Trading For Membership: Effects of EU Candidacy on Trade Openness and GDP Per Capita in Countries Seeking Membership

III: Data

These data show that Europe’s average Trade Openness from 1990-2007 was roughly 93.01% and the average openness for countries at the start of candidacy is 78.75%, providing us with a frame of reference with which to judge the implications of various cases. There are many instances of nations becoming candidates with openness levels far surpassing this 78.75 % such as Croatia’s 101.59% in 2004, but there are also a few cases where countries become candidates with openness levels far below the average such as Turkey (40.71% in 1999) and Sweden (52.33% in 1991).

Using the data, I hope to find a trend suggesting that candidacy to the EU raises a nation’s Trade Openness. To do this, I need to uncover a pattern in another variable related to Trade Openness that will shed light on how Trade Openness is affected in the big picture. Such a trend can be observed in the GDP per capita of many countries; as their Trade Openness increases in the first years of candidacy, GDP tends to shift downward (reflected in downturns in GDP per capita). This initial negative relationship between GDP per capita and Trade Openness may substantiate the theory that candidates must import from EU member states in order to raise their Trade Openness. Buying goods for the sake of artificially inflating a trade statistic would, in most cases, negatively impact GDP as the excess, superfluous goods enter the marketplace. (Note: all data below is compiled from Penn World Tables unless otherwise noted.)

Finland is one of the countries that experienced a dip in GDP per capita during its candidacy. Beginning the process in 1992, Finland’s GDP per capita fell almost every year of candidacy, as Trade Openness went up. Only in the final year of candidacy (1994) did Finland’s GDP per capita rebound and begin its upward trajectory throughout its membership.

Table 1: Finland EU Status, GDP Per Capita, and Trade Openness

The same trend can be seen during the candidacy of the Czech Republic. From 1996-1998, GDP per capita dips until rebounding in 1999, while Trade Openness rises.

Table 2: Czech Republic EU Status, GDP Per Capita, and Trade Openness

Turkey’s economy follows a similar pattern throughout its candidacy. Lacking more advanced data, I am unable to further control for other factors that may affect Turkey’s GDP per capita in this period, but the fact that it does not perfectly fit my model opens the door to some interesting questions. Why was Turkey given candidate status with Trade Openness so far below the candidate average? Is that what has drawn out Turkey’s candidacy, or are there political factors? Why was Finland given candidacy with such a low Trade Openness, and granted membership after only three years? As of this time, I am unable to answer these questions, but feel that they are important ones and warrant further research through this project.

Table 3: Turkey EU Status, GDP Per Capita, and Trade Openness

Croatia’s lack of a GDP per capita “dip” is further evidence of this theory. Entering candidacy with a Trade Openness of 101.03%, Croatia’s openness is drastically higher than the average for nations beginning candidacy, and as such, Croatia has no need to import for the sake of raising this statistic. Without any pressure to import against their will, Croatia’s GDP per capita experiences no negative turn.

Table 4: Croatia EU Status, GDP Per Capita, and Trade Openness

Finally, we come to Spain. Since my previous cases all trace the behavior of Trade Openness in countries predominately in the 1990s, I believe it is necessary to demonstrate this GDP per capita dip in a country whose candidacy ran before this period, lest my findings be attributed exclusively to the 1990s’ worldwide increase in globalization. Spain became a candidate in 1977 and experienced a steady annual dip in GDP per capita until recovering in 1980, while Trade Openness slowly, but steadily grew. The only apparent difference between Spain’s experience and that of my more recent cases is that Spain’s Trade Openness stats are lower, but they fit with the rest of the Europe in the late 70s. This case raises some interesting questions about the effects of the 1990s and globalization. It was in that period when Trade Openness stats seem to skyrocket above their previous norms with countries like Hungary jumping from levels of 30% in the 70s to 93% in 1999 and 167% in 2007. In examining the data, it can be seen that the trade boom leaves previous trends in tact and merely inflates the numbers involved.

