The EU's Enlargement and Mediterranean Strategies: A Comparative Analysis

The EU’s Enlargement and Mediterranean Strategies A Comparative Analysis

Edited by

Marc Maresceau and Erwan Lannon

The EU’s Enlargement and Mediterranean Strategies

Also by Marc Maresceau ENLARGING THE EUROPEAN UNION (editor)

The EU’s Enlargement and Mediterranean Strategies A Comparative Analysis Edited by

Marc Maresceau Professor of European Community Law European Institute University of Ghent Belgium

and

Erwan Lannon Researcher European Institute University of Ghent Belgium

Preface by Willy De Clercq

in association with

European Institute, University of Ghent

Editorial matter and selection © Marc Maresceau and Erwan Lannon 2001 Preface © Willy De Clercq 2001 Chapter 1 © Marc Maresceau 2001 Chapters 2–16 and Conclusion © Palgrave Publishers Ltd 2001 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2001 by PALGRAVE Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N. Y. 10010 Companies and representatives throughout the world PALGRAVE is the new global academic imprint of St. Martin’s Press LLC Scholarly and Reference Division and Palgrave Publishers Ltd (formerly Macmillan Press Ltd). ISBN 0–333–77281–4 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data The EU’s enlargement and Mediterranean strategies : a comparative analysis / edited by Marc Maresceau and Erwan Lannon ; preface by Willy De Clercq. p. cm. Includes bibliographical references and index. ISBN 0–333–77281–4 1. European Union—Mediterranean Region. 2. European Union. 3. European Union countries—Economic policy. I. Maresceau, Marc. II. Lannon, Erwan, 1968– HC240.25.M4 E94 2000 337.1'42—dc21 00–041513 10 10

9 09

8 08

7 07

6 06

5 05

4 04

3 03

2 02

1 01

Printed in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire

Contents Foreword Willy De Clercq

vii

Acknowledgements

ix

Notes on the Contributors

x

List of Abbreviations and Acronyms

xiv

Introduction: the Need for a Pan-Euro-Mediterranean Strategy – the Triangular Approach Marc Maresceau and Erwan Lannon Part I

xvii

The Political and Security Dimension

1 The EU Pre-Accession Strategies: a Political and Legal Analysis Marc Maresceau

3

2 Europe’s Mediterranean Strategy: the Security Dimension Álvaro de Vasconcelos

29

3 Towards a Pan-Euro-Mediterranean Association of Proximity Jean Raux

42

4 Differentiation and Association within the Pan-Euro-Mediterranean Area Catherine Flaesch-Mougin

63

5 The Many Faces of EU Conditionality in Pan-Euro-Mediterranean Relations Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

97

Part II

The Economic and Financial Dimension

6 Agenda 2000 and EU Budget Strategy: Funding Enlargement and Relations with Eastern and Southern Neighbours Geoffrey Denton

141

7 The Optimum Strategy for a Spoke: Linking with Other Spokes or Other Hubs? Alfred Tovias

153

8 Free Movement of Services and the Right of Establishment in a Pan-Euro-Mediterranean Economic Area: Between EU Membership and the GATS Lode Van Den Hende

169

v

vi Contents

9 Towards a Pan-Euro-Mediterranean Integration: a Survey of Issues in the Agricultural Sector Marianne Dony

193

10 Pan-European Rules of Origin and the Establishment of the Euro-Mediterranean Free Trade Zone Stefano Inama

199

11 The Financial Assistance of the European Union to Its Eastern and Southern Neighbours: a Comparative Analysis Alain Guggenb¨uhl and Margareta Theelen

217

Part III

The Socio-Economic and Human Dimension

12 EU Pre-Accession Strategy: the Social Dimension Andrei Popescu

257

13 The Economic, Social and Political Impact of the EuroMediterranean Partnership Bichara Khader

269

14 Company Law Harmonization and Reform as a Vehicle for Regional Integration Peter G. Xuereb

283

15 Towards Pan-Euro-Mediterranean Environmental Co-governance Kirstyn M. Inglis

303

16 The European Union and Migratory Pressure from the Mediterranean and Central and Eastern Europe Kris Pollet

335

General Conclusion: Towards a Pan-Euro-Mediterranean Regional Integration – Motivation and Objectives Péter Balázs

367

Appendix: the Network of Bilateral Agreements in the Pan-Euro-Mediterranean Area (1 January 2000)

379

Index

384

Foreword The publication of this book comes at an important moment in time. We are currently living through major changes in Europe. The third phase of Economic and Monetary Union and the enlargement strategy of the European Union are part of a historical process which will shape, in an irreversible way, the future of Europe. At the same time the Member States are aware that an ambitious policy to the southern periphery of the EU forms a counterpart to the policy of openness to the East and, as it was stressed at the 1995 Cannes European Council, ‘gives the European Union’s external action its geopolitical coherence’. Such a coherence is of crucial importance to the stability and security of the Pan-Euro-Mediterranean Area as a whole. This is precisely the focus of the research undertaken in this book. The challenges which Europe is facing are numerous. To keep a future Union of 25 to 30 members operational is indeed a real challenge for the EU, and as the Treaty of Amsterdam does not meet the requirements for preparing for such an enlarged Europe there is a need for intensive further reflection, not only on the institutional structure and the various specific policies to be developed but also, and perhaps even in the first place, on what role Europe will have in the new global environment and more in particular in its periphery. Agenda 2000 and the Commission’s opinions on the applications for membership of the various Central and Eastern European Countries (CEECs) have put in motion a process that first led towards accession negotiations with five CEECs together with Cyprus. Parallel with these negotiations pre-accession strategies were further developed with all the CEECs through Accession Partnerships. The 1999 Helsinki European Council has taken important decisions ‘marking a new stage in the enlargement process’. Turkey was recognized as a ‘candidate State’ while accession negotiations are now also opened with the remaining five CEECs and Malta. However, it is absolutely indispensable not to disregard in this enlargement process what will happen with the European periphery of this new Europe, in particular Russia. Of course, the same holds true for the Mediterranean Non-Member Countries. The strategic importance of the Mediterranean basin called for rebalancing the EU’s external relations. This was one of the main aims of the Barcelona Conference held in November 1995 that brought together the fifteen EU Member States and twelve Mediterranean Non-Member Countries in order to lay down the foundation for a Euro-Mediterranean Partnership. This conference was an event of major importance because it brought together some countries which are still in conflict with one vii

viii Foreword

another, and also because it has changed the nature of our relations with the southern periphery of the EU. The three baskets of the Barcelona Declaration are of equal importance and complementary to each other: a political and security partnership intended to define a common area of peace and stability based on democracy and respect for human rights; an economic and financial partnership aimed at constructing a zone of shared prosperity; a partnership in the social, cultural and human fields to promote understanding between cultures and exchanges between civil societies. As it looks today, no doubt, Europe will remain the most important actor in the field of trade and economics. But in order to fulfil its role in the international scene it has to play a constructive and active political role proportional to its economic strength. A necessary step in this direction is a coherent policy towards the Mediterranean and the Middle East. The new political, economic and social issues on both sides of the Mediterranean basin constitute common challenges calling for a coordinated overall strategy. The introduction of a new preferential policy towards the South on a par with the preferential policy towards the East constitutes a first but important step in this direction. It may reasonably be expected that the next Euro-Mediterranean ministerial meeting that will be held in 2000 under the French Presidency will be an opportunity to confirm these options and challenges. Obviously, there is still considerable work to be done. On the one hand, applicant countries for EU membership still have to do a lot towards the integration of the acquis communautaire. On the other hand, negotiations and implementation of the new Euro-Mediterranean Association Agreements will have to be accelerated. Another task for the future is indeed to define a much more consistent common approach to the southern and eastern peripheries of the EU. Globalization is an irreversible process. But without a firm political will it cannot succeed. In this regard it should also be noted that a strong emphasis will have to be put on the social and human factors. There is a compelling need for the Union to adapt itself to the new challenges and therefore to be the anchor of stability for the Pan-Euro-Mediterranean Area. No doubt, this book is one of the rare studies embracing, through a comparative and prospective approach, the emerging pan-Euro-Mediterranean regional integration. It will for policy-makers, scholars and practitioners constitute an indispensable tool of reference. Willy De Clercq Minister of State and Member of the European Parliament President Europees Instituut VZW Ghent, 5 January 2000

Acknowledgements The publication of this book would not have been possible without a solid scientific backing from the University of Ghent. Through several research projects, in particular a university GOA Project and an ‘Interuniversity Pole of Attraction (IPA)’ Programme (Universities of Liège, Ghent and Brussels) together with a Tournesol Project, implemented within the framework of the bilateral scientific co-operation between Belgium and France linking the European Institute of the University of Ghent with the CEDRE of the University of Rennes I, it was possible to lay the foundations of this book. This project also benefited very much from the co-operation of the TransEuropean Policy Studies Association (TEPSA), which, among other things, provided an adequate network offering the required expertise on a number of subjects. Furthermore, a number of experts from other institutions and associations co-operated in this project. We have many debts of gratitude to all those who have been involved in this project. This book would never have been published if it had not had the generous financial support of the Europees Instituut VZW. Financial support was also provided by the IPA project, TEPSA and the University of Ghent, Department of International Relations. This allowed us, in preparation for this book, to organize a workshop at which the drafts of the various papers were discussed. The real editorial work, of course, came later. In this respect, special thanks go to all those who have been closely involved in providing assistance to the editors. In particular we would like to express our sincere thanks to Ms Kirstyn Inglis for her substantial editorial assistance, and for the translations of the contributions of Jean Raux and Catherine Flaesch-Mougin as well as for the linguistic revision of the manuscript. We are also very grateful to Mrs Anne Rafique for her invaluable help in the final editorial review of the manuscript of this book. Marc Maresceau Erwan Lannon Ghent, 1 January 2000

ix

Notes on the Contributors Péter Balázs is currently Ambassador of Hungary to Germany. He is a Professor of the Budapest School of Economics, lecturing on theories and praxis of European integration. He graduated at the Budapest School of Economics and joined the Hungarian Ministry of Foreign Trade. He was the representative of Hungary to the EC in Brussels (1982–87) and afterwards led negotiations with the OECD, EFTA and other regional economic organizations. He was a State Secretary at the Hungarian Ministry of Trade and Industry (1992–93) and Ambassador of Hungary to Denmark (1994–96). Willy De Clercq studied law at the University of Ghent and social science at Syracuse University, USA. He has been a Vice-Prime Minister, Minister of Finance of the Budget and of Foreign Trade in the Belgian government. He was Member of the Commission of the European Communities (Delors I) from 1985 until 1989, responsible for Economic External Relations and Foreign Trade. He is currently a Member of the European Parliament and the Chairman of the Committee on Legal Affairs and Citizens’ Rights of the European Parliament. He was Member of the Belgian Chamber of Representatives for 26 years and since 1989 Minister of State. He is President of the European Institute VZW. Geoffrey Denton was Professor and Head of the Economics Department at the College of Europe, Bruges, from 1973 to 1983. From 1983 to 1993 he was Director of the British Foreign Office’s Wilton Park Conferences. Since 1993 he has been a Senior Research Fellow at the Federal Trust, London, and has contributed to TEPSA, Brussels on EU Enlargement to Central and Eastern Europe, focusing on budgetary issues and reform of EU policies and institutions. Marianne Dony teaches European law at the Université Libre de Bruxelles and is in charge of the course on the Common Agricultural Policy. She is Director of the Legal Department of the Institut d’Etudes Européennes of the Université Libre de Bruxelles, a member of the Interuniversity Pole of Attraction (IPA) network (European Integration Law) of the Universities of Liège (IEJE), Ghent (EI) and Brussels (IEE). She is the editor of L’Union Européenne et le Monde après Amsterdam (Brussels: ULB, Etudes Européennes, 1999). Catherine Flaesch-Mougin is Professor at the University of Rennes I – Pˆole europ´een Jean Monnet and Director of the Centre de Recherches x

Notes on the Contributors xi

Européennes (CEDRE-CNRS-UPRESA-6050). She holds a Jean Monnet Chair and is specialized notably in the external relations of the EU and in the financial and institutional aspects of the EU. She is the co-editor of Le Partenariat entre l’UE et les Amériques: Le Libre Echange en Question (Rennes: Apogée, 1999). Alain Guggenbühl is Lecturer on European Governance at the European Institute of Public Administration in Maastricht. He also teaches European policies at the Catholic University of Mons. He is a member of Team Europe Brussels, a panel of visiting lecturers of the European Commission’s Press and Communication Service. His publications have notably dealt with eastern enlargement, the Amsterdam Treaty, Social Europe and EU openness and transparency. Tom Haenebalcke is a Researcher at the European Institute of the University of Ghent within the framework of a project (‘geconcerteerde onderzoeksactie’, GOA) financed by the Ministry of Education of the Flemish Community (Universiteit Gent, BOF). Stefano Inama is an UNCTAD project manager co-ordinating various technical assistance programmes helping developing countries in trade negotiations and intergovernmental disputes. He graduated from the University of Bologna (Italy) and from the College of Europe. He has worked extensively on the trade issues contained in various trade agreements and their relations and linkages with the multilateral trading system. He is currently engaged in studies and technical assistance projects on regional integration in the Mediterranean region, especially the AMU (Arab Maghreb Union) and the Pan-Arab Free Trade Area. Kirstyn M. Inglis qualified as a Scottish solicitor, having worked in English City law firms and Brussels-based legal consultancies. She has edited and contributed to trade law and EU environment law publications. She now works as a Research Assistant at the European Institute of the University of Ghent, in the framework of a project (‘geconcerteerde onderzoeksactie’, GOA) financed by the Ministry of Education of the Flemish Community (Universiteit Gent, BOF). Bichara Khader is Professor at the Université Catholique de Louvain and Director of the Centre d’Etudes et de Recherches sur le Monde Arabe Contemporain. He is the author of more than twenty publications on the Arab world and Euro-Mediterranean relations. His last publication is entitled L’Europe et la Palestine: Des Croisades à Nos Jours (Paris: l’Harmattan, 1999).

xii Notes on the Contributors

Erwan Lannon studied law at the University of Rennes I (CEDRE) and political science at the Université Libre de Bruxelles (CERIS). He has been a consultant to UNCTAD and has worked at the Delegation of the European Commission to Israel. He is currently working at the European Institute of the University of Ghent within the framework of the Interuniversity Pole of Attraction (IPA): European Integration Law, Universities of Liège (IEJE), Ghent (EI) and Brussels (IEE). He is the author of several studies and articles on Euro-Mediterranean relationships. Marc Maresceau studied at the University of Ghent, the Johns Hopkins University, Bologna and at the Institut Universitaire de Hautes Etudes Internationales, Geneva. He was Leverhulme Fellow at the University of Edinburgh and Visiting Professor at various universities. He teaches European law and institutions at the Universities of Ghent and Brussels, he is the Director of the European Institute at the University of Ghent and holds a Jean Monnet Chair. Many of his publications concentrate on the external relations of the European Union, in particular relations between the European Union and Central and Eastern Europe. Kris Pollet was a Researcher at the European Institute of the University of Ghent from 1994 until 1999 doing research on the immigration and asylum polices of the EU in the framework of an FKFO project financed by the Fund for Scientific Research (FWO). He is currently working at the Legal Department of the Overlegcentrum voor Integratie van Vluchtelingen (OCIV – Flemish Refugee Council). Andrei Popescu was awarded a PhD in law at the University of Bucharest in 1980. He was Director in the Ministry of Labour and Social Protection between 1990 and 1996. He was Romania’s governmental representative in the ILO governing body between 1994 and 1996. Currently, he is University Professor in the National School for Political Studies and Public Administration and Head of the Department of Approximation of Legislation with Community Regulations in the Legislative Council. He is the author of many publications and studies in the field of labour and social security law. The publication The International Labour Law (Bucharest: Holding Reporter Publishing House, 1998) was given an interdisciplinary research award. Jean Raux, is Professeur émérite at the University of Rennes I – Coordinator of the Pˆole europ´een Jean Monnet and former Professor at the College of Europe (Bruges-Natolin). His main areas of research are the external relations of the EU and the constitutionalization process of the EU. He is the co-editor of Le Partenariat Entre l’Union Européenne et la Fédération de Russie (Rennes: Apogée, 1998).

Notes on the Contributors xiii

Margareta Theelen is Researcher at the Trans-European Policy Studies Association (TEPSA). She is co-author of the publications From Europe Agreements to Accession. The Integration of the Central and Eastern European Countries into the European Union (Brussels: European Interuniversity Press, 1996) and L’Union européenne … Faisons la Route Ensemble (Brussels: Artis Historia, 1998). Alfred Tovias is Associate Professor at the Department of International Relations and Deputy Director of the Helmut Kohl Institute for European Studies of the Hebrew University in Jerusalem. He has been a consultant to UNCTAD and to the World Bank. He is the author of Tariff Preferences in Mediterranean Diplomacy (London: Macmillan, 1977) and Foreign Economic Relations of the European Community: The Impact of Spain and Portugal (Boulder, Co: Rienner, 1990), and co-author of The Economics of PeaceMaking: Focus on the Egyptian–Israeli Situation (London: Macmillan, 1983). Lode Van Den Hende holds a Law degree and LLM from the University of Ghent and is teaching assistant at the European Institute. He works as an attorney in various areas of Community and WTO law. He has been legal adviser to the Belgian Delegation to the 1996 Intergovernmental Conference. Álvaro de Vasconcelos is Director of the Institute for Strategic and International Studies (IEEI) of Lisbon and member of the Steering Committee of the Euro-Mediterranean Study Commission (EuroMeSCo). He specializes notably in the external relations of the EU and more particularly in Common Foreign and Security Policy and defence issues. He is the editor of La PESC, Ouvrir l’Europe au Monde (Paris: Presses de Science Po, 1998). Peter G. Xuereb LLD (Malta), LLM (London), PhD (Cambridge) is Professor of European and Comparative Law, Head of the Department of European and Comparative Law, and Chairman of the European Documentation and Research Centre at the University of Malta. Until 1993, he held academic posts at West London University, Exeter University and the University of London. He is a consultant in European Union law and transnational business law and is head of the EU law unit in the firm of Tonna, Camilleri and Vassallo.

