Implications for developing countries: Trade and investment

The accession of the Central and Eastern European Countries into the European Union will change the trade and investment relations between developing countries and the Union. There is a danger of a diversion in trade and investment flows. There is a possibility that the current EU15 will import more from the candidate countries at the costs of imports from developing countries. Similarly, ICM from the EU15 might be directed towards the CEECs, while the ICM flows towards developing countries might decrease. On the other hand, economic growth in the CEECs will stimulate trade between these countries and developing countries. Accession into the European Union also means that according to the acquis the new member states need to comply with the common commercial policy of the Union. This means that the CEECs are required to apply the General System of Preferences towards a number of developing countries. The external tariff of imports in the CEECs also need to be adjusted according to EU levels. This means in some cases that the external tariff of the CEEC markets will be lower than pre-accession levels, although in other cases the tariffs might be increasing.

The following documents will provide more information on the effects of the eastern enlargement for trade and investment flows with developing countries.

Relevant publications

Trade Effects From The Integration Of The Central And East European Countries Into The European Union, J.F. Francois, M. Rombout, Sussex European Institute, Working paper No. 41, 2001

The authors of this working paper aim to discuss the consequences of the enlargement for trade. In order to do so a computable general equilibrium model is applied. It does not only deal with the effects on the European Union’s Member States and the candidate countries, it also discusses the effects on third countries. They conclude that there are no evident impacts on third countries in general, although they do warn that the enlargement will affect certain sectors in some countries. Most likely, countries with interests in agriculture and in textiles and clothing will be affected by trade diversion . 

For the paper click here.

Development Cooperation of Transformation countries. The Enlargement of the European Union and Latin America, L.L. Klochkovsky, 1998, Discussion Forum, Platform of Austrian non-governmental development organizations, Austria

In this contribution the author discusses the effects of enlargement on the relations between Latin America and the EU as well as between Latin America and the countries in Central and Eastern Europe. The paper gives an overview regarding the different issues which are at stake for Latin America including trade, investment and aid aspects. The negative effects of the EU enlargement are emphasized in the paper. Positive aspects of the enlargement such as increases in wealth are neglected. Therefore the overall conclusions are not well balanced. The author is advising Latin American countries however to achieve a diversification in their trade relations with the EU in order to deal better with the upcoming changes in Europe.

The document is available here.