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

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

Advertisement Year	EU Status	GDP per capita	Trade Openness
1991	Unaffiliated	20755.78568	41.14312089
1992	Candidate	Advertisement 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

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

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

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

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 globalization. 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

 

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.

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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 Politics 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.

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Endnotes

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