European Union and Central & Eastern Europe Relationships Essay

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Introduction

The relationships between the EU and Central and Eastern Europe propose great opportunities and benefits for both sides. Support for economic cooperation is based on the realization that it enables nations, governments, societies, enterprises, and individuals to create more wealth and generate more income through more efficient modes of production, consumption, and exchange. Increases in wealth and income give rise to higher standards of living and improved quality of life in Central and Eastern Europe. Without a growing productive sector of the economy, it is not possible to sustain higher levels of wealth creation or income generation in the EU. The main benefits for both parties involve economic, political and socio-cultural areas which have a great impact on all spheres of life and performance.

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The relationships between the EU and Central and Eastern Europe help the latter to overcome negative outcomes of the market-centered economy and improve their economic systems. Without cooperation and support of the EU, these countries would be unable to restructure their markets and compete on the global scale. Cooperation allows export development corporations make it possible for the high-risk countries to import capital goods and attract private investment from producers and investors who would otherwise shy away (Nugent, 2004).

Second, the services of export development corporations make it possible for small- and medium-size firms in Central and Eastern Europe to establish business relationships and partnerships with counterparts in the advanced countries so that together they can advance the interests of international trade, investment, and globalization. Over time, these business strategic alliances can help Central and Eastern Europe to improve the volume and quality of their export trade and foreign investment.

These alliances also provide excellent channels of communication for technology transfer relationship building and for the entrepreneurial firms of Central and Eastern Europe to acquire technical, operational, and managerial know-how from the advanced countries. “Gorbachev, however, saw the normalization of economic relations with western Europe as an important part of his economic reform strategy” (Henderson 1999, p. 4).

Trade and investment are at the heart of these relations. The countries in Central and eastern Europe most active and benefiting most from globalization are the same ones with the largest share of global trade and foreign investment. Countries lacking the institutional capacity for global trade and investment cannot gainfully participate in economic globalization (Henderson, 1999). These countries must be able and willing to open up their foreign markets in goods, services, and investments.

For most of these countries, trade and investments provide the best and most sustaining opportunity to alleviate poverty among their citizens and to catch up to the developed countries in terms of wealth creation, income generation, and rising standards of living (Nugent, 2004). Industrial policy formulation and implementation is key to wealth creation and income generation for society as a whole. Yet, this remains one of the most difficult public policy challenges for government and the private sector. “The general purpose of economic integration with the EU is broadly expected to lead to greater trade and investment opportunities” (Grabbe and and Hughes 1998, p. 37).

First, as the role of the state changes in economic management, corresponding market-friendly changes are required in the values, attitudes, and behavior of politicians, public servants, and civic leaders (Henderson, 1999). In many cases, these changes have been slow to take root, and senior officials have not been consistent in their support for market-friendly industrial policies. Second, there has often been confusion and misunderstanding about the exact nature of the new role of government in an open globalizing economy.

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Economic and political relations between the EU and Central and Eastern Europe allow these countries to adapt to new economic conditions and develop a unified approach to growth and economic development. The idea is not for government to abdicate its responsibility for providing leadership and strategic direction as would be suggested under pure laissez-faire conditions. Indeed, no country in the world practices pure laissez-faire economics (Nugent, 2004).

Therefore, the new role requires government officials to work as facilitators and champions of the overall strategic directions of the country’s industrial policy and development. The role of the government is to remove the impediments to industrial policy development and implementation and to work closely with the private sector and the international community to ensure a positive sustaining enabling environment (Henderson, 1999).

Globalization requires significant policy changes in labor and employment. Cooperation between the EU and Central and Eastern Europe draws on large pools of unskilled cheap labor and to support labor-intensive industries, with globalization, and given the need to produce high-end value-added goods and services, the emphasis changes to skilled technologists and knowledge workers. Technologists are those workers who combine both technical knowledge and manual skills.

They are usually trained in community colleges or specialized technical schools, rather than academic universities (Nugent, 2004). Examples include different types of technicians, automobile mechanics, health-care workers, and computer programmers. They are highly skilled and provide industry with a competitive comparative advantage. Developing countries unable to produce enough technologies are at a disadvantage because they do not have the human resources needed for producing nontraditional high-value-added goods and services. In fact, it has been argued that industrialized countries will continue to maintain a significant competitive edge over and above emerging economies as long as they educate and produce more technologists than the competition (Hyde-Price, 1996).

As the most important, this partnership and cooperation in political, social and economic spheres allow Central and Eastern Europe to participate in global economy. Developing countries and transition economies enhance their capacities for meaningful participation in the global economy through privatization and private sector development. It should be pointed out at the outset that privatization is not an issue only for developing countries (Hyde-Price, 1996).

