The Political Economy of Euro-Mediterranean Relations

European Neighbourhood Policy in North Africa

Christos Kourtelis

• Publisher: Palgrave Pivot
• Year: 2015
• ISBN:
  9781137449078
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

The author analyses the implementation of the agricultural and industrial parts of the European Neighbourhood Policy (ENP) in Egypt, Tunisia and Morocco. Following a sectoral approach to assess the implementation of the ENP, he investigates which interest groups win and which lose from the policy.

1

The Positive Integration of the Partner Countries through the ENP

Abstract: This chapter illustrates the operational design of the European Neighbourhood Policy. Due to the fact that the EMP Association Agreements (AAs) work as an umbrella of the ENP, the first part of the chapter is a comparative analysis between the ENP Action Plans and the AAs. This part explains the added value of the policy in the political economy of Euro-Mediterranean relations and the logic of positive integration that informs the ENP. It is argued that by deepening the trade cooperation between the EU and North Africa, the policy alters the distribution of costs and benefits for social actors. Under these circumstances, the identification of winners and losers cannot be done only on regional lines. Through the examination of the ENP country reports and the commitments of the partner countries, the second part argues that the North African states should be added to the other social actors that are influenced by the policy, as they have strong vested interests in the economic part of the ENP.

Kourtelis, Christos. The Political Economy of Euro-Mediterranean Relations: European Neighbourhood Policy in North Africa. Basingstoke: Palgrave Macmillan, 2015. DOI: 10.1057/9781137449078.0006.

Introduction

The bilateral APs between the EU and each partner country reflect the priorities of the two sides and they set the agenda for the economic reforms that the Mediterranean countries have to do in order to get ‘a larger stake of the EU market’. The duration of the APs is three to five years and even if the overarching framework was common for all the partners, a differentiated approach was followed for their construction. The main idea behind this approach is that the APs should be responsive to the more specific needs of the EU’s neighbours.

To achieve these aims, the European Commission (EC) prepared country reports, which described the political, social, and economic situation of the partner countries. The first talks of the EC with Tunisia, Morocco, and Egypt started in 2004. Having a clear picture of its neighbours, the EU proceeded to discussions with the three North African countries in order to find ways to solve their socio-political and economic problems and to map out their priorities. These resulted in the first drafts of the APs, which identified the priorities of the partner countries and of the EU and were sent from the EC to the European Parliament (EP), to the European Economic and Social Committee (EESC) and to the Committee of the Regions. After this, the APs were endorsed by the Association Councils. The Association Councils, the Committees and the Subcommittees (of the Association Agreements) are responsible for the implementation of the APs in the Mediterranean countries.

The role of the Association Councils in the APs and the fact that the AAs have been governing the Euro-Mediterranean relations for the past twenty years lead to an important question. What is the contribution of the APs in the analysis of the Euro-Mediterranean relations? The starting point of this book is that even if the ENP complements the previous arrangements of the Barcelona Process, the APs attempt to correct the shortcomings of AAs through the promotion of positive integration. This situation has important implications for the social actors in both the EU and the partner countries, because the deeper the integration of the ENP partners into the EU market the more changes there are likely to be to the distribution of costs and benefits.

Keeping in mind the different logic of integration, the aim of the chapter is to go beyond the responsibilities of the Association Councils and the other bodies. To understand the reform process of the North African countries, the chapter first outlines the differences between the AAs and the APs and the integration logics that inform them. Then it highlights the main conclusions of the country reports about the economic situation in the partner countries. The final part of the chapter explains the contents of the APs and it argues that assumptions which see the North African states being interested primarily in the political aspects of the ENP (due to their authoritative system) and that the asymmetrical negotiation power of the EU shaped the results of the ENP are misleading. The implementation of the reforms is important for a comprehensive assessment of the ENP and of the power of the partner countries. It shows that the ENP states are not decision takers, but actors with strong interests in the economic sphere of the policy.

The Association Agreements and the Action Plans

After the creation of the Barcelona Process the EU managed to conclude its first AAs with the Arab Mediterranean partners. Economically, the AAs have dismantled tariff barriers and put additional pressure to the North African governments to privatise parts of their public sector. Yet, deep economic reforms were progressing very slowly and non-tariff barriers to trade between the two regions were poorly addressed.

In addition, regional and geopolitical changes have challenged the multilateral character of the EMP. The collapse of the Middle East Process and the events of 9/11 undermined its regional and subregional dimensions. Moreover, the biggest challenge for the EMP was the enlargement of the EU, which was prompted to rethink its external relations with the Southern partners.

The discussions about the ENP at the EU level follow in Chapter 4, but at this point it must be mentioned that the APs were suggested as an additional tool that could improve the performance of the partner countries. The aforementioned challenges to the regional dimension of the EMP and the separate negotiations about the APs between the EU and each one of the partner countries shifted the EU’s approach towards the Mediterranean partners from multilateralism to bilateralism (Bicchi, 2011), even if subregional initiatives were not totally eliminated. For example, the industrial aspect of the ENP supports the promotion of the Agadir Agreement (a subregional plan that was suggested by the partner countries) and regional initiatives for the promotion of the sustainable growth of the agricultural sector have been created after the Arab Spring.

