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Task for the V4: join the market

Kryštof Kruliš Kryštof Kruliš / Ed. 3. 2. 2016

The V4 could at least explore the possibility of allowing free movement of services based on the country of origin principle.

Since the time of its foundation on 15th February 1991 the Visegrad Group (now also known as the „Visegrad Four“ or „V4“) has become a vital platform for regional cooperation on mostly all imaginable sectoral issues.

Under the V4 umbrella, the Czech Republic, Slovakia, Poland and Hungary now keep an ongoing dialogue and cooperation in areas ranging from development of digital agenda and connection of energy and transport infrastructure to a joint fight against extremism, terrorism and cybercrime.

Also the modus of operation has become quite varied and the cooperation of public institutions is becoming more and more accompanied by various regional expert meetings and common programs of the civil society across the region.

WITHIN EU

The Visegrad Group is not maintained as an alternative to integration in the European Union, quite the contrary. Many aspects of the V4 agenda are now Europeanized and complement the initiatives on the overall union level.

The countries of the V4 are tied together by the common recent experience with the transition from the Communist era and subsequent entry into NATO and the European Union. It is not surprising that they face similar challenges and can learn useful lessons from each other. To a large extent they also have a similar economic structure of their economies.

The Czech Republic, Hungary and Slovakia are open economies and their exports and imports alike are at very high levels relative to GDP (above three quarters of GDP). Only Poland, due to its larger domestic market, has a lower level of engagement in foreign trade.

Nevertheless, this holds true only in comparison to other V4 countries. Poland still has a more open economy and depends more on foreign trade than similarly populous states of the EU, such as Spain. Another important similarity is that the most important export trading partner for all of the V4 countries is Germany.

GERMAN FACTOR

The German market serves both as a V4 final market and as an entrance to the outside world through manufacturing
of V4 goods into the final “made in Germany” export products headed for non-EU markets. The V4 countries, through their reliance on the German exporting machine, are more dependent on the developments of the global economy than the list of their most important trading partners might otherwise suggest.

However, the V4 countries are not only isolated islands connected only to the imaginary German mainland. Their mutual economic linkages are also quite significant and the V4 countries are important export trading destinations to each other. All V4 countries have at least one of the other V4 countries among their top three most important export trading partners. Immediate neighbours within the V4 group always rank as at least the fourth most important mutual export trading partner. The only exception is Slovakia as an export partner for Poland, which may be due to the size of the Slovak market and the natural obstacle of the Tatra Mountains.

The V4 countries are engaged in an intense competition for foreign investments, but once a big investment is attracted to one of the V4 countries, it is usually good news also for the rest of the region. Geographical closeness and membership in the single market of the European Union allow for easy development of complex cross-border supply chains with involvement of businesses throughout the Visegrad region. A newly established big car manufacturer in Slovakia or Poland is thus a blessing for many Czech suppliers of the automotive industry.

INTERESTS OF V4

The preservation of access to the single market of the European Union and its further intensification (for instance in the area of free movement of services) are in the natural and vital interest of the V4 countries represent. Like Benelux in the 1950s, the Visegrad Group has all the incentives toly functioning single market. Besides this, similarly as in the case of Benelux, the V4 could serve as a platform for enhanced market integration. There could be many gains from this. In the political domain, this could serve as a good example of market integration possibilities for the rest of the European Union. The V4 countries could for instance at least explore the possibility of allowing free movement of services based on the country of origin principle among themselves. Such a positive regional example could be the best way of how to fight with the overweening Polish plumber stereotype that still lingers in some of the old members of the European Union and prevents the adoption of this principle on the level of the whole union.

The more integrated the V4 markets are in the sense of simplification of various bureaucratic obstacles could also be a significant incentive for both small and large business. For instance, the Common Consolidated Corporate Tax Base (CCCTB) has been discussed at the level of the European Union for years. It is a means to simplify corporate taxation and redistribute the tax base between participating states (to be taxed there by the individual tax rate of each state) according to a specific key. The hardship at the overall union level resists in divergence of interest of countries in regards to such a distributing key. key. Simply, capital rich countries of the union have different interests than the countries where the products are manufactured.

The Visegrad Group would be an ideal place to launch CCCTB in a smaller regional scale. From the perspective of capital/labour ratio, the V4 countries represents lower heterogeneity than is the case on the overall union level and the system thus could be more ea-
sily accepted. This could attract more foreign investments. Similarly, the red tape for e-shops in the region could be significantly lowered by the broadening of the Mini One Stop Shop (MOSS) which are applied currently at the union level only for electronic goods, to all goods offered via the internet between V4 countries.

This could be an invaluable help to start-ups allowing them to engage in regional activities more easily. Other possible V4 market integration projects could include coordination in development of infrastructure in many ways, from transportation projects to connectivity of energy networks.

The overall result of above mentioned, and many more possible ways of enhanced integration of the V4 markets, could create a V4 internal market which would bear significantly more resemblance to a single domestic market of one state.

Originally published: Task for the V4: join the market

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Czech Republic 515
EU Internal Market 43
Europe 546
European Union 330
Poland 207
Visegrad Group 219
economy 131
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