14  This follows from the fact that transnational corporations often react to the prospect of a larger market arising from regional arrangements by establishing integrated production and distribution networks within the region in question. 15  Eurostat, European Union Foreign Direct Investment Yearbook 2000. Moreover, according to UNCTAD’s latest World Investment Report, Poland, the Czech Republic, the Russian Federation, Hungary and Slovakia absorbed around seventyfive per cent of world FDI flows to Eastern Europe in 2001. 16  Staying out of the EU is also likely to have negative implications for Malta’s credit rating. In a recent report, for example, FITCH credit rating agency notes that: “staying out would damage Malta’s creditworthiness unless a new government were clearly determined to retain and develop the parts of the EU Acquis that are starting to enhance the efficiency and competitiveness of the Maltese economy.”  17  Argentina, Brazil, Paraguay and Uruguay. 18  Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates  4  BIS Review 69/2002  EU membership would also pose some challenges. For example, because membership implies more than a free trade agreement, Malta would have to apply the EU’s common external tariff (CET) to imports from third countries. Upon closer examination, however, it seems that this is unlikely to be a major problem. For a start, Malta’s customs duties on non-EU imports are already roughly in line with the CET, so that not much change would be necessary.
The situation is not expected to change in the near future in view of the differences among small 22 states themselves. As an EU member, moreover, since Malta’s representation in EU decisionmaking bodies would be more than proportionate to its population, its voice would stand a better chance of being heard, not least because most of the other acceding countries are also small and could be potential allies on issues of common concern. Indeed as Malta’s recent experience with the OECD and developments relating to the proposed EU savings tax directive have shown, Malta is likely to obtain a better deal as an EU member. Four years ago the OECD was planning to take action against non-co-operative countries on its list of “harmful tax havens”. Malta was not on the list because the Maltese Government undertook to eliminate any offending practices and to exchange information with foreign tax authorities once a level playing field was achieved. But the relevant aspect of this episode is that small jurisdictions are being compelled to revisit their strategies and diversify their economies in a manner which does not harm the interests of stronger, high-tax economies, and that standards and codes of good practice will increasingly serve as another dimension of competition. In these circumstances it cannot but be perceived as an advantage by prospective members that the EU not only has the capacity to resist threats to the competitiveness of its members, but also has enough bargaining power to persuade its competitors to reach a compromise acceptable to its members.