The European Union's Commissioner for Enlargement, Günter Verheugen, spoke before the Chicago Council of Foreign Relations on 6 April 2000 about the challenges of expanding the EU vision beyond its current borders. This event was cosponsored by the European Union Center-Wisconsin and the European Union Center-Illinois.

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Shaping a new Europe 
Political and Economic Implications of enlargement

President Rielly,
Distinguished guests,
Ladies and gentlemen,

It will certainly be no secret to you that the Chicago Council on Foreign Relations has an outstanding reputation not only in the United States but also on the other side of the Atlantic.  I feel particularly honoured by your kind invitation, President Rielly,  to speak here in Chicago tonight and it is my great pleasure to address such a distinguished audience.

Let me thank everybody who was involved in the preparation of this event, and I am particularly grateful that it was organized in cooperation with the EU Centers at the University of Illinois and the University of Wisconsin in Madison.

I have been asked to address the political and economic implications of enlargement of the European Union.  Enlargement is the biggest challenge the Union is facing at the dawn of a new millenium. And it is without any doubt one of the key priorities for the European Commission.

When I was offered the job of Commissioner for enlargement last year, an anecdote about former President Carter came to my mind: when Jimmy Carter once visited Egypt, he was taken on a tour to the Great Pyramid of Giza, and he was told that it took twenty years to build it. "I am surprised that a government organization could do it that quickly" was Carters reaction.

That might give you a sense of how I feel: I am dealing with 15 governments organizations of our Member States and with 13 governments of our candidate countries. And they won't give me 20 years to accomplish a task that might be even more difficult than building the Great Pyramid: that is to conclude accession negotiations with 12 countries and to pave the way for fully integrating Turkey into European structures.

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I.

Ladies and gentlemen,

The United States of America and the European Union have defined their transatlantic partnership in several important documents: the 1990 Transatlantic Declaration led to the New Transatlantic Agenda in 1995 which meant a shift from consultations to common action. In fact, the New Transatlantic Agenda provided a structured framework for wider EU/US cooperation on foreign policy, global challenges from international crime to terrorism, trade and economic matters as well as closer involvement of civil society in the EU/US partnership. To give further impetus to trade and investment cooperation, the Transatlantic Economic Partnership was launched in 1998. This is a solid basis for our cooperation - despite occasional disputes on singular trade issues like hushkits, bananas or hormon beef.

But we have to look beyond. We have to reflect on the question how EU enlargement, greater stability on the European continent and new market opportunities will affect - and maybe redefine - our transatlantic agenda in the coming decade.

Americans and Europeans share important common interests:

·       Our societies are based on common values: respect for democracy, the rule of law and  respect for human and minority rights.

·       We want to secure peace and stability in an increasingly unstable world.

·       And we  want to safeguard free trade and guarantee and increase access to global markets.

I would invite you tonight to share with me some reflections on  strategic political considerations regarding EU enlargement and  the benefits we might stand to gain on both sides of the Atlantic.

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II.

For us Europeans, enlargement is a political imperative and part of our European vocation. Just ten years ago, the Berlin wall came down and Communist regimes collapsed shortly after. The division of Europe has always been artificial. The failure of the liberal revolutions in the nineteenth century, the devastating wars Europe has witnessed in the twentieth century, and the Communist regimes created two separate Europe's, which we must now join. We are committed to  this historical mission: to integrate the Central and East European Countries which can and want to participate in our common achievements.

The next enlargement will be different from any of the earlier accession rounds - and unprecedented in scope: it will increase the population of the Union from 375 million to 550 million people and nearly double the number of Member States from 15 to 28 or more. Unlike former accession rounds, negotiations include complexe new policy areas like the monetary union, justice and home affairs and security and defence policy.

And never before there was such a huge economic gap between the Union and accession candidates: GDP per head in percentage of European Union average varies between about two thirds for Slovenia (68%) and the Czech Republic (60%) and less than one third for Lithuania (31%), Latvia (27%), Romania (27%) or Bulgaria (23%). Inflation rates vary between normal or moderate rates (Czech Republic 3,5%, Poland 6,5%) and exorbitant rates of 40% (Romania) or even more than 80% (Turkey in 1998).

This enlargement process is based on a set of criteria established at the Copenhagen European Council in 1993:

·       the political dimension - stability of institutions guaranteeing democracy, the rule of law, human rights and the protection of minorities,

·       the economic dimension - which requires the existence of a functioning market economy, and the capacity to cope with competitive pressure within the internal market,

·       and the full adoption of the Community legislation. In other words: new members must take on all obligations of membership, no opt-outs for new-comers. This is no easy task, by the way. More than 20.000 european legal acts have to be transposed into national law!

