2. The Economic Impact of Single Market Membership on the EU Enlargement Countries

This chapter examines the macroeconomic benefits that membership of the Single Market has given to the 11 Baltics, Central and South Eastern European countries that joined the EU after 2004. We find that these EU11 countries have benefitted particularly from membership of the internal market because of their high degree of openness and their strong trade integration within the EU. The analysis is conducted with the macroeconomic model QUEST that distinguishes between all EU member states and the rest of the world. We capture both the direct welfare effects for consumers from the reduction of tariffs and non-tariff barriers but we also consider indirect effects on income which work via labour supply, the decline of capital costs for firms and effects on EU value chains via lower prices for intermediates. GDP effects depend heavily on the degree of openness with respect to intra-EU trade. We find GDP effects which are in the middle of effects estimated in ex ante studies.