List of Abbreviations and Acronyms

AA ACP AMU APs ASEAN BD BP Bull. EU CA CAP CDE CEECs CEFTA CEN CFSP CIS CMLRev COMECON CSCE CTH CU EAs EC ECJ ECOS-OUVERTURE ECR EEA EFARev EFTA ELRev EMAAs EMP EMU ESCWA EUROFOR EUROMARFOR

Association Agreement African, Caribbean and Pacific States Arab Maghreb Union Accession Partnerships Association of South-East Asian Nations Barcelona Declaration Barcelona Process Bulletin of the European Union Co-operation Agreement Common Agricultural Policy Cahiers de Droit Européen Central and Eastern European Countries Central European Free Trade Agreement Comité Européen de Normalisation Common Foreign and Security Policy Commonwealth of Independent States Common Market Law Review Council for Mutual Economic Assistance Conference on Security and Co-operation in Europe Change in Tariff Heading Customs Union Europe Agreements European Community European Court of Justice Inter-regional co-operation with areas outside the European Union European Court of Justice Reports European Economic Area European Foreign Affairs Review European Free Trade Association European Law Review Euro-Mediterranean Association Agreements Euro-Mediterranean Partnership Economic and Monetary Union United Nations Economic and Social Commission for Western Asia Rapid Deployment Euroforce European Maritime Force xiv

List of Abbreviations and Acronyms xv

ERDF FDI FRY FTA FYROM GATS GATT GDP GSP IA IGC ILO IFOR IMF INTERREG

JCMS JHA JWT KFOR LIFE MAP m ecu MEDA

MENA MEPP METAP MERCOSUR M euro MNMCs MRAs MTNs NAFTA NATO NGO NIP NIS NPAA NTBs

European Regional Development Fund Foreign Direct Investment Federal Republic of Yugoslavia Free Trade Area Former Yugoslav Republic of Macedonia General Agreement on Trade in Services General Agreement on Tariffs and Trade Gross Domestic Product General System of Preferences Interim Agreement Intergovernmental Conference International Labour Organization Implementation Force International Monetary Fund Trans-European co-operation intended to encourage harmonious and balanced development of the European territory Journal of Common Market Studies Justice and Home Affairs Journal of World Trade Kosovo Force Financial instrument for the environment Mediterranean Action Plan Million ecu Financial and Technical Measures to Accompany the Reform of Economic and Social Structures in the Framework of the Euro-Mediterranean Partnership Middle East North Africa Middle East Peace Process Mediterranean Environmental Technical Assistance Programme Southern Common Market Million euro Mediterranean Non-Member Countries Mutual Recognition Agreements Multilateral trade negotiations North American Free Trade Agreement North Atlantic Treaty Organization Non-Governmental Organization National Indicative Programme New Independent States of the former Soviet Union National Plan for the Adoption of the Acquis Non-Tariff Barriers

xvi List of Abbreviations and Acronyms

OBNOVA

OECD OJ OSCE PA PCA PEMA PHARE PfP QRs RAE/LEA REC REMI RIAs RMCUE RTDE SEA SFOR SMAP STIMENA TACIS TCA TEU UCLAF UN UNCTAD USITC VCLT WEU WTO

Initiative for the rehabilitation and reconstruction of Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the Former Yugoslav Republic of Macedonia Organization for Economic Co-operation and Development Official Journal of the European Communities Organization for Security and Co-operation in Europe Palestinian Authority Partnership and Co-operation Agreement Pan-Euro-Mediterranean Area Poland–Hungary Aid for Economic Restructuring Partnership for Peace Quantitative Restrictions Revue des Affaires Européennes/Law and European Affairs Regional Environmental Centre for Central and Eastern Europe La Revue Europeenne ´ des Migrations Internationales Regional Integration Agreements Revue du Marché Commun et de l’Union Européenne Revue Trimestrielle de Droit Européen Single European Act Stabilization Force Short and Medium Term Priority Environmental Action Programme Swiss Trade Initiative for the Middle East and North Africa Programme for Technical Assistance to the Commonwealth of Independent States Trade and Co-operation Agreements Treaty on European Union Unité de Co-ordination de la Lutte AntiFraude – Unit on Co-ordination of Fraud Prevention United Nations United Nations Conference on Trade and Development United States International Trade Commission Vienna Convention on the Law of Treaties Western European Union World Trade Organization

Introduction: the Need for a Pan-Euro-Mediterranean Strategy – The Triangular Approach Marc Maresceau and Erwan Lannon

The purpose of this study is, in the first place, to analyse and compare the preferential relations between the EU and its eastern and southern peripheries, and then to stimulate further reflection on pan-Euro-Mediterranean regional integration. The respective frameworks for these relations share considerable similarities but also important differences (Péter Balázs).

Association and differentiation It is true that the legal basis of the bilateral frameworks with the CEECs remains a ‘classical’ one, that is to say that Europe Agreements are, after all, association agreements. Association agreements are also the bilateral legal framework for relations with the Mediterranean Non-Member Countries (MNMCs), regardless of whether they are candidates for accession or not. Since, at least from a legal point of view, association is a common denominator for the relationships with the ten eastern candidates and southern EU neighbours (the Agreement concluded between the EC and the PLO for the benefit of the Palestinian Authority being a special case), two contributions in this book unravel the many mysteries surrounding this basic notion. Indeed, association is far from being a monolithic concept and has many faces and forms of appearance. Therefore, when approaching this notion in the context of our study, differentiation provides the vantage point of reference (Catherine Flaesch-Mougin). Interestingly enough, thanks to the fact that it is multifaceted, it may serve to improve the quality of relationships for those still having a long way to go or who are simply excluded from the enlargement dynamic. It is in this context that the concept of association of proximity has been suggested and developed (Jean Raux). But, however important the legal basis for developing relationships between the EU and third countries may be, it is interesting to note that the enlargement-dimension phenomenon largely falls outside the formal framework of the association agreements. The role of the European Council has been predominant in providing the political impetus and in formulating the political conditions for EU membership. Of course, the role of the European Commission in the long accession process is also crucial. The joint efforts of these two institutions have produced the pre-accession stratxvii

xviii Marc Maresceau and Erwan Lannon

egy whereby candidate countries politically, legally and economically are gradually brought closer to the EU. As at the time of writing, the various stages of this pre-accession phase, which is not yet completed, are explained and analysed (Marc Maresceau).

The Mediterranean flavour of EU enlargement Enlargement is not exclusively a matter for the CEECs. Cyprus, Malta and Turkey are also part of the enlargement process and this unequivocally brings a Mediterranean dimension to the enlargement debate. An important and unavoidable question raised in connection with any reflection on enlargement is where to draw the borders of enlargement. Turkey, although a candidate since 1987, had been left aside by the Commission in Agenda 2000 and the 1997 Luxembourg European Council for various reasons. As a result of this, relations between the EU and Turkey went through a difficult and strained period. Turkey felt discriminated against and it was only at the 1999 Helsinki European Council that she was granted candidate status. However, accession negotiations with Turkey will only start once the Copenhagen political conditions can be satisfied. That is to say that Turkey is now facing a substantial political challenge and that its candidate status does not necessarily mean its admission. Indeed, the admission of Turkey has its opponents within the EU and in Turkey. One should also not forget that the integration of this regional power into the European Union would have tremendous (geo)political consequences. The EU will, in such a case, directly border Armenia, Georgia, Iran, Iraq and Syria – and via the Black Sea, countries such as Ukraine and the Russian Federation. In this particular case as well as at the regional level (i.e. in the Pan-Euro-Mediterranean Area), conditionality should be implemented in the framework of a more constructive and coherent approach and the export of the Community model should be tactfully implemented by the EU (Erwan Lannon, Kirstyn Inglis, Tom Haenebalcke). One of the main considerations in favour of the incorporation of Turkey in the enlargement process is that such a move constitutes a major factor in guaranteeing peace and stability in Europe. Indeed, the stability of the Mediterranean basin and of the Middle East is in the interests of the European continent as a whole. Therefore, Mediterranean Non-Member Countries should be treated as full partners in any security arrangements in which they are concerned (Álvaro de Vasconcelos).

The Russia factor Security is also one of the leading underlying driving forces for EU enlargement eastwards. However, in the long run this may prove to be true only if

Introduction xix an adequate relationship with Russia is established. For the moment, Russia is not an associate country or candidate for accession and is thus not included in the enlargement process. An enlargement that would leave Russia feeling pushed aside or an underdog in any way would not be advantageous. Therefore, it appears that opening up a dialogue with Russia is an urgent imperative in order to explore its perceptions of the possible positive but certainly also the adverse effects of EU enlargement. Several contributions have incorporated the impact of enlargement on Russia (Jean Raux, Catherine Flaesch-Mougin, Marc Maresceau).

Connecting the EU’s southern and eastern peripheries Connecting the EU’s southern and eastern peripheries is not an easy task. However, since the 1991 Intergovernmental Conference, the idea of equilibrium between the policies implemented by the EU towards its eastern and southern peripheries has emerged. The 1995 Cannes European Council, for example, endorsed this new approach by asserting that ‘an ambitious policy to the South forms a counterpart to the policy of openness to the East’. The concept of a ‘geopolitical coherence’ in the EU’s external actions is nevertheless still in its infancy, even if the 1999 Helsinki European Council stressed that there was a need ‘to ensure that optimum use is made of all the various means at the Union’s disposal for more effective and comprehensive external action by the Union’. But the EU–CEECs–MNMCs triangle remains an imperfect one. Interconnections between the two preferential zones are to be developed and the specificities of the strategies and interests of the EU’s partners are to be taken into account (Alfred Tovias). Interrelations and common interests are obvious. The transboundary nature of the environment (Kirstyn Inglis), migratory pressures (Kris Pollet) and terrorism (Álvaro de Vasconcelos) are clear, and such issues are particularly sensitive in the PanEuro-Mediterranean Area. No doubt such challenges cannot be resolved effectively without creating appropriate Pan-Euro-Mediterranean fora. Dialogue is the key, misperception the danger.

Towards a Pan-Euro-Mediterranean regional integration: challenges ahead In the process of linking the Central and Eastern European Countries with the Mediterranean Non-Member Countries key trade issues remain numerous. The agricultural sector is of crucial importance as Pan-EuroMediterranean regional integration will not be achieved without significant repercussions for the Common Agricultural Policy (Marianne Dony). One of the main objectives, in the first stage of integrating the Pan-EuroMediterranean region, is to create the conditions for the establishment of a

xx Marc Maresceau and Erwan Lannon

vast free trade zone. This presupposes notably a workable mechanism on rules of origin without which such an objective cannot be attained (Stefano Inama). Another aspect which is of considerable relevance in any modern approach to the concept of commercial policy is that of services. This is true in an intra-Community and enlarged Community context but services also constitute an area for further development in Euro-Mediterranean relations (Lode Van den Hende). Most of these strategic trade aspects must be considered in the light of the expected Millennium Round but also through the willingness of the EU to export the Community model. The financial dimension of this emerging regional integration is also fundamental. Connecting PHARE and MEDA financial programmes could be a first step in the right direction (Alain Guggenbühl and Margareta Theelen). Bringing together the economic operators is also of great importance and must be considered as an opportunity for further convergence (Peter G. Xuereb). On the other hand, one must be aware that enlargement has its price (Geoffrey Denton) and that enlargement cannot take place to the detriment of the EU’s Mediterranean partners. Furthermore, one should not forget the social dimension of enlargement (Andrei Popescu), nor can the social cost of the envisaged Euro-Mediterranean free trade zone be underestimated. The creation of the conditions for social harmony and political stability (Bichara Khader) are fundamental preconditions for the creation of a viable regional integration. While it is clear that there are initiatives and programmes taking into account the emerging Pan-Euro-Mediterranean regional integration, the EU, at the beginning of the year 2000, has no clear ‘triangular policy’ nor any ‘Pan-Euro-Mediterranean strategy’. The creation of Pan-EuroMediterranean regional integration and the development of triangular cooperation are essentially a matter of political will. We hope the present study may, for its part, contribute to an understanding of the increasing complexity and interconnections of the EU’s relations with its eastern and southern peripheries.

Part I The Political and Security Dimension

This page intentionally left blank

1 The EU Pre-Accession Strategies: a Political and Legal Analysis Marc Maresceau

Introduction In the EU enlargement procedure, one of the important steps is the Opinion of the European Commission on each application for EU membership. But the Commission’s role in the enlargement process as a whole is in reality much more important than Article 49 TEU (former Article O) at first glance suggests: the Commission has indeed a key position in the preparation of the formulation and implementation of the pre-accession strategies towards the applicant country as well as in the accession negotiations as such.1 Therefore, the request of the 1995 Madrid European Council to the Commission to embark on the drafting of a composite paper on enlargement,2 although unique in itself, was not so astonishing. Already the sheer number of all the applications from the Central and Eastern European Countries (CEECs) – no less than ten have applied for membership – together with the pending applications of Cyprus and Malta, 3 and not forgetting Turkey, made the prospect of further enlargement this time something very special and indeed very different from previous enlargements. The next enlargement(s), possibly involving so many different countries with such varying degrees of economic and social development, necessarily raised questions about the preparation of an adequate enlargement framework. Naturally, such considerations quickly have a political, economic and financial dimension. Of course, from the EU side, the Commission is not the only player in the enlargement process. The predominant political role, that is to say which countries are eligible for membership and the political preconditions and conditions attached to possible accession, is gradually but surely being played by the European Council. An interesting and unique interplay between not only the Commission, European Council and, somewhere in the middle, the EU Presidency but also some individually concerned Member States can be seen at work in the current enlargement debate. The dimension and degree of intensity of this interaction cannot be compared 3

4 Marc Maresceau

with previous enlargements, thus adding a very special touch to the present envisaged enlargement(s). In this paper the following structure is followed. In the first part some basic notions relating to Agenda 2000 and pre-accession strategies are addressed. Certainly, it is not easy to find one’s way in the EU’s terminological enlargement labyrinth. The prolific use of new concepts and expressions by the European Commission and other EU institutions has somehow reached the point where it seems that chaos dominates the enlargement cosmos.4 Just to take the year 1998: a European Conference was organized and nobody really knew what its purpose was; a very rare distinction was introduced between accession process and accession negotiations; Accession Partnerships were established, not to be confused with ‘partnerships’ as established through the Partnership Agreements; pre-accession and enhanced pre-accession strategies were formulated; national programmes for the adoption of the acquis, innumerable screening, evaluation and progress reports have been produced; and so on. But all this cannot conceal the fact that, at the beginning of the twenty-first century, it is easier to talk about enlargement than to achieve it. Yet, an attempt has been made to explain briefly and clarify the main choices on enlargement made by the EU, including those concerning the sensitive and delicate position of Turkey. The second part of this paper is more a case study concentrating on the analysis of some aspects of the political and legal dimension of the relations between the EU and Central and Eastern Europe in the light of the EU enlargement options as they have developed since the Commission published Agenda 2000 and its Opinions. In this part specific attention is also devoted to the impact of enlargement on relations with Russia.

