Speaker 1: One of over 200 blockades across Poland meant to shield
Speaker 1: the country from Ukrainian products, Farmers here are on a collision
Speaker 1: course with the expansion of the European Union.
Speaker 1: EU membership offers economic opportunities to millions.
Speaker 2: We know exactly what they want.
Speaker 2: We want to be part of EU.
More and more people in EU states are in favour of letting
new countries join the club, and EU officials have been pledging
to make it happen.
Speaker 4: Completing our union is the call of History it
Speaker 3: is the natural horizon of the European Union.
But the countries in line to enter are poorer than
those already in the EU, and some Europeans worry that
enlargement will threaten their livelihoods.
Speaker 5: We most probably go for the bankruptcy.
Speaker 1: In this episode, we will look at what it means for
Speaker 1: citizens to join one of the world's biggest economies.
Speaker 4: I think that that would give us like, more legitimacy.
Speaker 1: We will assess the cost of enlarging.
Speaker 3: We're we're talking peanuts, frankly speaking.
Speaker 1: And we will ask, can the EU afford to grow?
Speaker 1: That's all coming up on Business Beyond.
Speaker 1: For more than a decade, the EU seemed like a closed club
Speaker 1: with a line of members waiting to get in.
Speaker 1: Turkey became an EU membership candidate in 1999.
Speaker 1: In 2018, that succession process was suspended.
Speaker 1: But that's the story for another episode.
Speaker 1: In 2005, North Macedonia joined the queue.
Speaker 1: Montenegro followed in 2010, Serbia in 2012 and Albania in 2014.
Speaker 1: For a country to join the EU, it must fulfil certain criteria like
Speaker 1: being a democracy, respecting the rule of law and human rights,
Speaker 1: and having a functioning market economy.
Speaker 1: But for the past 20 years, reforms of candidates have been slow
Speaker 1: and the EU´s mantra was anti enlargement.
This is the former President of the European Commission,
Jean-Claude Juncker.
Speaker 1: Russia invaded Ukraine in 2022.
Speaker 1: All that changed.
Speaker 1: The war catapulted EU expansion to the top of the agenda.
Speaker 1: A year later, EU officials launched accession talks
Speaker 1: with Ukraine and Moldova, granted candidate status to Georgia
Speaker 1: and for the first time set a clear goal.
Speaker 2: I believe.
Speaker 1: We must be ready on both sides by 20-30 to enlarge.
Speaker 1: At the moment, a total of nine countries are candidates to joining.
Admitting them will be a challenge for the bloc's budget.
Speaker 1: This illustrates why.
Speaker 1: Luxembourg is the EU's richest country by GDP per
Speaker 1: capita and Bulgaria the poorest.
Speaker 1: Every single country actively on the list to joining the
Speaker 1: EU has a lower GDP per capita than Bulgaria.
Speaker 1: But what's the economic impact of admitting these countries?
Speaker 1: Well, that depends on who you ask.
Speaker 1: Nathalie Tocci is a former adviser on European foreign policy.
Speaker 3: I would say, you know, in most
Speaker 3: cases, because of course there was
Speaker 3: the one exception where there was a
Speaker 3: very clear economic upside, which was the northern enlargement.
Speaker 3: But if you take all other cases, the southern
Speaker 3: enlargement of the 1980s, the eastern enlargement of the 1990s
Speaker 3: and then of course and 2000s and then of course this?
Speaker 3: Enlargement.
Speaker 3: It is clear that that economics upside is is not there.
Speaker 1: The head of the European Commission sees things differently.
Speaker 3: The expansion of our single market
Speaker 3: brings economy of scale for our businesses, increases our
Speaker 3: competitiveness and therefore the strength of our single market.
Speaker 3: Our history of enlargement has dented economic success story.
Speaker 1: Before we dive deeper into whether the EU can afford
Speaker 1: to grow, let's take a quick look at what the EU even is.
Speaker 1: It was born out of the rubble of post war Europe.
Speaker 1: The so-called European Economic Community was meant
Speaker 1: to bring peace
Speaker 1: through Economic Cooperation.
Speaker 1: What started with just a few countries ballooned into
Speaker 1: the European Union with a total of 27 member states.
How it functions exactly is ridiculously complicated.
Speaker 1: But for the sake of this explainer it's only important
Speaker 1: to know some basics.
Speaker 1: Firstly, the EU is a single market.
Speaker 1: The aim of the single market is to make trade between EU countries as
Speaker 1: simple as possible.
