European Union: The Effects of the Expansion of the EU

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Table of Contents

Introduction
Theoretical perspective of the growth
Impacts of the union on members
Conclusion
References

Introduction

The European Union began in the 1950s with great hopes that it would aid in both political as well as economic development in the European world. Political development was viewed in the perspective that the EU would be in a position to eliminate the military discrepancies that existed between European countries at the time. Efforts directed to this objective by the union have been quite large and its effects conspicuously experienced. The economical development role is aimed at eliminating possible economic distracters such as war. This facet of the EU has not been able to provide quite substantial results if the unequal development among its members is anything to go by. Welfare gains arising from its growth have also been quite low, this begs for a critical view of the effects of the growth of the EU (Coe D. T., 1999).

The EU has continuously expanded since its inception and has always promised to expand even more. Its growth is evident from the number of countries that are subscribing to its members. Despite its increase in membership one question that lingers is whether its constant expansion in membership also translates to the relative expansion of its members as should be the case. Surprisingly this expansion seems to have little or no effect on the development of most member countries. It is expected that with the gradual expansion, of the trading bloc, there should be a relative increment in the GDP over time in the respective countries that are signatories to the union (Jacob, 2008).

In an attempt to critically evaluate the effects of the expansion of the EU, this paper is keen on objectively analyzing facts that point to the expansion of the union as well as comparing how the union’s growth over time has affected different countries and why this is the case. An economic theory will be used in an effort to argue out the effects that should be anticipated in the event a union such as the EU experiences an expansion over a given period. The theory will attempt to shed some light as to why members of a given trade bloc may differ significantly in their GDP despite being under one union that is constantly expanding in both its membership as well as resources. Evidence of the varying impact of the growth of the union will also be put forth, in a bid to clearly illustrate the diverse impacts of the EU expansion based on current economic as well as political state of the member countries. Consequently an objective conclusion on the topic of discussion, which critically questions the significance of the EU expansion to its members, is drawn. This is aimed at establishing the relationships that exist in the findings and the possible effects that they are likely to pose in both the present and the future (Krugman, 1992).

Theoretical perspective of the growth

The economic theory is put into use in an effort to evaluate the concept of the EU expansion. The focus of the theory is not much on the effects arising from the economic integration experienced in the EU, but rather concerns itself more with a growing trade-block phenomenon. A trade-block that is first made up of a few countries, then consequently increases the number of countries over a period, as is the case with the EU. The underlying argument here is whether, the constant expansion has effects that sharply differ from the original form of a trade block (Landau, 2008).

The argument of this theory is based on the domination factor within a given trade block. A trade–block expansion may be inclined to either trade creation or trade diversion. The dominating factor amongst the two greatly determines how members of a given trade block benefit from it. It determines whether an equal or an unequal development is experienced among union members. If for instance trade creation is the dominating factor upon a trade block formation then, an unequal gain among the members is experienced since new members influence changes in the relative prices within the trade-block, which consequently benefit other countries while at the same time harming others economically (Levy, 1997). Therefore a disparity in the growth of members will definitely occur. However, in the case where diversion is the key dominating factor of a trade block, member countries are likely to be treated symmetrically; hence whatever affects the group of a trade block is also presumed to affect each member in the same measure. Diversion is aimed at increasing the net income that is realized in a given trade block, as opposed to the trade creation concept that is keen on creating an opportunity for an existing country using a new member. As a result, the new member is viewed as an outsider who has created an opportunity for growth of the existing members. Much attention is focused on how the existing members within the trade-block stand to benefit rather than how the new member country will benefit from the trade-block. Consequently, as it may be expected there will be quite a great distinction between the growths of the countries involved in the formation of the trade block and those who later joined.

A close comparison between the theory and its argument to the EU case reveals the underlying reason that might attempt to explain the indifferences of growth among its members even with the increase in members. The theory tries to answer the question as to why the GDP of the member countries is not experiencing a relatively equal growth as is expected with the expansion of the trade block (Frankel, 1999).

One factor that comes out clearly is that the intentions that guide the expansion of the trade block determine to a very large extent whether the constituent parties of the union experience or fail to experience an equal growth rate with the subsequent expansion of the trade block. Concerning the forgoing argument the EU, seems to have focused more on the creation of trade for its existing members rather than, diversifying trading opportunities for both its existing as well as new members. This has consequently led to the unequal distribution of resources among members consequently culminating in unequal economic growth of members (Krugman, 1992).

