What If the V4 Countries Were Not Members of the European Union?

This question would not have gotten any attention a few years ago. During the first decade of membership, all expert or serious politicians, let alone the larger communities of the Visegrad Four countries, considered accession in 2004 as a qualitative cornerstone in their historical development from security, geopolitical, political, economic, and social point of view alike. All of them were aware of and repeatedly emphasized the unambiguous advantages of having joined the European Union based on various cost-benefit analyses.

At present, however, some developments in the V4 countries seem to justify this question and require reasonable answers in order to stop the dangerous and self-defeating populist wave. This paper aims at contributing to the expert debate expecting that a comprehensive and objective discussion can be started not only with populist politicians but, first of all, with broader circles of the population in all V4 countries.

This question would not have gotten any attention a few years ago. During the first decade of membership, all expert or serious politicians, let alone the larger communities of the Visegrad Four countries, considered accession in 2004 as a qualitative cornerstone in their historical development from security, geopolitical, political, economic, and social point of view alike. All of them were aware of and repeatedly emphasized the unambiguous advantages of having joined the European Union based on various cost-benefit analyses.

At present, however, some developments in the V4 countries seem to justify this question and require reasonable answers in order to stop the dangerous and self-defeating populist wave. This paper aims at contributing to the expert debate expecting that a comprehensive and objective discussion can be started not only with populist politicians but, first of all, with broader circles of the population in all V4 countries.

Why Did the Question of Non-Membership (Re)Emerge?

First, the political changes in the last years leading to the establishment of authoritarian systems (in Orbán’s expression “illiberal democracy”), the special interpretation of the “rule of law,” the demolishment of basic democratic institutions became a basic challenge to European values cemented in EU treaties and signed by all V4 countries in 2002, when official negotiations were finished and the way became open to membership in 2004.

Second, and as an unprecedented development within the EU, one of the member countries, namely the Hungarian government, blamed and accused Brussels openly and on the highest political level. The poster campaign of “Let’s stop Brussels” was, at least until today, the most manifest example.

Third, the migration plan with obligatory resettlement of a very modest number of asylum seekers (not “migrants”!) fostered the V4 cohesion and confronted the priority of “national identity” (“we are not an immigrant country”) with the EU’s migration plan. Just the opposite, it seems to be the most important element of demonstrating the (never existing) strong cohesion among the V4 countries.

With the potential Brexit, V4 countries are not only losing their ally but, at the same time, may be facing the revival of the deepening process of the EU.

Fourth, Brexit and its potential consequences fundamentally weakened the position of the V4 within the EU. Great Britain had always been considered as the basically by V4 politicians against any deepening of the integration. With the potential Brexit, V4 countries are not only losing their ally but, at the same time, may be facing the revival of the deepening process of the EU and the emerging institutional dividing lines between the “core” and the “periphery.”

Fifth, the V4 countries, belonging to the main beneficiaries of the EU Cohesion Fund, are fully aware of the fact that the unprecedented modernization chance, financed over two budgetary periods (2007-2013 and 2014-2020), is unlikely to be prolonged after 2020. The new multiannual budget (2021-2027, official negotiations starting these months) will look rather different from the previous ones. Partly due to structural changes in the new budget, and partly due to the consequence of Brexit, the EU cannot rely on payments coming from the second largest contributor anymore. The alternatives are either looking for additional contributions by the remaining members or seriously cutting the next budget.

Sixth, the emerging self-deceiving arguments by V4 politicians (part of demonstrating the “independence” and “maturity” of the four countries both in alliance and individually) have to be professionally criticized. Most recently, the Hungarian prime minister announced that Hungary does not need EU money anymore, because it stands on its feet and can generate high growth rates without the EU support. Polish politicians emphasize that EU funds have, to a large extent, served and enriched the net contributor countries, Ger many first of all, and not Poland. The Czech scene is more modest, since the key argument is more about national maneuvering room and less about “interference” (or “ dominance”) by Brussels.

Membership vs. Non-Membership: Some Basic Facts

It would be an ahistorical approach to imagine what would have happened with the V4 region and the individual countries had they not entered the EU.

The real issue is how did more than one decade of full-fledged EU membership shape the V4 countries in general, and their relations with(in) the EU.

Before an economic analysis, two basic pillars have to be underlined. First, all acceding countries have committed themselves to the EU rules, including the primacy/supremacy of EU law over national legislation in all areas where EU law prevails. Moreover, they accepted the “no opt-out” principle. Second, the V4 countries have clearly defined their interest in membership, including the four freedoms (trade, services, capital, and special emphasis on citizens and manpower), just access to EU funds, and full-fledged  articipation in EU institutions and decision-making bodies. In all areas, membership guaranteed these requirements.

