PART 4 WITNESSES' EVIDENCE
(continued)
WILL MEMBER STATES
DELIVER THE FUNDS PROPOSED IN AGENDA 2000?
56. Mr Samland gave
a cautious response when asked about the adequacy of the proposed
Community assistance for the applicant countries to make themselves
ready for accession. He said that the answer depended on "three
big `ifs'": if the reforms of the CAP and of the Structural
Funds were carried out as proposed in Agenda 2000 and if
economic growth occurred as estimated in Agenda 2000 in
the EU15 and the CEEC10 the answer would be "yes". But
failure in any of these respects would result in a shortfall in
the funding proposed by the Commission (Q 4).
Statistics
57. One large uncertainty
about the figures used to describe the needs and capacities of
the CEECs emerged during our enquiry. Commissioner Liikanen brought
the matter to our attention when he told us that it had been "terribly
difficult" to obtain the exact GNP figures for the applicant
countries: there was always an asterisk to show that the figures
could not be guaranteed. Statistical uncertainty with economic
performance is a familiar phenomenon: the size of the "black"
or "grey" economy is always difficult to assess even
in countries with relatively sophisticated means of measurement.
But these problems are likely to be magnified in the transition
economies.
COSTS
OF ACCESSION TO THE APPLICANT COUNTRIES
58. Accession to the
EU requires an applicant country to have a functioning market
economy and the ability to cope with competitive pressure and
market forces within the Union.[13]
Mrs Hübner saw the process of transition to a market economy
as unavoidable, not just as something necessitated by the accession
requirement of taking on the acquis communautaire.[14]
She acknowledged that both processes, in some areas, were extremely
costly (Q 34). Some particular difficulties highlighted by our
witnesses are reported in the following paragraphs.
Environmental
standards
59. The history of environmental
neglect in the CEECs made meeting the environmental standards
of the Community a particularly long and costly task. Mr Samland
reported that Mrs Hübner had told his Committee on Budgets
that Poland would need to spend over ten years about 2 to 3 per
cent of its GNP in order to meet the environmental standards in
the acquis. Mrs Hübner did not demur from these figures
but envisaged that in the negotiating period there would be discussion
of transitional periods: for environmental standards of up to
15 years (QQ 21,35-37). She said that air pollution was being
tackled quite successfully. For water and soil pollution, however,
Community standards could certainly not be reached by the end
of the negotiating period (Q 62).
Health and safety
and social standards
60. We were told of
estimates that the cost of applying the health and safety regulations
of the Community to Poland would be some 1 to 1.5 per cent of
the national GNP over several years (Q 21). Mrs Hübner noted
wryly that "it was quite funny that after so many years of
socialism, or whatever you call the system that we had, we are
so much behind the European Union in our social standards"
(Q 50). Transitional periods would be required and, this time,
the pressure for them would also come from the EU15 who would
be fearful of excessive migration of labour (Q 62).
The acquis and
transitional periods
61. The general view
of the Commission and our witnesses was that the acquis
would have to be accepted by an applicant country without derogation[15]
but that transitional periods would have to be considered on the
merits of each case. Again, it was accepted by our witnesses that
transitional periods should be as limited in scope and duration
as possible. The Estonian Ambassador, Mr Mälk, told us that
his country was "not oriented to endless and numerous transitional
periods" (Q 95). Commissioner Liikanen saw no alternative
to the Single Market acquis being taken on in its entirety
before accession: to do otherwise would make it impossible to
operate the Community legal order. Mrs Hübner told us that
Poland planned to adopt the acquis for the Single Market
by 2000 (Q 61). In Commissioner Liikanen's view it would be impossible
to insist that the acceding countries should fulfil the Community
health and safety and environmental laws from day one. There was
a need for the pre-accession strategy to concentrate on developing
the infrastructure which would meet these requirements (QQ 161,165).
After accession transitional periods would still be required.
The transitional periods, which would be different for different
functions, in some cases would "be rather long", he
thought (Q 184). Mr Samland thought that transitional periods
would not be shorter than those of ten years given to Spain and
Portugal on their accession (Q 24).
