Drift to nowhere in central Europe

IS THE WORLD ready for a greater Europe? More to the point, are Europeans ready for a greater Europe encompassing huge and ancient territories bound together by economic and security ties?

These are questions that the Group of Seven industrialised nations again confront as they ponder the future political structure of Europe. They also underlie the often contentious debate over Jacques Delors's successor as the next head of the European Union.

For the purposes of this column, let us assume that the answer to this is relatively pessimistic.

As long as the central European economies remain in limbo, Europe's future as a secure land of bright economic promise remains in doubt. Momentum to build a grand, unified continent has slowed, doubts have set in and barriers are beginning to go up. Lech Walesa's poignant appeal to President Bill Clinton for Western help to ensure that central Europe does not become 'a nowhere land where anything can happen' sums up the situation pretty well.

He was speaking mainly about the security void, but I would rather focus on the economic void. The Czech Republic, Hungary, Poland, Slovenia and Slovakia are part of Europe's historic industrial core. Judged this way, rather than on a per capita income basis, they match well with the EU countries. Their economic performance has been remarkable, as almost all have implemented stabilisation and reform programmes that would be rejected as politically impossible by West European governments. And yet, despite this progress, the EU has turned its back.

After supposedly embracing these economies with the signing of association agreements meant to free trade, the EU in fact offered limbo status with no verifiable conditions or timetables for membership. Free trade is the proclaimed objective of the association agreements, but the 'exceptional' trade restrictions against 'sensitive' goods, defined here as textiles, steel and agriculture, in fact cover most exports from these countries.

Is not the EU in danger of missing the boat? Arguments that the costs are just too high to offer membership fail to take account of the extraordinary potential benefits of solid longer-term growth. The gains from trade alone tilt the balance towards early widening through early membership. Already, in the aftermath of the collapse of Cold War economic structures, there has been as much as a fivefold percentage increase in EU imports by these countries.

Increases in growth and living standards will only result in greater volume and stability. It was Montesquieu who stated that peace is the natural effect of trade.

Watching the EU of today gives little hope that it intends to pursue such high-minded goals. Instead, excuses abound and there are many rationales against admittance: entry would mean a mass relocation of industry to these low-wage economies; there would be intolerable strains on the EU's budget; and the political uncertainties of the economies argue for a wait-and-see approach.

For an answer to the first point, we need only look at the experience of admitting Greece, Spain and Portugal when similar objections were raised. The record shows that the industrial triangle of London-Frankfurt-Milan has remained intact. There are numerous studies that suggest that the longer-term trade benefits will far outweigh higher budgetary costs.

Finally, a wait-and-see attitude is likely to produce exactly what Mr Walesa fears: 'A nowhere land where anything can happen.'

Granting more generous trade privileges to the central European economies is the cheapest and most effective form of assistance that the EU can offer. This, with the prospect of membership-inspired financial support based on a clear set of conditions, would constitute a European version of the Marshall Plan which brought so much prosperity to Western Europe. In the process, everyone benefited.

Having just returned from Europe and numerous conversations with central Europeans, I am struck by the extent of the damage limbo status can bring.

For example, how encouraging to hear a leading Czech intellectual assert: 'We know now we can make it economically.' But how discouraging when he adds: 'We live in fear that someone will try to take it away from us and we will stand alone.'

This is one of the messages President Clinton is hearing on his trip to Europe. He is being pressed to exert a US role in crafting 'a grand vision of a unified continent'. For its part, the EU could also take an important step towards that goal.

It could and should amend the association agreements with Central European economies to include conditions and timetables for admission.

(Photograph omitted)