Information & Training Seminar for Diplomats

15th -17th March, 1997

Papers

OUTLINE OF AN INTRODUCTION TO THE EUROMED TRAINING AND INFORMATION PROGRAMME FOR DIPLOMATS

A SURVEY OF EUROPE’S MEDITERRANEAN POLICY. WHERE IT COMES FROM – WHERE IT STANDS TODAY- WHERE IT SI LIKELY TO GO

by Dr. G. Vanhaeverbeke, Sec.-Gen., Trans European Policy Studies Association, Brussels.

I. HISTORY, RATIONAL, METHOD AND SUBSTANCE

1. The E.C. actively began establishing external economic policy links with most of its Mediterranean non-member neighbours during the sixties.

The resulting string of agreements were initially confined to trade: the E.C. provided unilateral free access to the European market for industrial goods and limited concessions for specific agricultural products originating from the Mediterranean non-member countries (MNC).

This initial generation of contractual links was further expanded in the seventies to include economic and financial cooperation intended to back economic development and stimulate cooperation between the two shores of the Mediterranean.

Relations with Turkey, Malta and Cyprus were governed by Association agreements.

Generally speaking, the EC's Mediterranean policy followed a traditional pattern of combining trade concessions with financial cooperation and conventional aid arrangements.

The rational of the policy was not only rooted in economic but also in political considerations typical for the prevailing cold war preoccupations: every available policy instrument was also conceived as a way to neutralise Soviet influence in the area. Europe's Mediterranean policy was designed also as a mean to stabilise political regimes against possible Soviet infiltrations or take-overs. This seemed particularly to be the rationale behind associating Greece and Turkey to the EC in 1962-64.

2. The second stage of Europe's Mediterranean policy (1974-78) was directed at quite a different security perception: the threat of the "oil" weapon", of oil supplies being cut off (c.f., oil embargo against Netherlands in late 1973).

The "global Mediterranean policy" of the 1970'S was therefore quite naturally targeted at peace between Israel and the Arab World. The Israeli-Arab conflict was indeed, seen to be at the heart of the new threat perception, which was no longer of a military but of an economic nature (energy security).

This suited the E.E.C., a non-military economic grouping. Consequently, it choose economic means to address political issues, i.e. the Palestinian conflict:

• it attracted Israel closer to Europe through tree trade

• it offered the Arab Mashrak/Maghreb countries further unilateral free trade and some further but still (modest) financial assistance.

3. At the end of 1989, by the collapse of the Berlin wall, the European Commission produced a report trying to assess - and proposing to "redirect" -the Community's Mediterranean policy in order to streamline this policy according to the changed geopolitical context.

By December 1990 the Council adopted "The new Mediterranean Policy" introducing new features, using assistance with economic reform to encourage the process of opening up to the outside world and of structural reform. This process had already started in some of the MNC. Another element, hitherto missing, was being introduced: systematic encouragement to regional cooperation.

As a result, the upcoming generation of association agreements with MNC was aiming to include 4 dimensions: political dialogue; free trade in industrial goods; economic, social and cultural cooperation, appropriate financial cooperation.

The European Union wished these features, introduced by the New Mediterranean policy, to be seen as deliberate steps towards a partnership approach and as a distancing from the aid approach.

The rational of the "new Mediterranean policy" is no longer rooted in fear for military or economic security threats. The new security considerations are of diffuse, socio-economic nature. By order of perceived importance Europe is feeling threatened by 3 different and largely unrelated sets of threats

• immigration with its consequences for Europe's social fabric and internal security

• drugs with its disastrous effects on certain categories of exposed youngsters - terrorist acts, both by and against foreign residents from the MNC

The Commission, drawing also on 1992 World Bank reports, concluded that the main triggering factor of development for MNC would consist of the dynamic effect to be expected from the progressive opening up of the M.E. and N. African economies to the competitive E.U. economy.