Agenda 2000 and pre-accession follow-up: general overview On 15 July 1997 the Commission published within the framework of Agenda 20005 two distinct but nevertheless closely interrelated documents: For a Stronger and Wider Union and The Challenge of Enlargement. On the same day, in accordance with Article O TEU (now Article 49) the Commission also published its Opinions6 on the applications for EU membership of Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. 7 The result of these Opinions was that, according to the Commission, accession negotiations could only be opened with five applicant countries from Central and Eastern Europe – the Czech Republic, Estonia, Hungary, Poland and Slovenia. Furthermore, such negotiations could also be entered into with Cyprus. The reasons why a number of applicant countries of the CEECs could not be included in the first accession negotiations, again according to the Commission, were political and/or economic. Cyprus and Malta, 8 for their parts, had already received a favourable opinion in 1993 from the

The EU Pre-Accession Strategies 5

Commission on their application for membership in 1991 and no new opinion needed now therefore to be given. Of course, as regards Cyprus, the Commission could not ignore the continuing division of the island but noted that accession negotiations ‘could start before a political settlement is reached’.9 These negotiations, in the eyes of the Commission, ‘[had to] be seen as a positive development which could promote the search for a political settlement’.10 One of the underlying ideas here was that such a move could also create considerable political and economic advantages for the Turkish Cypriots. But the extreme virulence of the reactions on this matter on the Turkish Cypriot side, 11 and more importantly the Turkish government, shows that at the time the Commission had not made a particularly accurate evaluation of the situation. Turkey’s reaction was, moreover, very much inspired by the fact that the Commission in its Agenda 2000 had almost totally ignored that country. In this document, indeed, only a short and general summary of the bilateral relations had been provided, 12 while in the specific chapter on the effects of enlargement on those countries which were not included in the EU accession policy, Turkey was merely worth two lines. The Commission was kind enough to recall that ‘the EU has a particular close relationship with Turkey whose eligibility for EU membership [had] been recently reaffirmed’ 13 but nothing specific was said on the triangular aspect of the EU–CEECs–Turkey relations and, above all, not the slightest indication was given as to how the orientation of the possible future accession policy towards Turkey was to be addressed. True, it must be mentioned that on the same day of the publication of Agenda 2000, the Commission also published, but at the same time clearly distinct from it, another document called Communication on the Further Development of Relations with Turkey.14 This, once more, was a complete miscalculation. The Communication, while reiterating the principle of Turkey’s eligibility for EU membership and assuring that Turkey would be judged on the basis of the same criteria as all the other applicants, hardly did anything more than mention in passing the state of relations between the EU and Turkey, making only a few vague references to a deepening of some technical aspects of these relationships (trade, customs union, liberalization of services and proposals for co-operation in other areas). Again, nothing concrete was proposed regarding Turkey’s accession request and on the whole the result of this Communication was that it did nothing more than add an extra dose of EU fuel to the Turkish flames. These disappointments, together with the feeling of isolation, explain the bitterness and sharp irritation of Turkey, not only to the Commission’s Agenda 2000, but also to the Commission’s approach as a whole. Only in 1999 would concrete signals of a change in the Commission’s views on relations with Turkey become apparent (see below). The basic Commission options expressed in its Opinions concerning the choice of with whom, from the CEECs accession, negotiations could be

6 Marc Maresceau

started were endorsed by the 1997 Luxembourg European Council. But at the same time the European Council had not been totally insensitive to the storm of criticism which had come on the one hand from those applicants from Central and Eastern Europe who had been set aside and on the other from Turkey. Therefore, the European Council – it must be said, in an intelligent way – introduced the new concept of accession process beside that of accession negotiations and proposed that the accession process be launched with all the applicants from Central and Eastern Europe and that, as far as Turkey was concerned, a strategy had to be drawn up ‘to prepare Turkey for accession by bringing it closer to the European Union in every field’. This more diplomatic approach of the European Council had managed to take away some or most of the frustrations expressed by many of the nonselected CEECs after the Commission’s Opinions of July 1997. However, one important black spot in the European Council’s proposals could not be erased: once again Turkey continued to be extremely dissatisfied with the whole procedure, feeling discriminated against, misunderstood and left out. This was clearly demonstrated by the reaction of Turkey towards the initiative to hold a European Conference. The 1997 Luxembourg European Council, stressing that a global and dynamic strategy had to be developed whereby enlargement was to be seen as a ‘comprehensive, inclusive and ongoing process’, had indeed also decided that a European Conference had to be organized. Such a conference was supposed to bring together the EU Member States ‘and the European States aspiring15 to accede to [the EU] and sharing its values and internal and external objectives’. On 12 February 1998 the London European Conference took place in which the fifteen EU Member States, the ten applicant countries from Central and Eastern Europe and Cyprus participated. The idea of such a meeting had been strongly supported by the Blair government since the UK held the EU Presidency during the first half of 1998. The Conference itself was composed of the Heads of State and Government and the President of the Commission. Although Turkey had also been invited to participate – and as a matter of fact the Turkish presence was one of the very reasons behind the conference16 – she had loudly declined the invitation for reasons mentioned previously. In the end, the Conference concentrated on transnational crime, security and regional co-operation – topics which are always welcome even if there is no real agenda – but its concrete results were particularly minimal since the meeting was lacking any clear structure or goal. While aimed at tackling issues on a ‘pan-European’ basis and giving the less advanced applicants for membership a forum together with the selected candidates, it was difficult to situate some European countries. Switzerland, for example,17 showed some interest but in the end did not participate and some other ‘European’ countries, such as Moldova or Ukraine, which from their point of view were also ‘aspiring’ to accede to the EU, while eager to participate were simply not welcome. And finally, it must be said that,

The EU Pre-Accession Strategies 7

probably, everybody was happy that Russia had not expressed the wish to participate. Unless fundamentally rethought, it would appear that there is little or no future role for the European Conference as it was originally conceived although it must be said that the Commission in its Composite Paper of 13 October 1999 (see below) is of another opinion. After having expressed the view that Turkey, as a candidate country, would become a full and active member of the European Conference, the Commission continues to see the Conference as a potentially important forum for political consultation for countries aspiring to accede to the EU. The European Council for its part also has no clear-cut opinion on the issue and the 1999 Helsinki Summit Conclusions only stipulate that ‘the future of the European Conference will be reviewed in the light of the evolving situation’. Nevertheless, the French Presidency seems to wish to ‘revitalize’ the idea and has convened two meetings of the European Conference (one of them at Ministerial level). Maybe in the future the European conference could evolve towards a more pan-European oriented framework, integrating most – if not all – of the countries of the European continent, where inter alia the effects of EU enlargement on European non-members could be addressed. Enlargement process and enlargement negotiations It was at the Brussels meeting on 30 March 1998 of the Ministers of Foreign Affairs of the fifteen EU Member States and the ten applicants from Central and Eastern Europe and Cyprus that the accession process was formally launched. For the CEECs an enhanced pre-accession strategy was set up based, on the one hand, on a new model called Accession Partnerships setting out the main political, legal, economic and financial priorities, and on the other the organization of ‘increased pre-accession financial assistance’. The legal act establishing such Accession Partnerships was Council Regulation 622/98 of 16 March 1998. 18 These Partnerships provided, inter alia, for a single framework covering the priorities in each applicant country on which the preparations for accession had to concentrate. The concept of Accession Partnership was further worked out in various Council Decisions of 30 March 1998 spelling out for each applicant from Central and Eastern Europe individually the principles, priorities, intermediate objectives and conditions.19 In response to the EU initiatives the ten applicants from Central and Eastern Europe presented their respective national policy programmes describing in detail the various measures and actions needed to attain the objectives set out in the Accession Partnerships. On 31 March 1998 the opening session of the accession negotiations between the EU and the selected CEECs and Cyprus took place. Consequently, this last event put into motion the first ‘real’ accession negotiations train. In April 1998 the applicants’ analytical screening of the state of implementation of the various facets of the acquis communautaire

8 Marc Maresceau

also took place with all the ten CEECs to determine each country’s position in the Accession Partnership strategy. A similar exercise occurred regarding Cyprus. For Cyprus, not being included in the Accession Partnerships, a specific pre-accession strategy had been suggested by the Luxembourg European Council, concentrating inter alia on the judicial and administrative capacity of the country to cope with the acquis communautaire and on certain forms of technical assistance. In accordance with the Conclusions of the 1997 Luxembourg European Council, the Commission presented its ‘Regular Reports’ for the first time on 17 December 1998, reviewing the progress made by each applicant, country by country. They were based on an intensive screening of each applicant country in the light of the famous Copenhagen criteria for accession and the conditions related to the integration and application of the acquis communautaire. As already mentioned previously it was the first time such a country report was also devoted to Turkey’s progress towards accession. These reports were followed by updated versions published on 13 October 1999 and have more or less a similar structure. The two reports first describe the bilateral relations as they result from the Europe Agreements and pre-accession strategies. Then the political criteria for membership are analysed. This implies a screening of the situation in each applicant country in the light of the conditions relating to democracy and the application of the rule of law. The examination covers the position of parliament, government and administration, and last but not least the judiciary. In the 1998 Reports, this part of the scrutiny also includes a specific section on measures taken by each applicant country to combat corruption, a concern of increasing significance, where ‘the efforts undertaken by the candidate countries are not always commensurate with the gravity of the problem’. According to the Commission ‘there is a certain lack of determination to confront the issue and to root out corruption in most of the candidate countries’.20 The 1999 Regular Reports demonstrate that, in this respect, little progress has been made. 21 Another important facet of the examination of the political conditions concerns the protection of human rights and the protection of minorities in each applicant country. In a second and third part of the chapter examining the criteria for membership, the economic criteria and the ability of the applicant countries to assume the obligations of membership relating to the acquis communautaire are addressed. Finally, a last part is devoted to an assessment of the administrative and judicial capacity of each candidate to implement and apply the acquis. After the publication of the first regular reports, the impression had been growing that the distance between countries of the first accession train and those of the second was narrowing and that an upgrade of the status of some applicant countries from ‘category two’ to ‘category one’ might be possible. For example, Latvia and Lithuania had been making important

The EU Pre-Accession Strategies 9

progress while in Slovakia the creation of a new government after the elections of September 1998 had considerably improved the political climate and the political atmosphere of the relations between Slovakia and the EU. In the light of the economic evaluation already made in 1997 it seemed that that country had only a small step to take to jump onto the first accession train. The Commission and Council acknowledged the progress made but were nevertheless reticent to propose a modification of Slovakia’s status while leaving Bulgaria and Romania behind. This may explain, at least in part, why the 1998 Vienna European Council limited itself to only welcoming the progress in the preparation for accession negotiations of all the CEECs22 which, for the moment, were excluded from the negotiation table. Thus, expectations were growing that the December 1999 Helsinki Summit would review the original ‘classification’ of candidate countries. This, at last, became the position of the European Commission when on 13 October 1999, Mr Prodi announced a fundamental shift in the Commission’s enlargement strategy by proposing to open accession negotiations with all the Central and Eastern European candidate countries (and Malta), even if most of the remaining applicant countries did not fully meet the economic criteria. 23 This change in accession ‘methodology’, based on the need for a new momentum in the enlargement process in particular after the Balkan crisis, goes together with a greater differentiation among the applicants. This implies that a detailed account of each candidate’s progress in the preparation for membership will be made while the conclusion of the accession negotiations will be done on a case-by-case basis. In other words parallelism between negotiations on the one hand and concrete implementation of EU law on the other will be an important guiding principle. At the 1999 Helsinki European Council the Commission’s new approach was endorsed, which implies that accession negotiations were opened in February 2000 with Bulgaria, Latvia, Lithuania, Romania, Slovakia and Malta. However, while the remaining applicant countries are getting closer to the Copenhagen political and economic criteria for EU membership, ‘new’ EU conditions may well give rise to serious concern. For example, a number of applicant countries have, over the years, developed nuclear energy programmes not always in alignment with the necessary safety standards. In this respect the 1999 Cologne European Council had already given a clear signal by stressing ‘the importance of this issue in the context of the Union’s enlargement’ and requested that the Commission examine this question thoroughly in the next regular progress reports.24 Also the Helsinki Conclusions make explicit reference to ‘the importance of high standards of nuclear safety’. As an illustration this means for Bulgaria, for example, that acceptable closing dates for unsafe units at the Kozloduy power station have to be set (see below K. Inglis). In addition, in the totally different field of childcare institutions, a ‘new’ condition was imposed on Romania, whereby the EU required that effective

10 Marc Maresceau

reforms be introduced. Of course the EU is in a comfortable position here. The longer the duration of the pre-accession phase, the more, potentially at least, new requirements for EU membership can be added to the list or existing ones further refined. There is not much candidates can do about this. Between the beginning of the accession negotiations with Poland, Hungary, the Czech Republic, Estonia, Slovenia and Cyprus (the ‘Luxembourg group’) on 31 March 1998 and June 2000, 29 of the 30 identified chapters of the acquis communautaire have been opened for negotiation, the only one left out being ‘institutions’ (and ‘Others’). Negotiations with all the countries of the Luxembourg group on a number of domains are ‘provisionally’ 25 completed and cover the following nine areas: education and training, science and research, statistics, industrial policy, small and medium-sized enterprises, consumer and health protection, telecommunications, CFSP and EMU. Negotiations on the remaining chapters have further to be completed with one or more of these candidates. For example, negotiations on fisheries have been completed with five candidates but not with Poland, while social and employment policy as well as audio-visual policy have been concluded only with Cyprus. This is also the case as far as free movement of goods and customs union with the Czech Republic are concerned. Other areas such as company law and financial control have been completed with a few candidates. However, there are still some hard nuts to crack. For the ‘sensitive’ chapters progress in the negotiations is slow and some have only just started. The difficult chapters include free movement of persons, free movement of services, competition policy, CAP, regional policy, transport, taxation policy, energy (including nuclear energy), environment, budget, and justice and home affairs. Without going into the details of the negotiations, it may be worth while to say a word about one of the most difficult chapters, that of free movement of persons, in particular of workers. In May 2000 this chapter was opened for negotiation with the six candidates of the Luxembourg group but the EU common position on this issue remains very vague. While not yet raising in so many words a request for transitional periods allowing restrictions on labour market access it is very likely that during the negotiations this may become the EU position. Austria, for example, has already made clear her specific position on the issue, stressing inter alia the fact that she shares a common border with the CEECs of 1256 km, that there is already a high proportion of CEEC workers (10 per cent) in the country, and that enormous wage differences with the CEECs exist (CEECs generally have not more than 25 per cent of Austrian wage level). Moreover, also Germany and possibly other Member States may well ask for transitional periods on this matter. However, candidates are of the opinion that reciprocal free movement of persons, including workers, should be established from the day of accession. They do not understand why the general EU insistence on full application of the acquis communautaire in general

The EU Pre-Accession Strategies 11

imposed upon them should not apply regarding movement of persons. Another question linked with this topic is that of the application of the Schengen Agreement and the EU visa rules. To date the candidate countries have visa requirements which differ from those applied by the EU Member States. The result of the EU requirement to have full alignment with the EU list of third countries whose citizens need a visa before entering EU territory is more easily said than done. That means, for example, that Poland has to impose visa requirements for citizens of fifteen countries with which today she has no visa obligation, including direct neighbours such as Ukraine and also other Eastern European countries. Also Hungary will have to review her agreements with her neighbours, as least with those which will not be in the EU at the time of Hungary’s joining. For the moment Hungary has signed such agreements with Romania, the Republic of Yugoslavia, Ukraine, Croatia, Slovenia and Slovakia. Moreover, in most of these countries live Hungarian minorities, which adds a special dimension of sensitivity to the EU request of visa alignment. Clearly, the rigidity of the EU position results in the re-establishment of particularly tough borders and border controls among the countries of Central and Eastern Europe. Obviously, the negotiation picture for the Helsinki group countries, that is to say Romania, Bulgaria, Slovakia, Latvia, Lithuania and Malta, is different from that of the Luxembourg group since negotiations only started in February 2000. For the six countries concerned negotiations have been completed on small and medium-sized enterprises, science and research, education and training. They have been opened with some countries on certain topics such as competition policy, culture and audio-visual policy but negotiations on most of the difficult chapters still have to be opened. It is difficult to foresee how the negotiations will further evolve. A road map aiming at defining the way and means for the completion of the negotiations may well be formally approved at the 2000 Nice European Council. But there is little or no prospect of a firm EU commitment towards a negotiation scenario with target dates being offered in the short term. This may be frustrating for the front-runner candidate countries, in particular Poland and Hungary, but it is a realistic attitude. The results of the Intergovernmental Conference on the institutions will provide an indication of how an enlarged EU can continue to function ‘while maintaining the momentum of European integration’. And even in the hypothesis of a clear EU vision in this respect some of the substantive matters of the various sensitive negotiation chapters will need an inventive approach by the EU as well as by the candidates. Such an approach may well imply a stronger emphasis on political rather than technical considerations. However, this is not without risk: on certain concrete issues the distance between the respective positions of the candidates and the EU could prove to be so considerable and maybe insurmountable that the technique of transition periods is inadequate to bridge the gap.

