made know their concerns about dangers to their sovereignty and social values. However over three quarters say that they are now happy with EU membership (The Economist – Reaping the European Harvest, January 8, 2005) and this is largely due to the upturn in the polish economy generated by EU membership. In the first eight months of its membership Poland was given $3.4 billion from the EU budget, equating to roughly twice what it paid in. Farmers’ incomes have risen by one third for small farmers and by two thirds for those with large farms reversing years of decline. Generous EU subsidies and an influx of foreign buyers paying good prices for Polish fruit and meat have been the reason for this. Poland’s total exports rose by over30 per cent in the first nine months of 2004 due to the abolition of customs formalities and tourist numbers have been boosted by 20 percent with EU rules opening up the skies to budget airlines. (The Economist January 8, 2005). There have been similar results in other Eastern European states – in Poland, the Czech Republic, Hungary, Slovakia and Slovenia, growth averaged 4.6 per cent as opposed to 3.5per cent in 2003. In Baltic States Estonia, Latvia and Lithuania, less regulated economies enjoyed growth of 6.7 per cent in 2004 (The Economist January 8, 2005).

There have been some economic tensions with more established member states. The low tax policies of newer members have been criticised by the likes of France and Germany who see the lower taxes of Central European states as damaging to jobs and investment in Western Europe. Belgium, as well, has publicly questioned why the EU should give regional financial assistance to states that appear to collect very little in tax. Slovakia, for example set a 19 per cent flat rate for income tax, corporate tax and VAT for 2004 as an incentive for its business climate. Despite the raised eyebrows of Western members however, tax revenues showed a modest rise for the year.

For smaller states, the greatest attraction of the EU is its economic power. Individual aspects such as trade without tariffs and the common currency can alone be seen as positive benefits for the smaller states, but it is the overall economic package that comes with the EU that really appeals – small states generally believe that membership will secure their long-term economic prosperity.

Security in the EU

Security is an important issue for small states and the EU offers a security that many of these countries could not achieve alone. It is however an issue that means different things to different countries. The Czech Republic for example has been as keen to join NATO as it has the EU, whilst neutral small states such as Malta have concerns about being tied into a Western security bloc that threatens the neutrality that it cherishes.

An effective security policy is crucial for the EU. Bretherton and Vogler rightly states that: “If the Union is fully to realise the potential of its significant presence, it is vital that the economic power of the European Community is articulated to a stronger sense of collective political purpose. A well-coordinated and fully functioning common foreign policy would have this effect” (p169 Bretherton and Vogler – The European Union as a Global Actor, Routledge Publishing, New York 1999).
Individual states have differing agendas in terms of security. States in Eastern Europe and The Baltics are largely looking to move west and away from the old sphere of Soviet influence. Slovenia on the other hand has one eye always on the situation in the former Yugoslavia.

The EU has a secondary role in terms of security to NATO and small states realise this. For the majority, NATO membership is more important in terms of security but there is a perception that EU membership can somehow be a stepping-stone to NATO membership. Military alliance with the US is seen as a far greater guarantee of security than membership of the EU. Certainly there is a noticeable gap in the military capability European NATO members and The US – the EU has struggled to fund and mobilise its 60,000 strong Rapid Reaction Force whilst the extra $48 billion that President Bush planned to spend in addition to America’s $331 billion defence budget in 2002 was more than Britain or France spends in a year (The Economist – A moment of truth –the future of NATO, May 4, 2002).

The EU’s Common Foreign and Security Policy announced objectives that will have been well-received by small states:

• To safeguard the common values, fundamental interests, independence and integrity of the Union
• To strengthen the security of the Union in all ways
• To preserve peace and strengthen international security
• To promote international cooperation
• To develop and consolidate democracy and the rule of law, and respect for human rights and fundamental freedoms (p171 Bretherton and Vogler1999)

Whether it has the military capability to be little more than a defence and security talking shop overshadowed by NATO remains to be seen. It is not planning to set up a European army – its Rapid Reaction Force is little more than a multinational peacekeeping force, like that of the United Nations. With a force of 60,000 personnel, the objectives of the force are to undertake peacekeeping, humanitarian, crisis management and rescue missions at short notice. EU policy has made it very clear that such a force will in no way replace the national armed forces of individual member states.

