European Union Expansion – An Interview with Thomas d’Aquino, CCCE President and Chief Executive

May 3, 2004

On May 1, 2004, the European Union was expanded from 15 to 25 countries.  Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovenia, and Slovakia have joined the union.  To mark this historic occasion, Thomas d’Aquino answered questions on the expanded European Union from the perspective of the Canadian business community.

1. Why is expansion of the European Union important?

The expansion of the European Union is extraordinarily important from several perspectives but in particular from an historical perspective.  Of the ten new members, eight are former communist states.  Adding these members has reunited two halves of a continent that was split during the Cold War.

Ultimately, expansion serves as a further indicator of Europe’s willingness to promote stable democratic institutions, market-based economic conditions and competition within a union of countries.

The accession of these ten countries is a remarkable achievement that will bring huge political benefits in the form of more lasting peace and stability.  It will reinforce values that we as Canadians hold dear, namely: freedom, tolerance, plurality and diversity.

2. How will the change affect Canadian companies?

Measured by GDP, the European Union will grow by about 5 per cent and by some estimates will rival the size of the three NAFTA economies.   However its population will swell by 75 million, or 20 per cent, to more than 450 million people.  The union will account for roughly 18 per cent of global trade and contribute more than 25 per cent of global GDP.

3. What should Canada’s priorities be in strengthening its ties with the new, larger European Union?

The Canadian Council of Chief Executives fully supports the Trade Investment Enhancement Agreement (TIEA) framework agreed to by Canada and the European Union this past March.  Negotiations should begin as soon as possible after the framework is approved by our respective Parliaments with input from our respective business communities. To be effective, the TIEA must result in timely and meaningful reduction and elimination of trade and investment barriers between Canada and Europe.

4. What economic challenges does a larger European Union face?

From an economic perspective, the European Union must leverage the benefits of expansion, move to a more dynamic growth path and improve its international competitiveness.  Structural reforms in labour, in regulatory and fiscal policy will be essential in this regard.  Effective enforcement and governance in the form of more flexible decision- making processes remain essential conditions for successful enlargement both now and into the future.

5. What are the economic benefits for the Canadian private sector of adding ten new members to the European Union?

In the immediate future, the economic benefits of EU expansion will be modest for the Canadian private sector.  Over the longer term, the solid commitment of former non-democratic states to greater economic openness based on democratic principles and institutions augurs well for global growth and for greater prosperity. 

In addition to the larger internal market of consumers, the Canadian private sector will benefit from simplified and enhanced access to the markets of the ten new members with a single set of trade rules and administrative procedures across 25 economies.  Adoption of the EU’s common external tariff will result in an overall reduction in customs duties paid into these markets for Canadian products.  As well, the ten new members will adopt more effective regulatory standards in areas such as intellectual property protection, access to government procurement, competition policy, and generally better investor safeguards.

6. What are the economic implications of expansion for existing EU members?

The ten countries will become full members of the European Union.  This means they will adopt the full body of European Union law (the acquis communautaire), take part in its institutions, treaties, the single market, the European Union budget, and adopt the common external tariff.  In due course, they will also join the European Monetary Union. 

From an economic perspective, expansion will not be a wrenching event for existing members of the European Union.  Most of the internal gains from trade and capital flows have accrued over the past several years.  Expansion could very well serve as a catalyst for much needed economic measures such as tax and labour reforms.  A larger union of members with more favourable competitive positions, and entrepreneurial hunger, should provide an additional impetus for reforms within existing member economies.

7. How will expansion affect the challenge of global peace and stability?

The expansion of the European Union will not guarantee peace and stability in the region, but it will be an enormously positive force.  However, Europe can help project stability to neighbouring countries through dynamic economic growth policies.  A prosperous Europe will be a benefit to all in the region.

This said, expansion matters precisely because a larger, stronger European Union is the only way to ensure the democratic stability of the continent.  Enlargement also strengthens the zone of security confidence in the region and it will help to further enhance economic and security relations between Europe and Russia.

8. Is accession by other countries in the cards?

The ultimate size of the European Union remains open to question and to negotiation.  Bulgaria, Romania and Croatia will probably join the EU in the coming years.  The question of Turkey’s accession will no doubt continue to be debated, as will closer ties with neighbouring African and Middle Eastern countries.

9. How would you summarize your reaction to this change?

It is not only an historic achievement.  It is a triumph of statecraft, an affirmation of the desire of all peoples for open societies and for ever closer cooperation in an increasingly integrated and interdependent world.