Forging the Future: The Impact of EU Enlargement on the Steel Industry

The European Union is entering a new era. The addition of ten new member states on 1 May 2004 is having a significant impact on almost every industry sector. The preparations companies based in the new member states have made are among the most obvious changes, but companies operating in the EU-15 also need to assess their strategies and procedures to ensure a smooth transition. This paper is part of a series on the implications of EU enlargement for specific industry sectors. For the new member states, membership of the EU is expected to generate economic changes in three important ways. It: extends the internal market by driving the development of the u0093four freedomsu0094 in all the new member states through implementation of a common body of EU rules, standards and policies known as the u0093acquis communautaireu0094: this involves removing the barriers to trade of goods and of services, easing the movement of capital and reducing barriers to the free movement of labour within the EU; offers access to EU funds to support development (but requiring new member states to provide some matching funding); and obliges new member states to adopt the euro once they have fulfilled the Maastricht criteria. These changes give rise to some important impacts affecting companies in the steel industry operating in the enlarged EU market: the size of the internal market has increased, as 75 million new citizens come within the EUu0092s borders to create the worldu0092s largest trading group with over 450 million consumers, although the new member states will add less than 5% to the EUu0092s GDP; economic growth, especially in the new member states, will be boosted; substantial EU funds are available to support industrial, social and infrastructure development (around $22 billion), which should spur steel demand; adoption of EU environmental laws will give rise to potentially large additional costs; and competition between firms will intensify as higher quality, though more expensive, Western European suppliers in