CEFIC looks East as the EU plans its next expansion

While the protestors took to the streets of Gothernburg to voice their opposition to the spread of unfettered capitalism, Europe's chemical industry executives prepared themselves for the inevitable expansion of the European Union - and the influx of new member states into CEFIC, the industry's umbrella body.

This year's general meeting was hosted by the Chemical Industry Federation of Finland, whose president, Tauno Pihlava, is an authority on EU enlargement. Six years ago, he was on the other end of it, following Finland's accession to the EU. 'We in industry felt the tightening of competition and the change in the operating environment in a concrete manner in our day-to-day work,' he said.

The most contentious aspect of EU accession, then as now, is the transition period granted to the new member states. During this period, companies within the new states have free access to the single market but do not have to comply with all the EU rules and directives.

In practice, this means that they have a cost advantage over companies based within the EU. 'It is probably a great temptation for the applicant countries to seek to obtain transition periods that are as long as possible, and thereby to benefit from the asymmetrical trade policy situation,' Pihlava said.

Finland, in fact, lobbied for a 3-5 year transition period; it was granted 1-3 years. However, Pihlava says, this has helped in the long run, as it forced it to become involved in trade on a sustainable basis. 'Fast adjustment truly does offer bigger long-term gains than can be obtained with long transition periods.' he commented.

However, the next batch of countries to join the EU are likely to change the organisaton considerably - and they are in a very different position to Finland six years ago. Thirteen countries are seeking membership of the organisation - Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, the Slovak Republic, Slovenia and Turkey - representing the largest enlargement in the organisation's history, and transforming it into the world's largest trade block.

Moreover, there have been concerns about the state of the industries in this country, regarding their environmental standards and other factors, and the enlargement has faced opposition. Shortly before the CEFIC meeting, Ireland's citizens voted against the enlargement in a referendum. 'The results of the referendum should not delay the process,' commented CEFIC president Jean-Pierre Tirouflet, 'but European policy makers must communicate more clearly with their citizens.'

The state of things

The state of the industry differs across many of the states, according to Francois Vleugels of Eastman Chemicals, who has been involved in operations in the Czech Republic (successfully) and Belarus (less successfully). 'The results were as different as night and day,' he commented.

The new member states will have a number of problems to overcome, he said, most importantly around language and culture. 'The majority of workers in Central and Eastern Europe do not have a good knowledge of English,' he said, 'and likewise, there are very few Westerners who understad the local languages.' Anybody wishing to operate in the new member states will have to have people educated in cross-cultural matters.

The levels of human resources are not a problem, though - 'the workforce is still relatively cheap and people are well educated and technically competent,' Vleugels said. Plant standards are still lacking in some areas, however: 'Many plants have not been brought up to Western standards, and that is essential if we are going to protect the environment and the health and safety of employees and neighbours.'

Vleugels' experiences have shown him that the EU could benefit from the enlargement as much as the new members. 'The willingness to change, the work ethic, the talent, the flexibility - all will add value to the EU's total resources,' he said. And for the new members, joining the Union will accelerate market and social reforms, which will attract inward investment from European and US companies.

'For Western Europe, the development of relations with Central and Eastern European countries is not a threat, but a gigantic opportunity,' he said. 'By extending to them the benefits of EU membership, we broaden the overal consumer base, and widen the economic opportunities that their inclusion will bring. The sooner we move towards expansion, te better it will be for all of Europe.'