Work detail

Selected Economic Consequences of the Czech Republic´s Accession into the European Union

Author: Mgr.Daniela Votavová
Year: 2002 - summer
Leaders: Ing. Irena Kemény
Consultants:
Work type: European Integration
Masters
Language: Czech
Pages: 92
Awards and prizes:
Link:
Abstract: The institutional changes related with the accession of the Central and Eastern European Countries into the European Union are accompanied by additional costs that have to be incurred. The way, how these expenses will be spread in time, will play the key role in avoiding their overcharging and threats of competitiveness.
The trade liberalization as a result of the European Agreements was one of the factors contributing to the sharp increase in the mutual trade among the CEECs and the EU. The real exchange rates development, the cyclic import demand changes in the Western European countries and the domestic demand decrease in the transition countries participated as well. The trade expansion between East and West also represents the reversion to a more natural trade model, which comes back without the artificial distortions that were given by the central planing system. However, the possible potential for the further rise in the foreign trade remains unclear. This potential seems not to be generally very high in none of the candidate countries, because the effects of the close integration of the transition economies with the Member States, as for the foreign trade, was already reached in the past ten years.
The discriminatory accession of EU to include some of the CEECs may create a significant potential for trade diversion. Reductions in trade costs between the EU and its new partners together with incentives for capital flows in favour of the CEEC-Ins will increase the profitability of production in the CEEC-Ins relative to the CEEC-Outs leading to trade diversion. The estimates tend to support this hypothesis.
Considering the limited domestic capital sources in CEECs, the foreign direct investment can significantly contribute to the crucial progress in the transition. The credibility strengthening of the transiting economies in the eyes of investors may represent one of the basic effects of the EU institutional frame adoption and the transiting countries accession into the EU. However, the preposition, that greater FDI will automatically leads to the new Member States improvement, is far from being definite. As, its composition can only be based on the experience of the previous enlargements.
The integration may contribute to both medium-term and long-term growth. The result of the improved source allocation brought by the removal of trade barriers removal is the most valuable asset. The effectiveness increase will encourage investments and this unusually high investment rate will eventually disappear. The growing capital contribution level will increase the proportion of capital to labour and decrease the incentive to higher capital investments until its eventual disappearance. As for the long-term growth, the barriers removal may simplify flows of international knowledge. This could decrease the innovation costs and subsequently cause the increase of domestic rentability of the investments to research and development and encourage more sources to be drawn towards innovation.
Nevertheless, the fundamental positive of Czech Republics´ accession into the European Union cannot be measured by any macroeconomic indicators nor by quantified costs or benefits of firms. That should be the final fulfillment of the Czech nation's ambitions to become an officially accepted part of the European space, with which it shares the intellectual, cultural, social, moral and other standards. Remaining outside this area, keeping the prosperity and preserving its own sovereignty in the current globalized world represents unrealistic alternative.
The goal of this thesis is to outline the arguments of the individual points of view in the discussion about advantageousness of our country's accession, considered in context of the previous enlargements experiences and the existing Eastern enlargement consequences surveys.


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