The Community
and other sources of investment funding
62. Phare and other
Community pre-accession aid would help to finance the restructuring
and investment required for applying the acquis and reducing
the length of transitional periods, but a great deal of further
investment would be required from the international financial
institutions, including the World Bank. The European Investment
Bank (EIB) and the European Bank for Reconstruction and Development
(EBRD) should develop their activities for this purpose (Q 22).
The EBRD told us that the Bank and the Commission were working
to combine their strengths in promoting transition and improving
environmental performance. The EBRD saw cooperation with Phare
and the EIB in co-financing large infrastructure projects as offering
"substantial future business opportunities" (p 72).
A present obstacle to private investment involvement in some
of the applicant countries was the lack of insurance regulations
(Q 23). Mr Samland saw a need for the international financial
institutions to accept more risk and for the CEECs to provide
a proper legal and insurance framework for private money (Q 23).
63. Mrs Hübner
recognised the importance of foreign direct investment in promoting
transition and adoption of the acquis. The Polish government
was very satisfied that Poland had recently become attractive
to investors and was catching up with the Czech Republic and Hungary
in this respect (Q 38). Foreign investment not only supplemented
the shallow domestic capital market but had an additional beneficial
impact in terms of promoting quality change and the modernisation
of technology (QQ 45-46). In 1996 nearly 6 billion US dollars
went to Poland in foreign investment. In 1997 by June this figure
had risen to 14 billion US dollars. But this figure was still
"not enough" (Q 56).
INSTITUTION
BUILDING
64. There was agreement
among our witnesses that the quality and capacity of the administrative
and judicial systems of the applicant countries needed to be strengthened
as a matter of priority. Commissioner Liikanen expressed concern
about the capacity of the administrative and judicial structures
to achieve the "deep partnership" with the Commission
which will be required (QQ 157, 163). In the Commission's avis
given in Agenda 2000[16]
for each of the countries comprising the 5 in the first wave it
is said that further administrative reform will be indispensable
if the country is to have the structures to apply and enforce
the acquis fully or effectively. Administrative capacity
had an important bearing on a country's ability to implement and
enforce the acquis. Mrs Hübner commented that it was
comparatively easy to put legal provisions in place but "enforcement
is problem number one" (Q 44). The Polish government was
working hard on reforming the civil service so that there would
be well-trained teams able to negotiate with the Commission throughout
the administration. She mentioned, as another example, 1,500 judges
who were being trained under a programme for European integration:
the British, the French and nearly all Member States were contributing
to the training of Polish civil servants (Q 45).
Absorption capacity
65. More widely, it
was recognised by some that institutional capacity influenced
the ability of a country to handle and absorb effectively net
inflows of investment funds. This "absorption capacity"
was not unlimited. Mr Samland pointed out that Ireland had absorbed
the equivalent of 8 per cent of national GNP and had done so very
successfully. He thought that instead of the fixed limit of 4
per cent of national GNP proposed in Agenda 2000 there
should be a realistic and more project oriented policy (Q 4).
He saw the proposed 4 per cent ceiling as a rule of thumb to fit
the Community Budget rather than an economic calculation (Q 9).
Mrs Hübner thought that this ceiling was not something which
should be imposed on all applicant countries despite their different
absorption capacities-it should be decided jointly after looking
at the needs and capacities of the country concerned (Q 38). She
also remarked that it was necessary to be aware of the serious
macro-economic impacts of big inflows of funds to the country
(Q 34).
TIMING
CONSIDERATIONS: THE INTERACTION OF ECONOMICS AND POLITICS
66. Economic development
and political progress towards accession were not seen by our
witnesses as independent variables. The prospect of accession
was a "major incentive" to the CEECs to sustain their
efforts to establish democracy and develop a market economy according
to Dr von Ploetz. He said that the EU's trade with the CEECs
(about one hundred million people with relatively little purchasing
power) already in 1996 exceeded EU trade with the United States.
The growth rates in EU-CEEC trade were much higher than in EU
trade with the Asian tigers or the United States, according to
Dr von Ploetz (p 40).
