Should a country join the EU?

Analysis

The benefits of joining the EU

There are a lot of people or pressure groups who agree with the integration due to several advantages. First of all, for an economy of a candidate country, EU can encourage trade between the member countries; it can increase the degree of harmonization and co-ordination of economic policies. For example, remove tariffs, quotas, subsidies, etc to allow free trade. Without barriers to entry, it can help the candidate countries to reduce the cost to firms because it will indicate that no commission is required to buy foreign currencies, hence it will lead to a reduction in transaction costs. It will also mean more competition because there will be an increase in trade and act as an incentive for firms to produce at lower costs and boost the economy. In addition, we should aware the fact that firms can take advantage of economies of scale when they start to trade in one large market.

From a macroeconomic perspective, joining the EU may cause inflation to fall as member countries tries hard to meet the convergence criteria, therefore promote economic growth. Besides the economic analysis, the political agenda should not be ignored, as EU integration is the first leap to a single European state, i.e. a central bank, a common legislation, etc. The process of enlargement has continued over the past years and has dominated the talks at several summits. In Reeve's opinion "The economic effects of enlargement will undoubtedly be beneficial in the longer run. With careful analysis of economists from different countries, the enlargement policy which will be launched in 2004, is believed to have a better, stronger Europe, which can improve the EU's competitiveness in world trade with the World Trade Organisation (WTO)

The costs of joining the EU

Although there are a lot of potential benefits of EU integration, there are also costs which will arise in joining the EU. The main concern of EU held by eurosceptics is the loss of monetary policy as a macro-economic tool. They argue that the trade cycles of the countries from the EU may not be sufficient enough to be in line with each other to support a single interest rate. In July 2000, the International Monetary Fund (IMF) produced a report to claim that "the economy of Ireland (Eire), which is a member of EURO, was in danger of overheating because the interest rates across Europe was not high enough to suppress Ireland's inflation. Therefore, the government of Ireland would need to use fiscal policy to correct the overheating." The IMF, in July 2001 estimated the growth rates for Ireland is 7.5%, along with 3.7% for France and in the case of Germany the estimated growth rate is below 3%. Eurosceptics believe that estimates such as these indicate that one common interest rate cannot fit all countries.

Member of the EU have also got to pay an amount each year towards the EU budget. This can be a disadvantage as it will decrease their budget for the country. According to microeconomic analysts, domestic firms may suffer from competition because companies may trade with other countries instead of domestic firms because of their ability to sell it at a lower price. From a non-economic view, there are worries that EU integration will cause a loss of economic sovereignty, as it will lose individual countries' identity, especially if they join the EURO aswell.

Conclusion

Joining the EU is a vastly complicated business, a complex decision in all aspects especially with political ones. Politically, democracy and the rule of law are mandatory. On the economic front, applicants need to establish a stable market economy able to withstand competition with other EU states. However, my research made me realize that the benefits of joining the EU seem to outweigh the costs from both an economic and political way of looking at the situation. Particularly with the fact that EU will become the world's largest economic community, after the enlargement policy is to be introduced in 2004. Therefore, I think that a country should join the EU as long as their economic structure is suitable.

Evidence

Besides evaluating my research, I have also found evidence to support my decision. Estonia for example, is one of the 13 candidate countries waiting to join the EU, as they believe it will boost the economy and increase inflow of foreign investments, along with Hungary, they expect a surplus of GDP from EU integration after joining the EU. Another country Sweden was first been offered the opportunity to join the EU in 1996, however, the people vetoed. Today, after seeing the success of EU, they decided to join, as this will lower unemployment and put the finances into good shape. University of California did a study on Sweden's economy and believes that EU will boost its trade with other EU countries as well as increase total output by 1/10 in the long run.