The Time Pattern of Costs and Benefits of EU Accession

The paper summarizes the seminar meeting held at IIASA on December 5-7, 1998, on "The Time Pattern of Costs and Benefits of EU Accession." The underlying idea of the seminar was as follows. The CEECs aspiring to EU membership have already understood that opening their markets to the West and adjusting to the institutional framework, laws, and rules of the EU entails direct and indirect costs, generating considerable tension for the intitutions and individuals concerned. At the same time, these nations will certainly benefit from accession. East European experts and policy makers have not yet performed a systematic accounting of the costs and benefits to their countries before, during, after accession. Especially lacking is an appreciation for the "time pattern"of emergence of these costs and benefits. The lack of such an analysis is a drawback for the accession negotiations and for public policy. Understanding the temporal and regional patterns of costs and benefits is crucial to planning annual macroeconomic programs, as well as to projecting such indicators as private consumption, investment, and trade and current account balances. An appreciation of these patterns is also crucial to mobilize public support for the accession at the appropriate time. The costs of converging to the EU are not evenly spread across the societies in transition countries and emerge at various stages of the accession process. Moreover, many of the changes related to accession have diverse economic, social, administrative, and political effects. Most of the analyses of the costs and benefits of accession for the EU-member states and CEECs focus on a single aspect or on a particular time period and calculate the costs and benefits for the incumbents only. The discussion at the seminar encompassed the costs and benefits in terms that went beyond the strictly economic, and focused primarily on the CEEC side. The period in question under consideration is characterized by the following milestones: the start of the transition, the signing of the Europe Agreements, the start of accession negotiations, accession to the EU, and accession the European and Monetary Union (EMU). The mix of participants at the seminar was ideal for informed scientific and policy discussion: researchers and government experts gathered from nine candidate countries (all but Latvia, for which the invited expert withdrew at the last moment) plus Macedonia, as well as from European and U.S. universities and the European Commission. A relatively large number of Austrian experts also contributed to the success of the meeting. Of the six sessions at the workshop, the most heated debate was on the costs and benefits associated with agriculture, environment, EMU, and future of EU transfers. The report is structured as follows. The first section summarizes the most recent developments in the accession process in the individual candidate countries and Macedonia. The second is devoted to the experience of past enlargements and to general issues surrounding measuring the costs and benefits of the coming enlargements. The following section deals with EU's environmental requirements, especially the "hard" costs and "soft" benefits that various studies associate with them. The fourth section analyses expected developments in the monetary and exchange rate policies of the candidate countries, with the emphasis on the recent turbulence on the world financial markets and the issues raised by the necessity of fulfilling the conditions associated with EU membership. The next section deals with the expected size, role, and possible use of EU transfers in the periods preceding and following accession. The sixth section is devoted to agriculture, one of the most complicated issues that arises in the accession process. The final section summarizes the results of the synthetic approaches that employ computable general equilibrium (CGE) models to estimate the costs and benefits of enlargements.