1. Definition of the objective
To achieve the goal of becoming a member of the European Union
means to commit ourselves to the principles described in the
Treaties on which the European Union is founded (i.e. to become a
Party to these treaties).
Taking into account the task set out in Article 2 of the Treaty
on European Union (the Maastricht Treaty) means to start preparing
to accede to a degree of integration which has taken the EU Member
States nearly four decades to reach.
Therefore a clear understanding is needed on the basic
principles founding the European Union in the economic area with
due regard to the stages involved and the tasks set out for each
one of these stages in order to arrive at the present stage of
integration.
In the economic area the EU integration process evolved from the
Treaty of Rome (1957) establishing a common market and a
progressive approximation of the economic policies of Member
States, through the Single European Act (1986) providing for the
establishment of the internal market, comprising an area without
internal frontiers, to the Treaty on the European Union (1992)
committing EU members to another significant deepening of
integration namely the establishment of economic and monetary
union, ultimately including a single currency.
The achievement of the goals of the Treaty on European Union is
expected to take place by the year 1999.
2. Characteristics of the series of stages involved in the EU
integration process related to the free movement of goods:
2.1. The Common market - stage one; based upon the objective
of customs union which covers all trade in goods and which
involves the prohibition between Member States of customs duties on
imports and exports and of all charges having equivalent effect,
and the adoption of a common customs tariff in their relations with
third countries as provided for under Article 9 of the Treaty
establishing the European Economic Community (the Treaty of Rome);
The progressive establishment of the common market was to take
place during a transitional period of twelve years.
The establishment of the Common market started with the entry
into force of the Treaty of Rome in 1958 and was completed by 1968.
The Common market comprises the following activities (the list is
related only to free movement of goods and thus not
exhaustive):
- achievement of duty-free access for all goods between Member
States;
- adoption of common external tariff in the relations of Member
States with third countries;
- mutual abandonment of anti-dumping and anti-subsidy
measures;
- approximation of the laws of member States to the extent
required for the proper functioning of the common market.
2.2. The Internal market- stage two; based upon the objective
of adopting measures with the aim of progressively establishing the
internal market over a period expiring on 31 December 1992. The
internal market shall comprise an area without internal frontiers
in which the free movement of goods, persons, services and capital
is ensured (Article 13 of the Single European Act); This stage has
been targeted for completion by the end of 1992 and a lot of
progress has been achieved so far, but the process is not completed
yet.
The measures to be implemented under the Single European Act are
aiming to achieve the following:
- free movement of goods, labour, capital, services;
- removal of border controls;
- harmonisation of VAT rates;
- mutual recognition of standards and certification
procedures;
- common external trade policy;
- open government procurement;
- strong Community control of competition policy and state
aids.
The implementation period for Member States is five years and
the changes necessary are so radical that many of the Member Sates
have not yet passed all the legislation that was supposed to have
been in place by the end of 1992. 1)
The successful accomplishment of the task set out in the Single
European act will result in the establishment and proper
functioning of the Single market.
2.3. The economic and monetary union - stage three.
The objective set out in the Treaty on European Union is to
promote economic and social progress which is balanced and
sustainable, in particular through the creation of an area without
internal frontiers, through the strengthening of economic and
social cohesion and through the establishment of economic and
monetary union, ultimately including a single currency in
accordance with the provisions of the Treaty (Art. B of the Treaty
of the European Union); the achievement of this objective is
targeted for the year 1997-1999.
2.4. Accordingly the present stage of integration of the
European Union is described by the following principle (Art.
2 of the Treaty on European Union):
"The Community shall have as its task, by establishing a common
market and an economic and monetary union and by implementing the
common policies or activities referred to in Articles 3 and 3a, to
promote throughout the Community a harmonious and balanced
development of economic activities, sustainable and
non-inflationary growth respecting environment, a high degree of
convergence of economic performance, a high level of employment and
of social protection, the raising of standard of living and quality
of life, and economic and social cohesion and solidarity among
Member Sates".
The achievement of this task comprises the following activities
as defined under Article 3 of the Treaty on European Union (the
list is exhaustive in order to illustrate the dimension of the
efforts required to achieve the goal of membership):
(a) the elimination as between Member States, of customs duties
and quantitative restrictions on the import and export of goods,
and of all other measures having equivalent effect;
(b) a common commercial policy;
(c) an internal market characterised by the abolition, as
between Member States, of obstacles to the free movement of goods,
persons, services and capital;
(d) measures concerning the entry and movement of persons in the
internal market as provided for in Article 100c;
(e) a common policy in the sphere of agriculture and
fisheries;
(f) a common policy in the sphere of transport;
(g) a system ensuring that competition in the internal market is
not distorted;
(h) the approximation of the laws of member states to the extent
required for the functioning of the common market;
(i) a policy in the social sphere comprising a European Social
Fund;
(j) the strengthening of economic and social cohesion;
(k) a policy in the sphere of environment;
(l) the strengthening of the competitiveness of Community
industry;
(m) the promotion of research and technological development;
(n) encouragement for the establishment and development of
trans-European networks;
(o) a contribution to the attainment of a high level of health
protection;
(p) a contribution to education and training of quality and the
flowering of the cultures of Member States;
(q) a policy in the sphere of development co-operation;
(r) the association of the overseas countries and territories in
order to increase trade and promote jointly economic and social
development;
(s) a contribution to the strengthening of consumer
protection;
(t) measures in the spheres of energy, civil protection and
tourism.
