Former Communist countries joined the EU in 2004 and in 2007. Having different features in their surrounding region as compared to the older EU members, centrally-planned economies were and still are - challenged to alter their political and economic environment in order to align with the EU membership. This paper identifies the implications of economic integration on centrally planned economies. Despite cases against, the net effect of economic integration for consumers and citizens is positive because they are offered a greater variety of products at lower costs and prices. Ex-Communist countries become a pole for foreign direct investment as a result of trade liberalization and market openness. The political dimension of reform policy is vital.
[...] Graph FDI Inflows from transition economies (2006-2010) Adapted from Economist Intelligence Unit “World Investment Prospects to 2010: Boom or Backlash” The political dimension of Economic Integration The political dimension of economic integration is related to the ability of the governments of the CEE countries to proceed to the necessary reforms as to adjust to the EU requirements. Most of the CEE countries have weak reforming governments. In particular, in Bulgaria, the political situation is improving. An important component of political stability is the ongoing administrative reform aiming to harmonize the Bulgarian legislation to the European norm. [...]
[...] Based on above facts, the upward trend of FDI in the free trade area is fairly explained Cases against Economic Integration Integration is not easily achieved or sustained. Although it might benefit the majority, it may also harm the minority. The lowering of barriers to trade and the investment which occurs between countries may result to an increased price competition. The cases against economic integration involve, but are not limited to, the following: Consumers may benefit but certain groups are harmed: the benefits of free trade outweigh the costs by a significant margin, yet this is irrelevant to those who bear the costs. [...]
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[...] This paper considers the implications of economic integration on centrally- planned economies. In section the reasons for the Eastern enlargement of the EU are presented. In section the theoretical background of economic integration is investigated, while the birth of the European Union, its five enlargements and the Eastern enlargement of the EU in 2004 and 2007 are also presented. In section the paper presents the empirical evidence to prove the cases for economic integration. In section the political dimensions of economic integration are explained. [...]
[...] High levels of corruption reduce the level of international trade and the economic growth rate thus hurting the economy The Theoretical Background of Economic Integration Economic integration is the elimination of trade barriers between markets leading to complete absence of discrimination between national economies (Balassa 1961). Economic integration is perceived as a mixture of national markets, where countries sign regional integration agreements (RIAs) to reduce trade barriers between them (Venables, 2000). The theory of economic integration originates from Traditional Trade Theory (Smith, 1776). [...]
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