2.1. Impact on Overall Growth

The V4 growth over the entire period (2004-2016) was substantially higher than that of the EU-28 (and even more than that of the EU-15). Although the 2008-2009 crisis interrupted this process, most countries recovered quite soon, Hungary being the exception. Prospects for the period of 2017-2018 indicate that an EU-28 average growth of 3.6 % will be accompanied by much higher growth in all V4 countries (6.6 percent for Poland, 6.5 percent for Slovakia, 5.1 percent for Hungary, and 5 percent for the Czech Republic). These figures confirm that EU membership substantially contributed to higher than average growth and, accordingly, to the successful catching-up process to EU average.

Foreign Trade Developments

Foreign trade proved to be the key driver of growth, structural change, and unprecedented and successful geographic reorientation for all V4 countries. In contrast to the opinion of many experts, high dependence on the ex-Soviet market could be changed within a few years, partly due to the collapse of the Soviet market and partly to the opening of EU markets, including first large-scale investments of foreign companies with trade-generating impacts. Definitely, this process, both due to its dramatic speed and the lack of institutional preparedness, did involve high costs and not only benefits.

It would be an ahistorical approach to imagine what would have happened with the V4 region and the individual countries had they not entered the EU.

However, all other (imagined) options would have entailed much more costs and much less benefits. It has to be underlined that the V4 countries, due to their historical heritage and their geopolitical situation, are relying much more heavily on the EU trade than most of the other member countries. On V4 level, 83 percent of their total exports was located in other EU member countries in 2005 and almost the same share (81.7 percent) in 2015. At the same time, the EU-28 average declined from 68 to 63 percent in a decade.

2.3. Foreign Direct Investments and EU Membership

Foreign capital played a decisive role in the success of transformation, structural change, and competitiveness of the V4 countries. In addition, based on their own interests, they were important drivers of EU accession. They started to invest in the region well before the official negotiations started in 1998 (see Hungary) or during the accession period, anticipating membership for granted. No cost-benefit analysis can ignore that foreign companies fundamentally contributed to economic growth and structural modernization, transfer of technology, education and training, employment, and creating a new social environment. In sum, they definitely strengthened the region’s integration in global and EU-level structures.

It has to be underlined that the V4 countries, due to their historical heritage and their geopolitical situation, are relying much more heavily on the EU trade than most of the other member countries.

2.4. Free Movement of Persons

This was one of the most important requirements of the new member states (mainly driven by Poland) to sign the accession treaties. After 2004, three members (United Kingdom, Sweden, and Ireland) immediately lifted all restrictions, while other “old” member countries did it within a transitional period of 7 years (Germany and Austria being the last countries to eliminate all barriers). The “migration capacity” of the individual V4 countries was rather different after 2004. While we experienced a huge outflow from Poland (and partly from Slovakia), Czech and Hungarian citizens made rather limited use of this possibility. The situation dramatically changed after 2010 in Hungary, resulting in an additional 500,000 citizens leaving the country in the last seven years. At the moment, there are about 6 million EU citizens working (and living) in another EU country, out of which about 40 to 45 percent originate in the V4, with clear dominance of Polish, and increasingly Hungarian citizens. The reasons for working abroad are manifold and can by far not just be explained by wage differences.

Of course, massive (e)migration is an ambiguous development. On the one hand, it reduces high-level and socially unfavorable domestic unemployment (see Poland over a longer period) and increases financial resources as a result of remittances sent back by citizens working abroad.

On the other hand, it may deprive the sending country of the best prepared, talented, mobile, and young people, increase lack of skilled labor needed by competitive domestic and foreign-based companies, sharpen demographic problems, increase regional differentiation, and deprive governments of a broad group of taxpayers.

2.5. The Impact of EU Resources

Over the period of two multiannual financial frameworks (2007-2013 and 2014-2020), the V4 region has access to EU funds in the amount of about 240 billion euros, or, on the average, 17 billion euro annually. Of course, the money, even if fully used (which has not been the case), has not been distributed evenly from year to year. In some years (mainly in the first period with projects launched), only a very modest sum could be drawn, while the second half of the period showed very high payments. There is no doubt, however, that EU resources over 14 years offered an unprecedented historical opportunity for sustainable modernization, provided the money had been or is being spent correctly and for the right purposes. On yearly average, EU transfers corresponding to 2.5 percent of GDP of the region (and about 3.5 percent in case of Hungary) can (or should be able to) produce an annual growth of 2.5 percent without any change in the domestic economic performance – at least on paper.

