European integration and weak states: Romania’s road to exclusionary development

Abstract

This paper challenges approaches that expect unavoidable decline in developmental state capacities as a result of European market integration. Using Romania’s automotive industry as its case study, the paper shows that deep integration with the EU forecloses protectionist strategies and builds state capacities for FDI-based development instead. While Romania was initially a weak state, deep integration with the EU helped develop its core state institutions and sectoral developmental state capacities. The EU strengthened state autonomy vis-à-vis domestic actors and increased its ability to broker win-win deals among these actors and multinational corporations. It also helped create elementary state institutions that could foster industrial upgrading. The Romanian state used these capacities to enable the initial investment of multinational corporations and to incentivize them to engage in further expansion and upgrading, rather than merely to use Romania as an assembly platform. However, the state has, to date, made little effort and little use of the EU funds to broaden the scope of the beneficiaries from market integration, thereby contributing to an MNC-led exclusionary developmental pathway. While weak states might not fully use the opportunities offered by deep integration with the EU, this integration still provides more opportunities than threats for their developmental agency.

Keywords:

• Development
• EU
• industrial policy
• Romania
• state
• globalization

Acknowledgments

I would like to thank all project participants, particularly Laszlo Bruszt and Julia Langbein, for their most helpful comments on earlier versions of this article. I am also grateful to four anonymous reviewers for their insightful criticism and suggestions. Alexandra Diaconescu provided excellent research assistance. All the errors in the text remain mine.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 Romania Insider. (2018), ‘Higher Ford production takes Romania to top 10 European car makers’, available at: https://www.romania-insider.com/romania-top-10-european-car-makers, last accessed 2 November 2018.

2 http://comtrade.un.org/data.

3 These shifts in automotive industry also reflect the broader trasnformation ‘from cocktail to dependency’ (Ban, 2013).

4 Written communication from the Romanian Ministry of Finance

5 Interview with former Ministry of Economy officials; Bucharest, January 2015 and July 2015.

6 The Agreement for Romania’s Association to the European Union.

7 Interview with former official in the Ministry of Economy, Bucharest, July 2015.

8 Evenimentul Zilei. (2006) ‘Patru decenii la Dacia’. 9 October 2006. Available at: http://www.evz.ro/patru-decenii-la-dacia-414205.html, last accessed on 27 July 2015.

9 Telephone interview with former European Commission DG Enlargement officials, June 2015.

10 Telephone interview with former European Commission DG Enlargement officials, June 2015.

11 Originally created for Poland and Hungary in 1989, PHARE program expanded to other countries. Romania became a beneficiary in 1990.

12 Telephone interview with former European Commission DG Enlargement officials, June 2015.

13 Telephone interview with former European Commission DG Enlargement officials, June 2015.

14 Interview with the executive director of ACAROM, Bucharest, January 2015.

15 Ministry of Finance of Romania, written communication.

16 Ministry of Finance of Romania, written communication.

17 Gazeta de Sud (2015), ‘Statul si Ford nu are fi respectat clauze din contractul de privatizare’, available at: http://www.gds.ro/Local/2015-02-19/statul-si-ford-nu-ar-fi-respectat-clauze-din-contractul-de-privatizare, last accessed 10 February 2015.

18 Invest Romania, available at: http://investromania.gov.ro/web/doing-business/fiscal-incentives, last accessed on 28 October 2018.

19 ‘Bosch to invest 120 mln in Romania by 2013’, Business Review, 5 June 2012, available at: http://www.business-review.eu/featured/bosch-to-invest-eur-120-mln-in-romania-by-2013-26795, last accessed on 5 February 2018.

20 Interview with former Ministry of Economy official, Bucharest, July 2015.

21 Such regulations limit cut-throat competition and the surge of incentives such as those apparent in the USA where incentives are practically unregulated and the central government sets no floor to individual states bidding for investments (Thomas, 2000).

22 Interview with the former president of the Competition Council, Bucharest, June 2015.

23 Interview with executive director of ACAROM, January 2015.

Additional information

Notes on contributors

Visnja Vukov

Visnja Vukov is assistant professor at the Department for Political and Social Sciences at the Pompeu Fabra University and a senior researcher at the joint Johns Hopkins University and Pompeu Fabra University Public Policy Centre. Her research focuses on the political economy of core-periphery integration in Europe. Her work has been published, among others, in West European Politics, Comparative European Politics and Studies in Comparative International Development.