European Enlargement - advantages for
existing EU members

The main advantages for the existing members of the European Union
(including the UK) are generally thought to be:

Export Potential – commercial opportunities from enlarging the
Internal Market
a) Classic trade creation effects of increasing the size of a customs union
b) Accession countries are small – but have grown more quickly than EU(15)
in recent years and have much faster growth potential (higher trend growth
rates – see research from Crafts (2002) later on in this case study) - The
long run economic potential of the accession counties is much greater than
their current size!
c) If living standards increase – export potential for consumer goods
industries is huge
d) Much recent FDI into accession countries has concentrated on retailing,
banks and hotels!

Exploitation of economies of scale from supplying to a larger market
a) Gains in productive efficiency / increasing returns to scale
b) Exploitation of principle of large minimum efficient scale in many industries

Foreign Investment and Incomes and Profits
FDI into accession countries will provide a net flow of interest profits and
dividends - boosting a country’s GNP and supporting the balance of
FDI flows likely to supplement rather than reduce domestic capital spending
FDI will speed up the transformation of accession countries

Free trade
Potential cost savings when importing raw materials and components from
accession countries (improving the terms of trade for developed EU

A more diverse European labour market
Opportunities for British and other EU(15) businesses to import lower cost
skilled labour in areas where there are severe labour shortages

Migration of labour from accession countries may help to offset longer-term
effects of ageing populations / slow growth of population of working age

Increased opportunities for EU people to travel, live and work in Central,
Eastern and Southern Europe

Successful integration of appellant countries may reduce the surge of
economic migrants seeking employment in the existing EU from eastern
European countries

More jobs
a) European Round Table of Industrialists estimates that enlargement could
create 300,000 jobs across current EU Member States

Higher EU economic growth
Independent research suggests that accession of the 7 largest Central
European candidates could increase UK GDP by £1.75 billion

There is significant economic potential around new growth areas like
Warsaw, Budapest and Prague

A cleaner environment
a) Accession countries have spent huge sums in securing improvements to
air and water quality to meet more stringent EU standards – reduction in
cross-border pollution will have positive externalities

Enlargement will be a catalyst for further economic reform in the EU
a) Reforms to the CAP
b) Spur to countries to reform their labour markets in the face of increasing
low-unit labour cost competition from accession economies