Table 5: Spain EU Status, GDP Per Capita, and Trade Openness

IV: Conclusion

The question of a relationship between trade openness and EU candidacy sheds further light on the most vital interactions between the member states of the most powerful political union in the world. In determining how important economic factors are in relation to political ones in questions of candidacy, we, as observers, can better understand the motivations and concerns of the EU on the whole, thus allowing us to better interpret and predict its actions in the future.

In examining these cases, Turkey’s GDP per capita “dip” lasts for four years, Finland’s lasts for one year, the Czech Republic’s lasts for three years, and Spain’s lasts for three years; each accompanied by a total drop in GDP per capita of $719.07, $659.46, $100.90, and $194.6 respectively. Based on these cases, I have found that the GDP per capita “dip” lasts for an average of 2.75 years, begins in the first three years of candidacy, and results in an average drop of $418.68. Based on these results, I am confident that this relationship is worth studying. While it may prove that these variables are unrelated, I believe that this merits further research.

References

Alan Hesston, Robert Summers and Bettina Aten. (2009). Penn World Table Version 6.3. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania. Note: all data on trade openness come from this source unless otherwise noted.

Dunford, M. and Smith, A. (1998). "TRAJECTORIES OF CHANGE IN EUROPE’S REGIONS: COHESION, DIVERGENCE AND REGIONAL PERFORMANCE." Retrieved from: http://www.sussex.ac.uk/sei/documents/wp26.pdf

Grabbe, Heather. (2003). "Europeanization Goes East: Power and Uncertainty in the EU Accession process." The Politics of Europeanization. Oxford UP, 303-28. Google Books. Web. .

Gray, Julia C. (nd). "The Company You Keep: How Membership in International Institutions Affects Investor Risk in Developing Countries." Diss. UCLA. Web. Retrieved from: http://jcgray.bol.ucla.edu/dissabstract-jg.pdf.

Mayhew, A. (2000). "Enlargement of the European Union: An analysis of the negotiations with the Central and Eastern European candidate countries." Retrieved from: http://www.sussex.ac.uk/Units/SEI/pdfs/wp39.pdf

Nilson, Lars. (2000). "Trade integration and the EU economic membership criteria." European Journal of Political Economy 16.4: 807-27. Science Direct. Web. Retrieved from: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V97-41NCXSS-C.

Slapin, Jonathan B. (2009). "Exit, Voice, and Cooperation: Bargaining Power in International Organizations and Federal Systems." Journal of Theoretical Politics 21.2: 187-2111.  Web. Retrieved from: http://jtp.sagepub.com/cgi/content/abstract/21/2/187.

1.) Note that all data on trade openness come from this source unless otherwise noted:

Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.3, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, August 2009.

2.) Nilson, Lars. "Trade integration and the EU economic membership criteria." European Journal of Political Economy 16.4 (2000): 807-27. Science Direct. Web. .

3.) Ibid

4.) Gray, Julia C. "The Company You Keep: How Membership in International Institutions Affects Investor Risk in Developing Countries." Diss. UCLA. Web.

5.) Ibid

6.) Slapin, Jonathan B. "Exit, Voice, and Cooperation: Bargaining Power in International Organizations and Federal Systems." Journal of Theoretical Politics 21.2 (2009): 187-2111. S@ge Full Text Collections. Web.

7.) Ibid

8.) Mayhew, A. (2000) "Enlargement of the European Union: An analysis of the negotiations with the Central and Eastern European candidate countries" SEI - http://www.sussex.ac.uk/Units/SEI/pdfs/wp39.pdf

9.) Dunford, M. and Smith, A. (1998) "TRAJECTORIES OF CHANGE IN EUROPE’S REGIONS: COHESION, DIVERGENCE AND REGIONAL PERFORMANCE" SEI http://www.sussex.ac.uk/sei/documents/wp26.pdf

10.) Grabbe, Heather. "Europeanization Goes East: Power and Uncertainty in the EU Accession process." The Politics of Europeanization. Oxford UP, 2003. 303-28. Google Books. Web. .

11.) Ibid