European Union enlargement to 25 members may someday challenge U.S. as single superpower

The European Union (EU) added 10 new member nations on May 1, enlarging the union to a total of 25 countries with a combined population of 458 million. The U.S., with a total population of 293 million is still the sole political and economic superpower of the world but may yet be challenged by the EU for that status, according to William J. Streeter, a professor of international business at the Olin School of Business at Washington University in St. Louis.

“Clearly this important expansion of the EU has been motivated by a long term vision of a democratic and peaceful Europe that is economically and politically a major world power alongside the U.S.,” Streeter said.

But Streeter also notes that in some respects, the current enlargement is not nearly as dramatic as it might seem. “This EU expansion is not nearly as significant as the addition of the United Kingdom, Ireland and Denmark in 1973. The addition of the UK, which had been vetoed in 1963 and again in 1967 by French President Charles de Gaulle, had more profound implications for the sharing of power in the European Union than the current expansion.”

Streeter said the adoption of the single currency euro in 2002 in the EU by twelve of the formerly fifteen members also had far greater impacts on monetary and fiscal policies within the union than the enlargement to 25 members. “None of the new members will qualify for changing to the euro currency for at least several years,” he said.

Eight of the new EU members are also relatively poor former Soviet bloc nations, Streeter notes. “The new member nations will receive substantially more in subsidies and other forms of financial support than they will contribute. Since 2000, the EU has contributed over 3 billion euros annually to the 10 countries to assist them in preparing for accession and the new members will receive more than 10 billion euros per year during the next three years.” Gross domestic product in the European Union will increase just 5 percent with the addition of the 10 new members, Streeter said.

“Both the bureaucratic and financial aspects of the current expansion have been well planned,” he said. “But this expansion will certainly not be without pain as the EU struggles with its current low economic growth and the major challenges of restructuring their socialistic welfare systems that are not sustainable due to the aging of the population.”

Streeter notes that many American and Asian businesses have already established operations within the new EU member nations to take advantage of lower labor costs. “This allows them to be more competitive throughout the European Union,” he said. “In that regard the EU expansion offers increased opportunities for U.S. firms in Europe.”

The most important implication for a larger European Union, according to Streeter, will be a subtle, long-term increase in the political as well as economic position of the EU in challenging the single superpower status that the U.S. has maintained since the end of the Cold War. “A more powerful EU, together with the emergence of China as a significant world power, will hopefully have major positive effects on the globalization movement. Americans, and particularly our politicians, need to grasp and embrace that concept.”