Committee Reports > List of Committees > Joint > 1979 > Committee on the Secondary Legislation of the European Communities > Report No. 51 - Problems of Enlargement

REPORT

A. GENERAL

Introduction

1. In this report the Joint Committee wishes to draw the attention of the Houses to certain problems connected with the proposed enlarge ment of the European Economic Communities by the accession of Greece, Spain and Portugal. Initially the Committee undertook an examination of this matter with the object of assessing the effect of Greek membership on Ireland in particular. It has, however, become clear to the Committee that many of the problems associated with the accession of Greece will be encountered again even in a more acute form on the accession of Spain and Portugal and in the Committee’s view these problems should now be tackled with the future membership of all three countries in mind.

Joint Committee’s Examination

2. The Joint Committee in its consideration of this matter has examined the documents listed in the Appendix to this report. It has also consulted all the Government Departments concerned. In addition members of the Joint Committee have had the advantage of a wide ranging discussion on the subject with Commissioner Richard Burke who was accompanied by Mr. Liam Hourigan of his cabinet and Messrs. R. Goffin and D. Corboy of the Commission staff. The Joint Committee owes a debt of gratitude to Commissioner Burke and his officials for their painstaking efforts to enlighten the Committee on all aspects of enlargement.

State of Negotiations

3. The Treaty of Accession of Greece to the European Communities was signed in Athens on 28th May, 1979. This Treaty will now be submitted for ratification by all the Contracting States in accordance with their respective constitutional requirements. As far as Ireland is concerned the Committee is advised that the Treaty will be submitted to Dáil Éireann for approval in due course but that it has not yet been decided if ratification will necessitate any consequent legislation. The intention is that Greek membership will take effect on 1st January, 1981.

4. Portugal applied for membership on 28th March, 1977 and the Council agreed on 5th April, 1977 to initiate the procedures provided for in the Treaties. The Commission’s Opinion on the application was forwarded to the Council on 19th May, 1978. At its meeting on 6th June, 1978 the Council gave a favourable response to the application. Negotiations were officially opened on 17th October, 1978 and are proceeding according to an agreed schedule. The Joint Committee understands that position papers have been exchanged on several aspects of the negotiations between the Community and Portuguese delegations.

5. Spain applied for membership on 28th July, 1977 and the Council agreed on 19th September, 1977 to set the necessary procedures in train. The Commission’s Opinion was delivered to the Council on 29th November, 1978 and on 19th December, 1978 the Council decided to open accession negotiations. These negotiations were formally opened on 5th February, 1979 but the Committee is advised that it is unlikely that substantive negotiations will commence before the autumn of this year.

6. While it is not possible to say definitely when the negotiations with Spain and Portugal will be concluded the Joint Committee has been advised that there are indications which suggest that both countries may be members by 1st January, 1983.

Position of Applicant Countries

7. In a survey of economic development in Spain, Greece and Portugal and their present economic situation the Commission has drawn attention to some features common to the three countries which a Community of Twelve will face in restoring growth and improving conditions. These are a very low level of development, the importance of agriculture in terms both of production and employment, an inability to create sufficient jobs and resulting labour flows, regional imbalances and the concentration of industry on sectors already in difficulty in the present Community.

8. On the other hand there are marked divergences which necessitate each country being looked at separately. Spain has a large market (35 million) with a high growth rate and is a major competitor at least in some sectors. The Spanish economy is regarded as having a higher growth potential than the other two. Earnings from tourism and shipping and the need to speed up industrialisation are expected to promote a high medium-term growth rate in Greece provided that balance of payments problems are overcome. Spain and Greece have a GNP which is lower than but close to those of Italy and Ireland. In contrast the per capita GNP in Portugal is 60 per cent of that in Ireland which is the lowest of the Nine. Since 1974 Portugal has been facing serious economic difficulties following large scale decolonisation and far reaching changes in the structure of the economy. Combined with a slowdown in world economic growth these factors have resulted in massive external payments deficits.

B. INSTITUTIONAL AND SECTORAL ASPECTS

Institutional Consequences

9. The Community institutions were designed with six Member States in mind and the enlargement to nine has already subjected these institutions and the decision-making procedures to considerable strain. It can be expected that further enlargement will make decision-making in particular all the more difficult. In December last the European Council agreed to invite three prominent personalities (“Three Wise Men”) to consider the adjustments to institutional mechanisms and procedures that will be necessary for the proper functioning of the enlarged Community. Their report is expected to be available to the European Council in the autumn and it seems appropriate to the Joint Committee that consideration of the institutional implications of enlargement should be postponed until that report is available.

Customs Union

10. The integration of the applicant countries into the customs union will be facilitated by the Association Agreement with Greece and the Trade Agreement with Spain in force since 1st November, 1962 and 1st October. 1970, respectively, and the EEC and ECSC Agreements concluded with Portugal as an EFTA country in 1972.