Speaker 1: It essentially means people, goods, money and services can move
Speaker 1: freely between EU countries.
Speaker 1: And as a bonus, most EU members also use the euro,
Speaker 1: which makes transactions even easier.
Speaker 1: Another important detail.
Speaker 1: EU countries pay membership dues.
Speaker 1: The amount each country pays depends on its wealth.
At the same time, member states also get money from the EU.
Speaker 1: It spends the biggest chunks of its budget on
Speaker 1: regional development and agriculture.
Speaker 1: Those member states that are less well off relative to the others get
Speaker 1: more money from the EU than they pay in.
Because of how the E US budget works, many worry about one country
joining in particular.
Speaker 3: Now, Ukraine is obviously a different ball game
Speaker 3: because of its size, because of its agriculture sector,
Speaker 3: because of its, you know, sort of average wealth, which is
Speaker 3: obviously lower than that of the EU, and above all because it's a country
Speaker 3: at war with, you know, 500 billion in reconstruction and
Speaker 3: still counting, right?
Speaker 1: Ukraine would become the Eus biggest agricultural producer
Speaker 1: and one of its most populous countries.
Speaker 1: At the same time, it would be the poorest.
Speaker 1: That would mean a drastic reshuffle of the EU´s finances and a big change
Speaker 1: for one country in particular, Poland.
Speaker 1: EU funds are mainly allocated through relative wealth, so admitting
Speaker 1: Ukraine into the EU could turn Poland from the biggest recipient of
Speaker 1: funds into a net payer.
Speaker 1: Poland's government here in Warsaw has been one of the staunchest
Speaker 1: supporters of Ukraine since the outbreak of the war.
Speaker 1: And broadly speaking, support for Ukraine joining the EU is
Speaker 1: among the highest here in Poland.
Speaker 1: But when it comes to the more sensitive economic sectors,
Speaker 1: the picture looks different.
Speaker 1: For the past months, Poland's farmers have been in revolt.
Speaker 1: As a show of solidarity with Ukraine following
Speaker 1: Russia's invasion, the EU agreed to allow goods from Ukraine to come
Speaker 1: into the block with little to no restrictions.
Speaker 1: Farmers in the border region saw their produce prices plummet.
Speaker 1: They fear it's just a first taste of what's to come.
Speaker 1: The EU has been pushing to open up its borders to Ukraine.
Speaker 1: Polish farmers are blocking the roads leading to the country.
Speaker 1: They worry that EU expansion will threaten their livelihood.
Speaker 1: In 2004, Poland's farmers joined the ranks of the biggest food
Speaker 1: producers in the EU if Ukraine enters the union.
Speaker 1: That role is under threat because Ukraine's
Speaker 1: industrial farms dwarf European ones.
Speaker 1: Lucasz Czech is a grain and pig farmer.
Speaker 1: I asked him what would happen if Ukraine were to join
Speaker 1: the EU anytime soon.
Speaker 5: We most probably go for the bankruptcy I think because it we
Speaker 5: would be easily flooded of the much cheaper products from the Ukraine.
Speaker 1: With the help of EU innovation funds,
Speaker 1: Lucasz invests in new technology for his produce.
Speaker 5: European Union, we have incredibly high standards of food production.
Speaker 5: We have a lot of documentation checking,
Speaker 5: probing veterinary services.
Speaker 5: We have IT system to measure every movement of
Speaker 5: every peak or every poultry.
Speaker 1: If Ukraine were to join the European Union, it would likely
Speaker 1: get the biggest chunk of its agriculture budget.
Speaker 1: At the same time, farms like this one in Poland would lose
Speaker 1: out on subsidies.
Speaker 1: But it's not just subsidies Lucas worries about.
He thinks opening the EU borders to Ukraine before it meets
European Food production standards is foul play.
Speaker 5: Like we have the football match and you have like
Speaker 5: one team is not getting the red cards or yellow cards.
Speaker 5: Yes for what they doing because of the war.
Speaker 5: Yes.
Speaker 5: And, and it's huge deal which should be managed by
Speaker 5: governance and government of European Union.
Speaker 1: Back in Warsaw, Pawel Sliwowski of the Polish Economic Institute
Speaker 1: is more optimistic.
Speaker 2: For example, Polish farmers could
Speaker 2: try to produce more complex products so they can try
Speaker 2: to move up on the
ladder of value chain production, and then should try to seek
opportunities, for example, in buying some raw basic commodities
from Ukraine, work on them here and sell them with some
of the margin of gain.