In addition, the APs were based on benchmarking and they promoted regulatory reforms (rather than the elimination of tariffs and adjustments of quotas as the AAs). Their successful implementation would give to the partner countries a greater stake of the EU market, so even if the ENP follows the EMP and the AAs work as an umbrella for the APs, the latter attempt to fill the gaps that the AAs left behind and to upgrade the economic (and political) relations of the two regions.

The following paragraphs highlight the differences between the AAs and the APs and the significance of the latter agreements. The AAs replaced the older co-operation agreements of the 1970s and they form the legal basis for governing relations between the North African partners and the EU. The AAs include a wide range of political, economic, and social issues. According to the European External Action Service the EU-Morocco AA is

In line with the new generation of Association Agreements between the EU and its Mediterranean partners ... Emphasis is placed on ... regional co-operation ... Furthermore, the agreement includes provisions on freedom of establishment and the liberalisation of services, free movement of capital and competition rules, the strengthening of economic co-operation on the widest possible basis and the co-operation on social matters, supplemented by cultural co-operation. The Agreement ... reinforces the arrangements for free trade in industrial products, which have been in force since the late 1970s. There is to be progressive and reciprocal liberalisation of trade for agricultural products. (EEAS, 2012a)

For the AA between the EU and Tunisia the EEAS mentions that

Tunisia was the first Mediterranean country to sign an Association Agreement with the EU on 17 July 1995 ... Under the term of the Agreement, the EU and Tunisia commit themselves to co-operate in a wide range of areas including: strengthened political dialogue, trade, economic, social and cultural issues. The Agreement foresees also financial co-operation to accompany reform measures in Tunisia. An important component of the Association Agreement is the clauses providing for the establishment of an EU-Tunisia free trade area by the year 2010. (EEAS, 2012c)

In the same line, the EU-Egyptian AA

incorporate free trade arrangements for industrial goods, concessionary arrangements for trade in agricultural products, and opens up the prospect for greater liberalization of trade in services, and farm goods. (EEAS, 2012b)

Upon these legally binding documents, the ENP is called to build the APs. The APs are considered as political agreements, which do not carry the legal obligations of the AAs, but they still offer incentives in return of reforms. According to the EU these incentives are

greater integration into European programmes and networks, increased assistance and enhanced market access. (European Commission, 2010c)

The texts above highlight two main differences between the AAs and the APs. The first is the type of the agreement (legally and non-legally binding), and the second is the level of integration that they promise to the partner countries. These characteristics are not unrelated to each other. Many analysts of the ENP saw the APs as wish lists of the EU for reforms that Europe wanted to see in the partner countries (Bindi & Angelescu, 2012, p. 110; Harasimowicz, 2007, p. 84). Due to the absence of legally binding penalties (and of the EU membership), the APs become less credible than the AAs, and they do not give much leverage to the EU to promote the suggested reforms (Bindi & Angelescu, 2012).

However, the situation is more complicated than the conclusions of these observations. Indeed, a legally binding agreement enjoys greater credibility than a political document and governments are more likely to comply with it. Yet, non-legally binding documents offer greater flexibility to state actors and become more attractive solutions, especially in situations where states feel uncertain about the costs and benefits of closer cooperation (Lipson, 1991). Especially, when this uncertainty is followed by a high degree of power asymmetry between the two parties and of divergent preferences, these flexible arrangements become very attractive tools for states that want to reach an agreement (Abbott & Snidal, 2000; Hodson & Maher, 2004). In addition, the informal character of non-legally binding agreements gives the opportunity to governments to act fast by avoiding public scrutiny (Lipson, 1991). Under these circumstances, the design of non-legally binding agreements is determined by the distribution of costs and benefits and the degree of uncertainty about the suggested policies (Jojarth, 2009; Koremenos, Lipson, & Snidal, 2001).

In the case of Euro-Mediterranean relations, the distribution of costs and benefits and the degree of certainty of the suggested policies were related to the different concepts of integration that the two agreements promoted. The AAs followed the logic of shallow and negative integration, which was about the removal of trade barriers between two partners (Marks, Scharpf, Schmitter, & Streeck, 1996, p. 15; Montalbano, 2007). Hence, the negotiations were mainly about the removal of border controls between the two sides of the Mediterranean Sea. The AAs left issues of deeper integration for the future (e.g. liberalisation of services) or they included them in a very general manner (e.g. standardisation proceedings) (De Wulf & Maliszewska, 2010; Ghoneim, 2007). Under this logic the interests that supported the AAs were clear and were distinguished in the related literature along regional lines, as the agreements deregulated certain sectors and protected others (Montalbano, 2007). The clearest example that highlighted this regional categorisation came from the agricultural sector, which illustrated the protectionist logic of the EMP towards the European farmers.