Rich, industrialized countries also face challenges of privatization, although the net impact may be greater for the poor countries. Private provision of public goods and services is an extension to the privatization. Instead of the government selling public assets, it invites the private sector, through a process of competitive bidding, to provide a defined set of public services for profit (Nugent, 2004). These may be social services such as health care and welfare administration; utilities such as water, roads, and electricity; or security services such as prisons, or in the case of weak states, private military service. “Enlarging the EU eastwards will have major political, economic and security implications, and the process is likely to be long and complex” (Grabbe and Hughes 1998, p.2).

The government retains responsibility for the management of the contract and the supervision, monitoring, and evaluation of the services. The contract can be suspended or cancelled if the private contractor does not meet performance specifications, and contract renewal is subject to review and competition (Grabbe and Hughes 1998). The private sector contractors may be drawn from the local business community, NGOs, academic institutions, foreign companies or institutions, or combinations thereof. Sometimes, government agencies can also bid to get their jobs back through a competitive process.

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The EU exports low cost resources and labor while Central and Eastern Europe exports technology and innovative solutions. Globally, comparative advantage explains why manufacturing is concentrated in the countries; agriculture, mining, and textiles in developing countries. Within countries, there are also industrial clusters reflecting regional comparative advantage (Hyde-Price, 1996). Cooperation between the EU and Central and Eastern Europe, as it relates to trade, is aimed at reducing or eliminating protectionism in order to maintain a level playing field for all trading nations. Still, developing countries continue to face a wide range of nontariff administrative instruments of protectionism, which keep their exports out of the rich markets of developed countries (Grabbe and Hughes 1998).

Protectionism by the developed countries—aimed at keeping developing countries out of the formers’ markets especially in sectors such as agriculture, textiles, and light manufacturing where the latter have a decided comparative advantage—is a serious impediment to free trade and globalization and a constant source of conflict in multilateral negotiations (Nugent, 2004). As tariffs have been negotiated down over time, global trade has become more competitive.

Accordingly, both developed and developing trading nations use a variety of nontariff instruments to promote exports. Export subsidies are widely used by Central and eastern European countries and the EU alike to enhance their presence in the global market. Export subsidies are the other side of the protectionist coin because they protect inefficient domestic producers and keep out efficient, unsubsidized producers (Nugent, 2004).

Governments offer subsidies to exporters in order to protect jobs at home and promote domestic growth. Subsidies are also defended because they help maintain national culture, the countryside, and rural lifestyles. Subsidies take different forms, including ad payments to exporters, tax credits, loans, insurance policies, price support, underwriting research and development, and lobbying foreign governments. Governments of globalizing trading countries take it as their responsibility to engage in a wide range of public policy undertakings aimed at subsidizing and supporting the national export sector, and the citizens expect them to (Hyde-Price, 1996).

Cultural and political cooperation allow these countries to solve the problems of national security and cultural exchange, maintain political stability in the region and improve conditions of living in Central and Eastern Europe. All parties are invited to join including key ministries, businesses, NGOs, academics, and trade unions. “Looking beyond security, eastward enlargement could add new dimensions to EU external policy more generally, but probably only in the longer term” (Grabbe and Hughes 1998, p. 110).

Public servants represent respective ministries or agencies, whereas private sector members attend as individuals. Growth means the opportunity for wealth creation and income generation. In fact, such services make it very attractive for firms to export and invest abroad because they reduce the risks significantly without affecting the potential profits and other benefits (Nugent, 2004).

Conclusion

In sum, relationships between the EU and Central and Eastern Europe is mutually beneficial based on economic cooperation and trade relations. On the one hand, the EU maintains a strong security system and order in the region while Central and Eastern Europe can improve its economy and social systems. Although, partnerships are necessary for creating a positive macroeconomic enabling environment for further development and globalization. Most countries have export development corporations as part of their national institutional infrastructure for managing international trade.

Bibliography

  1. Grabbe, H. and Hughes, K. 1998, Enlarging the EU Eastwards. London: Pinter.
  2. Henderson, K. 1999, Back to Europe: Central and Eastern Europe and the European Union, London: UCL Press.
  3. Hyde-Price, A. 1996, The International Politics of East Central Europe. Manchester: Manchester University Press.
  4. Nugent, N. (ed.) 2004, EU Enlargement. Oxford: Oxford University Press.
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IvyPanda. (2021) 'European Union and Central & Eastern Europe Relationships'. 18 August.

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IvyPanda. 2021. "European Union and Central & Eastern Europe Relationships." August 18, 2021. https://ivypanda.com/essays/european-union-and-central-amp-eastern-europe-relationships/.

1. IvyPanda. "European Union and Central & Eastern Europe Relationships." August 18, 2021. https://ivypanda.com/essays/european-union-and-central-amp-eastern-europe-relationships/.


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IvyPanda. "European Union and Central & Eastern Europe Relationships." August 18, 2021. https://ivypanda.com/essays/european-union-and-central-amp-eastern-europe-relationships/.

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