11. Since November, 1974, Greek industrial exports to the Community, with the exception of coal and steel products, and two-thirds of the Community’s industrial exports to Greece are subject to duty-free arrangements. The remaining restrictions on Community exports will now be fully phased out by the end of the five year transitional period to be provided for in the Treaty of Accession. In this regard the Joint Committee is informed that the Commission had proposed a seven year transitional period for the phasing out of quantitative restrictions on exports from the Community and of all measures having equivalent effect but that the ending of these restrictions will now coincide with the end of the transitional period. The Joint Committee is adviced that the quantitative restrictions are of little, if any, significance to Irish industry. With regard to third countries Greece has already adopted the Community’s Common Customs Tariff for those products which now enter from the Community free of duty. As far as agricultural products are concerned there had been little progress towards liberalisation under the Association Agreement.

12. The Joint Committee is advised that because duty-free arrangements already operate in respect of Greek industrial exports, the accession of Greece will not raise any substantive problems for Irish industry. Under the Treaty of Accession, Greece will be obliged to discontinue its import deposit scheme (up to 150 per cent of value of imports) within three years of accession and its administrative requirements in respect of pro-forma invoicing on accession. The Joint Committee is advised that these measures should benefit Irish exporters.

13. For industrial products the Community in 1976 was already applying 40 per cent or 60 per cent tariff concessions (according to product) on 98 per cent of its imports from Spain. Spain in turn allows 25 per cent or 60 per cent according to product on industrial imports from the Community. In the case of agriculture Community concessions on Spanish imports cover 46 per cent of imports and their tariff incidence is 20 per cent. The corresponding Spanish concession covers 57 per cent of Community exports and the tariff incidence is 25 per cent. No quantitative restrictions are applied by the Community vis-à-vis Spain but the latter has applied restrictions on about 5 per cent of Community products.

14. All quantitative restrictions on imports of Portuguese industrial products were abolished on 1st January, 1973. Since 1st July, 1976 ECSC products and virtually all EEC industrial products originating in Portugal enter the Community free of customs duties. The CCT for some fresh and processed agricultural products has been reduced. Since 1st July, 1977 about 40 per cent of the Community industrial exports to Portugal have enjoyed exemption from customs duty. Exemption for about another 37 per cent is scheduled for 1st January, 1980 and for the remaining 23 per cent for 1st January, 1985. No provision has been made for any concession for the Community in the case of agricultural products.

15. In 1977 Irish exports to Greece were valued at £6.6m. and were mainly of food preparations, medicaments, electrical machinery, chemicals and lead ore. In the same period our imports from Greece were valued at £2.4m. and consisted mainly of magnesite, dried fruit, cotton yarn and clothing. The figures for Spain and Portugal in 1977 are:—

Agriculture

16. The three applicant countries share with the present Mediterranean regions of the Community some common characteristics in the agricultural sector. The Commission anticipates that on their accession there will be an increase in the rate of self-supply in the Community in some sectors (wine, olive oil, certain fresh fruit and vegetables) which are already in surplus in the present Community. On the other hand some products (milk products, meat) which are in surplus in the present Community are in deficit in the applicant countries.

17. Spain is a large agricultural producer, the number of people on the land being comparable with France and Italy. For many products its production is at least twice that of Portugal and Greece. It is a large exporter of citrus and other fruit, vegetables, wine and olive oil and is a net importer of meat and milk products, wheat, sugar and feed grains. The entry of Greece and Portugal should not give rise to major changes in the level of Community self-sufficiency for agriculture. In the case of Greece products which have hitherto given rise to difficulties on the Community market are a relatively small part of domestic output and Greece is an importer of dairy products, meat and sugar. Portuguese production and consumption of agricultural products are, compared with the Community, relatively low.

18. In Greece 36 per cent of the population is engaged in agriculture, 28 per cent in Portugal and 23 per cent in Spain. In Ireland the figure is 23 per cent and the present Community average is under 9 per cent. The contribution of agriculture to GDP is 9 per cent in Spain, 15 per cent in Portugal, 17 per cent in Greece and about 4.5 per cent in the present Community.

19. The Joint Committee understands that it has not been found in the negotiations with Greece that Greek agricultural products are likely to be in competition with Irish products to any extent. The Committee would anticipate a similar conclusion being reached in the case of Spain and Portugal when negotiations with those countries get under way. However the Committee believes that the accession of the three countries could have a profound effect on the common agricultural policy. Some shift in emphasis away from emphasis on northern temperate products is not unlikely with the increased responsibility imposed on the Community for the products and structure of Mediterranean agriculture. The Community will be obliged to ensure a fair standard of living for many more relatively poor farmers and farm workers.

Regional and Social Policies

20. The Commission anticipates that industrial and agricultural restructuring in the applicant countries and the trend towards capital-intensive industries will worsen unemployment. At present unemployment in the twelve countries totals 7.5 million and during the next decade the problem of youth unemployment, in particular, will be one of the main challenges.

