House of Lords - The future of EU enlargement

The future of EU enlargement - European Union Committee Contents

Chapter 4: Impact on member states and the union

107. We heard that enlargement was a process by which the EU continues to redefine itself, and it is certainly true that successive enlargements have transformed the Union as well as the individual countries seeking to join.[80] This chapter will consider the geopolitical, economic, and institutional changes flowing from enlargement, as well as the impact of accession on key EU policy areas, and finally the important issue of free movement of people.

Geopolitical impact

108. There was general agreement among witnesses that enlargement had had political and strategic benefits for the EU.[81] Commissioner Füle highlighted a number of strategic benefits arising from enlargement, including boosts to European security and the EU's influence beyond its borders.[82] Ms Liik and Dr Blockmans emphasised that the 2004 enlargement had better equipped the EU to deal with its neighbours to the East.[83] Turkish accession could bring similar benefits.[84] The Croatian Parliament took the view that the most important consequence of an enlarged EU was the overall stability of the continent. Professor Kullaa and the Minister for Europe also highlighted the importance that US foreign policy placed on stability in the Western Balkans, with EU enlargement being seen as a key tool to deliver this.[85]

109. Enlargement increases the EU's influence on the global stage and better equips the EU to deal with its neighbourhood. This has been seen through the 2004 and 2007 enlargements and can be anticipated as a likely benefit of further enlargement to the Western Balkans and Turkey.

110. Past enlargements have achieved the intended aim of bringing lasting peace and stability to the EU's neighbourhood, and future enlargements can be expected to extend this even further.

Economic impact

111. Our evidence suggested that enlargement brings economic benefits both for acceding countries and for the older Member States. Commissioner Füle observed that there were "clearly" "positive figures" showing the benefits of enlargement.[86] The LDEPP noted how enlargement had "opened new markets", although it had not had any "massive impact in terms of GDP", which might be linked to the economic crisis and ensuing period of austerity.

112. An important economic result of enlargement, according to some, was extension of the single market. A report published by the Commission in 2006 found that the 2004 enlargement had helped both new and old Member States "better face the challenges of globalisation" by extending the single market.[87] Various witnesses pointed to the fact that enlargement offers access to new markets, with an additional 104 million consumers introduced by the 2004 and 2007 enlargements, amounting to a combined GDP of around £11 trillion.[88] Mr Turan observed that Turkey's accession would add a further 75 million consumers to the internal market.[89] Nevertheless, as the National Farmers' Union highlighted, it was up to businesses to take advantage of the single market.

113. Some differences were identified in the degree to which existing Member States had benefited economically from enlargement. Professor Mayhew noted, for example, the correlation between geographical proximity to new Member States and economic benefits in terms of trade and FDI. He said that, on the whole, enlargement had had relatively little impact on southern Europe in these terms, while Germany, Austria and the Nordic EU countries had benefitted significantly. For the UK specifically, exports to the Central and Eastern European countries almost trebled over the 2001-2011 period, reaching close to £14 billion in 2011.[90]

114. Although difficult to quantify precisely in the light of other factors affecting the EU economy, enlargement has brought economic benefits to the existing Union, expanding the single market to nearly 500 million consumers, with a combined GDP of around £11 trillion.

Policy impact

115. The UK Government observed that enlargement inevitably changed the nature of the European Union, with implications for policy, but their view was that "we should recognise and embrace that diversity".[91] The Commission's overall judgment was that the EU and its policies had substantially benefited from enlargement, including in the core areas of the internal market and the environment.[92] Concerning the internal market, the impact of the free movement of goods in particular was explored, and some positive benefits of the free movement of persons were also highlighted. The Minister for Europe noted that some of the newer Member States were often UK allies on single market issues.[93] By way of example, many newer Member States had been supportive of UK initiatives relating to smarter regulation, growth and the digital single market.[94]

116. Dr Bozhilova saw environmental and energy policy as areas that had been affected positively by enlargement.[95] The FCO agreed, noting that enlargement had provided new opportunities to promote the energy and climate change agenda within the EU. Specific examples of UK collaboration with newer Member States included work with Hungary on low-carbon investment, and with Poland on nuclear power and shale gas. Looking towards future enlargement, the FCO considered that both Turkish and Icelandic accession could be beneficial to the EU's energy policy.[96] Commissioner Füle suggested that enlargement would reduce the risk that the EU would be affected by energy shortages.[97]

117. The positive views of the impact of enlargement on energy policy were tempered by the Minister for Europe who, in line with evidence given to our inquiry into EU energy policy,[98] acknowledged that realisation of UK goals concerning energy and climate change had been rendered more challenging by debate with Poland, which favours the use of coal.[99] The European Commission and others noted particular resistance at a political level by Poland to reducing coal-fired energy. As coal is a carbon-intensive fuel, it has the particular effect of jeopardising long-term carbon reduction goals. We also heard that the problem might relate to future enlargement as some of the Western Balkan countries and Turkey were similarly keen on coal.[100] In addition to issues relating to carbon emissions, it was noted that those countries acceding in 2007 had had significant problems in liberalising their energy markets. Looking further forward, some of the obstacles raised by recent accessions might be smoother in the future owing to preparatory work undertaken through the Energy Community Treaty.[101]