For the purposes of this study only the activities related to
the free movement of goods will be explored in details (i.e. points
(a), (b), (c) and partially point (h).
3. Short summary of the historical widening and deepening of
the EU (to illustrate the unevenness of the steps now facing the
countries wishing to join the European Union
3.1.Early years of the Common market
The current EU was formed when the Treaty of Rome went into
effect in 1958. At that time six countries joined and although it
was often called the Common market, the EEC of the 1950s and the
1960s did not correspond to its name until 1968 when all tariffs
were removed on intra-EEC trade. (The EEC-6 consisted of three
powerful economies (West Germany, France and Italy) and three small
rich countries (Belgium, Netherlands and Luxembourg).
3.2. North-west enlargement in the 1970's
Negotiations concerning the first enlargement started in 1970
soon after the EEC accomplished its goal of removing all internal
tariffs and quotas (with the United Kingdom, Norway, Denmark and
Ireland). The accession Treaties were signed in January 1972. When
the United Kingdom, Ireland and Denmark joined (Norway did not join
the EEC), the EEC was not much more than a free trade zone with
common external tariffs and some harmonisation of sectoral
policies (the Common Agricultural Policy and the Coal and Steel
Community). 2)
3.3. Southern enlargement in the 1980's
In 1961 the EEC signed an Association Agreement with Greece. In
1970 it signed one with Spain. Portugal had a free trade agreement
with the EEC since 1973 as a member of EFTA.
The stage of bilateral free trade in industrial goods lasted 20
years for Greece, 16 years for Spain and 14 years for Portugal
before their respective accession.
Greece applied for membership in 1975 and was admitted six years
after it had tendered its application. Compared with the degree of
integration implied by the Treaty on European Union, membership did
not involve a big step for Greece. At that time even the Single
European Act had not yet been conceived and actually the EEC at
that time was very little more than a Customs Union and a Common
Agricultural Policy. The accession of Greece was based mainly
on political considerations as at that time its per capita income
was only 80% of that of Ireland and only 41% of the EEC-9.
Portugal and Spain applied for membership in 1977 and joined the
EEC in 1987. These countries joined knowing that they would have to
comply with the Single European Act. Since this Act stipulated an
extremely large increase in the integration of all Community
nations, Spain and Portugal faced a considerable step to
membership. Both countries were granted long transitional
periods of up to 15 years for many single market measures and
massive transfers.
3.4. North-east enlargement in the 1990's
The most recent enlargement exercise (with Austria, Finland,
Norway and Sweden) began in 1992 and has gone rather smoothly and
rapidly by all accounts (compared with previous enlargements).
The three new Member States (Austria, Finland and Sweden) had
bilateral duty-free industrial trade with the EU for two decades
before taking the next step towards accession (after referendum
Norway did not join the EU).
The accession Treaties of Austria, Finland and Sweden entered
into effect on 1 January 1995. It is considered that the reason for
this comparatively easy enlargement is due to the fact that the
great majority of the policy changes necessary to bring the
applicants' policies in line with the EU's were already
accomplished during the talks with these countries on the
European Economic Area (EEA) agreement. Under its provisions
these countries had already agreed to accept almost all the Acquis
communautaire pertaining to the Single market. The European
Economic Area came into being in 1993 and is considered as a Single
market stage for the acceding States.
4. Trade liberalization policy in the context of regional
integration
The debate over the positive and negative sides of trade
liberalisation is a long-standing one. Political economy analyses
of trade policy formation emphasise the asymmetric political
influence of competing interests within the domestic economy. The
costs of protection to consumers may be large in the aggregate, but
they are widely distributed among thousands or millions of
individual households. Export-oriented firms often fail to perceive
the extent to which their ability to export is reduced by their own
country’s import barriers. Similarly, workers whose jobs would be
at risk if trade barriers were reduced are aware of it, whereas the
workers who would obtain the new jobs in the expanding export
industries if barriers were reduced are seldom aware that continued
protection is costing them jobs. For all these reasons,
pro-liberalisation forces tend to be under-represented in the trade
policy making process because they do not lobby extensively. In
contrast, import competing firms and workers have a clear and
concentrated interest in lobbying for protection. In these
circumstances, and as far as pressures exercised by different
interested parties in the economy are concerned, a protectionist
bias to trade policy decisions is more likely to be introduced than
a liberalisation bias. An important question, therefore, in
examining the effects of regional integration is their potential to
shift the politics of the trade policy making process in a more
liberal or more protectionist direction. That is exactly how
according to our understanding the purpose of this comprehensive
work on future Bulgarian membership to the EU is to be
considered.