The Helsinki European Council, last December, has reaffirmed the inclusive nature of the accession process, which now comprises 13 candidate countries within a single framework.  And it has stated that the Union should be ready for enlargement from the end of 2002.

I will not hide from you that before any enlargement can take place the Union itself has to do some homework. Skeptics in our Member States say that the process of further integration will come to a halt when even more countries join the Union. Indeed, institutions that were designed for six members, and which are already reaching their limits now with 15, will certainly not be able to manage a Union of 28 or more countries. So we are currently reviewing the Union Treaty with the aim to introduce indispensable institutional reforms needed to create an enlarged Union that will work.

Let me only explain one of the hot issues on the table: the question of the future voting power that bigger and smaller Member States should have in the Council. The current system to weight  member states' votes is deliberately tilted against bigger countries. But if it continues as it is, the lack of balance between population and voting power will become unsustainable. This issue is of particular importance in the perspective of new Members consisting mostly of small or medium-sized countries - only three out of the thirteen candidates have a larger population than the average of the existing Member States.

On-going negotiations with Cyprus, Hungary, Poland, Estonia, the Czech Republic and Slovenia - underway since march 1998  - will continue with the same, even with increased momentum. Only recently, on 15 February, the Union began accession negotiations with six more candidate countries, namely Romania, Slovakia, Latvia, Lithuania, Bulgaria and Malta.

The Union's enlargement strategy is designed to allow for a speedy negotiation process - we do not want to lose the momentum of change in the transformation countries. Our objective is to ensure that the pace of the negotiations will reflect each candidate country's program in preparing for membership. This includes the opportunity, for the most advanced of the 'newcomers' to catch up with the others within a reasonable period of time.

At the same time we have to make sure that the achievements of integration made so far will remain intact and be if possible strengthend in a Union of up to twenty-eight member states. In other words:  we have to reconcile the conflicting demands of speed and quality.

The countries of Central and Eastern Europe, Malta, Cyprus and Turkey have already shown their determination and their capacity for change. Their economies are increasingly integrated with that of the Union and huge efforts are being made by all actors, parliaments, governments, the public and private sectors, to prepare for EU membership. 

I insist on this point - huge efforts are being made by all actors. The countries of Central and Eastern Europe which are preparing for membership have to fulfill two extremely difficult tasks at the same time: They are still passing through a period of transformation from communist legacy to open and democratic societies. And we take note that enormous progress has been made. The political elites have shown courage and strong leadership. At the same time, these countries have to prepare their integration into a Union which is much further developped as it was the case before any of the earlier accession rounds.

Let me recall the accession of Spain and Portugal to the European Community, almost twenty years back. Also then, the main objective of enlargement was to achieve a political goal: we wanted to prevent further dictatorships, we wanted to establish democracy. The same holds true today. Our objective is to promote political and economic stability - and make this process irreversible.

This requires solidarity among member states and with the candidates. Economically strong members have to provide considerable financial funds to support the others. But we all benefit from the fruits this policy brings to bear - stability and properity. Today Spain - economically weak upon accession - is a stable democracy and  a flourishing economy. Without any doubt, today's candidate countries will witness a similar development.

When the first accessions will take place will depend entirely on the speed with which applicant countries can make progress on meeting the criteria. And I cannot today make any predictions about who would come when to the finishing line. None the less, we expect that the first wave of the next enlargement will take place before the term of this Commission comes to an end.

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III.

It seems important to me to make some additional remarks on Turkey, and on Cyprus. The Helsinki European Council in December 99 has granted Turkey the  status as a candidate for EU accession. The Union considers Turkey as a reliable partner in foreign and security policy. We want Turkey to be a stable democracy, respecting the rule of law and human rights. And we expect that Turkey plays a constructive role in contributing to peace and stability in the eastern mediterranean region.

The visible improvement of relations between the two neighbouring countries, Turkey and Greece, after the Helsinki decision has been widely welcomed. And I sincerely hope that this has created a solid  basis for further positive developments.

Regarding political reforms in Turkey we expect a firm commitment to continue the process of domestic policy reforms for instance on the penal code, the new civil code and enhanced independence of the judiciary. Important human rights issues must be addressed.