However, the concept of shallow and negative integration has led to poor results and other measures/policies had to be modified for the deep integration of these economies into the European market. The aim of the APs was from the beginning to confront these problems and to deepen the trade and economic relations between the EU and the Southern partners. This deepening was followed by the positive integration of the partner countries as the ENP referred to the creation of common rules that mitigate regional inequalities (ibid.). In that respect, the APs do not replace the AAs. They complement them by attempting to converge regulations and to solve ‘behind-the-borders’ problems, such as sanitary and phyto-sanitary rules, standards for industrial products, regulations of investments and government rules that restrict trade.

The modification of regulations and standards beyond borders needs a deeper and more elaborated understanding about the distribution of costs and benefits, because as markets expand different coalitions form. Under the ENP APs, the extensive harmonisation of national laws and regulations with the EU acquis and the stabilisation of the macroeconomic environment of the partner countries alter the coalitions that express these standards. Hence, the distinction between winners and losers cannot be seen only from a regional perspective, as in the case of the AAs. In addition, another factor should be taken into account; the (un)certainty of the APs. The outcomes of positive integration are not as certain as those of the negative integration of the AAs, not only due to the non-legal character of the former, but also because these regulatory responsibilities are left to national bureaucracies. Therefore, the role of the North African states becomes important for the evaluation of the regulatory implications of the economic part of the ENP. This issue should be highlighted, because so far the main focus of the ENP literature has described the state as an actor interested only in keeping the EU outside the domestic political affairs of the partner countries (Bechev & Nicolaïdis, 2010, p. 482). So, overall, in the agricultural and industrial parts of the ENP the equation has to take into account the domestic environment of each region (the EU and the North African countries) and the preferences and power of the state and the interest groups that are influenced by the ENP reforms. The significance of these parameters will be discussed in the next chapters, but at this point it is important to understand the content of the country reports and the commitments of the partner countries.

The country reports: same region, different challenges for the three North African countries

The EC drafted the country reports for Morocco and Tunisia in May 2004 and it finished Egypt’s country report almost one year later in March 2005, due to the simultaneous negotiations that the EU had with the Egyptian authorities about the AA. As said above, the role of the country reports was to provide background information about the partner countries to all the stakeholders of the ENP. Under this concept, all three reports started by explaining the existing AAs, which form the contractual framework for the relations between the EU and the three partner countries.

For the Moroccan economy, the country report acknowledged the openness of the country and its dependence on agriculture. In 2004, this sector added only 14 per cent to the Moroccan GDP, but it was crucial for the employment of almost half of the labour force. The fiscal deficit of the country was higher than in the second half of the 1990s (around 5 per cent in 2002, 2–4 per cent in the late 1990s), due to additional public expenditures. Revenues from privatisations and a service balance surplus financed the trade deficit of the country (European Commission, 2004c).

Under these conditions, the country could not fight poverty, despite the liberalisation of many prices of basic products and a wave of privatisations of the telecommunication sector and of other public services. The country report noted that the financial sector is reformed slowly and the state bureaucracy remains the largest problem for the development of a positive business environment.

The EU acknowledged that FDI inflows remained low and the main investments in the country involved the privatisation schemes. However, it perceived that progress in regional integration could foster trade and investments; the report highlighted the role that the Agadir Agreement could play for the development of regional trade. To foster trade, the report recognised that reforms in the transport and energy sectors were significant for the country.

In Tunisia the macroeconomic situation was different. Export-led growth and increased agricultural production were the motors of development for the Tunisian economy. This situation kept the trade deficit of the country at lower levels than in Morocco and the rate of inflation remained manageable (3 per cent in 2003). The deficit was covered by the stable FDI inflows and the favourable rating of the country’s bonds allowed the country to borrow with low costs (European Commission, 2004d).

These developments had a positive impact in the fight against poverty, which was not as high as in the case of Morocco. However, the main problems of Tunisia were related to SMEs and to the administrative controls in many products. The SMEs, which are still the spine of the Tunisian economy and labour market, did not have access to cheap credit; they remained uncompetitive and in a precarious position. On the other hand, the state intervention in many products has distorted the market. In addition, the EU highlighted the sluggish pace of privatisations and the slow opening of specific economic sectors (such as the transport sector) as being barriers to the further development of the country (European Commission, 2004d).

In terms of trade, the country was integrated more than any other Mediterranean partner in the EU market and is a member of the Agadir ...

Table of contents

• Cover
• Title
• Introduction
• 1  The Positive Integration of the Partner Countries through the ENP
• 2  The ENP as a Three-Level Game
• 3  Level I: The Domestic Interests in the EU and North Africa
• 4  Negotiating the ENP at Level II: A Three-Stage Process
• 5  Negotiations at the International Level: Are the ENP Countries Decision Takers or Implementation Partners?
• Conclusion
• Bibliography
• Index