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At the end of the day, people on both sides of the border must be reassured of the potential for prosperity for the next generation of Europeans. If the past is any indication of the future, we can safely say that the business case is indisputable, Stefano Mallia writes.
Twenty years after the European Union’s 2004 “Big Bang” enlargement, we have seen it all: perceptions and reflections have been morphing from enthusiasm to fatigue, from hope to fear, from aspiration to disappointment.
With the wisdom of the past two decades and seven different waves of enlargement since the beginning of the European project, it would probably be appropriate to celebrate this “big bang” anniversary with facts and figures to dispel emotional debates ahead of the EU elections in June.
The three-year-long war in Ukraine has pushed the issue of enlargement to the forefront of the European geopolitical agenda.
The candidate status that was quickly conferred on Ukraine, Moldova, Bosnia and Herzegovina, and Georgia, and the accession negotiations that have finally been opened with North Macedonia and Albania are positive breakthroughs for a policy which has stalled for years, due to the proverbial “enlargement fatigue”, to which Brexit has probably contributed.
It’s the economy, stupid
To make sure this new momentum stays the course in the long term, we should set straight the business case for enlargement.
Of course, democratisation and the rule of law are untouchable principles, as is the merit-based approach of the enlargement process, with no shortcuts. But, at the end of the day, people on both sides of the border must be reassured of the potential economic gains and prosperity for the next generation of Europeans.
At the moment, forecasts are scarce on what the economic impact of the next round of enlargement will be on the bloc. But if the past is any indication of the future, we can safely say that the business case is indisputable.
Trade between old and new member states grew almost threefold during the formal pre-accession process from 1994 to 2004, and fivefold among the new members themselves.
The EU-15 of the time grew on average by 4% annually from the start of the accession process to 2008, with the accession process contributing half of this growth, generating 3 million new jobs between 2002 and 2008.
The fears of the time that masses of migrants would move from the new to the old member states because of income disparities were unfounded. Indeed, the cumulative impact of migration on the working-age population in the old member states was limited, standing at 0.37% between 2004 and 2007.
By contrast, migration had a bigger impact on Ireland when it joined, with an annual increase of 1.25% in its working-age population over the following three years from its 1973 accession. On the downside, the new members recorded a significant brain drain, which in turn contributed to deepening regional disparities within the EU.
The energy we need is already there
We all know that the cost of bringing Ukraine and others into the club will be high because they are still poorer and agrarian to some extent, but it has been proven that it would be costlier to keep them out, in terms of economic security.
COVID-19 and the war in Ukraine have demonstrated that the EU needs to rethink its economic resilience and to homeshore and friendshore strategic supply chains, particularly in the context of the green and digital transitions.
REPowerEU, the EU plan launched in response to the global energy market disruption, envisages a ramp-up of European renewable energy production. The Net-Zero Industry Act and the Critical Raw Materials Act call for 40% of green and raw material value chains to be diverted to the EU.
EU accession candidates, particularly Ukraine, can play an important role in achieving these goals and in providing greater economic security.
When it comes to natural resources, Ukraine holds the largest gas reserves in Europe, after Norway. The country could contribute significantly to the phase-out of oil in electricity production and industry.
The country already produces some of the largest quantities of hydropower in Europe and could increase its production along with other green energy sources such as wind, solar and biomass.
The EU and member states like Germany are considering large-scale investments in Ukrainian green hydrogen production, which can be transmitted through the extensive existing pipelines.
ADVERTISEMENTUkraine has also been a major metal exporter and is home to lithium and rare earth deposits, which are crucial for the green and digital industries.
Agriculture and the single market
At the same time, Ukraine’s agricultural industry is one of the biggest in the world. Its integration into the internal market would substantially increase the EU’s food security.
The EU, whose budget represents only about 1.2% of its members’ combined GDP, or €1.8 trillion over its seven-year budget cycle, would need to overhaul existing policies as newcomers would absorb agricultural and regional cohesion funds.
Current member states, like Poland, which recently blockaded grain imports from Ukraine, would need to see the bigger picture of how economic convergence significantly benefits them.
The benefits for Western Balkan countries of increased participation in the single market are also crystal clear.
ADVERTISEMENTAs an indication, Croatia’s GDP has increased steadily since it joined the EU in 2013, translating into higher incomes for its citizens, with an average increase in per capita GDP of 67% (from €10,440 in 2013 to more than €17,240).
Finally, Ukraine and other accession candidates boast a well-educated workforce, particularly in the IT sector. Their inclusion in the single market could help alleviate the skills gap in the EU economy, which has increasingly become an obstacle to EU competitiveness, and help accelerate the digital transition.
The road to EU membership for up to nine new countries — including Serbia, Albania, and four others in the Western Balkans, as well as Ukraine, Moldova, and Georgia — will be tortuous as the union will also need to reform to make sure its absorption capacity is up to the task.
The business community also needs a clear timeframe and gradual single-market integration.
As business people know all too well, size matters. Involving the private sector will be a crucial step as this enlargement will be too big to fail.
ADVERTISEMENTEnrico Letta’s recent report was clear on that and called for the creation of an Enlargement Solidarity Facility, equipped with the financial resources to manage externalities and facilitate a smooth enlargement process.
There is no other alternative: if the EU wants to be a global power, it needs to be a local power first. This narrative needs to be loud and clear during the European elections.
Stefano Mallia is President of the Employers’ Group in the European Economic and Social Committee.
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