CIAO DATE: 11/04

Integration and Economy of Slovakia in Transition

Jaroslav Chlebo

Occasional Paper Series No. 43

April 26th, 2001

European Union Studies Center

Political upheavals in Central and Eastern Europe that culminated in the collapse of the Communist bloc at the turn of the 1990s left a geopolitical vacuum in their wake. In trying to cope with this situation, most post-Communist countries embarked on the course of European and transatlantic integration, pursuing the vision of a unified, democratic, socially just and prosperous Europe with market economy. Also the Slovak Republic sees integration as the most effective means of implementing its interests, and integration into the European and transatlantic structures is therefore the key priority of its foreign policy, expressed also in the Government Programme.

However, strong and unified Europe is not only in the best of interests of Slovakia or, for that matter, of Europe. The collapse of Communism and of bipolar world has created the need for a new world order. Europe will unquestionably play the key role in this endeavour. Building a strong Europe is also in the interest of its potential partners. This is especially true of the United States, because the traditional transatlantic alliance should be one of the pillars of this arrangement. Zbigniew Brzezinski put it during his visit to Slovakia as follows: "America needs partners to fulfil momentous tasks connected with building stability in Eurasia and cooperation with Europe. The main potential partner of the United States is Europe." Strong and unified Europe is not a rival, but a strong partner for the United States. The partner sharing the values of democracy, freedom, protection of human rights and fundamental freedoms. The partner capable of assuming its share of responsibility for future developments, not only in the European space, and to deal with the threats to these values anywhere in the world.

One of the most all-encompassing phenomena in the today's world is globalisation. This is a fact that must be faced and the challenges it poses must be addressed. One unquestionably positive facet of this phenomenon is that it has further enhanced and deepened the contacts between different regions of the world and, in particular, between Europe and America. It has also improved the possibilities of communication between individual civilisations, and thus strengthened the basis for mutual understanding and, consequently, for resolving potential disputes or misunderstandings. On the other hand, globalisation has brought to light the problems that the mankind will have to address. Global problems require global solutions. And, to search for these global solutions, there must be a strong America and a strong Europe.

Nowhere has the globalisation been more evident than in the economic area. The emerging global market offers unprecedented opportunities. And this is where economic relations between the EU and the United States play a key role, being the most important economic relations in the world economy. The EU is the biggest economic partner of the United States (*the biggest investment partner and the second biggest trade partner *) and the two account for almost 50% of the world trade. The end of the Cold War brought new qualitative and quantitative dimensions to this relationship. After the internal relations within Europe had been freed of ideology, qualitative changes took place also in the transatlantic links towards further deepening of mutual relations. The quantitative dimension is represented by the opening of borders in Central and Eastern Europe which strengthens the prospects for the enlargement of Euroatlantic integration.

n this respect, I would like to stress that the integration of Slovakia is seen as a complementary process in which the European and the transatlantic dimensions overlap and complement each other. It would be therefore wrong to perceive integration of Slovakia into the European structures as a threat to the interests of the United States in Slovakia - quite the opposite, integration creates a standard legal, economic and political environment in the country, opening up the space for further intensification of our mutually advantageous economic and political relations. One tangible proof of this fact is the last year's U.S. Steel investment into the former VSë (East Slovak Steelworks) Koäice, one of the most important investment ventures during the era of Slovakia's transition to market economy.

International economic interests of the Slovak Republic and economic diplomacy are among the priorities of Slovak foreign service. This is due to the high degree of openness of the Slovak economy (expressed by the share of exports and/or imports in the GDP) and the small size of the market of our country. Further development and economic growth of the Slovak Republic requires the strengthening of international cooperation, expressed in our integration into the European and the world market.

The Slovak Republic has fulfilled the first of its key integration priorities when it joined the OECD as its 30th member on 14 December 2000. With its entry into the OECD, the Slovak Republic demonstrated its preparedness to integrate into the world economy and into its global structures. This was also the first important step taken by Slovakia in the direction of the Euroatlantic space.

The accession of the Slovak Republic to the OECD gives also evidence of the progress of its economic reform, and of the progress made in the area of the environment, legislation and social policy. In Slovakia, this recognition and acknowledgement of the advanced stage of its economic reforms and of the restructuring of its banking and corporate sectors by the OECD member states, is perceived as a commitment. Slovakia is ready and determined to assume the obligation to liberalise its economy to the level expected from a future member state of the OECD.

Slovakia's integration into the OECD has an important economic dimension, reflected mainly in the area of foreign investment whose inflow to Slovakia lags behind that of its neighbours. Slovakia has become a less risky territory for foreign investors who can expect to find there a standard economic and business environment.

The accession to the OECD has also an important political dimension. It proves that Slovakia meets strict international criteria of a democratic state governed by the rule of law, and that it belongs among the most advanced countries of the today's world.

Moreover, OECD membership is an invaluable source of information. The 21st century is a century of information and the unique opportunity to obtain, through its representatives in the OECD, access to vital information about economic and political measures that were successful in other countries and those that failed to bring expected results is very important for Slovakia. The Slovak Republic thus participates in the work of the OECD Council, 24 committees, 56 working groups, 5 specialised agencies, 12 programmes, 1 project and several other advisory bodies of the OECD. It can thus learn about the latest tendencies that are characteristic of the dynamic development of the world economy, and about the development of policies that had proven to work in individual member states of the OECD.

