European Union

May 1st 2004 will be an historic date for the European Union because ten new Member States will be allowed to join the European Union. These states will be Hungary, Poland, the Czech Republic, the Slovak Republic, Slovenia, Estonia, Latvia, Lithuania, Malta and Cyprus. Bulgaria and Romania are pencilled in for membership in 2007 and Turkey is due to begin negotiations at the end of 2004. This shows the European Union’s commitment to further enlarging itself from the current EU 15 so as to increase the benefits of a larger union; these benefits will be discussed in more detail later in the piece.

Due to the removal of tariffs and other trade barriers, such as quotas, cross border trade between EU member states will increase. The addition of more than 100 million people into the EU market will allow businesses to sell to more people than before, thus increasing demand. This increase in demand will be especially apparent because the countries trying to gain membership to the EU have had to undertake economic reforms, which have led to high rates of economic growth, meaning that the people of these countries will demand more imports as they will have more money to spend. Having said that, just because there is a larger market for a business to sell to, it does not mean that there will necessarily be an increased demand for their products, especially if the product that they sell is already available in the new countries. It is also true for companies who are part of the ten prospective member states that their products may not meet the standards that are available in the larger countries in the Union, therefore their product will not sell in these other countries and demand will not increase. The European Union though has realised this and after a meeting of the European Round Table in May 2001 they believed that this gap in standards between certain countries would quickly disappear, as the companies who did not meet the standards would be able to modernise their production procedures due to the sharing of information with other member states.

Due to the increasing prosperity of the proposed member states’ economies, foreign direct investment will increase. This will give the businesses the necessary funds to try to increase their output, so that they can sell to this larger market of people. In the long run, this will give them funding that they can use to embark on large projects that would allow the company to grow further. These extra funds can also be used to modernise production techniques, so that the company can compete with the companies in other countries who offer higher quality products than themselves. However, increased competition is not good for all companies, the decline in companies’ profits in the airline industry is due to not only the September 11th attacks but also due to increased competition. In this case it was Swiss Air who came off very badly because they simply could not cope with having a lower market share and had to rely on the Swiss government paying Ј188 million to keep them in business.

In conclusion, whilst it is clear that there will be short term difficulties in the enlargement of the European Union, I believe that the increased trade and competition will mean that the enlargement will be good for businesses, especially those with appropriate strategies to benefit from the enlargement. I also believe that increased enlargement is not in conflict with further deepening mainly due to the fact that Greece, Ireland, Spain and Portugal all joined the Union as it was deepening and had no major problems.