Does Enlargement Conceal Globalisation? - Location Issues in Europe

There is a strong perception in the public that enlargement is linked to the current competitiveness and fiscal problems faced by the " old " EU members. This "Note" argues that the relocation problems experienced in the EU15, which are often attributed to " unfair competition " from the new member states, are driven by deeper structural changes in the global economy. An analysis of EU international trade and investment is used in combination with industry case studies to assess the impact of global competition and enlargement on the location of production. Previous enlargements had allowed productivity growth through scale and competition effects among quite similar countries. The latest enlargement has on the contrary stimulated a process of vertical specialisation, with a more radical impact on the location of production. It thus represents a further pressure to structural change in a context of increasing global competition. Examples in the paper illustrate the process of value creation through value chain reorganisation and relocation of production within the EU and more globally. Whether the initially positive effects of enlargement on competitiveness and growth will be maintained depends on firms' strategies and both national and EU structural policies.