12 Marc Maresceau

Turkey: the unavoidable partner In the aftermath of the Luxembourg European Council with regard to Turkey’s specific position in the EU enlargement policy, there were, at least in some EU Member States, a growing number of signals showing a greater understanding or openness towards the Turkish position. Turkey is indeed an important partner of the EU and its Member States both politically and economically. At the instigation of Member States, which were becoming increasingly irritated by the total inflexibility of Greece, signs were given that there could be scope for an improvement in relations with Turkey. In 1998, the Commission again, recalling that Turkey was ‘also a member of the Euro-Mediterranean Partnership’,26 presented proposals demonstrating ‘the European Union’s commitment to developing a strategy to prepare Turkey for accession’.27 Perhaps, more importantly, for the first time a progress report on Turkey was published on 17 December 1998 28 together with those on the Central and Eastern European applicants which the Commission prepared within the framework of an enhanced pre-accession strategy. While all this, at least from a procedural and perhaps even more so from a psychological point of view, might create the impression of a more equal treatment of the Turkish application for EU membership, originally only little concrete progress had been made. At the 19 July 1999 meeting organized within the framework of the European Conference, Turkey, although again invited, refused to participate. 29 Indeed the attempts by the German Presidency to include Turkey in the ‘accession process’ had failed as the Conclusions of the 1999 Cologne Summit clearly demonstrated.30 At this point it is interesting to note that it is perhaps not so much the political negotiations as the human catastrophe resulting from the terrible earthquake in Turkey in 1999 and the reactions, particularly from Greece, to this calamity which may have helped to create a momentum for change. EU financial aid to Turkey related to the natural disaster was approved by Greece, although so far Greece has always opposed the implementation of the Financial Protocol which is an essential part of the bilateral framework between the EU and Turkey 31 as well as the special financial assistance related to the establishment of the Customs Union. On 13 October 1999 the President of the European Commission, Mr Romano Prodi, in his speech on EU enlargement before the European Parliament, expressed the view, on behalf of the European Commission, that Turkey should be granted the status of ‘candidate country’ and the same was suggested in the Regular Reports from the Commission on Progress towards Accession published on the same date. However, Greek authorities were also quick to make clear that this gesture could not yet be interpreted as granting Turkey the status of ‘candidate country’ on a par with other applicants for EU accession,32 and significantly the Commission also indicated that in any case the granting of the qualification ‘candidate country’ would not imply that ‘accession negotiations’ would necessarily be opened

The EU Pre-Accession Strategies 13

immediately. Turkey, for her part, while accepting that the Copenhagen criteria must be met, continued to reject the idea of making political concessions prior to the granting of status of candidate country. In any event, as a result of the application by the Commission of the Copenhagen test criteria to the domestic political and economic situation in Turkey, there is still a long way to go before EU membership of that country can be seriously envisaged. The Commission expects that Turkey should be capable of acquiring a viable market economy able to cope with the pressures of the market in the medium term. But the main problems remain on the political side: human rights violations, the unacceptable treatment of minorities, the role of the army in politics and the continuing occupation of northern Cyprus.33 All this explains why, until the very last minute before the 1999 Helsinki European Council, suspense remained extremely high on the question of whether the conclusions of the meeting would satisfy Turkey. Even on the first day of the Summit exceptional diplomatic activity was developed to ‘explain’ to Turkey the meaning of the envisaged Helsinki ‘conclusions’ and to avoid any misunderstanding. An anecdote worth mentioning is that on the Friday afternoon Mr Solana, the High Representative for the Common Foreign and Security Policy, Mr Verheugen, the Commissioner for Enlargement, and a representative of the Finnish Presidency flew to Ankara to explain the Conclusions of the Summit, while on Saturday, 11 December, Mr Bülent Ecevit, the Turkish Prime Minister, in his turn flew to Helsinki to participate at the dinner of the Heads of State and Government of the EU Member States and the other twelve candidate countries.34 The wording of the Helsinki Conclusions is a masterpiece in diplomatic formulation. Turkey is qualified as ‘a candidate State destined to join the Union on the basis of the same criteria as applied to other candidate States’. This means that Turkey will benefit from the pre-accession strategy in the preparation for accession and thus an Accession Partnership will be set up (see below). Emphasis will be laid on progress towards fulfilling the political criteria for accession. Special importance will be attached to the issue of human rights and the respect of the principle of peaceful settlement of disputes in accordance with the UN Charter. Turkey – as any other EU candidate – is urged to make every effort possible to resolve the outstanding border dispute(s) and other related issues. If this proves to be impossible, it should bring the dispute(s) before the International Court of Justice within a reasonable time. The European Council will make an evaluation of the outstanding dispute(s) ‘in order to promote their settlement through the International Court of Justice, at the latest by the end of 2004’. But again it should be noted that these political conditions to which Turkey’s candidate status is directly being linked are presented as conditions applicable to all candidate countries. Seen in this context Turkey is, at least formally, not being discriminated against vis-à-vis other candidate countries. However, the ‘Helsinki condi-

14 Marc Maresceau

tions’ cannot be disconnected from the particularities of Turkey’s candidate status, and, as already mentioned, receiving candidate status does not mean that accession negotiations will start immediately. In the first place, a prerequisite for the opening of accession negotiations remains compliance with the Copenhagen political criteria. Turkey is still far away from this target but, as already mentioned, this will not preclude Turkey from participating in the Community programmes, agencies and accession process along with the other candidate countries. Finally, in EU–Turkey relations, the Cyprus issue is never far away of course. Here, the European Council notes that a political settlement will facilitate the accession of Cyprus to the European Union but that if no settlement has been reached once the accession negotiations are completed, ‘the Council decision on accession will be made without the above being a precondition’. However, at the same time it is added that ‘the Council will take account of all relevant factors’. All the pertinent parts of the conclusions on or affecting Turkey have necessarily to be read together and even then the diplomatic intervention of the US at the highest level was necessary to convince Turkey to accept the EU offer. Indeed one can understand the initial Turkish hesitation: while the EU went a long way to meeting Turkey’s demands, particularly in terms of being treated on equal terms with other candidates, there is no commitment to actually opening accession negotiations and accession itself today still appears somewhat enigmatic.

EU enlargement practice since 15 July 1997: an evaluation The publication of Agenda 2000 together with the various Commission Opinions on the CEECs’ application for accession had a fundamental impact on the pre-accession strategy as such. Of course, before 15 July 1997, there were already numerous initiatives developing a pre-accession atmosphere. As a matter of fact, after the 1993 Copenhagen European Council or, perhaps better, after the 1994 Essen European Council, the preaccession strategy became formally and firmly established. This resulted in various actions, forms of dialogue and projects. Probably one of the most interesting initiatives in this respect was the 1995 Commission White Paper on the Preparation of the Associated Countries of Central and Eastern Europe for Integration into the Internal Market of the Union aimed at laying down a detailed programme of approximation of laws for the CEECs. In this document, legal integration of the acquis communautaire related to the Internal Market was presented as a fundamental objective for a successful accession policy.35 But with the publication of Agenda 2000 together with its Opinions, the Commission made a strict differentiation between the applicant countries: there were those with whom negotiations could be started and those with whom this was not yet possible. Obviously, pre-accession

The EU Pre-Accession Strategies 15

policies applied to those selected necessarily had a different impact compared to that of the accession policies applied to those of the second train. The Copenhagen political criteria applied The ten Opinions of 1997 provided a detailed analysis of why, in the eyes of the Commission, an applicant had to belong to the first or second category. In this examination, the political and economic criteria were predominant. Four applicant countries, for example, failed the test exclusively or mainly for economic reasons (Bulgaria, Romania, Lithuania and Latvia). More important in the light of the topic of this paper is why applicants satisfied or failed the political test undertaken by the Commission. Such an examination is of particular relevance since meeting the political criteria after the entry into force of the Treaty of Amsterdam on 1 May 1999 also becomes a legal requirement for membership. The new Article 49 TEU explicitly stipulates that any applicant for EU membership has to respect the principles of liberty, democracy, human rights, fundamental freedoms and the rule of law. In all the Commission Opinions, a specific chapter is dedicated to the ‘Political Criteria [for Membership]’. This chapter has an identical structure: first, the place of democracy and rule of law in the country concerned is evaluated; second, an assessment is given on the application of the protection of human rights and rights of minorities; finally, a global and general evaluation is made. The section ‘Democracy and the rule of law’ contains a brief description of the constitutional and institutional structure of the country, how parliament and the executive function and what the position of the judiciary is in the constitutional framework. On the whole the picture presented by the Commission in all the Opinions is a remarkably positive one: since the political changes, all applicants have been able to organize free elections, through the classical game of coalitions political majorities have been formed, governments are accountable to a parliament, etc. While there were still some hesitations about Romania at the time the Opinion was delivered, the only real problem which the Commission was facing in this respect was Slovakia. The Commission remarked ‘that the [Slovak] government [paid] insufficient respect to the powers devolved by the Constitution to other bodies and too frequently [disregarded] the rights of the Opposition’. 36 These, together with the treatment of minorities, were also the main reasons behind the exclusion of Slovakia from the first group, while otherwise she presented a good economic record. Another aspect briefly considered in all the Opinions but certainly deserving closer attention is that of the place and functioning of the judiciary. Undoubtedly, in many if not all CEECs, transformation encounters serious difficulties at the level of the judiciary. It is not so easy to train or retrain judges and, in any case, this needs thorough preparation. As later evaluations such as the Regular Reports of 17

16 Marc Maresceau

December 1998 demonstrate, the ‘inherent weakness’ 37 of the judiciary in a large majority of the CEECs continues to cause a significant problem, particularly since accession to the EU implies the application of EC law by national courts to such a large degree. Seen in this context, familiarizing judges in the potential new Member States with fundamental notions of EC law such as ‘primacy’ and ‘direct effect’ is still an enormous task and this explains why important training programmes in EU law for judges in candidate countries have been or are being organized. Moreover, applicants must be aware of the fact that the final Opinions given by the Commission and addressed to the Council once accession negotiations are completed 38 explicitly refer to the specific legal implications of enlargement. No reservations in the application of the principles of direct applicability and primacy can be accepted and uniform application of Community law must also be ensured in the new Member States. All CEECs have made an effort to become more familiar with EU law and changes to the law curriculum in most of the universities reflect this. But, understandably, it will take time before the repercussions of this policy will be felt at the various levels of the judiciary. The examination of the applicant countries’ records in the field of human rights and protection of minorities – the second part under the chapter ‘Political Criteria’ – follows a similar pattern in all the Opinions. First the civil, political, economic, social and cultural rights are examined. There are, of course, nuances in the quality of protection offered by the various applicants but on the whole these aspects cause no serious concern. Undoubtedly, the most sensitive issue is that of minority rights and the protection of minorities in most of the CEECs. Here, virtually no applicant from Central and Eastern Europe has a totally clean record and the question therefore is more one of where the limits have to be drawn. If strictly applied, this point of reference in the scrutiny of the political criteria, together with the need to improve drastically the quality of the judiciary, could well constitute one of the main obstacles for a considerable number of applicants. On this issue, perhaps Hungary is an exception, although here also improvement in the treatment of the Roma has been requested by the Commission. Poland and Slovenia have only a small minority presence and the protection of minorities does not really constitute a special problem. In Romania the large Hungarian minority (7–8 per cent of the population) has been subject to discriminatory treatment but the situation has considerably improved as result of the measures taken by the government formed after the elections of November 1996. But the discrimination of the large Roma community (5–7 per cent of the population) continues to cause problems in that country.39 In Bulgaria, the Turkish minority had in the past suffered serious discrimination but since 1989 the situation has improved very considerably. Now, the biggest minority problem there is also that of the Roma.40

The EU Pre-Accession Strategies 17

As far as the Baltic states are concerned the situation is different. While in Lithuania, with a considerable minority amounting to 20 per cent of the population composed largely of Poles and Russians, a number of examples of discrimination do exist, on the whole problems remain limited. In its Opinion of 15 July 1997, the Commission mentioned, for example, the quotas for pupils of minorities going to higher education. But the global conclusion as far as Lithuania is concerned is that fundamental rights and the protection of minorities are guaranteed.41 The situation is different in Latvia and Estonia. In Latvia there are large categories of people intriguingly called ‘non-citizens’. They consist of citizens of the former USSR whose expired passports are not recognized abroad and who therefore do not have any citizenship at all. They constitute the biggest group within the minorities in Latvia. Minorities, including these non-citizens, account for more than 40 per cent of the total population. The Latvian Nationality Act of 1994 made the granting of Latvian nationality particularly difficult. A large number of discriminations were enumerated in the Commission’s Opinion which nevertheless came to the conclusion that ‘there were no major problems over respect for fundamental rights’. Latvia ‘needed to take measures to accelerate naturalisation procedures to enable the Russian-speaking non-citizens to become better integrated into Latvian society’ and ‘[had] also to pursue its efforts to ensure general equality of treatment for non-citizens and minorities, in particular for access to professions and participation in the democratic process’. The global conclusion by the Commission that ‘with the reservation that steps need[ed] to be taken to enable the Russian-speaking minority to become better integrated into society, Latvia [demonstrated] the characteristic of a democracy, with stable institutions guaranteeing the rule of law and human rights’42 was therefore somewhat astounding. However, since Latvia, according to the Commission, still had to make considerable progress towards the creation of a market economy, it was, in any case, not yet possible to open negotiations for accession with that country. In April 1998 notable improvements took place in Latvia speeding up the citizenship as well as the naturalization procedures. Nevertheless, a very high percentage of the population still keep their ‘non-citizen’ status,43 although an encouraging signal was the outcome of the 3 October 1998 referendum granting automatically Latvian nationality to children of stateless persons born in Latvia after the country’s independence. Moreover, amendments made to the Citizenship Law, which entered into force in November 1998, facilitate considerably the application for Latvian citizenship. But problems remain, particularly as a result of the tightening of the Language Law adopted by the Parliament in July 1999. This law was not promulgated by the President following reactions from the OSCE, Council of Europe and European Commission, the latter arguing its incompatibility with Community standards as enshrined in the EC–Latvia Europe Agreement. It

18 Marc Maresceau

must also be noted that non-citizens are not allowed to enter some professions such as those of lawyer, armed security guard or private detective on the grounds of state security.44 For Estonia, the conclusion in the Commission’s Opinion was different since this country, astonishingly, was selected for the first train accession negotiations. The true and complete story of this unexpected choice by the Commission will probably never be fully known.45 Was it a necessary compensation for the failure of the Baltic states to integrate into NATO? Was it the result of a geopolitical attempt to include not only three geographically central countries (Poland, the Czech Republic and Hungary) but also a country to the North, in this scenario being Estonia?46 Was it a provocative test to measure Russian reaction to a possible ‘extreme’ enlargement scenario whereby large Russian minorities are included in the EU and in which Russia herself in the long run is completely encircled by the EU? Knowing that a border treaty between Estonia and Russia has not yet been ratified, is the 1994 Essen European Council condition on ‘good neighbourly relations’ sufficiently satisfied? 47 While everybody knew that there had been many problems in Estonia with regard to the treatment of the large Russian minority, constituting something between 25 and 30 per cent of the population, the Commission produced in its Opinion nevertheless an extremely favourable and particularly soft picture of the situation. For the Commission ‘on the whole, the rights of the Russian-speaking minority (both with Estonian nationality and without) [were] observed and safeguarded’. The main suggestion by the Commission was that ‘Estonia [needed] to take measures to accelerate naturalisation procedures to enable the Russian speaking non-citizens to become better integrated into Estonian Society’. 48 Apparently, one of the main concerns of the Commission was the fact that there were insufficient resources available to Russian speakers to learn Estonian and since good knowledge of Estonian was required to pass the Estonian nationality exam, the Commission has been granting financial support through the PHARE Programme for the financing of these language courses.49 This, besides the fact that it is a strange way of using EU funds, also raises the question of whether it is the task of the EU to support policies of applicant countries imposing complex language tests on their minorities to obtain citizenship rights or to have a decent place in society. Therefore, it is not clear why the EU has to stimulate policies for the assimilation of national minorities and the giving up of the original identities of these minorities in applicant countries. It is very unfortunate that the 1998 and 1999 Regular Reports of the Commission on the progress made by the applicant countries do not elucidate this issue. On the whole, the examination by the European Commission of the question of the Russian minorities in the Baltic States remains very superficial, although the 1999 Regular Reports are a little more detailed

The EU Pre-Accession Strategies 19

than those of 1998. The 1998 Progress Report on Latvia welcomed the Latvian referendum on the citizenship law facilitating the naturalization of non-citizens. For Estonia, the Commission expressed regrets that the Estonian Parliament had not yet adopted the necessary amendments to the Citizenship Law to allow stateless children to become citizens.50 The 1998 Estonia Regular Report, for example, gave more details and stated that noncitizens ‘are still subject to some restrictions such as the right to sit on the boards of state-owned companies, to belong to a political party and to be employed in certain areas of the public administration’. 51 It must be mentioned that almost simultaneously with the publication of the 1998 Commission’s Reports, Estonia’s Citizenship Law was amended to allow ‘any minor under the age of fifteen, who has been born in Estonia after February 26, 1992’ to receive citizenship through naturalization if a number of specific conditions were met.52 With these amendments some of the most extreme consequences of the Estonian Citizenship Law are taken away: children from parents who are ‘non-citizens’ can obtain Estonian citizenship. Of course, this legislative measure, as such, is not sufficient to eliminate the discriminatory treatment towards the national minorities but it helps at least to reduce the number of non-citizens. On the other hand, opposite signals are provided by the Election Act (December 1998) and Language Act (February 1999) concerning the knowledge and use of Estonian in official matters, where the linguistic requirements were further tightened for non-Estonian speakers.53 The Commission, therefore, in the 1999 Regular Report observes that the Language Law ‘restricts access of non-Estonian speakers in political and economic life’. Consequently, this move ‘constitutes a step backwards’ and, according to the Commission, the law in question should be amended. 54 It must be said that at the time of finishing the manuscript a new draft language law was under consideration by the Estonian Parliament which once accepted would constitute a considerable improvement of the situation. It is obvious that in many of the applicant countries a very serious effort in the field of minority protection will still be needed. The 1998 Composite Paper refers to it as a problem which ‘continues to raise concerns in the perspective of enlargement’55 and the general conclusion of the 1999 Composite Paper on this point is not very different.56 In particular the issue of the position of the Russian minorities in the Baltic states mentioned above deserves much closer and more exhaustive attention and analysis. On the whole, the EU institutions, particularly the Commission but also the European Parliament,57 have been very complacent towards Estonia and Latvia as regards the treatment of minorities. Where some improvements in the treatment of minorities have taken place this is generally seen as the result of EU efforts. These improvements then receive great attention but the continuing discrimination against ‘non-citizens’ and Russian speakers is only briefly mentioned and has by no means been seriously examined or addressed to date.58

20 Marc Maresceau

The limits of enlargement: Russia, the ignored factor One of the main criticisms of EU enlargement policy is that enlargement was presented almost as something which could more or less happen in a vacuum. The fact that Turkey was largely ignored in the enlargement strategy until the 1999 Helsinki Summit has already been dealt with at length above. Also the effect of enlargement on the other Mediterranean NonMember Countries has been completely or almost completely disregarded. Besides a general statement to the Barcelona Euro-Mediterranean Conference, the Commission acknowledged that care ‘[would] be needed to avoid adverse effects on the EU relations with Mediterranean countries, for example in the area of agriculture, textiles and energy exports’, 59 but it failed to indicate how such effects could be avoided. An interesting development in EU thinking on enlargement in relation to European non-candidates is the Commission’s new regional approach to the countries of South Eastern Europe, that is to say Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia, the Former Yugoslav Republic of Macedonia and Albania. On 26 May 1999 the Commission proposed a plan for Stabilization and Association. 60 This includes the gradual development of bilateral agreements establishing a new form of contractual relations ‘with a perspective of EU membership on the basis of the Amsterdam Treaty and once the Copenhagen criteria have been met’. 61 It is not the place here to comment in detail on this new EU strategy plan towards the Balkans. Of course, it may astonish and shock many in the EU that a number of countries addressed in this plan were only recently or a few years ago involved in the most brutal ethnic cleansing and are now offered here, to use the Commission’s terminology, ‘a perspective of EU membership’. However important all these various aspects of the EU enlargement policy may be, one of the most uncertain remains the complete or almost complete lack of a policy towards the former USSR, Russia in particular. While it cannot be denied that a lot of what has happened in Central and Eastern Europe after 1985 has been the result of the new Soviet policy, internally but above all externally the European Community, observing what was unfolding in the COMECON world of that time, first took a ‘waitand-see’ attitude towards the USSR. For example, even in early 1988 – three years after Gorbachev had come to power – the European Commission was still of the opinion that only a simple bilateral trade agreement with the USSR could be envisaged, while the USSR had been pleading strongly for a much more ambitious framework. No doubt solid links with the EC were perceived as something which could be very precious for the modernization of the economy and the ongoing political transformation process. The Community, for its part, only gradually became aware of the need to conclude a ‘co-operation agreement’ with the USSR and such an agreement was finally signed in December 1989, that is to say in a period of time where the momentum of Gorbachev’s perestroika and glasnost had more or less

