Integration via pragmatism

The European Union (EU) has been brought into international focus by its recent enlargement and emergence as a world economic power. In May 2004, the EU was enlarged to 25 members with the entry of Central and Eastern European countries, marking the culmination of an intense process of economic integration.

In this book, Jean-Joseph Boillot, a professor of Social Sciences who joined the French Treasury in 2003 as a Financial Advisor for South Asia, highlights the importance of the EU as a formidable new economic order. He also looks into the dynamics of the EU enlargement process and the challenges ahead for the EU and India.

In the chapter "The Institutional and Economic Rationale Behind Enlargement", Boillot looks into the success of European enlargement so far, a process based on a pre-defined methodology involving periodic consultations, intermediary goals, consensual will and, above all, pragmatism.

The membership criteria were fixed in June 1993 by the Copenhagen European Council. Among them: democracy, market economy and the ability to take on obligations for the inclusion of Central and East European countries. That these countries be given a chance to catch up with their wealthy West European neighbours is an important part of the economic rationale""for the larger market potential that this would hold.

In "Virtuous Logic of Integration: FDI and Consumption Catching-up", Boillot opines that the success of Central Europe's transition to market democracy can be attributed mostly to a decisive virtuous cycle between the effects of supply and demand. Money flows have played a big role. In the last few years, the scale of FDI towards East Europe has been massive; even a small country like the Czech Republic attracts more FDI than the whole of India ($8 billion in 2003). Talking about the global attractiveness of these new members, the author elaborates the advantages they offer by way of low-cost human capital, proximity to the original EU15, competitive potential within Greater Europe, and even the effect of FDI on industrial restructuring and disparities between and within these countries.

In "Trade as a Means of European Integration", he deals with geographical trends in the European economy. An enlarged EU is set to become the world's largest economy, and is now less a collection of countries and more an integrated economic space that centres around several different geographical units. The economic forces in operation have begun to go beyond the old national frontiers, giving the EU its first semblance of a unified economy (like the US). The author offers related insights on rapid trade liberalisation as a powerful instrument of transition, continuation of trade flows towards the EU, and the manner in which the reinforcement of sectoral specialisation influences the finer economic intricacies of the European integration process.

In the chapter, "Sectoral Dynamics", the author speaks of growing sectoral specialisation in emerging regions. In enlarged Europe, a new electronic belt is emerging in the Baltic Rim, an automotive cluster in central Europe, and an apparel cluster in the eastern zone (which Italy and even Turkey have taken advantage of).

Boillot suggests that companies should redraft their strategies in view of the changes taking place in Europe that are resulting in the reorganisation of the continent's productive space.

That applies to Indian firms as well. The EU is India's largest trading partner, accounting for 25 per cent of India's global trade, though this is concentrated with the UK, Belgium and Germany. Enlargement could alter trade relations. In fact, Boillot, in "India and EU Enlargement: Challenges and Opportunities", brings out the dynamics of EU-India relations in key sectors, while highlighting the challenges ahead, along with recommendations from an Indian perspective.

On the whole, Jean-Joseph Boillet brings lucidity to the European integration process and its impact. But he neglects the political challenges and the problems of integration and other ethnic and religious disturbances within Europe, issues that are equally important for any well-rounded analysis of EU integration and economic prospects thrown up by the same.

In fact, there is sufficient evidence to argue that an economy cannot make much progress without a favourable socio-political environment that allows every economic agent to participate freely in the system.

Yet, this book is comprehensive, timely and useful. Backed by robust data, it presents new insights into the strong economies of a Europe that remains largely unknown to most players in the world. Boillot successfully stimulates debate as well, and raises interesting points of discussions that ought to make way for further investigation into the dynamics of EU enlargement.

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EUROPE AFTER ENLARGEMENT
ECONOMIC CHALLENGES FOR EU AND INDIA

Jean-Joseph Boillet
Academic Foundation
Price: Rs 495; Pages: 176