Impacts of the union on members

The impacts of the EU on its members have been argued to be diverse having some members gaining from the union while others not. The gains have been majorly on the political platform. Politically, the EU has brought relatively a better political understanding in the formerly politically volatile area which was characterized by military conflicts between the countries. From the Second World War, several countries in Europe did show political polarization to each with some countries taking to communism and others to capitalism e.g. West Germany and East Germany. Political gains for most countries may never be overestimated since this has brought peace and understanding to the member countries. Their foreign policies have been converged leading to a more impacting perspective as to their policies (Krugman, 1992).

Another political impact could be said to be the silencing of other countries’ ideas. Due to the streamlining of policies and laws regarding foreign understanding and relations, some country’s views end up not being swallowed by others who are considered original and “bigger members of the EU”. Some policies are arrived at due to a majority vote thus silencing the views of other countries. This ends up making some countries inactive in the global politics as their views are thought to be accommodated in the larger Union.

Some member countries have been said to have gained from the Union while others have not. Countries like Belgium, Italy, Germany, Ireland, and France have indicated some sense of economic growth since the joining of the EU also indicating some level of prosperity are countries like Spain, Portugal, and Finland while countries like Austria, Denmark, Greece, and the United Kingdom each indicate a fall in their economic growth. Members joining the Union have been experiencing diverse impacts with the benchmark being on when they did join the union. Research has it that most members who had joined the union originally experience relatively higher per capita income are gaining more from the union than those members who happened to have joined later this is relative to the OECD average. It could hence be said that the union somehow has benefited some member countries more than others. The members who joined later are standing chances of gaining as much as those who joined earlier may be difficult to determine bearing that the figures are hard to trace from the individual countries’ economic indicators. The six original countries that joined the EU are said to have leveled and then showed a rise in their Economic growth.

The impacts of the Union on trade are as well evident. Since joining the EU, the member countries have increased trade among each other in a large sense. This, economists argue, does not improve welfare and so does not assure increased income for the member countries. This, therefore, means that however nondiscriminatory the trade is. However, in terms of investment, the EU members showed an increasingly higher investment accumulation and rate (Ethier, 1992).

Researches conducted on some member countries have indicated increase in the economic growth. For instance, Moghadam and Coe (1993) conducted research on France’s development before and after joining the EU to assess the impacts of joining the organization. The duo was using capital accumulation, growth and trade integration. They identified explicit benefits on France due to the joining of the EU. This was as to the level of output and integration and should therefore not be considered a long-run effect on the growth rate (Coe D. T., 1993).

Italianer (1994) showed an increase in the GDP of the member country.

The union also tends to streamline the economy of the member countries and as such limiting their growth. By streamlining the growth, the countries are to some extent limited on to how far they can go economically (Ethier, 1992).

In terms of trade, the union encourages trade between member countries, not by policies only but conventionally too. Unions tend to increase understanding to member countries and thus encourage increased activities among the member countries, among the activities, is trade. This will serve to reduce the diversity of commodities obtained by the member countries as their products (imports) would mostly come from the neighborhood.

Conclusion

Evaluating the contributions of the EU to its member countries and whether the effects are positive or negative call for a detailed research. This will serve to pinpoint the precise impacts of the organization on the member countries. The research should therefore include traditional non-dynamic gains which emanate from trade and their benefits to the member country. The research would include getting to know whether there are economic growths in the EU or not and if there are, who gets to bag them and after how long does start trickling?

In a surmise, from the discussion held in the paper, the benefits of European integration to member countries in the long-run rates of growth, this happens while large countries and those that have stayed in the EU for long have had their economies grow faster than the OECD countries for the first half a decade and then experiences increased per capita income of the countries. The smaller countries that included the original members of the EU tended to increase their gains from the EU to almost similar levels as the union expanded. The late admissions into the union have had a rather different experience with others gaining (of course with delays) whilst others did not. Assuming these conclusions are accurate, then the impacts await the members who have just joined the union and the ones anticipating joining the union. This may be explained to be as a result of the lack of ability to take advantage of the widened market and thus they take time to adjust to the increased market before they start reaping from the same.

Politically, it would be of the essence to find out when the impacts are felt and where in particular are they felt? This would help identify the “killed” policies of member countries and how politically countries have been impacted upon by the joining of the union.

References

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Coe, D. T. 1993. Capital and Trade as Engines of Growth in France. IMF staff Papers , 542-66.

Ethier, W. J. 1992. Internationally Decreasing Costs and the World Trade. Journal of International Economics , 1-24.

Frankel, J. A. 1999. Does Trade Cause Growth. American Economic Review , 379-99.

Jacob, V. 2008. The Custom Union Issue. New York : Carnegie Endowment for International Peace.

Krugman, P. R. 1992. Geography and Trade. Cambridge: MIT.

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