The EU Pre-Accession Strategies 21

faded away. Simultaneously, the Community started to apply its policy of differentiation whereby the USSR received treatment which was different from that applied to other COMECON countries.62 The culmination of this new policy was a proposal of the EC to conclude Europe Agreements as a special form of association agreement, a proposal which was extended to all former COMECON countries except the USSR. In the 1990 Communication of the Commission on the conclusion of such association agreements, 63 it was explained why such agreements could not be envisaged with the USSR: this latter country raised specific questions concerning domestic reform, relations with the Community and integration into the international economic order. The magnitude of all these and other questions was such that the USSR could not be incorporated into the policies as applied to other countries in Central and Eastern Europe. The roots of this ‘differentiation’ would gradually but surely also contribute, at least in part, to explaining the origins of the isolation of Russia. The alternative EC/EU policies and legal instruments worked out for that country, such as, for example, the Partnership Agreement64 and TACIS, would prove to be dramatically inadequate. In the end, the result of the EU Partnership policy is that it even accentuates and contributes to the very thing that it aims to avoid, namely to further isolate Russia from the EU. Indeed, besides its very nice title there is little substance in this Agreement. Certainly for Russia and former USSR countries Partnership Agreements cannot constitute a valid alternative to EU enlargement towards Central and Eastern Europe. The whole problem here is one of geopolitics and, whether we like it or not, of geography. The next enlargement wave, if it is to take place, brings the EU necessarily closer to, and most likely even to the doorstep, of Russia. 65 Apart from the political implications which are considerable, it is obvious that enlargement – just to mention one or two examples – will in the first place seriously affect trade relations with Russia.66 The application of the EC external tariff will probably not be a major problem but the EC non-tariff restrictions and norms and standards in the new Member States will necessarily have a negative effect on trade with Russia and trade diversion seems unavoidable. Even more important are the particularly tough and restrictive Schengen rules, already mentioned, which will be applicable to Russian citizens in the new Member States.67 The current application of these rules to the present Schengen group countries is already creating a situation where, for example, from a legal and administrative point of view, inviting a Russian academic now is becoming more complicated than in the 1980s! Consequently, the application of the Schengen rules to the neighbouring countries of Russia will further isolate Russia in Western Europe. Another almost completely forgotten, but nevertheless exotic, aspect of EU enlargement is the special position of Kaliningrad in the event of an enlargement to take in Poland and Lithuania. It appears that consultations over this issue would be better held before, rather than after, enlargement.

22 Marc Maresceau

One would have expected that these and other grave implications of enlargement would have been properly treated by the EU, particularly in the Commission’s abundant reflections on enlargement. Unfortunately, this has not been the case so far. In Agenda 2000 the Commission only recognized that ‘the enlargement process will also require careful management in the Union’s relations with other partners in Europe and beyond, in order to ensure that it contributes to the overall objectives of strengthening international security and co-operation’, 68 but at the same time Agenda 2000 took for granted without any further explanation the fact that ‘enlargement should benefit relations and co-operation with Russia, the Ukraine and other New Independent States’ and that ‘by consolidating democracy and enhancing stability and security in Central and Eastern Europe, enlargement will increase the security of the EU’s eastern neighbours as well’.69 Of course, the Commission was not totally blind to the fact that additionally ‘adverse effects could result from enlargement, were it to be perceived as raising new barriers in Eastern Europe’, 70 which implies that the Union is to take steps ‘to minimise such risks and to create conditions for exploiting fully the opportunities created by enlargement’. 71 The Commission is aware that particular attention must be paid to the ‘legitimate security and economic concerns’ of those who are not included in the enlargement strategy.72 However, once again, no further specification is provided and besides applying the Partnership and Co-operation Agreement, suggesting the development of trans-European networks and giving support to the New Independent States for their participation in the pan-European and global economic and political system, no serious policy was formulated by the Commission or any other EU institution to develop an adequate policy towards Russia. There are of course various reasons which may explain or even justify this lacuna. Russia herself has no policy towards the EU and is weak and unstable in so many respects. She is militarily involved in Chechnya and was, certainly in the recent past, much more concerned with NATO than EU enlargement.73 In addition, in Russia, the handling of the Kosovo war by the West has not increased confidence in the West. The move of Mr Solana, former Secretary-General of NATO, to the seat of High Representative for the Common Foreign and Security Policy has given rise to increased suspicion of EU foreign and security policy as a whole. But the question remains: is a large-scale eastwards EU enlargement without a wellsubstantiated parallel policy towards Russia feasible, workable and acceptable? At the 1998 Vienna European Council a progress report on the development of a comprehensive policy towards Russia had been discussed while at the 1999 Cologne European Council a Common Strategy Paper was adopted.74 Unfortunately, no matter how good the intentions of these ‘papers’ may be and have been, again virtually no link was made then nor is it made now between eastward enlargement and EU–Russia relations.75 In

The EU Pre-Accession Strategies 23

the Cologne Strategy Paper the European Council recognizes that ‘a reinforced relationship’ with Russia based on shared democratic values is needed and that this ‘will help Russia to assert its European identity and bring new opportunities to all the peoples of the continent’. Then follows, without any further explanation, the axiom that ‘enlargement of the Union will further increase these benefits and opportunities’. Notwithstanding the title of Part 1 of the Strategy Paper, improperly called ‘Vision of the EU for Its Partnership with Russia’,76 the enlargement process as a whole is completely disconnected from EU–Russia relations. As a matter of fact, as is well known, the Strategy Paper was almost exclusively a unilateral exercise by the EU with an evident lack of strategy, and notwithstanding some Russian attempts to make some links between the Partnership Agreement and enlargement, 77 the position of the EU has always been that enlargement was something which should by no means be treated in the bilateral framework of the relations between the EU and Russia. In other words, Russia did not and should not have a kind of droit de regard on enlargement. Seen in this context the bombastic remark that ‘a stable, democratic and prosperous Russia, firmly anchored in a united Europe free of new dividing lines, is essential to lasting peace on the continent’ has a somewhat hidden and ironic undertone if one knows that it is precisely eastwards enlargement, as organized today, that is in the end creating and consolidating, almost in a mechanical way, such new dividing lines. The isolation of Russia from the rest of Europe, something which is strongly regretted by the Helsinki European Council, may in the first place be the result of the situation as it has developed in Russia itself over the last decade, but it is in a way also an unavoidable consequence of the EU policy followed so far. The lack of an adequate bilateral framework between the EU and Russia linking Russia in a firm way with and in Europe may also explain, at least in part, why the EU is virtually impotent in influencing Russia in the Chechnya crisis. Seen in this context it was hard to believe that the suggested sanctions in the Helsinki Declaration on Chechnya (review of the European Union’s Common Strategy towards Russia, suspension of some provisions of the Partnership Agreement and strict application of the trade provisions, and a review of TACIS), published the same day that President Yeltsin – by a strange symbolic coincidence – was on an official visit in Beijing, could have any serious influence on the military operations. Of course, it is true that incorporating the Russia factor in any reflection on eastward enlargement complicates the whole exercise tremendously. The picture of the 1999 Helsinki European Council offers the perfect contrast: enlargement means stability, including ‘reconciliation’ with Turkey, while Russia is chaos and war. The operations of the Russian army in Chechnya and their excesses could not have come at a more timely moment to highlight this fact. But is this the correct analysis at the beginning of the new millennium? Acting as though Russia does not exist may

24 Marc Maresceau

be workable and very attractive from a short-term perspective. Russia is weak and cannot influence the course of events, but is the EU policy towards Russia as it has been applied so far likely to contribute in the longterm to global security in Europe? One of the main EU objectives of the enlargement process, as proclaimed by the Luxembourg European Council and confirmed by that of Helsinki, is obtaining ‘stability and prosperity for the entire European continent’ (emphasis added). But can this be achieved by imposing on Russia an all-embracing EU enlargement as a fait accompli? Would the EU not be better, particularly in the light of the EU choice for a large enlargement strategy, to take seriously – and in parallel with this policy – Russian sensitivities and concerns? The way in which EU enlargement strategies have been proposed so far leads necessarily and in an irreversible way to a particularly strict compartmentalization within Europe between the EU and ‘the others’, the ‘others’ becoming gradually the remaining ‘other’. In the long run the EU approach towards Russia could well become the Achilles heel of the EU enlargement policy.

Notes 1. On the role of the Commission in the accession procedure, particularly in relation to the accession of Austria, Finland and Sweden, see D. Boos and J. Forman, ‘Enlargement: legal and procedural aspects’, CML Rev., 1995, 98–9. 2. In order to prepare such a study the Commission sent a detailed questionnaire to the applicant countries from Central and Eastern Europe in April 1996. 3. The case of Malta’s application for EU membership needs some further explanation. In 1993 the Commission had given a favourable opinion on Malta’s application for membership of 1990. The Maltese government formed after the election of 26 October 1996 had decided not to open negotiations on accession on the scheduled date. In other words, Malta’s application for membership was ‘frozen’, not withdrawn. This suspension resulted in Malta’s exclusion from the enlargement process launched by the 1997 Luxembourg European Council. After new elections on 5 September 1998 and the composition of a new government, Malta expressed on 10 September 1998 her wish to ‘reactivate’ her application. On 17 February 1999 the Commission published an update of its 1993 Opinion, in which the view was expressed that it may be expected that Malta was considered to be able to join the group of candidate countries with which negotiations were already underway (COM(1999)69 Final) and this was reconfirmed in the Regular Report from the Commission on Progress towards Accession, Malta, 13 October 1999, COM(1999)508 Final. At the 1999 Helsinki European Council Malta was indeed included in the accession process and accession negotiations were opened in February 2000. The biggest efforts which Malta will have to make are in the fields of legislation concerning the Internal Market and Common Customs Tariff. For a survey and an analysis of EU–Malta relations, see P. Xuereb, Malta, the European Union and the Mediterranean: Closer Relations in the Wider Context (Malta: Publishers Enterprises Group, 1998), and by the same author (co-ordinator), ‘Malta–EU relations and the acquis communautaire in the wider context’, in Xuereb (ed.), The Mediterranean’s European Challenge (Malta: EDRC, University of Malta, 1998), 148–54.

The EU Pre-Accession Strategies 25 4. This is an unworthy paraphrase of the title of Norman Cohn’s magisterial book Cosmos, Chaos and the World to Come. The Ancient Roots of Apocalyptic Faith (New Haven, CT and London: Yale University Press, 1993). 5. COM(97)2000 Final, Vols I and II. 6. On the preparation of these Opinions and some comments, see M. Maresceau, ‘On association, partnership, pre-accession and accession’, in Maresceau (ed.), Enlarging the European Union. Relations Between the EU and Central and Eastern Europe (London and New York: Longman, 1997), 15–19; also M. Maresceau, ‘The legal dimension of the EU enlargement to Central and Eastern Europe’, in European Union Eastward Enlargement. Challenges and Consequences. Papers presented at a Conference held in Jerusalem, 21–22 June 1998 (Jerusalem: Konrad Adenauer Stiftung–Helmut Kohl Institute for European Studies, The Hebrew University of Jerusalem, 1998), 16–20. 7. See COM(97)2001–10 Final. The Opinions on the application of Turkey, Cyprus and Malta had already been published in 1989 (Turkey) and 1993 (Cyprus and Malta). 8. On Malta’s application for EU membership, see above, note 3. 9. Agenda 2000, Vol. I, 66 (italics added). 10. Agenda 2000, Vol. I, 66. 11. In a reaction from the Turkish Cypriot side it was argued that the beginning of accession negotiations ‘with the Greek Cypriot administration’ would ‘render useless the process of negotiations recommenced between the Turkish Cypriot and Greek Cypriot leaders’. Parallel and similar to the progress made in the EU accession process by the Greek Cypriot side the Turkish Republic of Northern Cyprus together with Turkey decided to take the necessary measures aimed at economic and financial integration of the two parties: see Joint Statement by the Republic of Turkey and the Turkish Republic of Northern Cyprus of 20 July 1997. 12. Agenda 2000, Vol. I, 67–8. 13. Agenda 2000, Vol. I, 15 (italics added). The ‘reconfirmation’ of Turkey’s ‘eligibility’ for EU membership had already been expressed in a statement of the Association Council of 29 April 1997: see Bull.-EU, 4–1997, 1.4.74. The Association Council had also taken the position that Turkey’s application for membership would be judged according to the same objective standards and criteria as other applicants. 14. COM(97)394 Final, 15 July 1997. 15. Italics added. The broader expression ‘aspiring to accede’ in the Luxembourg European Council formulation was precisely used to include Turkey in a more or less elegant way (the CEECs and Cyprus were ‘candidates’ for accession). 16. This notwithstanding the fact that Greece had for a long time strongly opposed the idea of inviting Turkey to the Conference: see Agence Europe, 22 and 24–25 November 1997. 17. At the 1998 Vienna European Council Switzerland received the status of ‘member elect’ at the European Conferences: see Presidency Conclusions, No. 65. 18. See Council Regulation on assistance to the applicant states in the framework of the pre-accession strategy, and in particular on the establishment of Accession Partnerships, OJ, L85/1, 20 March 1998. 19. See OJ, L121/1 of 23 April 1998. Detailed information, country by country, is contained in OJ, C202/1 of 29 June 1998. 20. Composite Paper, Regular Reports from the Commission on Progress Towards Accession by each of the Candidate Countries, COM(1998)712 Final, 4.

26 Marc Maresceau 21. See 1999 Composite Paper, Regular Report from the Commission on the Progress towards Accession, COM(1999)500 Final, 13 October 1999, 12. 22. Conclusions, No. 60. See in this context also the General Affairs Council Conclusions on enlargement of 7 December 1998, Annex III to the Vienna European Council, Presidency Conclusions. 23. See Speech before European Parliament, Brussels, 13 October 1999 (http://www.europa.eu/rapid/sta … gt&doc=SPEECH/99/130/0/RAPID&lg=EN); see also the recommendations in Reports on Progress towards Accession by each of the candidate countries, Composite Paper, Regular Report from the Commission on Progress towards Accession, COM(1999)500 Final, 13 October 1999, 27–8. 24. Presidency Conclusions, No. 60. Countries facing difficulties in this respect are, for example: Slovakia, Lithuania and Bulgaria; see also the statement by Mr Günter Verheugen, Commissioner for Enlargement, Uniting Europe, 6 September 1999. 25. Accession negotiations on specific chapters, however, are part of a global package. Moreover, negotiations need time, while certain issues develop rapidly. Therefore, the need may arise to ‘reopen’ again certain chapters previously ‘concluded’. For a detailed overview of the state of affairs of the negotiations at the end of June 2000, see Uniting Europe, 19 June 2000. 26. See Commission Communication, European Strategy for Turkey. The Commission’s Initial Operational Proposals, COM(1998)124 Final, 2. 27. Communication quoted above – see note 9 (italics added). 28. COM(1998)711 Final, 17 December 1998. At the 1997 Luxembourg and 1998 Cardiff European Council the Commission had indeed also been asked to report on Turkey on the basis of Article 28 of the Association Agreement with that country. This provision stipulates: ‘As soon as the operation of this Agreement has advanced far enough to justify envisaging full acceptance by Turkey of the obligations arising out of the Treaty establishing the Community, the Contracting Parties shall examine the possibility of accession of Turkey to the Community.’ 29. See Agence Europe, 26 June 1999. 30. The German Presidency also proposed to invite Turkey to the ministerial meetings held together with the other candidate countries. For the formulation of the text of the German proposal, see Agence Europe, 5 June 1999. 31. The implementation of the Fourth Financial Protocol has already been frozen since 1980 (see H. Kabaalioglu, ‘The Turkish Model of Association: Customs Union before Accession’, in P. Demaret, J.-F. Bellis and G. Garcia Jimenez (eds), Regionalism and Multilateralism after the Uruguay Round (Brussels: European Interuniversity Press, 1997), 152), and when the Customs Union (1 January 1996) was established the financial package of 375 m euro budgetary aid together with a 750 m euro European Investment Bank facility to provide loans to Turkey have been blocked by Greece. (For an analysis of this issue, see N. Neuwahl, ‘The EU–Turkey Customs Union: a Balance, but No Equilibrium’, EFA Rev., 1999, 48–50.) 32. See Financial Times, 1 September 1999. 33. See COM(1998)711 Final, 17 December 1998, 53 and 21 (Cyprus issue); see also Regular Report from the Commission on Progress towards Accession, Turkey, COM(1999)513 Final, 13 October 1999. 34. On this episode see Le Monde, 12–13 December 1999: ‘La Turquie, candidate officielle à l’Union européenne, participe au déjeuner des chefs d’Etat et de gou-

The EU Pre-Accession Strategies 27

35.