The postwar history of regional integration agreements provides
numerous examples of countries acceding to an existing arrangement.
In an increasing number of instances, the desire for accession is
motivated by market access "insurance" motives. The goal is not so
much to obtain duty-free access to the integrated market - average
MFN tariffs are relatively low for most products after the
conclusion of the Uruguay Round of Multilateral Trade Negotiations,
and some potential members are treated preferentially in any event
- but rather to eliminate the threat of contingent protection, such
as anti-dumping and countervailing duties. Another objective may be
to secure a privileged trading relationship with a large trading
partner as an insurance policy in the event of breakdown in the
world trading system. If a regional agreement involving a
substantial number of high income countries provides the
opportunity for a limited set of developing countries to join,
accession by one low-income nation may create a domino effect.
Fears of trade discrimination and "investment diversion" may then
lead other developing countries also to try to join the
agreement.
The above is a purely theoretical conclusion from the economics
which however proved quite accurate through the postwar history and
seems relevant also to the present situation in Europe where two
main levels of trade and economic liberalisation could be
noted:
The first, is the one among the fifteen Member States of the
European Union. This is the deepest level of integration and it is
extended for the most part through the EEA to West European
countries that have remained in EFTA.
The second, is composed of those countries in Central and
Eastern Europe, with whom the European Community has concluded
reciprocal trade agreements. Among this latter group of countries,
trade remains restricted except among the members of CEFTA.
CEFTA was created with the view to foster existing longstanding
trade flows, but it also helps strengthen the respective countries
"bargaining position" vis-И-vis major trading partners, better
defend themselves against possible discriminatory effects.
The EFTA was also established in 1960 by countries concerned
with the EC’s supranational aspects and the likely level of the
common external tariff (recently, many Asian countries have
considered their options In the light of the completion of the EC’s
Single Market and NAFTA).
In this respect, several recommendations could be drawn
concerning the Bulgarian approach to the issue of European
integration process.
In most of the cases the preferential tariff margin can no
longer be considered a major incentive for trade vis-И-vis third
countries.
First. Bulgaria is to further develop its integration
with the EU as its major trading partner, in order not to fall
apart from the group of the associated Central and East European
countries. This will lead to trade discrimination and "investment
diversion" vis-И-vis those countries that are applying for
membership to the EU.
Following the conclusion of the Uruguay Round of Multilateral
trade negotiations and the respective drastic cuts in tariffs, the
Europe Agreement with its goal - the establishment of a Free Trade
Area is to some extend already overtaken by events.
Second. The concerted action of CEFTA (through
dismantling tariffs and trade policy alignment) in the application
for membership to the EU gives those four countries a theoretical
possibility for a lead vis-И-vis Bulgaria and Romania in the
process. Romania concluded a Free Trade Agreement with the Czech
Republic and the Slovak Republic. Bulgaria is still in the process
of negotiations. It is logical, that any form of FTA with the CEFTA
countries prior to the actual start of membership negotiations with
the EU will enhance our chances for better terms of accession to
the EU, i.e. better stay for the Bulgarian economic operators on
the single market.
Third. The EU trade policy system is based on the
multilaterally agreed principles and rules - those stipulated in
the Marrakesh Agreement establishing the WTO and its Annexes. It is
hardly conceivable that the actual process of negotiations for
membership could even start before the accession of Bulgaria to the
WTO. Bulgaria is the only one among the Central and East European
countries in transition that is still not a WTO member.
Fourth. While there seems no sound alternative to the EU
membership for Bulgaria, the major real economic question faced by
the society is rather "how to match the current state of the
Bulgarian economy with the necessity of further trade
liberalisation when acceding to the EU" due to trade policy
alignment.
It is worth mentioning that the above list of recommendations
should in no way be considered exhaustive.
5. Conclusions
- The establishment of an association between the Community and
its Member States on the one part and the Republic of Bulgaria on
the other part is providing for the appropriate framework for the
gradual integration of Bulgaria into the Community;
- The Agreement sets out the objective to gradually establish a
free trade area between the Community and Bulgaria covering
substantially all trade between them and to promote the expansion
of trade and the harmonious economic relations between the parties
and so to foster the dynamic economic development and prosperity in
Bulgaria;
- It is understood that the conclusion of such an agreement
involves the political will of the parties concerned and also
contributes to the fulfilment between the parties of the basic
principles on which the European Community is founded; To this
effect the association agreement is a necessary prerequisite for an
accession agreement;
Notes:
1)According to latest statistics (as of June 1995) the
average transposition rate is 92.6% while the threshold rate
established for the proper functioning of the Single market is 95%.
For the time being the problem sectors with a transposition rate of
about 70% are: public procurement; insurance; free movement of
persons (mutual recognition of professional training and
education); intellectual and industrial property (trade mark
Directive and rental rights Directive. Meanwhile the European
Commission launched a series of studies on the effects of the
Single market without frontiers with a view to publishing a report
on the impact of the single market by mid-1996.
2) It is worth mentioning that upon accession Ireland's per
capita GDP was about 50% of the EEC-6 average.
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