As part of its EU strategy, the Swiss government commissioned several research projects covering the most important aspects of economic integration. Given the interesting results and the wealth of methods used in these studies we decided to organize a conference on the topic of 'The Economic Impact of EU Membership on Entrants: New Methods and Issues." The idea was to use the work on Switzerland as a case study for discussing modern approaches on how to assess the economic effects of joining an integration zone. This seemed to us to be a topic of considerable interest for the rising number of prospective EU-member countries. The response was very favourable with many eminent scholars agreeing to contribute. The conference took place in Lausanne, Switzerland in October 1999 and the papers submitted together with the discussions are published in this volume. We would like to acknowledge the financial support of the Swiss State Secretariat for Economic Affairs and to thank the University of Lausanne for providing the venue facilities for the conference. Many persons helped in the preparation of the conference and this volume but we would like to especially mention Marc Surchat who provided substantial input for the conference and Walter Brodmann who very efficiently reviewed and finalized the manuscript. The Editors RICHARD E. BALDWIN AND A YMO BRUNETTI THE ECONOMIC IMPACT OF EU MEMBERSHIP ON ENTRANTS: NEW METHODS AND ISSUES INTRODUCTION What a transformation Europe has witnessed in the past 15 years.

This volume centres on the issues surrounding the likely economic impact that EU membership has on joining nations, with the main emphasis on new issues and methods. Given the significantly greater level of economic integration that now exists in the EU, accession brings up a host of issues that either did not arise or were of secondary importance during earlier enlargement waves. For instance, EU membership now entails eventual membership in the monetary union. This raises a series of new issues such as interest rate convergence, exchange rate stability and the loss of sovereignty over monetary policy. Additionally, these macro issues interact with micro issues such as export performance, capital formation and foreign direct investment (FDI). Migration, unemployment and foreign direct investment are further issues that acquire a magnified importance for the prospective entrants. All of these questions are treated in the contributions in Economic Impact of EU Membership on Entrants: New Methods and Issues that should be of particular interest to academics as well as decisionmakers in prospective member countries. Richard E. Baldwin worked for the Institute of International Studies. He was a Senior Staff Economist for the President's Council of Economic Advisors in the Bush Administration (1990-1991) and has advised the European Commission on several integration issues. He has also worked in the past for the European Commission, EFTA, the OECD, the FCO, the World Bank, USAID and UNCTAD. From 1991 to 2001 he was Co-Director of the International Trade Programme of the Centre for Economic Policy Research. His areas of specialisations are international trade, regional integration, andeconomic geography. Before coming to Geneva in May 1991, he was a professor at Columbia University Business School, having done his PhD in economics at MIT, an MSc at LSE, and a first degree at the University of Wisconsin-Madison. Aymo Brunetti is Head of Economic Analysis in the State Secretariat of Economic Affairs of the Federal Department of Economic Affairs, Switzerland. In addition, he is Professor of Economics at the University of Basel and teaches at the University of Bern, Switzerland.

Why have the economies of some developing countries fallen back while others have advanced? Why have so many stabilization and structural adjustment programs failed to deliver growth dividends? This book shows that there is a common and valid answer: political credibility defined as the predictability of the institutional rules of the game. This case is not only argued theoretically but also found to be confirmed by empirical analysis. Ten case studies pitting Latin American countries against Southeast Asian ones reveal the sources of political credibility. Economic openness is the necessary precondition, long-term reputation or democratic participation the sufficient one. Despite the seemingly superior strength of authoritarian reputation democratic control is the more successful road.