36. 37. 38. 39.

40. 41. 42. 43.

44. 45.

46.

47. 48. 49. 50. 51. 52. 53.

54. 55. 56. 57.

vernement’; also the Financial Times, 11–12 December 1999, ‘Solana tries to clear Turkey’s path to EU candidacy’. For a thorough analysis, see M.-A. Gaudissart and A. Sinnaeve, ‘The role of the White Paper in the preparation of the Eastern enlargement’, in Enlarging the European Union, mentioned at note 6, 41–71. COM(97)2004 Final, 17. Regular Reports from the Commission on Progress towards Accession by each of the Candidate Countries, Composite Paper, COM(1998)712 Final, 4. This final Opinion must be clearly distinguished from the one given before the accession negotiations are opened. See COM(97)2003 Final, 14–15; also Progress Report, COM(1998),702. On this sensitive issue, see N. Girasoli, ‘Roma/Gypsies and Immigration Issues in the EU’, RAE/LEA, 2000, 128–38. COM(1998)707 Final, 11. COM(97)2007 Final, 15. COM(97)2005 Final (italics added), 18. Regular Report, COM(1998)704 Final, 11–14. Many non-citizens prefer to keep the non-citizen passport because this passport allows them to travel to Russia without a visa, whereas a Latvian passport needs a visa. See 1999 Regular Report from the Commission on Progress towards Accession, Latvia, COM(1999)526 Final, 13 October 1999, 18. Ten days before the publication of the Commission’s Opinions even the usually very well informed journalist of Le Monde, Mr P. Lemaître, still published an article with the title: ‘L’élargissement de l’UE ne concernerait que trois pays’, Le Monde, 5 July 1997. According to Lemaître and Scotto ‘l’inclusion de l’Estonie dans la liste apparaît comme une anomalie qu’aucune raison objective ne justifie’, Le Monde, 18 July 1997. This, at least, is the suggestion made by two close observers of this question and advisers at the European Commission: G. Avery and F. Cameron, The Enlargement of the European Union (Sheffield: Sheffield Academic Press, 1998), 43. On 5 March 1999 a border treaty between Estonia and Russia was initialled but it is uncertain whether the Duma will quickly ratify it. COM(97)2006 Final, 16. Agenda 2000, Vol. II, The Effects on the Union’s Policies of Enlargement to the Applicant Countries of Central and Eastern Europe, 15. Composite Paper, COM(1998)712 Final, 4. COM(1998)705 Final, 11. Act Amending Sections 13, 15, 18, 19 and 14 of the Citizenship Act (unofficial English translation). The Estonian Language Act which entered into force on 1 April 1995 was already restrictive for the Russian-speaking minority. Russian is qualified as ‘a foreign language’ (Article 2) and treated as such. Detailed rules on the use of the language of a national minority are laid down in the Act. The Amendment Act of the Language Act and State Fee Act approved on 9 February 1999 imposed further linguistic requirements on the Russian-speaking minority. Regular Report from the Commission on Estonia’s Progress towards Accession, COM(1999)504 Final, 16. COM(1998)712 Final, 4. Composite Paper 1999, mentioned at note 21 above, 13. The European Parliament’s Resolution on the Regular Report from the Commission on Estonia’s Progress Towards Accession (A4–0149/99) is also an

28 Marc Maresceau

58. 59. 60. 61. 62.

63. 64.

65.

66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77.

example of such a very sympathetic but simplistic approach towards Estonia’s application for EU membership, minimalizing the existing discriminations and ignoring the language law restrictions. In the 1999 Regular Reports the treatment of minorities in Latvia takes up three out of 95 pages and in Estonia takes up three out of 85 pages. Agenda 2000, Vol. II, The Effects on the Union’s Policies of Enlargement to the Applicant Countries of Central and Eastern Europe, 15. COM(1999)235 Final. See note 3 above (italics added). See our study published in 1992: ‘The European Community, Eastern Europe and the USSR’, in J. Redmond (ed.), The External Relations of the European Community. The International Response to 1992 (London: Macmillan, 1992), 109–12. COM(90)398 Final, 27 August 1990. On these agreements, see J. Raux (ed.), Le partenariat entre l’Union européenne et la Fédération de Russie (Rennes: Apogée, 1998); and C. Hillion, ‘Partnership and Cooperation Agreements between the European Union and the New Independent States of the ex-Soviet Union’, EFA Rev., 1998, 399–420. Of course, with the accession of Finland to the EU there is already a lengthy EU border with Russia but the sensitivity of an EU border west of Saint Petersburg or around Kaliningrad is of a different nature. Russia has submitted a list of ‘concerns’ regarding EU enlargement to the President of the Commission. For text, see Uniting Europe, 13 September 1999, 4. See also M. Emerson, Redrawing the Map of Europe (London: Macmillan, 1998), 152–3. Agenda 2000, Vol. I, 6. Agenda 2000, Vol. II, The Effects on the Union’s Policies of Enlargement to the Applicant Countries of Central and Eastern Europe, 14. Ibid. Ibid. Ibid. For a critical analysis of this position and its consequences, see V. Shemiatenkov, ‘The Relations between Russia and the EU’, RAE/LEA, 1997, 277–89. This was the first application of Article 13 TEU since the conclusion of the Treaty of Amsterdam. For a summary of this report, see Agence Europe, 8 January 1999. Italics added. Article 102 of the PCA with Russia stipulates that the Parties ‘agree to consult promptly through appropriate channels at the requests of either Party to discuss any matter concerning the interpretation or implementation of this agreement and other relevant aspects of the relations between the Parties’. Notwithstanding some attempts from the Russian side, the EU has consistently avoided the use of this provision to discuss matters of enlargement affecting Russia while there can be no doubt that such matters are necessarily covered, if not by the expression ‘any matter concerning the interpretation or implementation of this Agreement’, then at least by the expression ‘other relevant aspects of the relations between the Parties’ in that article.

2 Europe’s Mediterranean Strategy: The Security Dimension Álvaro de Vasconcelos

Introduction In terms of security institutions, at first glance a marked asymmetry is apparent between the northern and southern shores of the Mediterranean. While European integration has grown in strength and depth along the northern shore where a dense network of security institutions is present, integration has progressed little, if at all, along the southern shore and the institutional security vacuum is evident there. Over the last ten years, the European Union has widened to include the former GDR, Austria, Finland and Sweden. It has completed the Single Market, virtually achieved free movement of persons across its borders and all but one of its twelve members who wished to do so adopted the single currency in January 1999. Among them are all the Mediterranean members of the European Union which succeeded in meeting the requirements set forth in order to be able to join Stage Three of the Economic and Monetary Union. The Mediterranean dimension of the Union may be strengthened in the not so distant future with the inclusion of Malta 1 and Cyprus. Further enhancement is more unlikely, however, since the prospects for Turkey or any of the Balkan States (with the exception of Slovenia) joining the European Union over the next ten years or so look rather slim at present. When it comes to security, the institutional pattern is dense. NATO remains, perhaps, the centrepiece of European security, with its core function of collective defence and its newer, but none the less important, peace support role. Through NATO, furthermore, the United States became an integral part of the European security and stability equation. While European membership of NATO and the European Union does not entirely overlap, and one southern Mediterranean power is a member of NATO (Turkey), the function of the European Union in terms of ensuring a stable environment in the European continent which reaches beyond its present borders cannot be overemphasized. Indeed, and somewhat paradoxically, its role in 29

30 Álvaro de Vasconcelos

managing potential conflicts between its present and prospective members is greater, if anything, than that of NATO.2 The South, however, provides a sharp contrast to this picture of cohesion. Both in the Maghreb and the Middle East, security arrangements are sparse and little or no progress has been made towards integration. The most ambitious project, which combines elements of economic integration and security co-operation, has never actually come into being. In spite of its promising start, stemming from the relaxation of tensions between Algeria and Morocco, the Arab Maghreb Union3 (AMU) was unable to grow out of the lethargy into which it plunged almost as soon as it was created. The unresolved issue of the western Sahara, the worsening situation in Algeria and, to some extent, Libya’s international isolation are the primary reasons for its virtual paralysis. In the Middle East, the picture of what concerns subregional co-operation is equally grim. The stalling of the Middle East Peace Process (MEPP) after the high hopes raised through the Oslo breakthrough took a heavy toll on the whole of the Middle East and beyond. It brought the multilateral and bilateral tracks of the peace process to a halt, shattering Yitzhak Rabin’s vision of a new Middle East into pieces even before it had a chance to take shape. The Arab League never developed a real security dimension and efforts towards integration, or at least increased economic co-operation among its members, have seen no real progress in recent years. As Gamal Soltan aptly notes, the balance of power approach still dominates both Arab–Israeli and Arab–Arab relations.4 A number of efforts were made in the North–South direction to fill up the existing institutional vacuum. NATO and the Western European Union (WEU) have a set of multi-bilateral dialogues with selected countries of the South, launched respectively in 1994 and 1992 under NATO’s Mediterranean Initiative and the WEU’s Mediterranean Group.5 The OSCE has also set up a Mediterranean Contact Group. Egypt and Italy jointly launched the Mediterranean Forum6 in 1994, an initiative that has survived the launching of the Euro-Mediterranean Partnership (EMP) in Barcelona in November 1995.7 The EMP is by far the most relevant of these initiatives, not only because it has a multilateral character but also because it is intended to be a multilayered process, comprising dimensions which are of a political and security nature as well as economic and human. Based on a set of agreements signed by the EU and its Member States and each Mediterranean partner, the EMP aims to develop into a qualified free-trade area sometime around 2010. If this were actually to happen, although progress achieved so far does not allow for many high hopes, the EMP would lead to the world’s largest FTA. It should be noted, however, that the EMP was launched at a time when there was solid cause for optimism regarding substantial progress in achieving peace between Israel and the Arabs. The exceedingly modest

Europe’s Mediterranean Strategy 31

progress achieved in the political and security basket of the EMP has remained hostage to a stalled and deteriorating MEPP ever since Prime Minister Rabin’s assassination. The economic and military co-operation between Israel and Turkey, which gives rise to misgivings on the part of neighbouring countries such as Egypt and close co-operation among other Middle Eastern countries, is the exception. Mr Barak’s coming to power in 1999 was welcomed in the Arab world and Arab leaders concurred that it constituted a chance to push the Peace Process forward that must not be missed. It is much too soon, however, to predict a successful outcome, particularly along the Palestinian track. It remains unclear, for example, how the conflicting stances towards territorial concessions within the broad government coalition are ultimately going to affect the Peace Process. Although the impetus of the MEPP for the goal of progress towards truly co-operative security all across the Mediterranean cannot be overemphasized, it is true that other obstacles remain. The effect of mutually distorted North and South perceptions is prominent among them. The perverse effect of perceptions Security perceptions are a decisive component of Mediterranean security in North–South and South–North directions alike. In the minds of a number of European publics, political Islamism – identified with terrorism and, at its worst, confusingly identified with Islam itself – tends to replace the defunct Soviet threat as the number one enemy, potentially at its best. Military establishments, even though defence policies have been altered, are still geared up to confront invasion, if not from the East, now deemed unlikely as a source of potential threat, then from the South, a closer neighbour than the distant Cold War enemy for most southern European countries. In Europe as a whole, declining demographics, in sharp contrast with rapidly increasing demographics in the southern Mediterranean and few signs of accompanying economic and social progress sufficient to safely accommodate the increasing pressure on labour markets, prompt fears of tidal waves of southern migrants flooding Europe in the coming years. As a combined result of high unemployment and the influence of the extreme right (which has succeeded in ‘contaminating’ immigration and asylum policies in a number of European countries), significant sections of the European public tend to perceive migrations from the South, in particular those from Islamic countries, as a societal threat, one that would put national identities at stake. In the South, the post-Cold War world order is seen as unjust. The West is perceived as set towards confrontation with the Arab and the Islamic world: while apathy prevails when it comes to implementing UN Security Council Resolutions concerning Israel, resolve does not fail, including recourse to military action, whenever an Arab country such as Iraq is concerned. Notwithstanding the position of their respective

32 Álvaro de Vasconcelos

governments during the Gulf War, the fact remains that Arab public opinion actively condemned the war against Iraq. This was seen not as a move to prevent the unlawful annexation of Kuwait by Iraq but rather as a deliberate attack on the part of the United States and its western allies against a powerful Arab country. A sense of betrayal developed particularly against France for having agreed to side with the United States against the Arab people. Another example, albeit with an incomparably smaller impact, were public reactions to the creation of EUROFOR and EUROMARFOR, generally seen as a move on the part of Europe in preparation for intervention in the South. Western inconsistencies in humanitarian or human rights related issues are often cited as proof of consistency in upholding double standards. Prolonged inaction on the part of Europe and the United States to prevent ethnic cleansing in Bosnia was seen in the South as having been tolerated only because Muslims were the victims.8 NATO’s Kosovo intervention provoked mixed feelings among the Arab elites. It was generally seen as a display of solidarity towards persecuted Muslims, and received the rather unexpected support of the Muslim Brotherhood in Egypt. Israel too had mixed feelings and, even within the government, first reactions at the outbreak of the crisis were contradictory. On a different key, it was also noted that a parallel could be drawn between Milosevic’s deportation of the Albanians from Kosovo and the expulsion of Palestinians from Israel in 1948, which partly explains Israel’s hesitant reaction to NATO’s intervention. The fact that bombing failed to stop deportation, however, and especially the fact that NATO’s campaign was not legally endorsed by the UN, contributed to raising fears among Arab states that the United States and NATO would take international legality into their own hands. Mirroring western public perceptions, radical Islamists defend policies based on identity and consider the influence of ‘western’ ideas as a societal threat. The time has come, according to radical Islamist leaders, for bringing decolonization to its final stage: it is now the turn of cultural decolonization,9 and the time for those who have fallen under the influence of the West to be intellectually and ideologically banished. Perverse effects are of course aggravated by the fact that governments’ perceptions are not, especially in the South, necessarily attuned with public opinion or the main currents among the intellectual elites. More often than not, governments are closer to their European and western counterparts than to their own domestic constituencies. As a consequence, more so perhaps than in Europe, the internal discourse of southern governments is at odds with their discourse, and sometimes even their stances, in international fora. During the Gulf War, for example, mounting public pressure in favour of Iraq led King Hassan II to affirm that the sole reason for the presence of Moroccan troops in the US-led coalition was the protection of the holy shrines in Saudi Arabia. It would be a gross

Europe’s Mediterranean Strategy 33

mistake, however, to discard public opinion in the South on the grounds that those governments are authoritarian anyway and hold a firm grip on power. Even where this is the case at present, regimes cannot afford to discount domestic constituencies altogether, and indeed do not. And civil societies, although generally weak at present, are becoming stronger at making and keener to make their voices heard. An awareness of the discrepancy between the views of governments and the feelings of public opinion and the majority of the intellectual elites is essential to the success of any European initiative towards the Mediterranean dealing with security and defence.

NATO’s new strategic concept Generally speaking, the post-Cold War strategic thinking of NATO countries has evolved from the pre-eminence of territorial defence to the predominance of security interests. Concomitantly, the dominant concern is the management of crises and conflicts that are deemed to put relevant security interests within the Euro-Atlantic area at stake. NATO’s fiftieth anniversary Washington Summit approved a new strategic document which enumerates the potential risks that the Alliance should brace itself to confront in the coming years. The Mediterranean, or at least parts of it, is undoubtedly among the ‘peripheral regions’ where potential risks to NATO’s security are bound to originate. There is no common definition of the Mediterranean among NATO members, however. While for Europeans the Mediterranean means the Maghreb primarily and the Middle East (the near East, rather), the United States has a broader notion that extends to the Middle East and the Gulf, and the Maghreb is seen as a sort of pathway to that core region. Security concerns in such ‘peripheral regions’ include the proliferation of weapons of mass destruction (WMD), delivery means and warheads alike, terrorism and the disruption of energy flows. Instability caused by the uncontrolled movement of large numbers of displaced persons (i.e. refugees and illegal migrants) is also included. In the specific context of the Mediterranean, concerns with the rise of radical political Islamism, although not specifically mentioned, are obviously implicit as an aggravating factor of any such potential risks. A hard look at security risks across the Mediterranean, however, demands that a number of obvious conclusions are drawn. There is no credible direct military threat against Europe originating in the Mediterranean. Existing security problems are South–South, both inter- and intra-state alike (e.g. Middle East, Algeria). Although the primary targets of both are in the South, overspills from WMD proliferation and terrorism may affect Europe (e.g. Lampedusa in, 1986, Paris in 1995), and to some extent this leads to a ‘Europeanization’ of Mediterranean issues.