Malta’s position as a neutral member state (along with Ireland, Sweden, Finland and Austria) makes it an interesting case in relation to security. It has had many concerns as to the military implications of its EU membership, however most of its issues can be resolved with reference to policy. The EU does not have any jurisdiction over military service – it cannot impose military service in EU countries; it has no power to decide what EU countries should do with their armed forces and whether they should participate in any military activities; defence and military matters are discussed under the Common Foreign and Security Policy and decisions must be taken by unanimous vote – Maltese forces cannot be ordered to fight with the armies of other EU countries; Malta does not have to give up its neutrality as a condition of EU membership – it can also refuse to serve as a military base or a join a military alliance; Malta does not have to join NATO.

Malta also has an interesting position in relation to the EU’s Rapid Reaction Force. It has agreed to contribute a platoon of 30 Maltese soldiers coordinated with Italian troops. It will not take part in any peacekeeping or crisis management missions and will limit its involvement to humanitarian and rescue missions. Even more unusually, participation in the EU force will be the decision of individual soldiers – The Commander of its Armed Forces will ask for volunteers for the EU platoon. Finally, Malta has sought clarification that the EU as an entity cannot join NATO. It is aware that the EU itself has no capability to defend members and the NATO umbrella of mutual defence of its members does not cover Malta itself – in effect, Malta alone is responsible for its own defence.

For most of small states looking at EU membership however, eventual membership of NATO is a twin goal. One of the issues for all European states in future will be whether the EU security role must be increased if the US shows itself less likely to commit its troops in or around Europe in the future, even under the umbrella of NATO, to fight battles that should be fought by Europe itself. There are mixed messages from the American – on one hand it hints that the EU should be taking more responsibility for the defence of Europe yet at the same time it has repeatedly warned Europe that the EU should not attempt to build its own military organisation, independent of NATO. As Rifkin suggests: “the US would like EU member countries to pony up greater military expenditures and to ratchet up their commitments to the defence of Europe, but within the NATO rubric, so as to maintain US military dominance in that part of the world” (p310 Rifkins 2004).

Historically, the idea that the EU should speak with one voice in terms of foreign policy and world affairs has been around since the earliest ideas of European integration. It has however been the issue around which national governments are most reluctant to lose control of and whilst small states are keen to benefit from the security of EU and possible NATO membership, their governments and their populations are also reserved about handing over too much influence in terms of defence and foreign policy to a centralised body. Certainly, over the years, the EU has had far more success in creating a single market and a common currency than it has in formulating a common foreign and security policy. Nonetheless the geopolitical changes across Europe since the fall of communism, along with the crises in the Balkans have encouraged members to make continuing attempts to show a united fronting terms of foreign policy.

Whilst progress continues to be made, albeit slowly in the creation of Rapid Reaction Force, previous attempts to forge a military partnership have failed. An attempt to form a European Defence Community was unsuccessful in 1954 and a further attempt through a process called European Political Cooperation in 1970, in which countries attempted to coordinate their positions on foreign policy issues had little success in translating words or statements into action.

The sphere of foreign policy does give smaller states some leverage within the overall activities of the EU. Whilst some within the EU are pushing for a greater amount of authority to go towards the EU and its institutions, the situation at present remains that essential authority remains with member states – the agreed formula requires that key decisions are taken by a unanimous vote. This obviously is problematic with 15 members, never mind 25. It does however allow small states an important power of veto if they so close to use it. The system also allows small neutral states a degree of protection in terms of their neutrality. If for example, 24 other states decided to join NATO, thus wiping out the perceived neutrality of member states, a neutral country such as Ireland would still be able to veto this.

The Common Foreign and Security policy that was laid out in 1992 was soon tested in the breakup of the former Yugoslavia. The experience was a sobering one for the EU – unable to broker a peace deal diplomatically, it was unable to act effectively as an intervening European force and member states could only become involved under a NATO or UN umbrella.

