EUROPE'S NEW DIRECTION

ANY INSTITUTION that increases its membership by one-third must expect to change in important ways. The 12-nation European Union is no different. Negotiations have been under way for a year between EU headquarters in Brussels and potential member states Sweden, Finland, Norway and Austria. The goal is to wrap up those discussions by mid-year 1994 and bring the four countries into the fold by Jan. 1, 1995.

There is the chance, of course, that citizens in any one of the four - or possibly all of them - may reject EU membership when voters decide the issue through national referendums. But with the rise of rightist elements in Russia and America's shrinking European military presence - raising fears of continental instability in Europe's smaller countries - the odds are better than even that the EU will be a much bigger place in 1995.* * * * *

It will also be quite a different place. To cope with the influx of new citizens, the European Union will have to change structurally to prevent paralysis in decision-making. These changes will occur through institutional reform, with the European Parliament given progressively more power. Change will also come in the Council of Ministers voting procedures.

Most decisions are now made through a weighted system of voting, which gives the larger nations proportionately more clout than smaller ones. A similar system would remain, but big countries like Germany, France and Britain want changes to the weighting so the admission of new members won't give a handful of smaller countries greater say than the big powers. Naturally, the small countries are resisting, but the EU has a history of

finding compromises in situations like this.

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The more interesting changes from a larger EU will center on its economic policy-making. When the European Community was launched in 1957, France was very much in control. Its interventionist brand of economics and trade policy went virtually unchallenged until Britain entered the community in 1973. Since then, the more economically liberal northern states - Britain, Denmark, Germany and the Netherlands - have often been at odds with France, Belgium and the Mediterranean states over the role of government in trade, business and economics.

It's fair to say that each of the four applicants holds views that are much closer to those of the northern EU states than to those of France. During the Uruguay Round trade talks, the Nordic states persistently pushed for the most liberal stance in everything from intellectual property protection to the removal of barriers in ocean shipping. Only in agriculture did they share the protectionist view of the French. Indeed, farmers in each of the four applicant countries are among the most subsidized in the world.

This more liberal view toward trade and business almost certainly will lead to clashes with Paris. Such tensions surfaced when Volvo's Swedish shareholders rejected a merger with French automaker Renault, ostensibly

because they believed the French government, as the principal shareholder, would always give priority to French jobs at the expense of those in Sweden.

France's normal fear of being outflanked is likely to increase if the Nordic and Alpine states are admitted to the EU. And for good reason: These new members are more likely to look to Germany for alliances than to France.

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It now seems certain the EU Commission, which negotiates for the 12, will complete its negotiations with the Scandinavians and Austria in time. As members of the European Free Trade Association, these countries are already tightly bound to EU rules and regulations under the European Economic Area, which joins the association with the EU. Moreover, talks last week removed obstacles involving harmonized health, safety and environmental standards. There was also general agreement among the four prospective members to accept the common EU foreign and security policy.

The talks could still run off the rails over the applicants' desire to maintain certain levels of subsidies for farmers. Norway also remains concerned that EU investment rules may allow Statoil, the giant energy company, to be taken over by foreigners. But it seems unlikely that any of the parties would risk the embarrassment of failing to agree on terms of entry. Whether those terms will be enough to satisfy voters is another matter.

Clearly, though, a larger European Union is inevitable, and that expansion can only come to the east and to the north. That almost certainly means a shift in the union's balance of power and a substantial change in its policies.

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