34 Álvaro de Vasconcelos

Radical Islamism, in and of itself, does not represent a threat to Europe; again, the driver of such movements is internal, and these aim primarily at overtaking the state. Why then is there a perceived ‘threat from the South’? Terrorist activities are prominent among the reasons that account for this perception. In recent years, terrorist attacks in Paris, in 1995, attributed to the Algerian GIAs (Armed Islamic Groups), left eight dead and 41 people wounded. Tourists in southern countries are also targeted, as was the case in the November 1997 Luxor attack, perpetrated by Islamist extremists 10 where 58 predominantly Swiss citizens were killed; nine German nationals had also been killed in an attack on a tourist bus outside the Cairo Museum in September. The number of casualties caused by such attacks pales, however, in comparison to the number of victims of terrorism in the South. Since they began in 1992, and up to and including the Luxor massacre, the total number of fatal victims as a consequence of terrorist attacks by Islamist extremists in Egypt is estimated at some 1000–1200, of which less than 100 were foreign tourists. In Algeria, the figure for fatal casualties since the civil war broke out in 1992 is currently put at some 70 000. Although terrorism is a grave threat, its effects are felt essentially within the countries of the South. Similarly, proliferation is primarily linked to attempts at regional hegemony and existing Arab–Israeli tensions. Aside from Israel, it is thought that Libya’s and Algeria’s missiles could be launched at a maximum range of some 550 km, which brings their primarily southern neighbours within range.11 Disruption of energy flows could indeed affect Europe. On the one hand, if alternative sources could be found for the oil supplies channelled through the Mediterranean basin, including those from the Gulf, the impact would primarily be felt on the price of oil rather than on its availability; gas, on the other hand, poses a different problem for countries relying primarily on pipeline supplies. France and Italy rely heavily on gas supplies from Algeria, as do Spain and Portugal. In all, North African gas accounts for some 25 per cent of the EU’s present gas consumption, a proportion likely to increase in the near future. Algeria is one of the main suppliers, linked to southern Europe through two main pipelines (through Tunisia in the case of Italy and through Morocco in the case of Spain and Portugal). Sabotage attempts on both these pipelines by armed Islamist insurgents have been reported in 1996 and 1997.12 Currently, the main vulnerability of gas supplies to Europe is primarily a result of the open confrontation between radical Islamist factions and the military power in Algeria. The threat of disruption to gas supplies should not be overemphasized, however. Any Algerian government, whatever its political allegiance, has a major interest in securing the undisrupted flow of energy which is by far its main source of revenue. And Libya’s ‘rogue state’ status has certainly not stopped the continuous flow of its gas and oil supplies, mainly into Europe.

Europe’s Mediterranean Strategy 35

The root causes of the major problems confronting southern countries are mainly domestic. They result from the failure to address the situation that permits radical Islamism to flourish as the sole apparent alternative to the military-backed regime. Although in varying, less acute degrees this same pattern – the stifling of pro-democracy, non-violent political opponents – exists in other countries of the South. As a result, the most extreme forms of opposition, including the wholesale recourse to violence and terrorism, tend to prevail. It should be borne in mind that political Islamism is an identity-based nationalistic current. It emerged towards the end of the 1980s against the backdrop of a perceived loss of political legitimacy of existing regimes in the face of mounting economic and social crises that they had failed to prevent or to adequately address. And if the rejection of ‘western’ values consistent with the unquestionably totalitarian character of its radical varieties is obvious, it would be a mistake to see such movements as some kind of new ‘anti-western international’. Radical Islamist movements are first and foremost nationalistic. This is clearly illustrated, for example, by the uncompromising pro-Morocco attitude of Moroccan Islamists as far as the western Sahara question is concerned. The totalitarian leanings of radical Islamist movements constitute first and foremost a threat against the societies that they wish to control through the power of the (theocratic) state. It is not possible to counter their influence unless economic measures are combined with political reform that will allow for better governance, in particular through freedom of thought and expression and through encouraging civil societies to freely and actively participate in the political life of their countries. Migration is not a security problem, even in the softer realms, and should indeed be decisively decoupled from security concerns. Migrations originating in the Maghreb have obviously been the combined result of poorly absorbent labour markets in Morocco, Tunisia and Algeria, while Europe needed cheap labour for its own development. In spite of the fact that the migratory pressures have not diminished in the South, the European Union has effectively shielded itself from such pressures. The anticipated huge numbers of North Africans pouring into Europe failed to materialize. According to the OECD, the total Maghrebi migrant population in Europe rose from 1.76 to 2.07 million between 1983 and 1995, i.e. over more than ten years. The perception of migration as a societal threat is primarily a result of the demagogic and persistent campaign of extreme right movements in Europe, which mistakenly points to migrants as the main threat to employment of nationals and a grave menace to their national identity. Indeed, considering migration as a security concern amounts to legitimizing the extremist rhetoric of such right-wing parties as the French Front National. Refugees and asylum-seekers are a political problem that should be adequately addressed. In 1996, 226 000 asylum requests were filed across the EU Fifteen. Their vast majority, however, come from the Balkans and Turkey, in the latter case as a result of the Kurdish issue, and not from

36 Álvaro de Vasconcelos

North Africa or the Middle East. Even the prolonged situation of political violence in Algeria has failed to produce asylum-seekers, predictably in France, in any significant proportion. As the Kosovo crisis has potently illustrated, the issue to be addressed is not primarily that of refugees as such, but rather the causes that force people out of their country. There lies, in the cause not in the consequence, the true security dimension of the refugee problem.

The prevailing South–South dimension The eminently South–South or even domestic nature of Mediterranean issues is illustrated both by the existing crises and conflicts in the region and by the security concerns of southern Mediterranean countries themselves. As far as the latter are concerned, with the exception of Israel, the ‘internal threat’ plays a prominent part. Algeria represents the most extreme case at present of this trend and this primarily accounts for the growth in its military expenditure in these last few years. Aside from the Arab–Israeli conflict (the status of Palestine, and Israel’s occupation of parts of Syria and Lebanon), the question of the western Sahara, which opposes Morocco to the Polisario Front backed by Algeria, is typical of the South–South nature of most existing security issues. The main exception to this rule is to be found in the tensions between Turkey, a member of NATO, and Syria, Iraq and Iran especially over the Kurdish question. In a NATO context, these should be viewed as North–South. Turkey’s security concerns should be fully taken into consideration by NATO as, by virtue of Turkey’s membership, NATO indeed borders the Middle East and the Gulf. All initiatives taken in regard to Mediterranean security, including NATO’s Mediterranean Initiative, meet with one common and insurmountable difficulty. While these dialogues are North–South, and their confidence-building dimension is therefore strictly confined to the North–South and to a lesser extent the South–North direction, the existing security problems are, to a vast extent, South–South. Furthermore, their format, as noted above, is ‘multi-bilateral’, i.e. NATO talks to each individual southern Mediterranean country. There is not much that can be achieved in terms of cooperative security, since no form of partnership or association is offered. The usefulness of these dialogues should not be ignored, however, at the level of information-sharing (although it is unclear what exactly has been shared so far) which is instrumental in changing mutually existing negative perceptions. This is unquestionably a major element in building confidence, but again not in the South–South direction where it is most needed. Common security concerns, such as proliferation, are currently not included in the dialogue. There is little chance they will be so included while Israel, one of NATO’s dialogue countries, fails to accept arms control mechanisms.

Europe’s Mediterranean Strategy 37

The possibility of transforming NATO’s Mediterranean Initiative into a mechanism similar to its Partnership for Peace (PfP) has been aired. But the organization’s new strategic concept seems to play down any significant upgrade of the existing dialogues at least for the time being. It merely states that ‘The Alliance is committed to developing progressively the political, civil and military aspects of the dialogue with the aim of achieving closer co-operation with, and more active involvement by countries, that are partners in this dialogue.’ The document is slightly less cautious in mentioning another element which can provide an important countermeasure to the perception that NATO is preparing to confront the South, namely their taking part in NATO military exercises. ‘The participation of southern Mediterranean countries in manoeuvres in the Mediterranean together with Allied military forces’ should, according to the document approved in Washington, ‘become the rule rather than the exception.’ The cautious attitude of NATO regarding a significant upgrade of its Mediterranean Initiative is linked to two factors. First, it is aware of the negative attitude towards NATO harboured by the southern Mediterranean public. Secondly, it is aware that the current prevalence of authoritarian regimes on the southern shores of the Mediterranean would prevent political convergence between the full membership of such a Mediterranean Partnership, unlike what happens with most of its current PfP partners. Military co-operation, in its most concrete form, was intensified with southern Mediterranean countries in recent years, with Egypt, Jordan and Morocco’s participation in NATO-led IFOR/SFOR operations in Bosnia. Beyond the Mediterranean basin, the United Arab Emirates (UAE) have contributed 150 men and a refugee camp within Operation Allied Harbour in Albania. At least in its initial stages, however, non-NATO southern EMP members were not expected to take part in the KFOR peace-enforcement military force in Kosovo.

The Euro-Mediterranean Partnership Although the EMP security dialogue is multilateral, it encounters a similar obstacle to that of the NATO dialogue in confronting security problems in the Mediterranean. Syria and Lebanon refuse to discuss security in any official institutional framework in which Israel also participates. The confidence-building role of the EMP is therefore severely curtailed, although the mere fact that dialogue was indeed pursued even if the MEPP virtually collapsed may be regarded as an achievement in itself. The EMP is, in fact, the sole multilateral Mediterranean framework in which a consistent, high-level dialogue in which Israel and a significant number of Arab countries take part has been pursued. Senior officials in charge of the Barcelona process have succeeded in launching some confidence-building measures, such as a joint initiative on the part of Egypt and Italy for sea-rescue operations. At the civil society level, the EuroMeSCo network of

38 Álvaro de Vasconcelos

foreign policy institutes from the EMP countries, launched in 1993 and enlarged to full EMP participation in 1996, is also tackling both soft and hard security issues. Syria and Lebanon, however, have blocked more ambitious confidence-building measures so far. The EMP ministerial meeting held in Stuttgart in April 1999 has taken the decision to proceed with the drafting of a Euro-Mediterranean Charter for Peace and Stability, which is considered ‘a functional instrument for the implementation of the principles of the Barcelona Declaration’, and was able to agree on a schedule for its completion as well as produce a set of guidelines and topics to be contemplated in the Charter. These include partnership-building measures, as well as improving co-operation among neighbours, through the gradual establishment of a network of subregional co-operation agreements and cross-border projects, and crisis management and post-conflict rehabilitation. These measures are expected to develop, at a later stage, into ‘joint action modalities’. It is interesting to note that much effort went into ‘decoupling’ progress towards the adoption of the Charter from the MEPP. It is unlikely that much ground will be covered, however, without concomitant progress along the bilateral and multilateral tracks of the MEPP. The change of leadership in Israel seems to create a favourable environment for the process to resume. Arabs, Europeans and Americans should all act swiftly and coordinate their efforts as far as possible to support progress in the MEPP. This would also help remove existing obstacles to subregional co-operation in the Middle East, a process that should be encouraged by all actors involved. If progress is indeed achieved along the various tracks, it is most likely to speed up the process of adoption of the Euro-Mediterranean Charter, thus enhancing the EMP’s security dimension.

The European Union’s common Mediterranean strategy In accordance with the enhanced foreign and security policy dimension contemplated in the Amsterdam Treaty, the 1998 Vienna European Council has decided to devise a common strategy for four areas which rank high in the Union’s foreign policy priorities: Russia, Ukraine, the western Balkans and the Mediterranean. 13 In the case of the Mediterranean, the common strategy devised by the Fifteen will integrate the acquis and the furtherance of the Barcelona process, which will form the basis of its more long-term approach. At the same time, however, it should include a blueprint for those issues that require both long- and short-term action, such as the MEPP or the Algerian crisis. As far as security in the Mediterranean is concerned, however, the European Union, especially in light of its declared commitment to a stronger defence dimension while at the same time building stronger ties with NATO, is well advised to bring its own relations with the United States into the picture.

Europe’s Mediterranean Strategy 39

While transatlantic solidarity remains the core foundation of European security, the same kind of solidarity cannot automatically be transposed to Mediterranean security as a whole. For one thing, as noted above, Europeans and Americans differ on the very geographical definition of the Mediterranean region and their main areas of concern are also not the same. The European Union now has a definition of the Mediterranean that coincides with the southern membership of the EMP (plus Libya), and sees it primarily as the meeting point between the Arab-Islamic and the European world. The Maghreb is an area in its own right and an important one for Europe. The differences in approach and in priorities have led some to propose a schematic division of labour between Europe and the United States in the Mediterranean along geographic and priority action lines. Europe should take care of the Maghreb where social and economic issues are the main challenge to be confronted. The United States should take care of the Middle East on their own where security issues prevail and the effects of the MEPP are more intensely felt. As for the Gulf, the United States should take the lead while allowing Europe to play a supporting role and carry a fairer share of the burden. American analysts contend that this would suit both the European Union, whose hesitations in foreign and security policy make it a weak power player but do not affect its strong foreign economic policy role, and the United States, which sees itself as the sole real player in the Middle East backed by a credible military presence.14 This is unacceptable to Europe, not least because the Middle East is now a part of the EMP. Israel is indeed crucial to this Euro-American divergence. The United States regards Israel’s security problems as its own. For Europe, the Arab–Israeli dispute is a South–South issue. The link between the European Union and NATO has been further reinforced by the fact that NATO for the first time recognized the European Union as a security actor in its own right and, at the same time, by the strengthening of the security and defence dimension of the Union agreed in Cologne. The fact that the current Secretary-General of NATO was chosen as High Representative for the Common Foreign and Security Policy of the EU is yet another indication that security and defence will move higher up in the European Union’s agenda. This was powerfully prompted, quite obviously, by the crisis in Kosovo. There is no question that the United States remains a Mediterranean power, as much as a European power, as far as security and defence issues are concerned. This should be fully appreciated by the European Union. This is not to say that NATO should be enlarged to the South but merely to say that all those involved stand to benefit from a Mediterranean dialogue between the European Union and the United States. It is doubtful, however, that NATO would be the adequate framework for this dialogue. Mediterranean issues of concern to both Europe and the United States

40 Álvaro de Vasconcelos

clearly transcend the realm of security. On the other hand, although it may increasingly tend to be so, the European Union as such is not a part of NATO. The Transatlantic Dialogue, where a comprehensive approach, including political and economic issues may be included together with security, seems to be the right forum for such a dialogue to bear all its potential fruits. One final consideration seems in order regarding the interplay of external and regional actors in any given area, and in this particular region especially, which is suited to the application of the notion of cooperative security. Indeed, common security concerns and potential risks clearly transcend threats in their ordinary definition. Countries across the Mediterranean, in the Maghreb and the Middle East alike, should be treated as full partners in any security arrangements in which they are concerned. Taking the southern countries on board as full partners is indeed the aim of the Barcelona process. Similarly, it is a precondition for the success of any Mediterranean initiative involving the United States. It should be noted, furthermore, that because they are indeed committed to the success of the EMP, Europeans are increasingly bound to take into account the points of view of their southern partners and engage in consultations with them in the case of any contingency involving the Mediterranean.

Notes 1. After freezing its application for EU membership, Malta revived it after the 1998 elections had brought a new government to power. 2. Paradoxically, since the bonds between NATO allies are built on the commitment enshrined in the North Atlantic Treaty of going to war, if necessary, to defend any other member under attack, the new Strategic Concept, while underlining the continued commitment to Article 5, also stresses that ‘it is clear that Article 5 would apply come the attack from where it may’. Shared NATO membership, however, had little effect on either Greece or Turkey when their dispute over the Aegean Sea islet was on the verge of leading to military confrontation. 3. Created in 1989 by the Treaty of Marrakech, the Members of the Arab Maghreb Union are Algeria, Libya, Morocco, Mauritania and Tunisia. 4. Presentation on ‘Subregional Co-operation and Integration’, EuroMeSCo Annual Conference, London, May 1998. 5. NATO’s dialogue countries are Egypt, Israel, Jordan, Morocco, Mauritania and Tunisia. The WEU’s Mediterranean dialogue, launched in 1992, includes these same countries plus Algeria. These dialogues consist mainly of meetings between the relevant sections of each organization’s secretariat with the southern countries’ ambassadors in Brussels. 6. The Forum for Dialogue and Co-operation in the Mediterranean, created in Alexandria in July 1994, although it emphasizes economic, scientific and technological co-operation, is also concerned with political dialogue. The Mediterranean Forum is formed by Algeria, Egypt, France, Greece, Italy, Malta, Morocco, Portugal, Spain, Tunisia and Turkey. 7. The Euro-Mediterranean Process, a Franco-Spanish proposal to the EU European Council, was launched during the Spanish Presidency of the EU in 1995. The

Europe’s Mediterranean Strategy 41

8.

9. 10.

11. 12.

13.

14.

EMP is currently made up of the signatories of the Barcelona Declaration: the Fifteen and 12 southern partners: Algeria, Cyprus, Egypt, Israel, Lebanon, Malta, Jordan, Morocco, the Palestinian Authority, Syria, Tunisia and Turkey. Two members of the AMU are not among the EMP: Mauritania and Libya, and Turkey, although a member of NATO, is part of the South in the EMP process. The prospects for developing some form of closer co-operation gradually evolving to its inclusion within the EMP look brighter after the UN sanctions have been suspended. On the initiative of the German Presidency, Libya was asked to attend the EMP Ministerial Meeting held in Stuttgart in April 1999. On Arab and Muslim public reaction to the Bosnia crisis, see, for example, A. Hallil Dessouki’s chapter in M. Jopp (ed.), The Implications of the Yugoslav Crisis for Western Europe’s Foreign Relations, Chaillot Paper No. 17, Paris, WEU Institute for Security Studies, October 1994. François Burgat, L’Islamisme en face (Paris: La Découverte, 1995). Although at the time of writing the full official report on the Luxor attack was not finalized, it is thought to have been perpetrated by Al-Gama’at al-Islamiyya (The Islamic Group). It should be noted that Al-Gama’at renounced violence in March 1999, and in May some 1000 convicted militants and prisoners in preventive detention were freed from Egyptian jails. See I. O. Lesser, A. J. Tellis, Strategic Exposure: Proliferation Around the Mediterranean (Santa Monica, CA: Rand, 1996). The only case of major disruption to gas supplies (in 1998, when the supply to Italy was stopped for three days), however, was attributed to a technical problem. Suspicions of a terrorist attack on the pipeline were aired but never proven. A common strategy for Russia was indeed approved by the 1999 Cologne European Council. The Cologne European Council reiterated the decision taken in Vienna to adopt a common strategy for the Ukraine, South–East Europe and the Mediterranean. The ‘common strategy’, which provides for decision-making on a qualified majority basis, was added to the array of CFSP instruments in the Amsterdam Treaty. The common strategy for the Mediterranean was approved by the 2000 Feira European Council. On the ‘division of labour’ between the European Union and the United States, see D. C. Gompert and F. Stephen Larrabee (eds), America and Europe: A Partnership for a New Era (Cambridge: Cambridge University Press/Rand, 1997).

