Transcript 1. dia

NEW EU MEMBERS OF CENTRAL AND
EASTERN EUROPE
Europe Agreements
(Association)
Tibor Palánkai
Emeritus Professor
Corvinus University of Budapest
Master Course
2014
Prof. Palánkai Tibor
Genesis of Europe Agreements
Officially association offered in April 1990 in Dublin based
on Article 238 of Rome Treaty.
Offer for six countries: Bulgaria, Czechoslovakia, Hungary,
Poland, Romania and Yugoslavia
Negotiations start on December 19, 1990, only with
Czechoslovakia, Poland and Hungary.
Mandate for association - term ‘Europe Agreements’ was
introduced.
Three agreements were signed on December 16, 1991.
Genesis of Europe Agreements
The trade policy part of three agreements (the Interim
Agreement) valid from March 1, 1992;
Other parts came into force after the ratification (Hungary
and Poland on February 1, 1994).
After 1992 separation of the Czech and Slovak Republics,
the association was renegotiated.
In 1993, EU signed similar agreements with Bulgaria and
Romania,
In 1995 with Baltic countries (Estonia, Lithuania and
Latvia). In 1996 with Slovenia. Ten countries signed.
Content of Europe Agreements
Many new features:
New element - political dialogue and cooperation
(regular contacts and consultations, common
positions in major international issues),
Political transformation (based on common values
and aspirations), - political conditionality but
proper sanctioning lacking.
Content of Europe Agreements
Europe Agreements - free trade, with long term
commitment to ‘four freedoms.’ (European
Economic Area model)
Concrete obligations only for two (movement of
goods and capital).
In trade of goods – with the exception of
agricultural products – the aim was to establish
completely free trade by December 31, 2000.
Content of Europe Agreements
• Free flow of goods, without customs tariff
burdens, other financial costs or quantitative
restrictions.
• Liberalization of trade is implemented
reciprocally, but in asymmetrical way, (CEEcs
were granted a grace period till 1995 for opening
their markets). For agricultural goods
concessions.
• Maximum transition period of ten years, in two
successive steps, each lasting for five years.
Asymmetries of Free Trade
Associate countries were entitled to protect new or
restructuring industries up to 12.31.2000 by
unilateral market protection measures in form of
tariff increases:
In the case of structural reorganization, of social
tensions, protect infant industries, and of
balance of payments
The measures could not affect more than 15% of
import and no tariffs higher than 25%.
Asymmetries of Free Trade
EU level of tariffs abolished tariffs was about 3 –
5% on average, with little effect on trade, By
contrast, the CEE’s tariffs were about 8-10% in
1991, with considerable protective effects.
Delay in liberalizing certain ‘sensitive’ goods (steel,
textiles) where associate countries had
considerable surplus export capacity was
unjustified. Dumping procedures allowed.
Asymmetries because of weak industrial and
consumer protection and non-tariff instruments.
Four Freedoms
Direct capital investments, repatriation of profits and capital
was immediately guaranteed, Changeover to the free
flow of capital prescribed by the Community was
implemented. Freedom to set up a business, generally
prescribed as ‘national treatment’.
With regard to trade in services, the aim was liberalization,
but left to the future.
1995 White Paper, gradual adjustment to the single market
measures.
Four Freedoms
Liberalization of movement of labour was left to
bilateral treaties concluded with members. The
Agreement guaranteed social non-discrimination
for workers of associate countries.
Free movement of labour remained only a
theoretical possibility, due high unemployment in
member countries.
Hungary had bilateral agreements of this kind only
with Germany and Austria.
Financial Assistance
Concerning financial assistance only vague
obligations.
No financial protocols were attached to the Europe
Agreements.
Aiding was assigned to the PHARE framework.
The grants received (about €1bn annually) in the
framework of PHARE have indeed contributed to
the process of transformation, stabilization and
modernization.
The association agreements did not contain
specific monetary prescriptions.
