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Spain and Portugal set to test waters of European Community

The 12 flags of the nation's of the enlarged European Community (EC) proudly line Madrid's main avenues in readiness for celebrations tomorrow -- the day Spain and Portugal finally become members. Before getting down to their New Year's resolutions, Spaniards and Portuguese will be able to exult in their sense of achievement. The EC was enlarged twice before, most recently to include Greece in 1981. But no decision was as emotionally charged as the one to include Spain and Portugal.

However, in Spain the sense of political triumph has been somewhat overtaken by stage fright. The long, drawn-out negotiations, formally started up in 1979 for both Spain and Portugal, have brought home the harsh realities of an open market. What's more, the signing of the EC treaty last June was nothing more than an arrival point. Tough negotiations on smaller issues have continued until now. The feeling is that adjustments may have to be made after the first effects of membership are felt.

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Spain and Portugal have both been through austerity programs in the past three years. In the case of Portugal, this has meant curbing a serious debt problem. Although both countries are concerned about the effects of EC entry on their fragile economies, membership should not mean a major upheaval.

Under a system of preferential agreements with the EC, Spain and Portugal had already been sending half their exports to the community. What will happen now is that effects of EC entry will vary with every economic sector and from business to business.

Spain's highly protected industries will have to face the moment of truth when trade barriers are progressively let down. In Portugal agriculture as a whole will be hit as subsidized prices of main products will come down to meet lower EC prices.

Spanish officials are also concerned that the EC system of value-added tax, which starts in both countries with tomorrow's entry, will bring about a psychological setback and set off inflation.

After six months of political crisis, Portugal's government is even worse off than Spain's and is hardly prepared to apply the new tax and other regulations.

Transition periods will give both countries time to adjust to the community gradually. In fact, Spain, with its dynamic fruit and vegetable export sector, had to accept a 10-year wait before gaining unlimited access to the European market for these products.

This was the biggest concession the nation had to make to obtain entry, in the face of opposition from a powerful lobby of farmers in southern France.

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Citrus fruit growers here, however, have complained they will get a worse deal in the short term than other suppliers outside the community, such as Morocco. However these farmers know that in the long run they will benefit greatly from open access to Europe's markets.

Spain's fishing fleet, Europe's largest, will also have to spend another 10 years subject to strict license limitations from the current members.

Unlike Spain, where all political parties have backed EC entry, Portugal faces opposition to EC membership from a strong Communist Party on the grounds that the economy is too weak to stand full competition. Many businesses agree. However, as a poor country, Portugal is likely to get regional development funds from the community on the same basis as Ireland, covering the whole territory.

For the EC itself, enlargement means strengthening the European commercial bloc as a counter to the United States and Japan. It increases the community's consumer population by 38 million Spaniards and 10 million Portuguese -- making a total of about 320 million. Spain is also the continent's fifth-largest industrial power.

At a time when a reform of EC institutions is at hand, some observers feel the new members will help stimulate the process. Others are concerned the enlargement will hinder the community's already deficient decisionmaking machine.

After decades of trials and tribulations at home and ostracism abroad, followed by the peaceful change from dictatorship to democracy in both countries, Spain and Portugal have been welcomed into the fold of democratic nations like two long-lost, well-deserving brothers.

Speaking of Spain's democratic change in the past decade and the imminent entry into the EC, King Juan Carlos said in an end of the year message, ``we must close forever the chapter of doubt and fear, because we're entering a new one of creativity and hope.''

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