In fact, it was almost simultaneously in the framework of the Regional Economic Development working group (REDWG) of the M.E. Peace process that this "challenging and yet feasible scenario" was proposed. The scenario required specifically a doubling of regional GDP by 2010 (3 % from 1990 to 2000 and 5 % from 2000 to 2010).

This scenario would imply:

• a peaceful environment (translated into reduced military expenditures)

• concentrating on a wide range of converging economic policies

• effective regional cooperation in ail fields of common interest

• short term external assistance (public aid) to alleviate the negative effects of the costs of economic reforms

• medium term capital creation and financial flows domestic savings, workers remittances foreign direct investments and commercial loans.

Unfortunately, because of the demographic expansion factor, the resulting per capita GDP would remain poor. The wealth gap between E.U. and Maghreb/Mashrak would probably widen from its present level of "one to ten" towards "one to twenty". The gap between Israel and its Arab neighbours would be of the same order (Israel 7 million people GDP would be approximately equivalent to the 134 million people GDP of the neighbourhood).

That is why reducing the "prosperity gap" became one of the key objectives of Europe's Mediterranean policy.

However, it was clear from the outset that this objective could not be achieved by gigantic injections of financial assistance

• not only would Europe be totally unwilling and incapable of injecting such amounts of aid

• but it was equally clear that without the necessary fundamental reforms in the political, economic, social, judicial and economic systems, ail money injections would be of not much avail.

4. Finally, in September 1993 (i.e. 2 months before the formal entry into force of the Maastricht Treaty) the Commission produced a communication on EC support for the Middle East peace process emphasising the need

• for Europe to help the Palestinians progress towards autonomy -and for regional cooperation in the Middle East to be promoted.

II RESULTS OF EUROPE'S MEDITERRANEAN POLICIES

1. The trade picture

MNC's industrial goods exports to EU markets increased steadily from 1979 onwards. The overall share of total MNC exports in terms of manufactured products doubled from 28 % to 56 % between 1979 and 1994.

Not all of the MNC performed equally well. Countries which introduced successful economic reforms pushed up exports of manufactured goods most spectacularly: Tunisia, Turkey exceeded rates of 70 %. Yet, MNC's trade balance with the E.U. continued to display a major- and even increasing - deficit.

MNC Exports of agricultural produce towards the E.U. have increased in absolute terms but the relative share of exports occupied by agricultural product declines. It can be seen partly as a normal, even positive development when agriculture loses ground to manufactures. In fact MNC continued to complain about the European "Common Agricultural Policy" ’s self-serving protectionism.

2. The political picture

Europe's Mediterranean policy did little, it anything, to solve the Israeli-Palestinian conflict. Nor did it enhance Europe's security of oil supply in any relevant way.

(The oil threat withered away for reasons that had little to do with Europe's Mediterranean policy:

• development of new production facilities outside the Arab World,

• competition from alternative sources of energy (gas, nuclear, coal),

• diversification of sources of European supplies (North Sea, Russia, Australia, and North America).

3. Financial and technical cooperation

Although combined Community aid from the budget and from EIB loans accounted for 0.4 % of GNP, addressing vocational training, rural development in the MNC financial and technical cooperation remained difficult to assess; significant macro-economic effects were difficult to identity.

Although E.U. assistance was considerably increased under the new Mediterranean Policy and geared towards structural adjustments, economic reform, health care, education, this kind of assistance remained inadequate relative to the financial needs of heavily indebted MNC.

It remains equally true however that in some of the MNC where adjustment programmes were agreed with the E.U., the World Bank and IMF substantial progress was made, economic reform was taking shape. This was, and still is, particularly true with Turkey, Tunisia, Morocco and Jordan.

4. Regional cooperation

Unstable political situations and slow progress in the Peace Process are the obvious reasons why regional cooperation remains embryonic notwithstanding the European Unions explicit encouragements in that direction.

5. Overall assessment

Actual E.U. assistance to the Mediterranean region between 1985 and 1995 accounted for a modest average of 3 % of total aid to the region.