Speaker 1: We've taken a detailed look at the economics of Ukraine joining,
Speaker 1: but what about the other candidates?
Speaker 1: The Western Balkans?
Speaker 1: Most countries in this region have been EU candidates for over a decade.
Speaker 1: North Macedonia, even for two creeping reforms in the region,
Speaker 1: bilateral disputes between EU countries and candidates,
Speaker 1: and slow reactions from Brussels have stalled the enlargement process.
Speaker 1: But here the economic story is a different one.
The cost of admitting the Western Balkans would
be significantly smaller.
Speaker 3: If you take basically the six Western Balkan countries,
Speaker 3: Georgia and Moldova, add them all up together,
Speaker 3: we demographically speaking, we're talking about more or
Speaker 3: less the same size of the United Kingdom.
Speaker 3: We're talking peanuts, frankly speaking.
Speaker 1: Peanuts for the EU, but let's look at what it means for
Speaker 1: Canada countries to join one of the world's biggest economies.
Speaker 1: Montenegro is the country furthest ahead in the queue
Speaker 1: to joining the EU, and at this market in Podgorica,
Speaker 1: it kind of seems like it's already a member.
Speaker 1: Since 2002, Montenegrins have been paying with
Speaker 1: euros for the country with a population of 630,000.
Speaker 1: Europe's currency offers a guarantee of stability.
Speaker 1: But EU membership doesn't only promise
Speaker 1: abstract macroeconomic benefits.
Speaker 1: It would also be felt concretely.
Speaker 1: Jasna Pejovic founded an online learning start up
Speaker 1: in Montenegro's capital.
Speaker 1: For her, being an EU citizen would be transformative.
Speaker 4: I think that that would give us like
more legitimacy on the one side and on the other side,
like a better brand perceptions.
Being part of the EU would be a stamp of approval
for international investors.
Speaker 4: And another thing is like, oh, we never did business
Speaker 4: with with Montenegro.
Speaker 4: We don't know how to do this.
Speaker 4: What are payment options, what are law regulations?
Speaker 4: And for them I asked them, but if we are part of European Union,
Speaker 4: would it be different?
And for many of them, they said that would be different
because they know about European Union.
Speaker 1: Jasna is by far not the only Montenegrin who has high hopes
Speaker 1: for EU membership.
Speaker 1: 80% of the population wants to be part of the Union.
Speaker 1: Citizens in the Western Balkans earn on average
Speaker 1: just 14% of their European neighbours.
Speaker 4: At this moment we are around 45 to 48% of living standard
Speaker 4: compared to EU countries and that's the big dream in accession process,
Speaker 4: converging in real terms with living standards.
Speaker 1: Mila Kasalica has been following Montenegro's progress
Speaker 1: towards EU membership closely.
Speaker 1: She says the biggest cost of accession won't lie with the EU.
Speaker 4: It's not the question of a cost.
Speaker 4: Costs are mainly part of local communities because it's not
Speaker 4: Brussels question how we will converge over them or how we
Speaker 4: will fulfil the rules.
Speaker 4: It's our job, it's our accountability,
Speaker 4: it's our responsibility.
Speaker 1: The road to EU membership has been long for Montenegro,
Speaker 1: with much still to be gained.
Speaker 1: Higher living standards, a bigger customer market and
Speaker 1: more international appeal.
Speaker 1: Many people in Montenegro hope that EU membership would bring about
Speaker 1: an economic boost.
Speaker 1: Montenegro's government aims to join the block by 2028.
Speaker 1: Experts warn that goal is unrealistic.
Speaker 1: So far, the EU has only approved a fraction of Montenegro's reforms.
Speaker 5: Sometimes EU leaders.
Speaker 1: Don't know.
Speaker 2: Exactly what?
Speaker 1: They want.
Speaker 2: We know exactly what we want.
Speaker 2: We want to be part of EU.
Speaker 1: This is as soon as possible.
Speaker 1: A look at Montenegro unveils a paradox.
Speaker 1: Economically, the Western Balkans could be embraced by the single
Speaker 1: market and lift the living standards of millions.
Speaker 1: Admitting the countries is much cheaper than admitting Ukraine.
Speaker 1: But the region's accession process has dragged on,
Speaker 1: while Ukraine's has momentum behind it.
Speaker 1: That's because the question of whether the EU can afford to
Speaker 1: expand is about much more than just money.
Speaker 1: Being part of the EU comes with a mutual defense guarantee,
Speaker 1: so attacking a member state is more costly.
Speaker 1: It's part of the rationale driving Ukraine's push towards Europe.
