In 2004, eight post-communist countries of Central and Eastern Europe joined the European Union (EU), and in 2007, Bulgaria and Romania followed them. The newcomers raised the number of the EU members from 17 to 27. Ten CEE countries: Poland, Estonia, Lithuania, Latvia, Slovakia, the Czech Republic, Slovenia, Hungary, Bulgaria and Romania were poorer comparing to average living standard of the “old” European Union; so one of the priorities of enlarged the EU was to increase their standard of living towards the others (old members) (Read, 2007).
Accession of eight post-communist countries in 2004 was the first official response of the EU to the collapse of the Berlin Wall in 1989. The inclusion of former communist countries to the EU was the only morally correct and possible response to overpower the division of Europe initiating during the Cold War. However, before joining the EU, the new members were obliged to go through internal improvement in the course of which the countries as candidates had to adopt acquis communautaire of the EU. Due to this hard and complicated process, new members became even more Europeanized than most of the “old ones”. Nevertheless, none of them would have wished to undergo the comprehensive evaluation of the EU commission of their legal, political and economic system again (White et al., 2012).
The Big Bang of Enlargement
In December 2001, there was reported that 10 countries such as Malta, Cyprus, Lithuania, Latvia, Estonia, Slovenia, the CzechRepublic, Hungary, Slovakia and Poland would join the EU association by the end of 2002. Nevertheless, in 2002, negotiations with these candidates on remaining issues such as regional assistance and agriculture revealed the following challenges such as burden-sharing matter and higher budgetary. Therefore, the accession treaty with 10 countries was finally signed on the 16th April, 2003, and on the 1st May, 2004 these countries became full members of the EU. Then, in December of 2004, the EU completed negotiations with Romania and Bulgaria concerning the status of anti-corruption measures and legal reforms in both countries. Romania and Bulgaria officially joined the EU on the 1st January, 2007. Considering these last two countries, the Union’s borders nowadays stretch from the Black Sea to the Baltic one. Today, the EU’s total population consists of over 500 million of people (McDowell & Thom, 2007).
Dynamics and Challenges
The process of integrating was undergoing at three levels. First, countries as candidates took part in the institutional restructure that suitable to the EU. They sent their official representatives to the EU Parliament; each representative was entitled to nominate a member of the European Commission. Languages of countries as candidates received status of official languages of the EU. At the second level of integration, the new members of EU obtained access to the EU programs and funds; these resources were shared among countries according to the established necessity. Newcomers also gained support on the gradual basis for their farmers according to the Common Agricultural Policy (Lovino, 2009).
Understandably that EU membership along with new opportunities included also obligations and duties. Before entering the Union, each newcomer adopted the EU’s existing legislation (acquis communautaire). The new members made essential reforms in the sphere of protecting rights of their citizens and providing them personal security. Because of enlargement of the US territory due to geographic position of new members, countries as candidates took over obligations and responsibility to control large stretches of the EU external borders. The European Union had provided substantial funding for purchasing new equipment and technology as well as skilled and qualified experts to train their frontier troops (Horst, 2010).
Different Points of View on Challenges and Opportunities
During 2004 – 2007 years there was developed a new economic and political European landscape in many spheres; especially these changes affected trade policies. On one hand, there is the “View of the European Commission” that asserts that the CEE enlargement facilitates decreasing of asymmetric shocks in the European economy and simultaneously synchronizes business cycles of all members of the EU. It means that with the further development of the integration process, the business cycles of the “old” and “new” EU’s members are becoming more similar, and the economic shocks are becoming more symmetric. In other words, the enlargement is a good thing for the international trading because the new members became much more economically stable and, thereby more attractive for investment into their businesses. Moreover, the economies of new members are growing faster after entering the EU, as well as their population represents a new free market of consumers for the production of the “old” members (Frandsen, Jensen, & Vanzetti, 2007).
On the other hand, there is “View of the Krugman” that asserts that integration facilitates higher competition among countries as regards each other, and considering that their level of economic development quite various, it leads to idiosyncratic business cycles and extremely asymmetric shocks. In other words, integration of strong economies with weak ones should lead to unstable and highly unpredictable market oscillations. It means that from the “the Krugman” point of view such integration is a high-level threat to the economy of the “old” members (Frandsen, Jensen, & Vanzetti, 2007).
Again, on the bright side, due to enlargement the “old” members gained an opportunity to have not only new marketing outlets but also less expensive production. There is a significant difference between manpower cost of “old” and “new” members of the EU; so, there is the opportunity for businesses of “old” members to cheaper labour force and purchase of cheaper primary goods (Behrens, 2007).
Challenges and Opportunities of United Economic Zone
In 1986, the Single European Act was introduced. According to this act the fiscal, technical and physical obstacles to the international trading were removed. United Economic Zone facilitated minimizing of exporting costs, as well as structural funding and efforts of EBRD infrastructure improved business conditions. Due to strict law and high requirements of security the EU showed improvements in taxation, regulations and crime rate; yet, some complications that concern corruption in judiciary still remain. These difficulties and such obstacles as bureaucracy and weak financial institutions became more evident since the EU enlargement (Allen, 2009).
Another factor of the enlargement is that a lot of workers of “old” members believe (and to some extent it is true) that they lost their jobs or have less earning due to cheap force labour of “new” members. The enlargement also facilitated the moving some labour-intensive factories and plants to more labour-needed regions (Behrens, 2007).
Therefore, for some areas of business of “old” members the enlargement brought difficulties but for others it brought more opportunities. For example, for Finland, Austria and Germany, which geographically favourable situated to exploit new marketing outlets, the enlargement provided annual growth in GDP. On the other hand, such countries as Portugal, Italy and Spain were the countries which intense-labour businesses were moved to more needed-labour regions because they lost their competitiveness. Ireland also became one of the countries that lost as a result of the enlargement. Ireland lost the support of FDI since the CEE newcomers appeared more attractive candidates for FDI support. And again, looking on the bright side of things, the enlargement made closer and geographically more accessible such monumental international markets as for example, Russian and Indian ones. A lot of businesses of “old” members gained the opportunity to penetrate into these markets successfully only because of the enlargement (McDowell & Thom, 2007).
In 2004 and then in 2007, The European Union expanded with 12 new members. Ten of them were post-communist countries and other two were Cyprus and Malta. It became possible due to the historical process that started after the collapse of the Berlin Wall. It was a considerable integration step of the European Union, which continues to be a subject of discussion and arguments for a long time (White et al., 2012).
This paper has considered challenges and opportunities that the “old” and “new” members of the European Union faced due to joining the central and eastern European post-communist countries. Some of them involve the ability to develop the administrative and legal system necessary to implement the acquis communautaire. Others include the ability to deepen and extend the political reforms and social changes that will finally result in the transformation of economies of all members into market-oriented competitive. There was also considered the issues of structural imbalances that appeared due to commercial interests of labour-intense industries. The enlargement brought to the “new” members improvements in taxation, regulations and decreasing in crime rate, as well as corruption, bureaucracy and weak financial institutions. Some of the “old” members were affected unfavourably due to enlargement, but the majority of the “old” members gained the opportunity to have not only new marketing outlets, such as Russia and India ones but also less expensive production due to the difference between manpower cost of “old” and “new” members of the EU.
Two different points of view such as “View of the European Commission” and “View of the Krugman” see the integration from two different angles. The European Commission View asserts that CEE enlargement was exclusively favourable for all members of the EU. On the contrary, “View of the Krugman” asserts that integration was unfavourable for all members of the EU. Considering that all countries of the EU still undergoing the process of recovery after world turnover, only time will ambiguously prove which point of view was closer to the truth.