118. We also heard differing views as to the impact of enlargement on the Common Agricultural Policy (CAP). Following the 2004 and 2007 enlargements, agriculture came to represent a larger proportion of employment within the EU, rising from 4% pre-2004 to 7.5% after the 2007 enlargement. In addition, the 2004 and 2007 enlargements introduced Member States with different agricultural structures to those in older Member States.[102] Mr Howitt MEP observed that, despite predictions that the 2004 enlargements would significantly impact the CAP, there have not been any significant changes.[103] The NFU, however, pointed to the more fragmented and inefficient nature of farming in some of the newer Member States and concluded that, for UK farmers, it had been more difficult to achieve desired policy outcomes in the direction of a more modern productive farming sector focused on the market. Concerns surrounding the lack of a level playing field have also arisen where farmers in newer Member States are unable to meet costly animal welfare obligations but nevertheless compete in the same markets as those farmers that comply.[104] Associate Professor Senior Nello took the view that the balance to be achieved in relation to agriculture was to adapt the acceding States' industries to EU policy and to avoid excessive transfers within the EU budget.

119. Dr Lazowski pointed to Justice and Home Affairs as an example of a policy area vulnerable to enlargement, particularly police and judicial cooperation in criminal matters, saying it was problematic if there were a lack of mutual trust in the rule-of-law.[105] On the other hand, the UK Government considered that enlargement offered opportunities for the UK to pursue policy objectives such as tackling cross-border crime, terrorism and illegal immigration.[106]

120. The LDEPP noted that the 2004 and 2007 enlargements had led to a "shift of priorities to the East" in European foreign policy, with a growing interest in EU-Ukraine and EU-Russia relations. Foreign policy was highlighted by the FCO as an area in which enlargement had helped the UK to meet its international policy objectives. An example was that of the imposition of sanctions by the 27 Member States, which they considered to have had a significant impact in relation to Iran, Burma and Zimbabwe.[107]

121. Enlargement has benefited some of the EU's core policies, such as the internal market. From a UK perspective, newer Member States have often served as allies on key policy areas, including single market issues and better regulation. Predicted negative policy impacts, such as on the Common Agricultural Policy, have not materialised in the way that was feared, although progress in developing a more innovative market-based CAP may have been hindered.

122. Future enlargement is likely to have a varied impact on EU policies. It may assist with certain areas, such as single market rules, but could pose a risk to important areas such as energy and climate change. We draw particular attention to the current inertia relating to a future climate change mitigation strategy, which we do not believe to be in line with the desired policy outcomes of the UK and many other Member States. While such issues can be overcome and should not deter future enlargement, policy outcomes should form part of the enlargement debate.

Institutional impact

123. The enlargement of the EU from 15 Member States in 2004 to 27 by 2007 necessitated a number of institutional changes. Most obviously, the size of the Council of Ministers increased. Despite a provision in the Treaty of Lisbon that the number of European Commissioners should amount to two-thirds of the number of Member States, an arrangement was made to maintain the existing position of one Commissioner per Member State, and the Minister for Europe told us that there was "no chance whatever" of a rotation system being agreed.[108] The size of the European Parliament has increased from 626 before the 2004 enlargement and is currently 754.[109] However, it is difficult to estimate precisely the costs of enlargement to the EU institutions, owing to various confounding factors, such as the Union's increased competences and efforts to streamline the institutions' administration and make efficiency savings.

124. Witnesses were divided on how significant an impact enlargement had had on the ability of the EU institutions to function effectively. The EPC argued that the 2004 and 2007 enlargements have not "hamper[ed] the overall efficiency of EU decision-making," and several other witnesses agreed.[110] The Minister for Europe said that, in his experience, enlargement had not made taking decisions at EU-level more difficult.[111]

125. However, the NFU argued that decision-making was more cumbersome, forcing more decisions to be taken in a more informal way, thus reducing transparency. Professor Richard Rose, Director of the Centre for the Study of Public Policy at the University of Strathclyde, noted that, since EU decision-making favours consensus, bargains and compromises must incorporate far more interests and points of view. He also observed that official languages have risen from 11 to 23, adding to the complexity of negotiations and decision-making. Statistics from the European Parliament, set out in Figure 3, suggest that since 2004 the proportion of first-reading deals has increased. By achieving an early agreement with Member States, first-reading deals can limit the scope for members of the European Parliament to amend a piece of legislation.

126. There is no clear evidence to suggest that the 2004 and 2007 enlargements have had a negative impact on the EU's ability to make decisions. In our view, however, enlargement must inevitably have added to the complexity of negotiations and contributed to an increased reliance on informal processes in order to reach decisions. Such processes threaten transparency and we therefore emphasise that the Government and EU institutions should remain alive to the need to maintain transparency in decision-making while enlarging the Union.