21. Regional internal imbalances in the applicant countries are already considerable and could be aggravated following the liberalisation of trade after accession. In the Commission’s view corrective measures in the form of “large-scale regional policies” will be required.

22. The Joint Committee believes that enlargement may introduce a new element affecting the social policy of the Community in regard to women. The three applicant countries could fairly be regarded as socially under-developed compared with the present Community and the Committee believes that at present they even lag behind Ireland in the whole area affecting the position of women. The Committee is concerned that the inevitable additional demands that will fall on the Social Fund as a result of this situation should not inhibit Community assistance being available to improve the opportunties open to women in this country. The Committee believes that the aim should be to extend the categories of Social Fund assistance available to improve the lot of women specifically and it sincerely hopes that enlargement will not prevent this being done. As an initial step to take account of the projected large increase in the female population of the Community the Commission itself might review the staffing of its two sections dealing with women’s questions which seems numerically quite inadequate even for present needs.

Sea Transport

23. In the course of its examination of the accession of Greece the Joint Committee observed that the fact that Greece is one of the major shipowning countries in the world should assist the measures being taken by the Community to combat marine pollution by tankers, with which the Committee dealt in its thirty-eighth report of 7th March, 1979 (Prl. 7928). With Greek accession the Community’s percentage of the world fleet will be increased from 20 to 30 per cent. This will be an important aid to the Community in seeking to bring the IMCO Convetions, MARPOL and SOLAS into force. Moreover on accession the Greek fleet will become subject to the legislation adopted by the Community on the subject of tankers.

C. CONCLUSIONS OF JOINT COMMITTEE

Political Considerations

24. The Irish Government, in common with the Governments of other Member States, has welcomed the application of Greece, Portugal and Spain for membership of the European Communities believing that membership will buttress the development of democracy in those countries. It is clear that for the Council of Ministers the political benefits of enlargement have predominated and have overridden objections that might be made on grounds of institutional or economic difficulties. Nevertheless it remains a fact that the political commitment necessitates a matching economic commitment if enlargement is not to result in a weaker Community which will be able to meet neither the aspirations of the new nor existing Member States. The Joint Committee notes that the Minister for Foreign Affairs indicated in the Dáil on 15th February, 1978 (O.R., Vol. 305, Col. 1315) that a commitment to enlarge the resources of the Community proportionately with the extended membership has been accepted by the Council and recorded in the Council’s minutes. With imminent membership of Greece and the possibility of speedy negotiations with Spain and Portugal it seems to the Joint Committee to be time now to begin to implement that commitment.

Budgetary Consequences

25. The Commission has calculated that, assuming full membership of the applicant states in 1978, they would have been able to receive in that year a net financial flow of about 1,000 million units of account by way of transfers from the Community budget and 500 million units of account by way of loans. In addition they would have been able to draw on balance-of-payments support, with possible medium-term financial assistance amounting to between 1,000 million and 2,500 million EUC.

26. As far as the Community budget is concerned the Commission has already drawn the Council’s attention to the fact that even without taking enlargement into account the Community’s own resources will be insufficient to meet expenditure after 1981. In this connection the Commission has made suggestions for raising additional revenue on which the Joint Committee is making a separate report. It is clear that the accession of new Member States which will be substantially net beneficiaries will greatly aggravate the budgetary difficulties of the Community and put even present policies in jeopardy unless new resources are made available. The Council itself has already accepted the need for additional resources and it seems imperative to the Joint Committee that firm decisions must be taken before Greek membership begins on 1st January, 1981.

Economic Problems

27. In a communication sent to the Council on 20th April, 1978 the Commission pointed out that the integration of the three applicant states into the Community necessitated specific sectoral measures which, in the Commission’s view, should involve the transfer of resources to them from the Community before accession. The Commission indicated that “a start must be made with this right away, for it is necessary to step up the present efforts to increase transfers to the weak regions of the Community which will be affected by enlargement to enable them to stand up to its consequences”. The Joint Committee must express surprise that little weight seems to have been given to this important aspect and urges that the matter be vigorously pursued with a view to ensuring appropriate action by the Council.

Competition

28. The Joint Committee understands that Greece has succeeded in negotiating a Protocol similar to Protocol 30 to the Treaty of Accession relating to Ireland. With the accession of Greece and later of Portugal and Spain it can be anticipated that Ireland will experience even sharper competition in seeking to attract investment. It seems, therefore, to the Joint Committee that fullest possible use must be made of Protocol 30 both in the matter of national aids for investment and in seeking preferential treatment in the operation of Community policies bearing in mind that Protocol 30 acknowledges, as the aim of all Member States, the raising of the standard of living in Ireland to the level of other European nations and the elimination of underemployment and removal of regional differences.

(Signed) MARK CLINTON,

Chairman of the Joint Committee.

30th May, 1979.