NCPA - National Center for Policy Analysis

Expansion of European Union May Promote Free Markets and Pro-American Sentiment

May 14, 2004

The new additions to the European Union (EU), primarily former communist-bloc countries, could have a significant role in freeing up European markets and reducing anti-Americanism.

Accession countries from Central Europe have both lower wage rates and lower corporate taxes than existing EU members. The American Enterprise Institute (AEI) says that, assuming they don't yield to German grievances, the policies of Central Europe will help spur competitiveness all over Europe. AEI anticipates the economic impact will be shaped in the following way:

  • The tax disparities between the older and accession countries will force all European governments into tax competition.
  • With Europe's largest economies stagnating and its rigid labor markets, capital is likely to move from the west to the east.
  • Economic ideas -- such as pension fund privatization and the flat tax -- are likely to flow from the east and may help reignite the West's moribund economies.

In addition, the Central Europeans are far more sympathetic to the U.S. than their western counterparts, having supported the war in Iraq and embraced the virtues of capitalism. At least initially, therefore, the expansion of the EU will blunt the anti-American sentiment growing among the existing European establishment.

Source: Radek Sidorski, "Europe (Almost) Whole and Free: EU Enlargement and Its Implications," American Enterprise Institute, May 2004.

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