FIGURE 3

Concluded codecision procedures in the European Parliament

Source: European Parliament

Free movement of persons

127. The principle of free movement within the Union applies to citizens of EU Member States. Those staying for over three months should be: in a position of employment or self-employment; a family member of a worker; a student; or able to support themselves financially without imposing a burden on the financial resources of the home state.[112]

128. Partly to address concerns about the degree of such movement, restrictions on the free movement of workers were applied to workers from new Member States for a transitional period of up to 7 years following all of the last three enlargements. After the 2004 enlargement, all prior Member States other than Sweden, Ireland and the UK made use of these transitional provisions. The UK did not restrict entry, but did require workers from the new Member States to register. After the 2007 enlargement, all of the prior Member States, with the exception of Finland and Sweden, made use of the transitional provisions on the movement of Bulgarian and Romanian workers. All restrictions on free movement from the countries that acceded in 2004 have now been lifted. Those restrictions that remain on Bulgarian and Romanian citizens, including those in the UK, will need to be lifted by 31 December 2013.

129. We heard that the migration of motivated workers had brought economic benefits.[113] Dr Samantha Currie of the University of Liverpool argued that citizens from the new Member States have "helped to alleviate skills bottlenecks" and have filled gaps in the labour markets of older Member States that were otherwise unfilled by nationals.[114] She also noted the Commission's report in 2006 that found that migration from new Member States had not adversely affected labour markets in older ones.[115] Associate Professor Senior Nello referred to recent work done by Martin Kahanec and Klaus Zimmermann, which found that the impact of the 2004 and 2007 enlargements on wages and employment "are small and hard to detect".[116] Kahanec and Zimmermann also found that post-enlargement migration contributed to the growth prospects of the EU. Growth can also be expected as a result of intra-EU movement flowing from future enlargement according to Richard Howitt MEP, who noted that "Europe needs Turkey's young labour", an observation that echoed the European Commission's 2012-13 enlargement strategy.[117]

130. Witnesses observed, though, that there had been some negative impacts from the free movement of persons. Dr Tannock MEP mentioned, for example, the relocation of business to new Member States in order to benefit from cheaper labour costs as an economic impact on the older Member States.[118] Dr Currie noted that the possibility to post cheap labour from a new Member State to work in a country where labour costs are otherwise higher, known as social dumping, has caused problems, exposed in European Court of Justice cases interpreting the Posting of Workers Directive.[119]In one such case, a Latvian company delivering a contract in Sweden employed Latvian workers at a rate of pay consistent with the Directive but lower than the rates of pay for Swedish workers, leading to collective action by the Swedish workers.[120] The Court ruled that the collective action was in conflict with the company's freedom of establishment under the Treaty. Dr Currie concluded that the issues raised are sensitive and "such concerns will inevitably be heightened in the context of EU enlargement whilst wage levels across the Member States remain so variable". An attempt in March 2012 by the European Commission to resolve the issue was withdrawn by the Commission several months later owing to opposition on subsidiarity grounds and a lack of political support.[121]

131. The Minister for Europe said that, amongst EU leaders, there was no "strong appetite to retreat from the principle of freedom of movement" because the principle provides "advantages to citizens from every country". However, he identified a concern—shared by Ministers and officials of other countries "particularly" in the north and west of the EU—regarding migrants who came not to work but in order to claim benefits. He spoke of these as "real public concerns about migration and about integration and social cohesion".[122] Other witnesses agreed that there were public concerns relating to migration from the newer Member States, with a perception that local jobs had been lost to migrants.[123] Professor Mayhew noted that, despite the UK gaining an economic benefit from migration, its "scale" had given rise to some "high profile anti-immigrant and anti-foreigner agitation". Mr Howitt MEP emphasised the economic benefits of migration within the EU but accepted that the political consequences are certainly "one of the barriers that we need to examine in relation to EU enlargement".[124]

132. The free movement of workers is a fundamental Treaty right and an important element of the EU's internal market, offering potential benefits to all EU citizens and providing motivated migrant workers to fill gaps in labour markets that would go unfilled by national workers.

133. We acknowledge widespread public concerns about the impact of the free movement of persons. The seven year transitional period allowing Member States to maintain restrictions on the movement of workers from new Member States is, we consider, ample time to allow for the restructuring of labour markets. If, as we detect, Member States are supportive of the principle of free movement, communication of its advantages is clearly an important issue to be addressed by Member States.

134. Where the concern is directed towards the free movement of non-workers who may be travelling to receive social security benefit, rather than to engage in employment, it is a matter for the authorities of Member States to tackle within the framework of EU legislation.

80 Kullaa, Turkish Embassy Back

81 Avery, Dimitrov, Commissioner written evidence, Czech government, FCO written evidence, Q 165 (Howitt), LDEPP Back

82 Commissioner written evidence Back

83 QQ 3, 4 Back

84 Q 9 Back

85 FCO written evidence Back

87 Bureau of European Policy Advisers and Directorate-General for Economic and Financial Affairs, Enlargement, two years after: an economic evaluation (http://ec.europa.eu/economy_finance/publications/publication7548_en.pdf) Back

88 FCO written evidence, FCO memorandum, LDEPP, NFU, Tannock Back

89 Q 122 Back

90 FCO written evidence Back

91 FCO memorandum Back

92 Commissioner written evidence Back