Negotiations with Turkey have not yet started.  The ground has to be properly prepared. Full compliance with the political criteria of Copenhagen is, like for all candidates, a pre-condition for the start of negotiations.

The positive developments in Greek-Turkish relations,  Turkey's candidate status and the resumption of proximity talks aiming at a comprehensive settlement for Cyprus all contributed to an improved  political climate and the chance for new dynamism. The Helsinki summit concluded that a political settlement will facilitate Cyprus' accession to the Union, but if no settlement is reached by completion of the accession negotiations, the decision of the EU on accession will be made without a politcal settlement being a pre-condition.

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IV.

What do we stand to gain from an extended European Union? What are the political benefits?

First and foremost, the enlargement process is vital for securing political stability, democracy and respect of human rights on the European continent as a whole. We are creating a transatlantic community of democratic nations - defending our common values on a global scale.

Political stability and freedom will be increased throughout Europe.  Against the background of many years of crisis in the Balkans we all understand the importance of this process. The only way to achieve lasting stability in Europe is further integration.

The enlargement process also contributes to greater political stability within and between candidate states.  We are reducing the risk of potential regional conflicts. To give you one example: Today, minorities in candidate countries are better protected than only a few years ago. The situation of the Hungarian minority in Slovakia has improved; and language laws including safeguards for the Russian minorities in Estonia and Latvia are being drafted in close cooperation with the OSCE.

Many other cases could be made: the expansion of the European Union will enable us to enhance environmental security, it will reinforce the Union's non-proliferation policies, and it will provide the opportunity to tackle more effectively common transnational problems such as crime and money-laundering.

Let me briefly address one issue that - as I know - is of particular interest on this side of the Atlantic: the rapid development of a European Security and Defense Policy (ESDP).

I will not speculate, when and for whom of the remaining EU applicants NATO membership will be possible. EU and NATO enlargement - although often considered as complementary - are two different and distinct processes. But EU membership reinforces the economic and institutional pillars of these countries, thus contributing to their security, and they are of course participating in ESDP structures which are presently taking shape.

The Union is currently establishing new structures in order to fulfill the Amsterdam Treaty commitments to take responsibility for the so-called Peterberg Tasks - that means peacekeeping, peace enforcement and humanitarian rescue missions. And the Union is seeking to improve its defense capability by creating by 2003 a rapid reaction force of 60.000 - a force we intend to be able to mobilise within 60 days and deploy and maintain in the field for a year.

But let me make it very clear: The European Union is not trying to loosen its ties with the US - on the contrary, we want to strengthen them. We are not trying to weaken NATO - but strengthen it.  The Union is not trying to create a European army separate from NATO - but an EU capability to act where NATO does not wish to become involved. For our friends and partners who are not, or not yet, in the EU, we are preparing arrangements to ensure that ESDP is an inclusive - not an exclusive - process.

In other words: Europe tries to take on more responsibility for its own security. And it tries to enhance its part of the transatlantic burden-sharing.

Territorial defense is and will remain the task of NATO. The European Union is not an organisation of collective defense. But the Union should be able to keep its own house in order - including the use of military force, if necessary.

Finally, before turning to the economic part of the coin, a word on the final shape of the European Union. Will the enlargement process be extended beyond the 13 candidate countries? How are relations with the neighbours of an extended Union shaping up?

The present enlargement process will have a profound impact on the Union's relations with the countries of the Western Balkans as well as with its neighbours to the East, Russia and the Ukraine in particular, and to the South. Although I do not not exlude that  additional countries could become candidates for accession in the long term, the scope for further extending the Union  is limited. But the Union will deepen relationships with its immediate neighbours.

Let me in particular mention the Western Balkans: What we need is a long-term strategy for peace. We are starting to implement such a strategy - we are  buildining South East Europe's road to integration with the rest of Europe, and with the Euro Atlantic Community.

The Union has spent more than 16 billion Euro in reconstruction and humanitarian assistance to the region since 1991. We have borne huge costs on top of that - maintaining a European military presence in the region for nearly a decade. And hosting huge numbers of refugees in our countries.

The European Commission is now proposing to spend nearly 12 billion Euro to rebuild the region over the next six years - in addition to bilateral aid from our member states and on top of the money we are spending to keep our military deployed. More than 2.4 billion Euros have been pledged or committed at last week's donors conference aimed at developing infrastructure, promoting private sector development and supporting policy and institutional reforms.

Only 10 days ago, EU Heads of Government in Lisbon have asked to reinforce efforts across the region and to work out proposals rapidly to expand trade access - though assymetric trade measures - to the European Union market. These will precede the Association and Stabilisation Agreements.

