Europe of 25 Nations May04

Last week, ten independent nations joined the European Union (EU) as full members to make the EU the world’s largest internal market of 470 million consumers. About 75 million new EU citizens will enjoy the single market governed by EU laws. They will be represented by the European Parliament and protected by the European Court of Justice. Never before have so many diverse nations joined the EU at the same time.

Most of these European nations were occupied and ruled for almost 50 years by communist governments controlled by Moscow. They were forced to accept a bureaucracy that was unaccountable and corrupt. Free enterprise and private ownership of assets were forbidden or discouraged. The state controlled the lives of its citizens from the cradle to the grave. Such protracted and comprehensive suppression distorted and destroyed the culture, competence and traditions of great nations such as Poland, Hungary and Czechoslovakia. EU membership of these nations has liberated them from the shackles of their past.

How will these new countries cope in applying the EU rules and adapt to the EU’s single market?

Agriculture in the New Member States (NMS), based on traditional small family farms, will need to be transformed so that larger, mechanised units will employ fewer people and produce more efficiently. Substantial technical and human resource investment will be required to increase the intensity and profitability, especially in animal production. The NMS will add 38 million hectares of unutilised agricultural area to the 130 million hectares of the current EU, thus increasing the farmed area of the EU by 30%. However, this expansion of area will only lead to an increased output of about 15% and an increased value of about 6%. With EU accession funding for restructuring agricultural production and marketing, rural incomes will rise by about 35% in the NMS.  Like Spain, Portugal and Ireland such an increase in rural incomes will bring substantial benefits for NMS citizens.

How will an enlarged EU impact on employment for citizens of the NMS? Already, there has been an increase in jobs in the public sector in each of the NMS. There has been some relocation of private sector manufacturing jobs to new locations in Eastern Europe. Relatively cheap supply of skilled labour and geographic location for marketing favour Slovakia, Hungary, Poland and Czech Republic as attractive countries for investment for automotive manufacturing, agro-processing and high-tech products. Owing to transport and housing problems, labour mobility between the NMS is low. Workers in any one of these countries are reluctant to move from one region to another. There is a need for governments of the NMS to invest in human capital to offer education and training especially in rural Poland, Hungary and Slovakia where there is structural and long term unemployment. NMS governments must also reform employment practices that stack heavily against employers and the establishment of new private businesses – a legacy from their communist past. Many of the citizens of the NMS are natural entrepreneurs and they should be encouraged to establish SMEs that can recruit and train the unemployed, especially in rural areas.

Whilst some skilled workers in these countries would seek work elsewhere in the EU, the vast majority will choose to stay in their own homes with their families preferring to enjoy a high income in a low-cost domestic economy. Less skilled workers may seek temporary seasonal work (agriculture, catering services etc) in the EU15. It is unlikely that there will be a massive inflow of benefit seekers from NMS to the UK in view of recent legislation that requires evidence of work. 

The accession of NMS offers EU15 SMEs and investors many opportunities to establish business and industry to exploit relatively cheap skilled labour, land, utilities and a significant domestic market e.g. 40 million in Poland. UK local authorities with skills in waste management, education, health and other public services can establish financially beneficial partnerships with similar authorities in the NMS. Enlargement of the EU is a win-win situation for British entrepreneurs with initiative, drive and determination to succeed.