e-Estonia and European Integration

e-Estonia and European Integration - Toomas Hendrick Lives

The European Union recently (and rather belatedly!) launched a program called e-Europe. The name, of course, comes from the field of information technology, and the aim of the project is to help Europe cope more effectively with the modern chal­lenges of the globalized world. Furthermore, the program reflects the realization that the EU is falling behind the US in the realm of technology and must catch up as swiftly as possible or risk losing even more ground.

Notably, there are individual countries that have recognized the importance of technology and have addressed the issue much earlier, even in Europe. It was not by chance that the e-Europe program was launched by a Nordic presidency in the EU, as it is well known that the Nordic countries lead Europe in the field of infor­mation technology. It is far less known that Estonia, separated from Finland by only 80 kilometers of the Finnish Gulf, can be regarded as e-Estonia, the latest Nordic start-up. In this respect, Estonia is highly integrated into Europe and in­deed into the world. In fact, the candidate countries are well integrated into the European Union in many areas. But is the EU itself willing to recognize this? The aim of this paper is to present a candidate country's view on European integration as it proceeds today and, in doing so, correct some common misperceptions in Eu­rope.


According to McConnell International, Estonia is the leading country in the world for promoting technological development_ It is ranked highest among 42 states in terms of government use of the Internet, training, and business climate. Cur­rently, 39 percent of Estonians regularly use the Internet. Ninety-five percent of public sector employees use personal computers in their daily work, and 20 percent of the population owns a personal computer. It is most curious that these circum­stances exist in what Western Europeans consider a poor, backward East European country. In addition, all Estonian schools are online as, of all candidate countries, Estonia dedicates the highest percentage of its federal budget to education. In addi­tion, more than 80 percent of bank transactions are made electronically, and, last summer, the Wall Street Journal stated that the Estonian Hansabank was among the three most technologically advanced banks of the world.

What do these numbers mean? In the European context, Estonia is in the top five or six countries in both mobile phone and computer use. Estonia may be poorer, but in those areas that currently rank as measures of advancement, Estonia has outpaced two-thirds of the EU member countries and is thus already well inte­grated into Europe.

"Western Europe" and "Eastern Europe"

The current status of Estonia is an example of a larger issue related to the divides that continue to exist between Western and Eastern Europe. Since the fall of communism, a number of Eastern European countries have pursued highly dy­namic reform and transformation policies, very much like the countries of Western Europe underwent in the post-WWII years. The emergence of new technologies and new economies reveals that the old vision of a backward, corrupt Eastern Europe, dismal and gray, should have been buried with the Soviet Union. But "Western Europe" still tends to place "Eastern Europe" in the context of a state that died ten years ago. Misguided preconceptions about Eastern Europe remain, to the detri­ment of both East and West. Why?

I have long maintained that Eastern and Western Europe operate on different clocks as a result of diametrically different experiences with change and decisive political actions. The post-WWII experience of Western Europe can be character­ized by unprecedented political and economic success founded on slow, incremental change. Indeed, it has become almost axiomatic in Europe that through discussion and mutual agreement the unpredictability and chaos of the 1920s, 30s, and 40s can be avoided. A corollary implicit in these Western European approaches to change is that instability and rapid change must be avoided at all costs. This approach has indeed been successful, especially given how, out of the ruins of the Second World War, Western Europe has become the economic and political powerhouse it is to­day. In the post-Soviet world, however, the experience with time has been the oppo­site. Slow, incremental change has always been seen as stagnation.

What liberated the Czechs, Hungarians, East Germans, and Esto­nians were rapid, decisive actions. This in turn, at least in the Estonian case, shaped the ap­proach for the ensuing post-liberation reforms and transition period. Spurred by success in re­establishing indepen­dence, Estonia's post­communist governments stepped eyes wide shut Estonian Parliament building, Talinn, Estonia into radical and resolute reforms. A case in point is currency reform. The International Monetary Fund warned Estonia in 1992: do not step out of the ruble zone; do not attempt a currency board. Nevertheless, Esto­nia pursued an independent course of currency reform by establishing a currency board on June 20, 1992. The change was so immediate and complete, and the people were so interested, that by the time I went out to change money in the late after­noon, all the Kroons had been sold for that day, so I was forced to borrow from my friends. No shops would accept any other currency. On that day, the depressing institution dividing communist society into haves and have-nots, the hard-currency shop, died in Estonia, and in its place a vibrant new economy was born. Within half a year, the reform was proven so successful that the IMF was advising other coun­tries to also adopt a currency board. Thus far Latvia, Lithuania, and, most recently, Bulgaria have followed the Estonian example, with considerable success.