In its 19 October 1994 Communication to the Council and the European Parliament, the Commission humbly and rightly concludes that "The record of the Community's activities remains mixed, despite progress made since the advent of the New Mediterranean Policy.

Considering the challenges which our Mediterranean partners will face in the coming years and the political and socio-economic implications for Europe, special attention is needed, along with commensurate financial support".

III. BARCELONA AND BEYOND

1. A comprehensive approach

This is when a number of enlightened people within the Commission and in a few member states developed a comprehensive Euro-Mediterranean concept based on inter-action between Europe and the Mediterranean. The strategy aims at drawing the Mediterranean into the European mainstream, at stimulating change and adjustments on the southern shores, at opening up societies through dialogue, trade, inter-change, private investments, movement of people, freedom of information, etc.

This approach is clearly visible in both the contractual relationship with each of the Mediterranean countries and in the successive drafts leading to the Euro-MED economic area and zone of security.

The essence of the Association Agreements presently signed or being negotiated are:

• respect of democracy and human rights,

• dialogue, both politically and economically,

• opening up of the markets to European competition and thereby exerting a formidable but constructive adjustment pressure,

• core European financial and technical assistance in support of the necessary reform and adjustment process.

As a sort of logical complement to the individual North-South agreements, the concept of a Euro-MED economic and political area basically contained a very simple political message:

Europe considers MNC as part of its neighbourhood. It wishes the neighbourhood to share certain principles and regulations.

Europe wants its neighbours to be closely and truly interwoven with the European fabric but also with all of their own neighbours in the Mediterranean and in Eastern Europe. Europe is willing to show how it has been proceeding in fields like industrial adjustment (Portugal), environmental policy, privatisation, energy policy, etc.

But Europe cannot do the job itself. The neighbours are in charge; they alone can determine the objectives and measure the resistance to economic and social reforms.

2. What are the chances of success of this new approach?

Of course predictions in such a complex set of issues are risky. But drawing on the opinions expressed by some of the "inspirers" of the Barcelona Declaration (I think in particular about Dr. E. RHEIN, honorary Director of the Commission DG External relations) it is possible to enunciate some general considerations.

There is no hope whatever for a quick fix. 20 years will be needed before any shrinking in the prosperity gap will be seen. The Mediterranean societies have not so tar proved to be the most dynamic in the worldwide race for socioeconomic progress and for attracting productive and job-creating investments.

There is hope only where there is

• a reasonable minimum of political stability. freedom and pluralism;

• a sound macro-economic policy which inspires confidence to domestic and international investors and savings alike

• a strict limitation of government interventions in the market mechanisms, whether it is the prices of goods, services, capital or foreign exchange.

On each of these three counts the Mediterranean is far from perfect, even it some sins of the past have been remedied in the last few years.

It appears prudent to assume that the problems and threats on Europe's southern front will continue to preoccupy Europe for a long time to come, (probably longer than those on Europe's immediate eastern front).

Through the Barcelona process Europe is committed to mobilise unprecedented energies and resources in favour of the Mediterranean. But only if measured by its own available moans, not by the dimension of the challenge.

The dimension of the challenge will further increase, it only by the number of additional people who will be living in the Mediterranean by 2020: the population of Turkey, Mashrak and Maghreb combined will be up by some 100 million, from 200 to 300 million

In the immediate future the environmental, social and economic stress (water, jobs, desertification, urbanisation, food self-sufficiency, etc.) is likely to increase rather than to diminish!

But Europe's fate is inexorably linked to that of the Mediterranean! Europe cannot turn a blind eye to developments, peaceful or explosive, that will unfold there.

Europe, therefore, has no other choice than that of the closest possible partnership with the Maghreb, Mashrak (and beyond to the Gulf). The sooner Europeans realise this and the more seriously they develop such partnership into something real, with substance and socio-political meaning for both sides, the better it will be for Europe and the Mediterranean.

I understand it is not up to me but up to a number of subsequent speakers on the programme

• to actually analyse the content of the November 1995 Barcelona declaration and

• to draw a balance sheet after 16 months of its implementation.