With entering the OECD, Slovakia did not fulfil its objective, it only made the first step towards its fulfilment. In other words, Slovakia does not want to be a mere recipient of the benefits of membership, but wants to actively participate in the structures of the Organisation and wants to further expand its activities. For instance, it has manifested its interest in becoming a member of the Nuclear Energy Agency (NEA) at the OECD by submitting its application to the Agency.

The membership of and the work in the OECD are seen also as important steps towards the fulfilment of the Slovak Republic's ambition to obtain full membership of the EU and NATO.

At present, the activities of the Slovak Republic in relation to the EU are aimed at intensifying the pre-accession strategy through a consistent implementation of the timetable of accession negotiations and preparation for the sessions of joint bodies of the Slovak Republic and the EU, established under the Europe Agreement on association. We emphasise the implementation of the commitments that arise for the Slovak Republic from its negotiating positions, systematic monitoring of partial processes of the pre-accession strategy, especially approximation of the legislation, institution building and financial support. An exceptionally significant role in the process of accession is played, besides the building of market economy, by the legislative dimension of integration process, i.e. transposition of the law of the European Union - called acquis communautaire - into the Slovak legal system.

The key determinant of the progress made by the Slovak Republic in the negotiating process is our strategic interest to enter the EU together with the Czech Republic, Hungary and Poland, our partners in the closely cooperating regional group, called the Visegrad Four group. To fulfil this goal, it is necessary to catch up with our neighbours and close the gap resulting from the fact that, while our neighbours launched accession negotiations as early as 1998 within the so-called Luxembourg Group, we started accession negotiations only in 2000 within the Helsinki Group after the new Government came to power and after the democratisation of the situation in Slovakia. It is in the interest of the Slovak Republic to maintain the momentum of the accession process. This is also necessary in view of the target date by which the Slovak Republic wants to be ready to join the European Union, i.e. 1 January 2004.

Of special significance for Slovakia is also avoiding the creation of the Schengen border that would cut across the Visegrad Group countries. It is in the best interest of the country to have the external border of the Schengen area to the East of it. After all, this is also in the interest of the European Union itself, because it would mean a considerably shorter Schengen border.

Our ambition in the first half of 2001, i.e. during the Swedish presidency, is to step up our negotiations efforts so as to be able to open negotiations on all the remaining chapters and to provisionally close some of them. The fulfilment of this objective would strengthen the position of the Slovak Republic among the entire group of candidates and would practically put an end to their division between the so-called Luxembourg and Helsinki groups.

Out of the total of 29 chapters we opened 23 as of the last meeting of the Accession Conference on 30 March 2001, and we have provisionally closed 12 of them.

We are aware of the fact that accession negotiations are reaching a qualitatively new stage where the negotiating chapters to be discussed will require transitional periods for their implementation. Slovakia is ready to accept the acquis communautaire without requesting any derogations. It will ask for transitional periods only in a limited number of areas which require high infrastructure investment (the environment, energy sector), or in which the Slovak economy will need a longer adaptation period (agriculture, free movement of capital, free movement of services, taxes).

A milestone for integration ambitions of not only the Slovak Republic but also of all other candidate countries was represented by the Nice summit. Although the summit did not meet all the expectations of "euro optimists", it has created the necessary legal base for expanding the European Union by adopting the Treaty of Nice.

The Nice summit was a milestone also because it requested the Swedish and the Belgian presidencies to launch extensive discussions on the future of the EU. The first stage of this process will be completed at the summit in Brussels-Laeken, where the European Council will make a declaration summing up the conclusions from this broad discussion. The next stage will be completed by the Intergovernmental Conference of 2004. This entire process will have great significance for further development of Europe, because it should address such issues as the adoption of the European constitution, setting up of a second chamber of the European Parliament, or the definition of competencies between the European institutions on the one hand and Member States on the other hand. This should result in the federalisation of Europe which should be perceived as the deepening of integration on the basis of the use of certain federal institutions while respecting national identities of the Member States. The entire process is intended to simplify and to render more transparent the decision-making procedure of the European Union which should ultimately increase the transparency of the functioning of the Union and bring it closer to the citizens. We are happy that the candidate countries have also been invited to join this dialogue.

The process of deepening the European integration is closely related also to the building of the European Security and Defence Policy (ESDP). Slovakia welcomes this process which it perceives as an opportunity for strengthening the European identity. We are, however, also aware of the risks that could arise from the failure to clearly define the role of the ESDP vis-à-vis NATO. We are of the opinion that the ESDP should not compete with NATO, and we understand the functions of the two as mutually complementary and preventing unnecessary duplication. We see the importance of the ESDP in building a reliable military potential that would enable Europe to take effective measures in the area of conflict prevention and crisis management, as a result of which Europe could assume the greater part of responsibility for the safeguarding of international peace and security.

The United States has always been a lighthouse that has shown the way to those who sought freedom and democracy. Integration of Europe at the threshold of the new millennium gives us an opportunity to build a similar lighthouse.