Thu Nguyen researches EU enlargement.
Speaker 6: For obvious reasons, the EU is now seeing enlargement as a security
Speaker 6: instrument.
Speaker 6: So the EU wants to enlarge for security reasons and the budget
Speaker 6: is part of the discussions, but it might not necessarily be the
Speaker 6: the deciding factor in it.
With an armed conflict raging on its borders,
perhaps the better question is no longer whether the EU
can afford to expand, but whether it can afford not to.
Speaker 3: So there are going to be economic costs,
Speaker 3: but the argument is that
Speaker 3: those economic costs are worth undertaking given that the
Speaker 3: strategic upside of doing it, or rather the strategic downside of
Speaker 3: not doing it, is is partly great.
Speaker 1: Vladimir Putin's land grab has pushed EU leaders to re evaluate
Speaker 1: the importance of expansion.
Speaker 3: So in a sense, enlargement was revived because of
Speaker 3: the security logic which is tied to Eastern Europe and the challenge
Speaker 3: for those that believe in enlargement more broadly and
Speaker 3: therefore also the Balkans.
Speaker 3: Yeah.
Speaker 3: I mean, the question is how do we tag onto that momentum?
Speaker 1: What also remains to be seen as whether the war in Ukraine creates
Speaker 1: enough momentum for EU members to put their money where their mouth is.
Speaker 6: Where does that extra money come from?
Speaker 6: Actually, that is also an open question.
Speaker 6: It is possible that it comes from the current Member States.
Speaker 6: It is also possible that the EU raises its own money through
Speaker 6: new own resources.
Speaker 6: There are discussions at the moment, for example through a plastic tax
Speaker 6: or through the new carbon adjustment mechanisms.
Speaker 1: The question of whether the EU can afford to expand
Speaker 1: or not is a matter of perspective, and many of the costs
Speaker 1: can only be estimated for now.
But a look at the past enlargement rounds can offer
some lessons on the benefits of letting new countries join.
In Poland, initial costs for the EU translated into an
economic boom for the country.
And that boom helps Member States too.
Speaker 2: When Poland joined the European Union and
Speaker 2: European Common Market few years ago, we started a very dynamic
Speaker 2: and profound transformation of the Polish economy.
Speaker 6: I think what what we we can acknowledge is that of course
Speaker 6: these are poorer countries that will enter the EU.
Speaker 6: At the same time it comes with benefit for the internal market,
Speaker 6: which becomes bigger.
Speaker 6: It comes with benefit because the workforce becomes larger.
Speaker 1: And there's another lesson to be learned from the past.
Speaker 1: Any budget reshuffle to new members doesn't happen overnight.
Speaker 1: During the last enlargement round, new member states only received
Speaker 1: a fraction of their agriculture funding initially.
Speaker 1: Then the funding was increased in phases.
The EU actually has adaptation mechanisms to ensure
that the fluctuations of what Member States receive and pay
in is not too high, and the EU also has adaptation
mechanisms to deal with enlargement to ensure that or so
there the the the extra costs are not immediately very, very big.
Speaker 1: At the beginning of this episode, we asked whether the
Speaker 1: EU can afford to expand.
What's clear is that an enlargement wave would mean a
drastic economic reshuffle for some in Europe's society.
That change would be felt concretely.
Speaker 3: Do I end up losing part of the budget?
Speaker 3: Well, mostly yes.
Speaker 3: You.
Speaker 2: Do in my view this is unavoidable scenario and
Speaker 2: to be more strict this is positive scenario
Speaker 2: because when you are a net buyer it means you are a rich,
Speaker 2: developed and country with a strong economy.
Speaker 1: At the same time, letting in new countries brings
Speaker 1: economic opportunities to millions of People.
Speaker 4: And that's the big dream in accession process,
Speaker 4: converging in real terms with living standards.
Speaker 1: The experts we spoke to emphasize that when it comes to enlargement,
Speaker 1: affordability is also a question of political will.
Speaker 3: So there are going to be economic costs,
Speaker 3: but the argument is that
Speaker 3: those economic costs are worth undertaking given that the
Speaker 3: strategic upside of doing it, or rather the strategic downside
Speaker 3: of not doing it, is is part of the rate.
Speaker 1: The question that remains, is there enough momentum in Europe's
Speaker 1: enlargement plans to move member states to front the bill?
Speaker 1: That's all for this episode and now we would love to
Speaker 1: know what you think of Business Beyond.
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Speaker 1: on the on screen link or in the description.
Thanks for watching and take care.