Privatization experienced similar successes. Estonia opted for the less popu­lar and far more radical program of straightforward privatization for cash rather than the politically easier voucher privatization. Today, Estonia has one of the few successful privatization histories in the post-communist space. In addition, Estonia eliminated all tariffs and opened itself to trade with the world, constitutionally mandated a balanced budget, established the first flat-rate income tax in Europe, and eliminated the corporate income tax. These measures have contributed to growth rates well beyond the European average. This year, the conservative prognosis for growth is 5.5 percent. Finally, in the transparency and international corruption index, Estonia has consistently ranked as the least corrupt country in Eastern Eu­rope. And, more significantly, Estonia is ranked as a country less corrupt than a number of EU member states. All of this should give pause to West Europeans still living in the decade old, comfortably smug, but misguided notion of Eastern Euro­peans as barbarians pounding at the gate.

Prejudice and Enlargement

Where, then, does the process designed to overcome the old barriers, including the static vision of the gray and woolly East, actually stand? On the surface, EU enlargement seems to be proceeding according to plan and sufficient political sup­port seems to exist. The EU's Nice Summit in December 2000 made clear that en­largement will take place in the near future. No matter to whom I speak, the rheto­ric is always positive: enlargement is a priority, enlargement is inevitable, rapid enlargement is necessary, etc. All of these political statements in support of Euro­pean expansion are most welcome, but as discussions on serious issues such as transition periods approach, the more often hesitant behavior towards the idea of rapid enlargement becomes apparent.

Technically, the date of accession depends mostly on the candidate countries' ability to implement the existing EU legal and institutional framework in the form of the acquis communautaire. Although accession to the EU can be delayed by fail­ure to meet these objective criteria for membership, enlargement can, however, also be delayed through subjective means. It is becoming increasingly apparent that enlargement is not entirely in the hands of the candidate countries alone. The so-called "big bang" approach to enlargement, whereby no country will be admitted to the EU until all or most of the other candidate countries are also prepared to enter, is one of the ways that those who do not support enlargement hope to pre­serve the status quo for as long as possible by lengthening the time for negotiations. Furthermore, specific countries advance arguments for or against enlargement based largely on their own national interests, rather than on the performance of candi­dates. Country X demands waiting until candidate Z is ready, while member state Q will not allow enlargement to precede until country Y is admitted. Publicly, en­largement is based on performance; in reality, however, enlargement is a matter of the interests of some EU states.

But if enlargement is held hostage to the national interests of individual mem­ber states and is delayed, or standards are artificially lowered for some, or, for purely political reasons, raised for others, the EU will be programming in new prob­lems. In the candidate countries best prepared to join, those governments coura­geous and bold enough to push through the most dramatic and frequently most unpopular reforms will be penalized for their decisiveness. At the same time, politi­cally motivated rather than performance-based enlargement will reward those gov­ernments that have been most recalcitrant in undertaking the understandably dif­ficult measures required for EU membership. I do not believe that the Union will be made better by rewarding slowness and punishing reform. As seen from the Single Market Action Plan, this principle is well understood within the Union; the same principle should apply to the candidate countries.

The existence of even more basic prejudices also poses a threat to enlargement and constitutes perhaps the largest obstacle to overcome. Resolution of these issues is as much in the interest of Western Europe as it is important for candidate countries. The problem not only hinders the enlargement process, but if Europe does not overcome the kinds of prejudices I have described, citizens of candidate countries will not believe that they are to be treated as equals in the EU and will oppose ascension.

Ultimately, while there seems to be agreement on the necessity of enlarge­ment, candidate countries continue to receive many confused signals about the cri­teria and conditions necessary for ascension and Europe's willingness to accept new members. Even rapidly developing candidate countries, such as Estonia or its fel­low leaders Hungary and Slovenia, which clearly stand at the forefront of innova­tive change, remain in the eyes of the EU as undeveloped Eastern European coun­tries threatening to drain the EU of its resources.

Arguments Against Enlargement

In addition to these attitudes, enlargement is further endangered by a series of technical arguments against eastward expansion. The most prominent of these arguments include: (1) enlargement will cause an inundation of foreign labor into Western Europe; (2) eastward expansion poses a threat to the Common Agricul­tural Policy (CAP); and (3) enlargement will be very expensive.