With Russia and the Ukraine the Union will establish strategic partnerships. And with the mediterranean countries, we are seeking new contractual relations, again with the perspective of establishing a free trade area.

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V.

Ladies and gentlemen,

Enlargement will bring an Single Market of over 500 million consumers and an open, border-free area where goods and services can circulate freely. Trade continues to be the dynamo for market integration and expansion.

The value of intra-EU foreign investment hit a new record in 1998. And so did the value of cross border mergers and acquisitions between EU firms. It is also important to note that since 1993 extra-EU trade has grown faster than intra-EU trade. Capital market integration is accelerating. The poorest areas in the Union are catching up with the rest of the EU.

This is of particular importance for candidate countries. Their readiness for participation in a competitive market economy is a decisive parameter for finally deciding to conclude accession treaties.

Our assessment of candidate countries' implementation of the internal market legislation is that they have all made progress towards alignment. The most advanced ones claim  that they will complete their legislative alignment by 2002 - 2003. A solid legal basis of internal market legislation is in place in most candidate countries but the related institutional framework still has to be finished. The administrative capacity to enforce internal market rules is essenial for our assessment of candidate countries' ability to comply with EU legislation.

All candidate countries have increased their trade integration with the EU. In terms of trade integration they are already as tied in with the EU as the EU's own Member States.

The EU is now by far the most important trading partner of the thirteen candidate countries. Their imports from the EU and exports to the EU range between 50 percent for countries like Bulgaria and Lithuania to more than 70 percent for Poland and Slovenia. These countries are now our second trading partner after the US. Direct investment by the current Member States in the candidate countries is also growing fast. In that sense they are already now enjoying economic benefits of integration.

But I repeat what I said earlier: Enlargement is a huge operation with more candidate countries than ever before.  This operation can only be successful if enlargement is based on sound and valid economic foundation and if the integrity of the internal market system is properly maintained. If not, the machinery that brings growth and prosperity to Europe will break down and spread disintegration.

A recent OECD study shows that the EU level of openness to trade and investment is equal to or higher than in the US and far higher than in Japan.  Non-EU manufacturers and service providers will in future only need to comply with EU standards to sell their goods and servives throughout the expanded internal market - instead of having to apply many different rules and standards.  Moreover, in most cases, accession will lead to lower tariffs for third countries than was previously the case.

In my view, there is no doubt that US business will benefit from access to an even larger market and from growing opportunities. The existing combined EU/US trade and investment relationship totals 2 trillion dollars.  By contrast, US trade with the candidate countries is small as a proportion of total US trading activity. After accession, the more predictable economic conditions and  a secure legal and administrative framework will further facilitate business activities and open the prospect of a business and trading relationship comparable to that existing now between the US and the EU 15.

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VI.

Ladies and Gentlemen,

I hope that by now I have given you some food for thought. I will be brief in my concluding remarks.

The European Union has set its course to new horizons.  After the successful completion of the Single Market and the introduction of a single currency, the next steps for further integration and extension of the Union are being prepared.

We will enhance the European security capability by creating effective crisis management mechanisms in close cooperation with NATO. This will not weaken our Transatlantic Alliance - but reinforce and revitalize it.

The Union will develop a strategic partnership with Russia and Ukraine, promote regional cooperation in South East Europe and conclude stability and association agreements with the countries of the Western Balkans.

In the Mediterranean, new contractual relations with the north African countries from Morocco to Jordan are being negotiated in the framework of the Barcelona process. Our aim is to achieve a free trade zone with these neighbouring countries by 2010. This will mean a market of over one billion consumers directly connected to the European Union.

But Europe's top priority remains, first and foremost, to vigorously pursue its policy driven unification process. We will make enlargement a success story.

The enlarged European Union will be different from today. Europe's face will change. And these changes will also affect our future common agenda.

My conclusion is: We have every reason to further intensify our close transatlantic relations in the future. There is no other political partner in the world, with whom we share so many interests and values.

Our common interests comprise conflict management, peace and stability in Europe. It comprises cooperation on business opportunities and on economic and financial issues in a world of interdependent and global markets. And we will have to rely on each other to master global challenges  such as international crime, terrorism and environmental pollution.

Close transatlantic relations based on equal partnership is in the interest of both, Americans and Europeans. The role of partners may change, but it remains essential to both of us to maintain and strengthen our partnership.

Thank you very much for your attention.