This way to the Other Europe
With a string of meetings between the EU candidate countries in the coming days as well as in the past weeks, such as the Central European Initiative Summit in Skopje, it seems that Euro-fever is starting to run high. The candidate countries' social democratic representatives also gathered in Warsaw, still struggling to determine a negotiating position in the face of what Enlargement Commissioner Guenter Verheugen dubbed as the "window of opportunity that has to be used before it slams itself shut."
For a good part of the last century, the iron curtain divided Europe into a free and affluent west and a nearly bankrupt east, which for political and ideological reasons was forced into exhausting self-sufficiency. The enlargement of the rich man's club is expected to lead to the final elimination of the cold war legacy: the painful east-west divide. It is pinned as a true inflection point in European history and as Central Europe's chance in the spotlight.
But when the EU last expanded in 1995, only rich countries - Austria, Finland, Norway and Sweden - were applying to join the club. The current situation is quite different - after the admission of the candidate countries as planned in 2004, the GDP of the EU would increase by a mere 5%. All the current candidates - apart from Cyprus and Malta - are former Soviet satellites and much poorer than Spain, Portugal and Greece at the time of their accession 20 years ago. The region consists of independent nation-states with a short modern history of sovereignty, although many of their roots reach far back into European beginnings.
Much of what will happen in the years after the enlargement depends on the Central Europeans themselves, which warrants a closer look at regional co-operation now and in the future.
Countries in the region have come a long way since 1989, with experiments in privatisation (both failures and successes) and deregulation - the buzzwords of the day. They have seen impressive growth, and vast fortunes have been made. But much of this newfound wealth is suspicious in origin and corruptive in nature, while the quality of the public services and effectiveness of the civil servants is questionable, to say the least.
The Central and Eastern European governments had, from the beginning, made it their ultimate goal to join the EU club. They realised they need to work together in reaching this goal early on, creating the Central European Free Trade Agreement in 1992. CEFTA, initially composed of Poland, Hungary, the Czech Republic and Slovakia, has long expanded from its original Visegrad four and has been admitting new members from the region. Cross-national trade has more than trebled in the years from 1993, and economic relations have been strengthened throughout.
According to experts, accession means that the losers of the expansion and the opening of the markets throughout Central Europe are the farmers, factory workers and unemployed young people. Ironically, for the opposition leaders who stand behind the collapse of communism, such as Solidarity dissident Lech Wałęsa, it is the reinvented protégés of their oppressors who are leading their countries into the new future.
For one thousand years, Lithuania was a continental country, linked with the west as well as the east, and now, is also looking towards Scandinavia for investments. Diplomatic relations between Poland and Lithuania commenced in 1991, following a minor diplomatic faux pas committed by Poland, namely not recognising Lithuania as an independent state immediately after the latter had declared so. Iceland beat Poland to it. Initially the level of economic exchange between Poland and Lithuania was very low, but with the creation of the Polish-Lithuanian Chamber of Commerce in 1992 trade exchange has been picking up.
"Poles and Lithuanians have understood that the future lies in co-operation," said Lithuanian Foreign Minister Antanas Valionis, during his recent visit to Poland. His comment clearly reflects the overwhelming feeling in the region.
Before the collapse of communism, Soviet-dominated Lithuanians often regarded Poland as their "window to the west." After the resumption of diplomatic relations by 1997, the trade exchange between the two states was already at €449.7 million. This was directly linked with the general improvement of the economic situation in Lithuania, an increase in its GDP, a decrease in inflation and the enactment of the free market law. Currently, two Polish banks, Kredyt Bank and Bank Pekao, have branches in Lithuania. Polish investment in Lithuania reached nearly $13 million in the past years, placing Poland as the tenth largest investor in the country. There are 735 companies with Polish capital operating in Lithuania, investing mainly in the fuel industry as well as agriculture.
At the same time, Poland has been actively supporting Lithuania's efforts to join NATO, incorporating a Lithuanian platoon into the Polish KFOR contingent stationed in Kosovo.
Potential trouble for the two countries could traditionally arise from their close-knit history. There are concerns for the autonomy the 270,000, or 7%, of the Lithuanian population who are Polish speakers and the autonomy they should have, be it through the spellings of their names or Polish language education.
While the relations between Poland and Lithuania clearly point to a "lending a helping hand" situation mainly caused by historic obligations, relations between Poland and the remaining Baltic states, Latvia and Estonia, although warm, are in no way as spectacular.
There is a reasonable portion of CEFTA-based trade, but in terms of small and medium presence in Latvia and Estonia, very few Polish companies are represented. There are individual Polish brands in the Baltics, such as consumer products from dairy company Bakoma, but the Finns, who are also getting their foot in the Lithuanian door, dominate those markets.
The closer post-1990 political co-operation between Poland and Estonia results from the concurrent character of the Polish and Estonian priorities relating to European integration and regional policy. Both Warsaw and Tallinn have been pursuing EU membership and have been included in the first wave of candidate countries. In 2000, Estonia ratified a free trade agreement between the two, but economically it is much more attached to the Nordic countries.