The first argument against enlargement is based on the belief that, although Europe is entering a labor-shortage crisis, an influx of cheap foreign labor poses a great threat to Western Europe. Currently, Germany seeks 20,000 technology spe­cialists from Eastern Europe; Denmark wants 4,000 from the Baltic countries. Eu­rope realizes that it cannot compete in the new economy without more trained spe­cialists, and it considers the best way to meet its needs is by having taxpayers in countries like Estonia pay for the education of specialists who can then immigrate to the EU. But, the EU member states remain fearful of the potential for less-skilled foreign workers to enter their countries and seek jobs. The situation, however, is not exactly as Europe envisions it. Last year, Austria was unable to attract enough technology specialists from abroad, and one survey revealed that the Hungarian specialists whom the Austrians had targeted as potential immigrants preferred to stay at home.

The second argument against enlargement maintains that the Common Agri­cultural Policy must be preserved in its current form to maintain rural life in the Union. However, the EU finds it too expensive to spend the large sums dedicated to the CAP on new members. From this, candidate countries deduce that rural life in the present EU is worth preserving, yet, in the case of Eastern Europe, it is not. The CAP is one of the few remaining issues of the EU internal reform that was not addressed at the Nice Summit. It seems expedient to begin to include the candidate states in discussions as soon as possible, as the controversies over the CAP will not disappear by restricting the discussions to the member states alone.

The argument suggesting that enlargement poses too great an expense to cur­rent EU members should be put into a certain perspective. Currently, spending on candidate countries is roughly one percent of the 1.27 of GDP that forms the EU budget. This equals one percent of one percent, or .01 percent, of total EU GDP, a formidable sum. But, in comparison to the amount paid by the US to Europe under the Marshall Plan, which allowed the original members to stabilize and eventually sign the Treaty of Rome, the totals become less impressive. The US opted to send the countries of Western Europe two percent of its GDP and granted open access to US markets for 10 years. These are much more significant contributions than the .01 percent of GDP and restricted access to EU markets offered to the current can­didates for EU enlargement. These discrepancies become even more glaring when one considers that European countries clearly were not viewed as candidates for statehood in the US, while Europe is indeed attempting to expand its political and economic union to include many new states.

The US did not contribute so heavily to the improvement of the nearly dead economies of Western Europe out of simple kindness. Rather, it created for itself what stands today as its largest foreign market supported by consumers with a high purchasing power and an appetite for US goods. Clearly, after the purchase of Alaska, the Marshall Plan was one of the best investments the US made. But in Western Europe, a similar self-interested awareness in the trade potential in its own backyard is absent (with certain exceptions such as Finland and Sweden, which have experienced very large growth in exports to countries like Estonia). Altogether, then, enlargement is mistakenly viewed as an expense that Europe cannot afford, rather than an opportunity that it cannot pass up.

The Future

I believe that there are two general directions that the European project can take. The first path demands that Europe be bold and move quickly to bring in those candidate countries that are, by objective evaluation, qualified. This means, inter alia, that the goalposts should remain in place and that they should be the same for everyone. By doing this Europe will ensure that enlargement will bring the greatest benefits to all: qualified candidates will be rewarded for their hard work, while those less qualified will see that hard work is indeed recognized, and that there is a light at the end of the tunnel. Candidate countries which have not been able to meet the standards must understand that enlargement will proceed, and that the first phase of enlargement will not be followed by a long pause. To this end, Nice produced a much-needed specific enlargement strategy; the central prin­ciples of flexibility and individual treatment of candidates, as well as a realistic timetable, are written into it.

The other option, of course, is to find reasons to postpone enlargement. To quote my dear friend and colleague, the Foreign Minister of Hungary, Janos Martonyi, "Ever since 1995 we have been told we will join the EU in five years." Delaying enlargement will continue to send the message that those who worked hard to reform were fools and those who delayed the process were on the right track. Certainly this is the message of the "big bang" approach. In this, it is impor­tant to remember that the message that effort does not pay will not inspire new members to be eager to play a constructive role in the Union.

In conclusion, I hope that I have managed to convey some sense of how dra­matically EU candidate countries such as Estonia have changed and that a static or recalcitrant view of Eastern Europe will only harm common European economic prospects and competitiveness. The view of Eastern Europe as a burden only bur­dens us all. An integrated Europe, whole, free, and prosperous, is within our grasp; it is ours to create. Carpe Diem, Europa!

Toomas Hendrik Ilves is Estonian Minister of Foreign Affairs since 1996. He has served as the Director of the Estonian Service of Radio Free Europe, the Estonian Ambassador to the United States, Canada, and Mexico, and was Chairman of the People's Party from 1998 to 1999.