For small state in Eastern Europe, EU membership is something to override their often-deep-rooted feelings of insecurity. The European Commission has also made statements to confirm that it is aware of its security responsibilities to the smaller states of Eastern Europe, confirming in 1990 that: “the peaceful revolution which swept Ester Europe in 1989 is probably the most significant event in global terms for the last 45 years. It is happening on the doorstep of the European Community. It represents a challenge and an opportunity to which the EChas given an immediate response” (p183 Mike Mannin – Pushing Back the Boundaries – The European Union and Central Europe, Manchester University Press 1999) The threats that they perceive are not necessarily the traditional threat of an aggressive neighbour, although(despite its own overtures towards NATO) Russia is still seen as potential threat by most and the Czech Republic has an understandable historical wariness of Germany. Hungary also has its own security concerns in relation to its extensive borders with the seemingly unstable states of the former Yugoslavia. The feeling of threat has generally emanated from the experience of rapid and fundamental internal change, exacerbated by perceptions of external threat to environmental or societal security.

Small states have fears about the spread of international terrorism in much the same way as large states, even though there has been little history of terrorist attacks in some of the smaller states to date. The indiscriminate nature of attacks on Western targets over the last decade has meant that all nation within Europe’s boundaries must be prepared to tackle the threat. The European Security Strategy agreed in2003 confirmed the commitment of all member states to its basic mission and priority areas for action: the fight against terror; a strategy for the Middle East and a comprehensive policy on one of the smaller states of Europe itself, Bosnia-Herzegovina. The Security Strategy also looked to build on the credibility of its intervention capability, identifying a number of peacekeeping, rescue and humanitarian missions that could be undertaken by the Rapid Reaction Force. It also agreed to provide up to 5000 police officers that could be deployed within 30 days for civilian duty in crisis areas.

For smaller states, the international security aspect of EU membership is largely about a feeling of belonging and knowing that their own defence is more secure because of membership of the EU. For the likes of Hungary and the former Soviet states in the Baltics, this requirement is largely met by EU accession and the potential for NATO membership. There are compromises to be made in the region of security though – this has been something that has been experienced by all member states. Despite their commitments to making a success of the Common Foreign and Security Policy, member states still find it difficult to change their own national policy towards a particular region or country in the name of EU solidarity. Even the seemingly closest of neighbours can disagree – for example Ireland’s opposition in comparison to British support for war in Iraq.

As things stand, military intervention including European nations is likely to continue to be NATO led. Accession to the EU alone is likely to offer the smaller states to operate in the midst of what has been referred to as an ‘island of peace’. That will suit the majority of them perfectly.

Social Aspects of EU Membership

At the most basic level, the governments and citizens of small states seeking EU membership seek a better standard of life. Whilst the economy and defence and security issues contribute to this the overall perceived social benefits of EU membership cover a wide range of issues. Directed specifically at the 10 prospective accession states in2004, the EC stated that “adapting to the EU’s employment and social policies will (also) lead to an improvement in key areas such as labour market reform, work conditions, health and safety, gender equality and social cohesion”.

The EU has been built on a commitment of economic competition alongside social cohesion and solidarity – it has developed traditions of quality in terms of working conditions, industrial relations and social policy in general. It purports to be a non-discriminatory society in which all citizens have the same opportunities and rights as others, regardless of sex, race or origin. All or these aspects are an attraction to many leaders and citizens in smaller European states. Similarly, EU policies in the workplace and in terms of social security attract small states. The EU looks to increase minimum rights as regards working condition with policies on issues such as equal opportunities, health and safety and flexible working time. It also sets targets for member states in terms of universal social protection, participation and democracy in the workplace and participation in democratic life. The EU introduces social inclusion programmes for the most vulnerable in society – in 2002 this led to the adoption of a coordinated policy among member states to fight social exclusion, a policy that was to be extended to new members states. The EU expects its member states to develop the social justice that is enshrined within its own charters. It encourages decent or fair wages and decent living standards for all its citizens. In the words of Jechimis “freedom from need for the basic necessities of life – food, housing, medical care and education – is as important to true democracy as the freedom of speech and worship, assembly and association” (p9 Daniel Vaughan-Whitehead, EU Enlargement versus social Europe, Edward Elgar Publishing, Cheltenham 2002) .
EU enlargement is promoted by the EU as mutually beneficial. New smaller member states benefit from the social policies of the EU and, despite the reservation of larger established states about some new members, they should benefit from the increased market and the diversity that new members bring. The EU enlargement of 2004 was estimated to increase the EU population by 28 per cent and its surface area by 35 per cent.

