Cyprus and Malta: Tiny
Nations to Join the European
Union
by Jason Gomberg
Office of
Europe, Market Access and
Compliance
As
appearing in ExportAmerica
The Mediterranean island
nations of Cyprus and Malta,
both having joined the
European Union in 2004, have
undergone significant economic
and structural changes in
recent years to prepare for EU
membership.
Cyprus
Full membership in the
European Union remains one of
the government’s foremost
political and economic policy
objectives. As evidence of
Cyprus’s commitment to
harmonize its economy with
that of the European Union,
Cyprus was one of the first
candidate countries to close
out all 29 chapters of its
accession agreement.
Structural reforms already
have transformed Cyprus’s
economic landscape. For
instance, trade and interest
rates have been liberalized.
Price controls, as well as
investment restrictions for EU
residents, have been lifted.
Also, private financing has
been introduced for the
construction and operation of
infrastructure projects.
However, Cyprus still has
challenges to overcome. Most
crucially, the island’s
political division presents
the greatest challenge to EU
accession. Economic reforms,
such as liberalizing utilities
markets (including
telecommunications and power
generation), restructuring
state subsidies, and
abolishing restrictions on
land ownership by
non-residents, have yet to be
completed.
The best prospects for U.S.
products and services in
Cyprus lie predominantly with
government and
quasi-government tenders, in
areas such as
telecommunications equipment,
coastal radar and air traffic
control systems, medical
equipment, computer services,
and municipal infrastructure
construction. Further, the
private sector’s growing
demand for U.S.-made office
machines, computer software,
and data processing equipment,
in addition to U.S. food
franchises’ recent successes
with expansion in Cyprus, also
represent export and
investment opportunities for
American firms.
Malta
 While
Malta has had an association
agreement with the European
Union for more than 20 years,
its EU accession process has
seen its share of controversy.
The Nationalist Party-led
government initiated Malta’s
accession application in 1990.
However, the Labor government
froze the membership request
in October 1996, only to see
the Nationalist Party
immediately resubmit it after
winning re-election in
September 1998.
Trade occupies a growing share
of Malta’s GDP. While the
European Union is Malta’s
major trading partner,
accounting for around 65
percent of imports and about
48 percent of exports, trade
with the United States has
grown significantly in recent
years. Official figures
indicate a fivefold increase
since 1992, with U.S. exports
to Malta in 2001 reaching $259
million. However, trade in
U.S. goods is actually
underreported, since many
American products are sold
through companies’ European
subsidiaries. Tourism accounts
for about 40 percent of
Malta’s GDP, and it
generates roughly $650 million
in foreign exchange earnings.
Malta’s chances for
post-accession economic
success hinge on the
country’s continued economic
restructuring—including
privatizing its state-owned
enterprises—to ensure its
attractiveness to foreign
investors. Leading sectors for
U.S. companies include tourism
infrastructure, computer
software, communications
services, and medical
equipment.
For Additional Information
Date Updated: March 27, 2007
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