EU Enlargement and the Portuguese Economy

Abstract

The main focus of the present paper is on the emerging and likely future trade effects of enlargement. Though our particular concern is with Portugal, we set the scene by comparing the trade structures of the 10 countries of Central and Eastern Europe (i.e. the eight CEE accession states plus Bulgaria and Romania) – including an analysis of the individual cases of the Czech Republic, Hungary and Poland – with those of the EU15 as a whole, and with those of the 4 EU cohesion countries. The elimination of trade barriers between incumbents and accession states will have two trade‐related effects on EU incumbents: an increase in bilateral flows with the CEEC and a shift effect as the CEEC displace some incumbent exports to EU markets. The first effect is likely to be strongest for those incumbents for which there is a strong overlap between their export structure and the import structure of the CEEC. Portugal emerges as one of the economies with the least overlap. The displacement effect, we conclude, is likely to be particularly strong in the case of Portugal, given the high degree of similarity between Portuguese exports and those of the CEEC. Portugal appears to be ‘being squeezed from below’ in that, for the majority of its traditional export sectors, the CEEC became progressively more competitive during the second half of the 1990's. Portuguese specialisation was increasingly confined to low‐technology, low‐added‐value sectors with declining demand, as strong FDI inflows to the CEEC led to an increasing preponderance of more dynamic sectors in their export structures. Thus, Portugal is also being squeezed from above. This suggests that there may be substantial industrial disruption, in response to which labour‐market flexibility and dynamic entrepreneurial response is crucial. Intersectoral mobility is generally easier the more highly educated the workforce – an indicator on which Portugal scores poorly. The Portuguese labour market, however, displays a high degree of flexibility, consistent with its long lasting low rate of unemployment. Continued flexibility will help minimise these likely adjustment costs. Besides the trade and industry effects, other topics considered in the paper include the implications of enlargement for Portugal's ability to attract FDI, the likely consequences for Portugal of inward migration from the CEEC to the EU, and the implications of enlargement for Portugal's budgetary relations with the rest of the EU.

Integration of CEECs into EU Market: Structural Change and Convergence*

“…Indeed, cursory evidence has shown that FDI flows into some southern European countries have declined during the 1990s, even if it has not been proven that the East receives what would otherwise flow to the South (see, for instance, Buch et al, 2001). However, some CEECs are in a better position than Portugal, Spain or Greece as regards host country characteristics that motivate an entrepreneur's decision to invest abroad, as shown, for instance, by Crespo et al (2004), based on data from the Institute for Management Development, for the cases of the Czech Republic and Hungary.…”

Prospects for the Greek Economy in the Post‐enlargement Era

“…Among the high-technology sectors, there has been some progress in pharmaceuticals, plastics, telecommunications, electrical apparatus and machinery, although their shares in Greek exports are not yet significant. This is further documented in the specialisation factors estimated by Crespo et al (2003), according to which Greece in 2000 is the country with the highest weight in the group of exporting sectors with high labour and natural resources costs, and the lowest weight in sectors with product differentiation and R&D costs. On the contrary, the CEECs exhibit a fair distribution among all exporting sectors, but showing much higher weight in the product differentiation sectors than the cohesion countries.…”

Επιπτώσεις Στην Ελληνική Οικονομία Από Την Ένταξη Της Ρουμανίας Και Βουλγαρίας Στην Ευρωπαϊκή Ένωση

“…Ανάλογες θέσεις διατυπώνουν και οι υπέρμαχοι του νέο -φεντεραλισμού 19 (neo-federalism), με τη διαφορά ότι αυτοί προκρίνουν ως την πιο αποτελεσματική λύση τη σταδιακή (gradual) αποδοχή του θεσμικού -κανονιστικού πλαισίου που διέπει τα ομόσπονδα κράτη 20 .…”

“…Εξαίρεση θα αποτελέσει ο αγροτικός τομέας, όπου θα παρατηρηθεί δημιουργία εμπορίου της τάξεως του 2,33% των συνολικών αγροτικών εισαγωγών. Το βασικό τους συμπέρασμα από την εξέταση τριών κυρίων σεναρίων (απλή κατάργηση των εμπορικών εμποδίων ανάμεσα στις δύο πλευρές, πλήρης υποκατάσταση των εισαγωγών από τους εγχώριους ανταγωνιστές, αύξηση της παραγωγικότητας τόσο στην ΕΕ όσο και στη Ρωσία) είναι ότι από την όλο και μεγαλύτερη αλληλεξάρτηση της ευρωπαϊκής και της ρωσικής οικονομίας αναμένεται να υπάρξουν σημαντικά οφέλη μόνο για την πρώτη πλευρά 19 .…”

“…Balassa (1966), Krugman (1980), Dixit & Norman (1980), Helpman (1981). 19 Lindqvist R.( 2006) "Intra -Industry Trade: An Analysis of Measurements", School of Economics and Management, Lund University, p.p.9.…”