The EU takes steps to ensure that the smaller states acceding to the EU are committed to their responsibilities in employment and social affairs. Efforts required by the states acceding in 2004 included:

• Full transposition of EU legislation into national legislation – in areas such as labour law, health and safety, gender equality, or anti-discrimination 
• Preparation for the participation in the European employment strategy, following up the so-called Joint Assessment Papers (JAP)which set out priorities for employment policy in the run-up to accession
• Preparation for participation in the open method of coordination in the arrears of social inclusion and pensions
• Preparation for the future intervention of the European Social Fund(ESF), a key tool in supporting the development of human capital and restructuring – the allocation of ESF is now entering a decisive phase
• Enhancing the dialogue in these countries involving employers and trade unions and their interaction with government.

EU policies towards employment and training are also seen as a positive factors by both politicians and populations in smaller European states.EU social policy has a determination to secure more and better jobs and opportunities at its core. EU policies are designed to ensure that nobody is left behind as it aims to become the most competitive and knowledge-based economy in the world. It has developed a Social Policy Agenda that links together its economic, social and employment policies and includes key strands:

• The European Employment Strategy
• Improving working conditions and standards
• Social inclusion and social protection
• Equality of men and women

The EU aims to raise the level of working age people I employment to 70per cent, again something that would represent a significant improvement for many of the economically stagnant smaller states. To do this the EU will have to create 20 million new jobs amongst the current25 member states by 2010 – a target likely to have current prospective candidates even kinder to join and share in the benefits of job creation.

The European Employment Strategy involves the EC meeting annually to decide on common priorities and objectives for the employment policies of member states. Strategies are created that aim to ensure job creation, job quality, a decent work-life balance and the stamping out of discrimination based on race, gender or disability. Individual governments feed into this with their own plans and how they are achieving them – as with many aspects of EU membership, small states can benefit from the chance to work with partners from other member states and develop best practices.

The European Social Fund also entices small states towards the EU. Itis due to spend around 60 million euros to develop work skills and social skills for citizens across the EU. The fact that the fund is particularly directed at states with high levels of unemployment or low-income also makes the scheme attractive to small states. A further 3billion euros is also set aside to tackle discrimination and inequality.

The minimum standards for all also set out attractive policies in terms of employment and social policy for smaller states. From expected guarantees on standards of working environment to minimum rules on working conditions and health and safety, the EU does set out to protect workers’ rights, something that is popular with voters throughout the EU.

Freedom of movement and the possibility of taking up employment elsewhere is of course a massive attraction for citizens in many of Europe’s small states where they feel their opportunities are restricted. In the period leading up to accession the citizens of prospective member states were free to travel and reside in existing member states for up to three months if they possessed valid travel documents, were not considered a threat to national security and could provide evidence of means to support themselves for the duration of their stay. Following accession, although the abolition of borders between existing and new members states as outlined in the Schengen agreements have not yet come into effect, citizens of small sates such as Latvia and Lithuania are now able to enter other member states and, providing that they meet the conditions for gaining the right of residence, they will be able to study and live there as well as voting in local and European Parliament elections.

The right to take up employment elsewhere in the EU has been something that citizens in smaller states such as those in the Baltics have seen as selling point for EU membership. At present this remains something of a grey area. Whilst the aim is to allow complete free market access and the right to work anywhere within the EU, if current member states are convinced that it is necessary to protect their own labour markets from disturbances and potential influxes of migrant workers then they can impose temporary restrictions on the right to work within their borders. Also, for a two-year period from 2004, existing member states can choose how to deal with work permits for citizens from new member states. These policies are to be reviewed after two years as the EU looks to move towards full freedom of movement.