Select Committee on European Communities Tenth Report



  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).


  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.


  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).


  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).


  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).


  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).


  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


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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