Regional Public Goods or Philanthropy? A Critical Assessment of the EU-Balkans Economic Relations

This paper examines the European Union’s (EU’s) economic relations with the Western Balkans (WB) in the light of the emerging debate on international public goods. The paper argues that the EU’s philanthropic approach to transition reforms in the WB is too discretionary to be efficient and/or equitable. We think that the concept of regional public goods (RPG) provides a good benchmark against which the efficiency/equity implications of EU-WB relations can be assessed. The RPG approach suggests that the EU’s trade and aid policies towards the WB will be efficient/equitable if: (i) EU policy takes account of the positive externalities associated with the transition reforms; and (ii) existing contractual arrangements reduce the scope for philanthropic discretion by the EU and free-riding by WB countries. First, we demonstrate analytically why these conditions are relevant. Then, we examine the current framework of EU-WB relations to evaluate the extent to which the EU’s policy reflects philanthropic collusion or efficient/equitable provision of RPG.