Romania & Bulgaria Join the EU

As expected, The European Commission has confirmed that Romania and Bulgaria will be joining the EU in January 2007 (report here, Bloomberg here).

Clearly this is good news for these countries - and for the EU as a whole - but I'm somewhat saddened by the inevitable budgetry pressures that will result. As a common market, the EU can effortless incorporate new members. As an extended social welfare state, it can't. The biggest pressures (reform of the CAP, structural funds and migration) will be heightened by the incorporation of such large, agricultural, poor countries with a mobile labour market. Sadly Britain seems unlikely to repeat our principled and commendable response to the rest of Western Europe's renege on opening labour markets, as John Reid threatens to close our borders. I sometimes get petrol at the "Gateway to London" services off the M1, and see line after line of coaches with Polish number plates. I'd welcome Romanian and Bulgarian coaches as well, but it's a mute point given the actual plans of migrants.

Perhaps we won't be "flooded" by Romanians (as the racist tabloids make out) because perhaps we're not such a good deal after all?

When I was in Romania last summer, EU assession was understandebly a hot topic and I was surprised how many people expressed doubts about the potential gains from membership. There was a realisation that the EU represented a fantastic mirage: the preconditions were good ones, ensuring fiscal discipline, consensus for needed reforms, and an opportunistic attitude. Consequently the economy has developed (a flat tax was introduced), inward investment has increased, prosperity is increasing. The benefits of EU membership, therefore, are being accrued prior to membership.

The journey toward accession has therefore been a positive one, and further steps are needed, but at long last policy is going in the right direction. What will really change in January 2007?

If you're already a member of NATO, why not form a few regional free trade zones and turn your back on the EU club? Afterall we need them more than they need us! The only way to provide the cheap labour required for the standards of living demanded by the man on the street are through

1. Immigrants
2. Expanded borders

We can actually view these concepts not as being one-and-the-same; but alternatives. By expanding the frontiers of the common market outward investment can increase, capital can flow across borders, and external trade can compensate for domestic inflexibility. Not for all sectors, perhaps, but certainly for some.

There's a fear that the troubles with the EU - inflexible labour markets, efforts to harmonise taxation, common voices in international affairs, unsustainable social welfare commitments (etc) - will now undermine the good work done to get here. Might the EU be just a mirage? The journey is what matters, and the ultimate prize simply a curse?

Perhaps, especially when we consider the tangible benefits from membership: the subsidies, the payments, the hard cash from Brussels. Think of Liverpool, and think of Chinatown and the actual consequences of injections of funding. As is sometimes heard across Merseyside "Get off that European wall"! For those of you unsympathetic to such an unsympathetic view of how public investment can be syphoned off, here's a nice reminder of the power of interest groups: Greg Mankiw reckons it'd save the US economy $1billion to get rid of pennies: a no-brainer, right? Wrong! Alex Tabarrok points out the battle lines:

The main lobbying group if favor of the penny... is funded by the zinc industry (zinc being the main ingredient in pennies)

On the opposite side ... it's no accident that Kolbe is from Arizona the dominant producer of copper the main ingredient in... you guessed it... the nickel.

The EU project is perplexing and a frustration for us all. Sometimes moo-ving in the right direction isn't enough. Sometimes incremental steps lead us up the garden path. The BBC use a photograph (right) from Bucharest's "Cow Parade": at least now they'll be well fed.

Comments

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