According to the Polish Foreign Ministry, the government-level relations between Poland and the Czech Republic are very good, while some Czech politicians go as far as to describe the relations as "above-standard." The relations are very intense, and it seems that the Czech Republic, Hungary and Poland have created the region's pressure group, due mostly to their economic authority. Even the recent incident involving renegade detective and Samoobrona MP Krzysztof Rutkowski, who passed himself and his associates off as Polish police officers and kidnapped a murder suspect from Czech jurisdiction, did not disturb relations."
The Czech Republic has been Poland's largest trading partner within CEFTA, with Polish exports to its neighbours reaching almost €1.2 billion in 2000. This placed the Czechs as the sixth largest buyer of Polish goods, while the Czech Republic ranks as the eighth biggest seller to Poland.
Poland assisted Slovakia in aligning its legislation with the EU's acquis communautaire and with other aspects of legislation and social policy issues. Relations between the two focus mainly on close interregional and cross-border co-operation, which developed most strongly in the fields of environment, tourism, border crossings, local trans-frontier traffic and support for local economic initiatives. The two countries have established the Tatras and Beskidy Euroregions, as well as the Carpathian Euroregion, which also involves Hungary and Ukraine. The trade between the two has been mostly stimulated by their CEFTA membership, and it grew from €711.3 million in the mid-1990s to almost €1.2 billion in 2000. The trade however, is mostly at the large-scale institutional level, consisting of industrial goods, agricultural products and the like.
Although Hungary regards Poland as a strategic partner in Central Europe, their relations on the one hand are characterised by common support for the interests in the process of integration with Euro-Atlantic structures, such as the EU and NATO; on the other hand, there is a strong rivalry for primacy. Although some problems have emerged regarding the trade in agricultural products, they were resolved within the CEFTA framework. Hungary was the first country the newly sworn-in Aleksander Kwaniewski visited in 1996. The number of companies involved in mutual trade increased from 40 at the beginning of the 1990s to 5,000 by the end of the decade.
The relations between Poland and Slovenia have been driven by the common goal of EU membership as well as Slovenia's goal to tighten its co-operation with Central European countries. In this context, Poland, regarded as the country with the largest potential in the region, is an attractive partner for Slovenia. At the same time, many Slovenians perceive Poland as a poor, backward, farming country, while Poles look at Slovenia as part of the former Yugoslavia, fearing its involvement in the Balkan conflict. Slovenian producers' interest in Poland has been considerable, such as the purchase of the Lek Polska pharmaceutical plant in Pruszków by Lek-Ljubljana.
While some countries have clearly been labelled for accession sooner than others, their interrelations will still continue, if not within the framework of the EU, then within CEFTA or even NATO. A common stand in negotiations did not prove to be a particularly successful strategy as each country has different expectations. But if only for the obvious geopolitical purposes, reasonable political and economic co-operation in the region will continue.
But experts say that while the co-operation looks promising on paper and in statistics, it is hardly enough to grant the region the economic sovereignty it is capable of.
Andrew Mailer, a London-based consultant and a visiting lecturer to Poland, said that co-operation on the institutional level is not representative of the local small- and medium-sized businesses investing in the region.
Mailer pointed out such an opportunity is arising as the western markets are becoming saturated. He said that Central and Eastern European countries must become aware of the trading potential amongst themselves as well as the other non-candidate countries, such as Ukraine, Belarus and Russia.
At the same time, real-life co-operation seems to be overshadowed by the countries' pursuit of the their own goals, says Mailer.
"It seems that some of the candidate countries are more preoccupied with getting a slice of cake out of the EU at the expense of other states, but not really co-operating in order to achieve this goal," he said.
Where political solidarity is concerned, most states have decided that standing on their own pays off. This is exemplified by Poland's insistence on negotiating a 12-year transition period for foreign land ownership. Hungary and the Czech Republic completed their negotiations nine months earlier, agreeing to the proposed seven-year period, although initially all three agreed to stand their ground.
"Our impression is that the accession countries are not that friendly to each other, and perhaps not going in the right direction," said Roland Beck, co-author of the Deutsche Bank Enlargement Monitor. "They would have a better negotiating position if they stood together, but rather it seems every single candidate country is pursuing its own interests."
According to Beck, the candidate countries are preoccupied with being perceived as individual states with individual interests - a trait which may make decision-making much harder in the enlarged EU. His suggestion for the region's first steps in the EU is a common position, but he also says that EU coalitions are more than just geographical.
With a per capita income of €4,000 as opposed to the EU average of €20,000, experts wonder whether the region will ever catch up, or will it remain the realm of second-class citizens? Others ask whether EU accession will encourage local trade or alienate the individual member states? In the following weeks, the Business Journal will focus on the economic and political relations between Poland and each of the candidate countries. We will attempt to answer the questions regarding the region's and its inhabitants' readiness for accession, as well as the business opportunities that arise for local entrepreneurs within the region rather than outside.
I should mention in conclusion that of the two other candidate countries, Cyprus and Malta, Poland has yet to initiate formal recognition of the Maltese Republic.