2.6. Membership in Schengen

The importance of Schengen is generally not emphasized or not even acknowledged. However, it has a very positive impact on member countries, not least the V4 region. First, it can be considered as a win-win system for European security. It shifted the eastern (security) border of the “old” EU to the new members’ eastern border (excepting Finland). Belonging to Schengen (together with belonging to the NATO) has enhanced the security of the new member countries which became the new eastern (and southern) border of the EU.

There is no doubt, however, that EU resources over 14 years offered an unprecedented historical opportunity for sustainable modernization, provided the money had been spent correctly.

Second, free flow of citizens would be massively and negatively affected with border controls among member countries. Third, several transnational companies based on just-in-time-production would not have considered the V4 countries as favorable location for their investments. This continuous flow of commodities in both directions (including export of cars) can only function if there is no border control and substantial loss of time. Non-Schengen would immediately disrupt this supply chain.

Weak Anti-EU Arguments of Populist Governments

In the concluding part I come back to some of the anti-EU arguments mentioned at the beginning of the paper.

First: Hungary cannot survive without EU support. A 3.5 percent potential growth in 2017, the highest in a decade, would be equivalent to the average annual inflow of EU money. Since a higher than average inflow of EU resources is predicted for 2017 and 2018, a 3.5 percent growth will remain even more fundamentally dependent on EU money.

Second: The Polish argument, according to which EU funds mainly favored foreign companies, can easily be rejected. EU funds financing infrastructure projects benefit ted not only foreign firms to consider location in Poland favorable but also domestic companies and citizens alike.

Third: The artificially but deliberately created common demon/devil, namely the threat of migration, has to be correctly interpreted and presented to the already mentally contaminated societies of the region. If Polish politicians believe that about 6,000 legally relocated asylum seekers (or Hungarian politicians think that 1,294 asylum seekers) would threaten the “national identity” of the country, then there must be a basic problem with this identity. Even more so if up to 10 percent of the domestic labor force seeks its future outside the country. Why is just this very unfavorable development not considered to be a real threat to “national identity”? The V4 countries, in their own fundamental interest, need to change their current attitude against the outside world (migration is just one topic, the EU is another, and there are many additional issues).

It is crucial to develop a realistic view of the potential of the V4 in the EU context. V4 represents 6 percent of the GDP of the EU-28, much less than the Benelux group.

Fourth: It is crucial to develop a realistic view of the potential of the V4 in the EU context. V4 represents 6 percent of the GDP of the EU-28, much less than the Benelux group. The latter has never come up with leadership demand but could substantially influence decision-making processes by clever compromises, flexibility, and high level of adjustment capacity. Self-proclaimed leadership of the V4 may be a political slogan without any content and credible implementation capacity.

4. Not Visegrad Four, but Vacuum Four

The last decade would have offered at least two historical chances which have not been used. First, after accession, and just by looking at the map, it became clear that the enlarged Union needs a third north-south infrastructure corridor as such a corridor had been implemented earlier between Scotland and Gibraltar and between Scandinavia and Sicily. Unfortunately, nobody in the V4 group came up with such an idea.

Second, nobody would have impeded the V4 countries to start a strategic cooperation in fostering their respective small- and medium-sized entrepreneurial sector and, particularly, extending such initiatives on regional, cross-country cooperation. Even sizeable EU resources could have been used for creating a competitive and strong, young and innovative regional entrepreneurial sector based on export-orientation, participation in the global or regional value chain of transnational companies, and successfully competing with imported goods and services in V4 markets. At the same time, decisive dividing factors remain, such as the assessment of Russia (between the Hungarian and the Polish view), or the introduction of the euro (being a eurozone member, Slovakia holds clear preference to the EU and the euro, in case it should choose between the EU and the V4).

In fact, Visegrad Four, in its current form, may be more appropriately named “Vacuum Four.”

András Inotai

Professor at the College of Europe (Bruges and Natolin (Warsaw)) since 1993. Director General of the Institute for World Economics, Budapest. Head of the Strategic Task Force on Integration into the European Union (1986-1988). Member of numerous Hungarian and international organisations and editorial boards of professional journals. Author of books and articles on regional integration, EC/EU relations, international direct capital flows, international competitiveness of the CMEA countries, the European Union’s Eastern Enlargement.

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