Austria is faced by the decision whether or not to join the European Union (EU) as a full member as of 1995. If a majority of the Austrian population votes "no" at the referendum on June 12, 1994, Austria will remain a member of the European Economic Area (EEA). An evaluation of the most important economic aspects of these two scenarios are the subject of this WIFO investigation. In the short run, EU membership means joining a tariff union, an elimination of both border controls and of the concomitant discrimination for a number of sectors, as well as the inclusion of agriculture and food processing into the integration process. These measures form the final step of Austria's integration into the Western European Single Market. Previous important steps leading towards this goal include tariff reductions through EFTA and free trade agreements with the EC, autonomous steps mainly with respect to monetary policy and membership in the EEA. The expected short-term effects of economic integration are of only secondary importance relative to long-run expectations, and especially to the political importance of membership. Membership in the EU allows Austria to participate in the completion of the European economic and monetary union and in the common foreign and security policy. EU membership will make Austria a partner in the decision-making processes of essential framework conditions which will influence Austria in any case, even if we do not join. Membership means that possible future discrimination of non-members can be avoided and that the Austrian economy will not be decoupled from Western Europe. These factors are especially important during periods of unfavorable economic developments in the European and world economies. State-of-the-art econometric modeling permits one to estimate the short and medium-term effects of the present integration and adjustment steps with sufficient accuracy. Longer-term dynamic effects are impossible to measure quantitatively, but qualitative statements about their direction and their effect on the economy are within the reach of economic research. The same holds for the consequences of Austria's integration into the political decision-making processes of the EU. Both model runs simulating the quantifiable effects of membership and the qualitative evaluation of membership vis-à-vis the EEA scenario speak unequivocally in favor of membership. Membership in the EU will in the short run impose additional burdens on the Austrian economy, consisting of temporary expenditure increases for the public households and in changes in the structure of production, which will in turn necessitate adjustment costs for employment and capital. On the other hand, with membership Austria will become a more attractive location for investment from inside as well as abroad. The short- and medium term costs of adjustment will be more than compensated by the longer-term benefits of membership. In this sense they can be regarded as an investment into the economic future of Austria. The careful evaluation of the effects of membership relative to maintaining the status quo and of foreseeable opportunities and risks in the long run in this WIFO investigation lead to the conclusion that EU membership will benefit the economy as a whole as well as the wide majority of economic sectors, professions and social classes. From an economic point of view membership in the EU is to be recommended.
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