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

By Constantine J. Petallides
2012, Vol. 4 No. 01 | pg. 2/2 |
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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

Year

EU Status

GDP per capita

Trade Openness

1991

Unaffiliated

20755.78568

41.14312089

1992

Candidate

19551.72211

45.59469788

1993

Candidate

18892.2547

51.08341727

1994

Candidate

19598.61584

55.54894615

1995

Member

20739.58135

56.5274974

1996

Member

21088.96206

58.86920368

1997

Member

22699.64664

61.40788752

1998

Member

24185.8625

62.42602938

1999

Member

25091.55467

64.73418808

2000

Member

26401.79381

71.72706411

2001

Member

27024.66205

70.98454394

2002

Member

27299.83326

72.00204736

2003

Member

27750.5908

71.02776323

2004

Member

28766.45285

73.98360549

2005

Member

29761.46199

78.06943861

2006

Member

31045.56394

81.78941102

2007

Member

32486.15469

81.53146954

Finland's GDP Per Capita

Finland's 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

Year

EU Status

GDP per capita

Trade Openness

1995

Unaffiliated

14602.62364

73.64135309

1996

Candidate

15327.62211

76.32493791

1997

Candidate

15297.21308

82.53414437

1998

Candidate

15226.6953

90.78311184

1999

Candidate

15462.81262

94.22031617

2000

Candidate

16044.15665

105.6267967

2001

Candidate

16521.95331

114.8592154

2002

Candidate

16900.06196

116.3487231

2003

Candidate

17517.60654

120.9606186

2004

Member

18285.3715

138.2107993

2005

Member

19420.33465

141.1225676

2006

Member

20687.09516

151.2912448

2007

Member

21931.51831

163.4834216

Czeh Republic's GDP Per Capita

Czech Republic's 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

Year

EU Status

GDP per capita

Trade Openness

1998

Unaffiliated

6418.31986

41.37731082

1999

Candidate

6093.582525

40.70670457

2000

Candidate

6428.208431

46.48146355

2001

Candidate

5708.507389

46.06522048

2002

Candidate

6017.591012

48.62820636

2003

Candidate

6253.601557

55.90605291

2004

Candidate

6737.092957

60.6695371

2005

Candidate

7132.831249

62.20189919

2006

Candidate

7457.442694

63.17499061

2007

Candidate

7737.858087

65.32816591

Turkey's GDP Per Capita

Turkey's 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

Year

EU Status

GDP per capita

Trade Openness

03

Unaffiliated

11231.59731

101.030673

04

Candidate

11656.87608

101.5924672

05

Candidate

12466.796

102.8489469

06

Candidate

13141.41367

104.5276102

07

Candidate

13878.69944

104.7321695

Croatia's GDP Per Capita

Crotaia's 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 . 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

Year

EU Status

GDP per capita

Trade Openness

76

Unaffiliated

14672.88555

16.46744237

77

Candidate

14718.17791

16.76669618

78

Candidate

14618.17813

17.59728022

79

Candidate

14523.57958

18.97659129

80

Candidate

14742.36748

19.05436883

81

Candidate

14481.85291

20.17091087

82

Candidate

14563.21888

20.99743142

83

Candidate

14675.19416

21.80641129

84

Candidate

14808.86576

22.99664843

85

Candidate

15118.14043

23.12170612

86

Member

15666.93479

23.6547003

87

Member

16578.63808

25.19022662

88

Member

17525.31709

25.92694099

Spain's GDP Per Capita

Spain's 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 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

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