67. Mrs Hübner
made the interaction between the politics and economics of accession
abundantly clear. She said, "When you talk to investors now,
everybody says that if [it were] not for the future membership
in the EU, probably they would not be that eager to come. That
is why it is important for us that this perspective of the future
membership as soon as possible is with us" (Q 56).
68. The British government
did not share the Polish sense of urgency. Mrs Liddell said that
"the pre-accession period has to be lengthy. There has to
be time to allow adjustment" (Q 75).
NATO
69. Our witnesses displayed
an almost total mental compartmentalization between the costs
of accession to the EU and those of accession to NATO. These two
processes, which are likely from now on to run in parallel for
the Czech Republic, Hungary and Poland, did not appear to have
been the subject of a coordinating review of costs and their timing.
Mrs Liddell described the enlargements of the EU and NATO as "autonomous
processes" although she did acknowledge that there were "an
awful lot of costs" which would have to be taken into account
(Q 89). Commissioner van den Broek recognised that the military
and financial obligations on countries joining NATO would have
implications for the length of the transitional periods necessary
to adopt the Community acquis (Q 220).
STARTING
AND FINISHING NEGOTIATIONS
70. The timing of the
start of negotiations with the applicant countries obviously will
affect the timing of their accession which, in turn, will affect
the cost and the timing of that cost to the Community Budget.
It would be no surprise to some of our witnesses if the road to
enlargement proved difficult and long. Those with experience of
the practicalities of past enlargement negotiations thought that
if negotiations began early in 1998 the earliest date for the
first accession would be around 2002-3. Mr Spencer saw the timing
of the first accession as being, in practice, determined by the
successful completion of the negotiations with Poland. He did
not think that a date before 1 January 2003 would be realistic
(Q 232). He did not expect the European Parliament to oppose accession
of the first wave at about that time even if major reform of the
Union's institutions had not been agreed (Q 240-245, 269-272).
The Commissioners who gave us evidence frankly accepted that there
would be difficult passages during the detailed work ahead. These
difficulties would arise from the impact on the existing Member
States of the reform of the agricultural and structural policies
of the Community as well as from the accession arrangements for
the new member countries. But we found a firm conviction among
our witnesses that self-interest as well as statesmanship would
produce a positive resolution: as Dr von Ploetz said, "Is
there an alternative? If the countries concerned were to abandon
their reforms that would lead to instability and ultimately greater
costs for ourselves" (p 40).
71. As to whether negotiations
should start simultaneously with all applicants or, as is suggested
in Agenda 2000, with the 5+1[17]
we heard arguments on both sides. The argument for simultaneity,
or what was described as "the regatta approach", is
broadly that this would avoid any appearance of a diplomatic rebuff
and would cause least disappointment to the applicant countries.
The argument for differentiation is that this reflects realities
and would avoid needlessly prolonged and, therefore, frustrating
negotiations. A Permanent European Conference involving the EU15
and all the applicant countries, including Cyprus and Turkey,
is suggested in Agenda 2000. This would provide a forum
which would have no authority to negotiate the terms of accession
but which could demonstrate the inclusive nature of the discussions.
In Commissioner van den Broek's[18]
words this conference would show that "it is not the `if'
but the `when' of their membership that is important" (Q
221). Mr Spencer expected the Luxembourg European Council in December
1997 to arrange for "a common symbolic start" to the
process after which real negotiations would start with the 5+1
(Q 230).
72. Commissioner van
den Broek emphasised to us that those countries not in the first
5 could catch up or overtake if circumstances warranted this (Q
215).
13
See the Copenhagen criteria set out in paragraph 27 above. Back
14
Acquis communautaire, which
is often abbreviated to acquis, is the total body of Community
legislation and precedent. Back
15
A derogation from the acquis would entail a permanent exemption
from one or more of its provisions whereas the acceptance of a
transitional period entails acceptance of all elements of the
acquis while allowing a period of time before their full
rigour is applied. Back
16
VII. FINAL RECOMMENDATIONS in PART TWO of Volume 1. Back
17
The 5 are the Czech Republic, Estonia, Hungary, Poland and Slovenia
and the 1 is Cyprus. Back
18
In the Commission Hans van den Broek has, among other things,
special responsibility for external relations with the CEECs,
Turkey and Cyprus and other European countries. Back
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