How has Ireland's membership to the European Union effected the economy and unemployment?
Receipt of Structural Funds under the Community Support Framework
What are the three functions of the Structural Funds? [TOP]
In 1988, as the move toward a cohesive market throughout the
European Community began, the range of structural funds were reformed, reorganized, and
expanded. This reorganization brought about the development of the Community Support
Frameworks (CSF). The CSF are coherent multi-year programs, designed to promote economic
and social cohesion throughout the European Union. The CSF is funded by a combination of
Community, domestic national authority, and domestic private-sector finance.(Barry
1999, 107) There are a number of other non-CSF structural funds, but it is the
CSF funds which have greatly affected Ireland. The funding provided by the CSF serves
three functions in reducing the unemployment rate and increasing the output of the
country. As we examine Ireland during the 1990's, it is evident that this CSF funding has
played a major role in its recent performance growth.
In the early 1990's, it was believed that Ireland needed some
increased compensation from a Cohesion Fund to assist in meeting the Single European
Market. The CSF funding programs work in three ways to help small periphery
countries such as Ireland become a more coherent member of the Single European Market. The
first of these functions is to develop the economy's stock of physical infrastructure.(Barry
1999, 108) This is a very important matter for Ireland, whereas they were
considered a terrible high-tech environment just a few decades ago. The former high
transportation costs which hindered Irish businesses during the 1970's have subsequently
been reduced with the formation of a modern system of roads connecting nearly all of the
Irish countryside today. Along with infrastructure improvements such as roads, there
have also been large improvements made in the energy and telecommunications sectors.
Ireland has used these funds to set up a five billion dollar telecommunications system,
which has been boasted as the most advanced in all of Europe.(OECD 1999)
This improved infrastructure along with the development of well-run support companies
within Ireland, have not only increased productivity, but have also attracted a large
amount of foreign investment. It is this increase in foreign investment which has
increased the productivity of the Irish economy, and led to the decrease in the
unemployment rate.
The second function of the CSF funding is to contribute to the
development of the human resources of the country through professional and technical
training.(Barry 1999, 108) This spending on human resources increases the
appeal of the labor force. Investment in human resources not only benefits the
individuals, but also creates a more highly educated workforce which in turn attracts
foreign direct investment (FDI). Ireland today boasts a large and well educated
workforce, which is focusing more on the growing sectors of engineering and computer
technology. Once FDI is established in these high skilled sectors, there is a
subsequent increase in the demand for unskilled labor, therefore, increasing the overall
employment in the country. During the 1990's, this function of CSF funding helped to
dramatically increase Ireland's inflows of foreign direct investment. One drawback,
which needs to be mentioned when talking about Ireland's increased employment, is
that many of the high-skilled workers are brought to Ireland from the company's host
country. This leaves primarily the low-skilled and low paying jobs for the
Irish.
The third function of CSF funding is to assist private sector
development in areas such as investment, marketing and innovation.(Barry 1999, 108)
The expenditures on productive services is not as clear cut, but it stimulates
Irish business activity by reducing costs of capital. What this means is that some infant
industries which may be in the periphery, may be at a disadvantage compared to incumbent
firms, and this funding allows then to offset the "learn by doing" aspects of
new businesses. It has been found, that these inflows of funding, have allowed some
smaller firms to flourish, and become input providers for the larger foreign firms,
creating local links.
The three functions of CSF funding provide both short term and long run effects. In the short run, the funding for things such as training, raises income and labor demand which increases productivity and decreases unemployment. The consequences of the enhanced productivity of workers and profitability of businesses will continue in the long run.(Barry 1999, 110) Ireland has seen tremendous performance growth in the 1990's, and the CSF funding has been a major factor in drawing these periphery countries into the Single European Market.
Increased Integration with partners in the European Union through liberalization of trade and investment
How has membership to the European Union liberalized trade and investment? [TOP]
The political history of Ireland, much like that of other European countries was entrenched in protectionist economics in the early part of the 20th century. From the 1930s to the late 1950s, Ireland followed a number of strict policies, which placed high tariff barriers on foreign imports. There was even the prohibition of foreign ownership of firms operating in Ireland under the Control of Manufactures Act.(Barry 1999, 45) This act along with much of the Protectionist policies were abolished in the late 1950s as Ireland began to cultivate foreign investment. While these acts and policies relieved some of the barriers which existed between European countries, the most important step in removing all of the barriers came in December of 1991. It was at this time, that the Maastricht Treaty came into effect in order to create a unified Europe in both monetary and social policy. One of the main focuses of the Treaty, was to break down the barriers between member countries, and promote the liberalization of trade throughout Europe. In Title II, Article III of the Maastricht Treaty, it is stated that the community shall include:
Title II goes on to list numerous other provisions in order to unify trade and investment regulations in the Member States.(Online, Europa 1999) Article 3 in Title II established the activities which will facilitate the cohesion of the European Community. These provisions and activities will aid the liberalization of trade and investment between the Member States by eliminating custom duties and other restrictions that would delay or incur high transaction costs for the Member States. The activities’ goals are the establishment and functionality of a common market. As these goals are met, more specific acts such as improving the competitiveness of the market and the education and training of workers follows. Therefore, it is hoped that the cohesion of the market will ultimately lead to a rise in employment.
The latest treaty, the Treaty of Amsterdam, brings the Union into the 21st century. The treaty significantly strengthens the Union's foreign policy, and develops a more coherent EU strategy to boost employment, as well as removing barriers to free movement of people across internal borders. This treaty took effect on May 1, 1999 following ratification by the member states.
