Changes in Industrial Competitiveness as a Factor of Integration: Identifying Challenges of the Enlarged Single European Market

About the Project

Objectives

The principal aim of the project is to evaluate the progress of the candidate countries in their readiness to compete with the EU industries and to show the differences existing among them in this respect as well as related challenges facing the Single Market and for EU policy.

We assume that the progress of the candidate countries in integration with the EU is an effect of the diminishing competitiveness gap between these and EU countries which results in restructuring of candidate countries' manufacturing sector (production and trade), changes in labour market and specialisation within the EU. Recognising the progress in competitiveness improvements as a determinant of the candidate countries' adjustment and their integration with the Single Market, we will focus on changes on the supply side of economy.

Another goal of the project is the analysis of mechanism of translation of uneven changes in competitiveness broken down by branches of manufacturing to structural changes in the manufacturing sectors of the candidate countries. Furthermore the project will deal with new problems, especially those of a social nature resulting from changes in the labour market which will create new challenges for the Single Market and EU policy. The research results will enrich the discussion of the development path of the candidate countries and adjustments taking place within the enlarged Single Market. The role of major factors and determinants affecting changes in competitiveness of the candidate countries will be highlighted.

By assessing changes in the competitiveness of the candidate countries and evaluating distortions in this assessment, the project will contribute to the discussion on competitiveness, its determinants and measures.

To fulfil the above goals will require a multidimensional analysis consisting of several stages. Thus the operational objectives will be as follows:

• To examine changes in the competitiveness of different branches of manufacturing in the group of transition economies that have been exposed the longest to competition from the EU industries and that have undergone the deepest reforms in the years 1994-2003 (Poland, Hungary and the Czech Republic). Here, we shall identify those branches of the manufacturing sectors of individual countries which have been continually and strongly improving their competitiveness, and those with constantly deteriorating competitiveness.
• To evaluate the impact of government policies on changes in the competitiveness of manufacturing sectors in the Czech Republic, Hungary and Poland. Salient variables will be used to examine the role of governments in promoting/halting the increase in competitiveness of the manufacturing sector.
• To examine the impact of the above changes on the structure of manufacturing and specialisation in the aforementioned candidate countries; i.e., to identify branches of manufacturing which, due to improved competitiveness, are increasing their share in GDP and, conversely, those whose shares in GDP are declining due to declining competitiveness.
• To assess the effect of the changes in competitiveness - or more generally of uneven integration of the candidate countries' manufacturing into the EU market - on the labour markets of the aforementioned candidate countries and of the EU. We will also seek to identify the sectors that are likely to shed labour and those likely to absorb labour (labour demand aspect). We will consider changes in competitiveness of the labour force of transition economies (labour supply aspect).
• To analyse export specialisations emerging in the candidate countries as a result of changes in competitiveness and the place those countries are taking in the European division of labour in connection with these export specialisations.
• To identify the actors responsible for developments in competitiveness and define their roles and the factors shaping their strategies, looking both at foreign and domestic firms.
• To examine the relationship between structural changes in manufacturing, trade and economic growth of candidate countries and some member countries, showing the impact of variation in changes in competitiveness among branches of manufacturing on economic growth.
• To examine policy implications of changes in competitiveness patterns of the candidate countries for the EU and assess various policy stances. The focus will be the need and directions of policy modifications in reaction to CEECs accession to the Single Market. We will examine the rationale of policy adaptations in individual Member States.