MEMBERSHIP of the burgeoning European Union is beneficial to smaller states, partly because it gives them more leverage in their dealings with China, the community's top representative in Hong Kong said. Etienne Reuter, head of the European Commission office in Hong Kong, said the ''collective clout of the union'' benefits smaller states when dealing with international matters such as the General Agreement on Tariffs and Trade (GATT) and negotiations and relations with China. Membership of the European Union is expected to expand to 16 in January 1996, when four of the continent's smaller states are scheduled to join. Negotiations between the European Union and Austria, Sweden, Finland and Norway were completed recently, but a number of obstacles remained in the path of their entry to the community, Mr Reuter said. Referendums would be held in the four countries to ratify the treaty on their accession to the union, but it was not certain a majority would vote for membership, he said. The parliaments of existing member states and the European Parliament had to ratify the treaty, too, he said. But this might not be granted because of a series of problems. Already the world's largest economy, the GDP of the European Union would expand 8.8 per cent if the four countries joined. This would make the community's economy twice as big as Japan's and 30 per cent larger than the United States'. The community's population would grow by 25 million to 367 million. Further expansion of the union would probably take place in eastern Europe, Mr Reuter said. Hungary and Poland had both made applications to join the union and the Czech Republic was expected to follow, he said. Despite a long-standing application for membership from Turkey, it was not expected to join because of the community's concern about its lack of economic development and opposition from Greece. The Baltic states were more likely to gain community membership. Changes to the institutional structures of the community would need to be made to maintain a balance of power between the smaller states and the bigger members.