Looking Forward: The Impact of EU Enlargement on the Chemical Industry

On 1 May 2004, ten countries became members of the European Union. The addition of Cyprus, the Czech and Slovak Republics, Estonia, Hungary, Latvia, Lithuania, Malta, Poland and Slovenia brings the total number of Member States to 25. Although the EU has successfully integrated new countries on previous occasions, this expansion is far more ambitious than any of the previous enlargements, not least because the economic gap between the EU and the new member states is substantial. For the new member states, membership of the EU is expected to generate economic changes in three important ways. It extends the Internal Market by driving the development of the four freedoms in all the new member states through implementation of a common body of EU legislation known as the acquis communautaire. This involves removing the barriers to trade of goods and of services, easing the movement of capital and reducing barriers to the free movement of labour within the EU. It offers access to EU funding to support development (but will require new member states to provide some matching funding). It also obliges the new member states to adopt the euro once they have fulfilled the Maastricht criteria. These changes have given rise to some important impacts affecting all firms in the chemical industry operating in the enlarged EU market: the size of the Internal Market has increased; economic growth, especially in the new member states, will be boosted, and competition between firms will intensify. This paper examines three aspects of the chemical sector: its current structure and performance, focussing especially on the situation in the new member states; how the enlargement process has already affected companies in the industry; and the key remaining opportunities and challenges facing companies in the future.