Question of „Evolution”
Aiming four freedoms, the possibility of certain
"evolution" was included into the Europe
Agreements to a European Economic Area type
of cooperation.
No similar commitment for evolution to full
membership was made, like in case of Greece,
Turkey, Cyprus and Malta.
The case of full membership was accepted only
later.
Frameworks of European Free Trade
Parallel, free trade agreements were concluded with the
EFTA countries, and they came into force on October 1,
1993. When Austria, Sweden and Finland joined the EU
in 1995, the EFTA agreements only affect trade with
Iceland, Switzerland and Norway.
In 1992, Czech Republic, Hungary, Poland and Slovakia
created the Central European Free Trade Agreement
(CEFTA), which was enlarged to Slovenia, Romania,
Bulgaria and Croatia.
In 1993, Estonia, Latvia and Lithuania signed the Baltic
Free Trade Agreement.
Impacts of Associations
The associations had substantial positive effects
on the development, transformation and
modernization of the CEE countries.
Europe Agreements assured rapid trade increase
of associated countries.
Between 1991 and 2004: GDP increase of CEE
candidates was 120%, their trade with EU
increased about 1000%, while total EU trade
only by 250%.
Impacts of Associations
They made possible rapidly to reorient their trade towards
EU as main partner.
In 1989, about 25-30% of trade of Candidates was with EC,
by 1993 this share was 50%, and by 2004, it increased
in New Member’s export to 67%, and in their import to
64%.
The trade integration reached the high level, characteristic
to the EU member countries.
Trade integration of CEE was the major factor in the rapid
export-led growth and from 2000s real economic
convergence (1,5-2% growth “surplus) of the CEE
region.
Impacts of Associations
Associations improved the region’s international
position and reputation both in international
forums and among foreign capital investors.
Obviously the associations served as a condition
of later membership of the OECD and NATO.
As the major trends of the following years proved,
association was necessary but not sufficient
condition from the point of view of foreign
investment.
Structural Modernisation
Association agreements contributed to structural
modernization.
Modernization requires four important factors:
· The adoption and application of up-to-date
technology (acquired through FDIs);
· Dynamic markets (not fulfilled, because slow
growth, but EU dynamic export market);
· Development resources (capital) (through FDIs,
but limited official transfers, €1bn from PHARE);
· A skilled, highly-motivated workforce (comparative
advantage of CEE).
Structural Modernisation
The modernizing effects of associations can be
well demonstrated by the drastic re-structuring of
the CEE foreign trade in just few years.
The share of high-tech product in export grew from
0 to 25% by early 2000, in H.)
Increase of share of manufactures in CEE export:
1990-2001. Pl: 15% -40%, Cz: 25%-50%, H:
20% to 65%.
Asymmetries
There have been ‘dependence asymmetries’ in
trade between the EU and the associates. count
Till early 1990s CEE candidates were marginal
partners (in 1989 the share of 10 associates was
less than 3%).
This share grew about 12-13% by 2004, above the
minimum dependency threshold (10%)
However, about 2/3 of Visegrad countries trade
from EU falls on DE, AT and IT (H. above 50%).
Trade Balances
In the first years, liberalizations were accompanied
by serious deterioration of trade balances of the
new associate countries.
Balanced trade before 1990. Between 1992-97,
nearly 65bn ECU cumulative surplus of EU with
10 Candidates and 8bn with Hungary.
After 1997, in most years Hungary and many
others produced surplus with EU.
Association - Transformation
The association agreements promoted the process
of transformation in CEE.
Transformation proceeded very dynamically after
1990, with regard to both privatization and the
development of market institutions.
The process got impetus by Copenhagen
accession criteria.
Summary
In summary, it must be stressed that despite the
early deficits, trade integration was a positivesum game for the associate countries as well,
because without their export to the EU these
countries would hardly have been able to
stimulate and restructure their economies.
Association contributed to the stabilization,
modernization and convergence of the CEE.
END
Thank you!