3 Towards a Pan-Euro-Mediterranean Association of Proximity Jean Raux

Introduction The very title of this contribution gives the game away. We have purposely favoured the ‘Pan-Euro-Mediterranean’ stance, projecting ourselves into the future and taking as a starting point the hypothesis of an enlarged European Union, or one in the process of enlargement, envisaging its relations with its neighbours. We take as a principle a Europe reconciled with its history and its geography, which has refound its centre in welcoming the Central and Eastern European Countries (CEECs, including the Baltic States) in their turn, and which has taken up a strategy of Europeanizing the Balkans in order to better counteract any possibility of a Balkanization of Europe. Thus, we take account of the relations to the South with the Mediterranean Non-Member Countries (MNMCs), already associated with the Community ‘in a spirit of partnership’,1 and to the East the relations with the countries of the post-Soviet space, members of the Commonwealth of Independent States (CIS), notably the countries of the western front from the Baltic to the Black Sea,2 liable in turn to be caught up in a ‘partnership association’ of a bilateral character. This new form of relationship could nevertheless be modulated, in the future, to the advantage of the Russian Federation, member of the Security Council and the undeniable power for the durable regulation of Pan-European problems external to the European Union. A privileged partnership association with the Russian Federation could be the guarantee for a harmonious integration of new Member States within the EU. The Pan-Euro-Mediterranean relationship would rest on three inextricably linked pillars: one pillar comprising the enlarged European Union, one pillar comprising the associated MNMCs, invited to one or more regional groupings in a spirit of partnership as espoused in the Barcelona Declaration of 28 November 1995, and one pillar made up of the ‘partners’, signatories to the Partnership and Co-operation Agreements (PCAs) and invited to a bilateral ‘partnership association’ without any prospect of 42

A Pan-Euro-Mediterranean Association of Proximity 43

admission, to handle carefully the independence of each while always cultivating the convergence of all. At the intersection of the three areas Turkey, as a key country, would naturally be a privileged partner of the European Union and a major element of the latter’s ‘proximity policy’. Already associated with the Community on the basis of a customs union, in principle effective since 1 January 1996, Turkey must not, however, be under any illusion as to the unanimous eagerness of the Member States of the European Union to welcome it in the immediate future. It is true that the 1999 Helsinki European Council has given Turkey the status of ‘candidate country’, but no indication is provided when accession negotiations will start and even less when they could possibly be completed. Various reasons explain this state of affairs. The official reason, and one which is legitimately cited by the Commission, is the lack of respect for democratic principles, human rights and, more particularly, the rights of the Kurdish minority. But also the Member States are fully conscious of the fact that they would not shy away from raising other obstacles to a potential ratification. An alternative prospect must be offered to suit Turkey’s geopolitical and geostrategic situation. The definition of a ‘proximity policy’ of the European Union could provide the occasion to formally recognize the major role of Turkey. The Amsterdam Treaty could actually offer the legal bases. The ‘reinforced co-operation’, foreseeable on the basis of Articles 43 to 45 TEU and 11 EC Treaty, could allow the tenacious opposition of Greece to be bypassed and open the way to a narrower association with the European Community. The European Union itself might even consider it ‘necessary’ to conclude a complementary agreement on the subject of security and judicial co-operation, in accordance with Article 24 TEU, while Greece could decline any possibility of participation. Once associated ‘in a spirit of partnership’, or parallel to the conclusion of their partnership association, the European Union and the Russian Federation could, at least partially, themselves take inspiration from the association framework applied to Turkey in order to underline the privileged character of their new relations. In this way, the European Union would take into account the major role and distinguished responsibilities of its large eastern neighbour. Thus the reference to ‘proximity’ is such that it would favour the emergence of a specificity of association with the European Community in the sense of Article 310 EC Treaty (ex-Article 238) for the states neighbouring the enlarged European Union. A specific category could find its place in the typology of the EC’s association agreements (I). Moreover, proximity amounts to an invitation to secure coherence with the external policy of the Union. The specificity of the ‘associative relationship’ is its intensity. The specific association with the EC must be, at its optimum, coherent with the external policy of the European Union (II). The specificity and intensity must, in particular, be reinforced in so far as Turkey and Russia are concerned. A specific privileged association in maximum coherence with the external policy of the European

44 Jean Raux

Union must bear witness to the major role of its two partners in the framework of a proximity policy (III).

I. The emergence of a specific association for states neighbouring the enlarged European Union A priori, association is foreseeable ‘with one or more States or international organisations’ (Article 310 EC Treaty), without geopolitical limit. Nonetheless, the initial practice was to take a strict approach. Association was first reserved for European countries and those considered as such (Greece, Turkey, Cyprus, Malta) and called upon to join the EC. However, the associative link was also necessarily and legitimately used with regard to the CEECs, in the prospect of joining the European Union, creating an ‘ever closer union among the peoples of Europe’. For its part, association, with a perspective of co-operation and a view to ‘economic and social development’, was first reserved for those countries maintaining, or having maintained, ‘special relations’ with certain Member States. Yet the arrival of those new Member States having colonial pasts (the United Kingdom, Spain and Portugal) saw the hypothesis of ‘special relations’ filled out and carried further justification for extending the associative link. Thus the practice was inverted and association became in a way generalized. The ‘banalization’ of the associative link would have been, without a doubt, more acceptable if the specificity of the relationships with neighbours of the EU had been safeguarded or, even better, developed. It is becoming obvious that it is necessary to institute a specific association for neighbouring states at Pan-Euro-Mediterranean level. Such an evolution, however, appears feasible while the European associated countries prepare to join the European Union in successive waves, to the stage where the category of association agreements with European states is rendered progressively obsolete. The dynamic peculiar to the Partnership and Co-operation Agreements, on condition that in particular a more rational internal mutation within the Russian Federation takes place, could favour the emergence of a ‘partnership association’ comparable to the Euro-Mediterranean model. That admission to the European Union is nevertheless reserved for European states, in view of the fact that it requires the acquis communautaire to be preserved so that the objectives of the European Union may continue to be pursued. One should therefore stress that the Members of the CIS cannot be associated in any other way than on a basis of ‘partnership’ without any prospect of admission. In other words a specific ‘association in a spirit of partnership’ must be instituted in an appropriate way. A necessary specific association The associative relationship is on the way to becoming the common lot of the partners of the European Community. The partnership association in

A Pan-Euro-Mediterranean Association of Proximity 45

the Mediterranean basin risks losing its distinctiveness in the light of the dual evolution of the association with ACP States, signatories to the Lomé IV/Mauritius Convention, 3 on the one hand, and co-operation with the Latin American countries and emerging regional economic groupings on the other.4 To the East, the simple substitution of a Partnership and Cooperation Agreement by a ‘classical’ association agreement could, in itself, no longer constitute an appropriate response to the particular requirements of a neighbour country. It seems increasingly evident that the partnership co-operation initiated with the East can no longer be left in the background. The ‘banalization’ of the association with the southern countries To the South, it appears that the new Partnership Agreement (succeeding the Lomé IV Convention) with the ACP States should be accompanied by specific agreements at the level of regional unions (West Africa, Southern Africa, East Africa, the Caribbean, the Pacific) on the basis of a reciprocal liberalization of trade accompanied and compensated by a multidimensional co-operation, itself driven by partnership. Only the least developed countries should still benefit from special preferences without reciprocity on their part but on condition that equality of treatment with the other least developed countries, to date non-associated and beneficiaries of the EC’s GSP, is respected. Association, since then, has been recognized as the ultimate objective for certain Latin American countries and regional groupings. The ‘Interregional Framework Co-operation Agreement between the European Community and its Member States, of the one part, and the Southern Common Market and its Party States, of the other part’, had already announced the intention of the signatories. The preamble states: The ultimate objective [is defined as] a political and economic interregional association founded on greater political co-operation and progressive and reciprocal liberalization of all trade, taking account of the sensitivity of certain goods and complying with World Trade Organization rules, and founded, finally, on the promotion of investment and closer co-operation.5 A ‘Joint Declaration on political dialogue between the European Union and Mercosur’, published at the same time as the Agreement but independent of it, confirms this long-term objective.6 More audacious still, the ‘Framework Co-operation Agreement’ with Chile is, at a glance, explicit in that it states in the very title itself that it is ‘leading ultimately to the establishment of a political and economic association between the European Community and its Member States, of the one part, and the Republic of Chile, of the other part’. A Common Declaration concerning

46 Jean Raux

the political dialogue between the European Union and Chile is annexed to the Agreement. The text is joined to the Agreement and approved as such by the Decision of the Council of the Community carrying the application of the Agreement.7 The states party to MERCOSUR and Chile could be among the first associated, on the basis of Article 310 EC Treaty. They could also open a comparable route to the ‘partners’ of South East Asia and those of the Indian subcontinent! But what is then the specificity of relations of proximity? A partnership of co-operation to the East henceforth in the background To the East, the upholding of the Partnership and Co-operation Agreements would seem well in the background when compared to the association agreements with the South. The substitution of the Partnership and Co-operation Agreements by association agreements, notably under the hypothesis of an enlarged European Union, could in itself turn out to be insufficient if the formula carried over is inspired by that applied to the South. The model envisaged must take inspiration from the constraints of proximity, while at the same time move away from the dynamic formula specific to those association agreements that carry a prospect of admission. Enlargement underlines, on the other hand, the opportunity of an association specific to third countries in proximity to the EU. Such association even becomes plausible under the condition that the Partnership Agreements are given a new impetus and their signatories are prepared to use the Agreement’s potential. A plausible specific association The foreseeable obsolescence of the association with European states It is already reasonable to consider, in a relatively near future, that all the European states, or else all those considered as such, will have joined the European Union in successive waves. The first wave reaching the shores of the European Union will announce inexorably the following waves. 8 Repeated admissions will render the category of association agreements with European states progressively obsolete, in particular the specific category of ‘Europe Agreements’ concluded with the CEECs, currently implemented according to a ‘pre-accession strategy’ which is, in our sense, inappropriately referred to as ‘pre-accession partnership’.9 The perspective of an association with countries of the post-Soviet space, today members of the CIS, would thus become feasible. The novelty of that ‘partnership’ association, in its nature and spirit, would result from the absence, whether explicit or implicit, of any perspective of admission even though it would concern first of all the countries said to be ‘East European’ (Belarus, Ukraine, the Russian Federation and Moldova). Better integration into the world economy in conformity with WTO rules, notably on the basis of a free trade zone with the enlarged EC, has

A Pan-Euro-Mediterranean Association of Proximity 47

already been foreseen in the framework of the Partnership and Co-operation Agreement with the Russian Federation. The provision of the Agreement referring to the possible opening in 1998 of negotiations establishing free trade could not be materialized. This is partly due to the late entry into force of the Agreement (December 1997), but above all for reasons internal to the Russian Federation, let alone the lack of enthusiasm among the EC and its Member States. Nevertheless, the principle has been established and accepted by the Parties. Thus a parallel might be drawn in the longer term with the freeing up of trade between the two shores of the Mediterranean. Again it would require that the Partnership Agreements’ potential is fully used. Using the political potential of the Partnership Agreements The enlargement of the European Union offers the possibility to use fully the political potential of the Co-operation and Partnership Agreements, until now retained, and this opens the perspective of a partnership association. Partnership is in fact a catalyst to co-operation. It can provide the impetus to the fullest possible co-operation in answer to the hopes of the partners, both in terms of scope and intensity. Co-operation can thus be as wide-ranging as possible for some, in particular with the Russian Federation and Ukraine. The objectives of the partnership can act as incentives upon relations between the partners.10 The adoption of a market economy, something that is already the case for the associated CEECs, is a fundamental objective in this regard (see, for example, the 14th indent to the preamble and Article 1 PCA with the Russian Federation). Russia is not yet considered a market economy country. Nevertheless, since the European Council in Cardiff of 15 and 16 June 1998, she is assimilated as a market economy country as far as anti-dumping is concerned. 11 Above all, ‘respect for democratic principles and human rights …, underpins the internal and external policies of the Parties and constitutes an essential element of partnership and of this Agreement’ (see, for example, Article 2 PCA with the Russian Federation). The comparison with an association agreement appears essential. However, the enactment of appropriate measures ‘if either Party considers that the other Party has failed to fulfil an obligation under the Agreement’ (Article 107, paragraph 2, PCA with the Russian Federation)12 cannot escape a political reading of which the parameters are not those which govern the interpretation and the enforcement of an association agreement. What is important is that a partnership approach is taken in the reading of it. The promotion of peace is actually at stake from the point of view of all partners and, most importantly, the Russian Federation. The existence of common interests must encourage the partners to search for and create converging positions in international fora, all the more so in any question concerning security issues. In this regard, the European Union’s Action

48 Jean Raux

Plan for Russia13 draws up a statement of the willingness of the Union to reinforce its dialogue with Russia on questions of the peaceful regulation of conflicts in the framework of the OSCE and the UN. The same document in particular conjures up problems linked to controls on arms exports and to conflict prevention. The Yugoslav crisis was not to be missed as an opportunity to provide the European Union and Russia with the chance of putting their partnership to the test and, in so doing, to assess its limits. The political dialogue institutionalized by the Agreement is conceived, first of all, to promote reforms in so far as the partner makes them known. The Democracy Programme, destined to reinforce a pluralist society in the partner states under the greater framework of the TACIS Programme, is itself going in this direction. A more systematic dialogue can provide the impulse to political co-operation at the appropriate level in order to ensure the promotion of peace. The political willingness of the parties remains fundamental. The spirit of partnership specific to an association may seem more appropriate. A specific association in an appropriate ‘spirit of partnership’ ‘Partnership’,14 having become the master word in the external policy of the European Community and its Member States, members of the Union, could become a first step towards association, from the moment that it provides the impulse to a multidimensional co-operation and a political dialogue, as could be the case for the New Independent States of eastern Europe. Such an evolution to the East would provide a means of counterbalancing ‘the associations … in a spirit of partnership’ concluded or in the process of conclusion with the Mediterranean Non-Member Countries, and even of ‘dynamizing’ the next development at Pan-Euro-Mediterranean level. A generalized ‘spirit of partnership’ with the Mediterranean Non-Member Countries The European Community and its Member States, on the one hand, associated ‘European’ countries, MNMCs in the process of re-association (the states of the Maghreb, the Mashreq 15 and Israel) and the PLO, on behalf of the Palestinian Authority, on the other, made commitments at Barcelona 16 on the basis of a global declaration with the objective of establishing a multilateral dialogue superimposed on the bilateral dialogue emanating from the association agreements. In this respect, the proximity of the MNMCs was decisive. Beyond the economic stakes, peace in the region, notably in the Middle East, and the need for each partner’s security, particularly that of the European Union which is being exposed to uncontrolled migratory flows, forces them to make a fresh attempt at co-operation.

A Pan-Euro-Mediterranean Association of Proximity 49

An appropriate ‘spirit of partnership’ to be instituted with the countries East of the European Union The plausible hypothesis of a generalization of the ‘partnership association’, as a privileged model of relationship with the Community in the progress of enlargement, can only bring to the fore the pressing need for ever more deep specific links with third countries in proximity to the EU. The enlarged European Union ought to move closer again to the ‘near abroad’ of the Russian Federation (states of the former USSR) and, above all, the Russian Federation itself. 17 The solution to the specific problems with third countries in proximity to the EU must be sought, in the first place, without the assistance of states foreign to the zone and not directly concerned. The indispensable reference to the Atlantic Alliance should not be solicited until after all regional ways and means have been exhausted, subject to their having actually been consolidated and even reinforced on the basis of a reinforced co-operation with the neighbouring States. The European Union needs a vast Pan-Euro-Mediterranean co-operation in order to succeed in its enlargements. Assigning precise limits to Europe is useless. We know where Europe does not end; we do not really know where Europe does end precisely. The European Union needs a flexible approach in this matter (‘frontières profondes’, Jean-Louis Bourlanges) in order to assure its future. An association to the East must be invented and enriched or refined with the South. Only a Pan-Euro-Mediterranean ‘proximity association’ can bear witness to the political dimension of the European Union and guarantee it. That is to say, there is no place for a specific type of association with third countries in proximity to the EU in the absence of coherence with the external policy of the European Union.

II. An association specific to the EC in full coherence with the external policy of the European Union Association ‘in the current state of Community law’, that is to say in the sense of Article 310 EC Treaty, only concerns the European Community. It does not aim at the European Union in its entirety. It is thus differentiated from admission based on a ‘common provision’ of the European Union Treaty since the Treaty of Maastricht (Article 49 Amsterdam), whereas originally the provision relating to the admission of a European state into the European Community (ex-Article 237 EC Treaty) immediately preceded that relating to association (ex-Article 238 EC Treaty) and could logically have inspired the first, the provision concerning admission is now clearly distinct and governs the admission of a European state into the European Union without reference to the association regime. Yet the logic of the ‘common provisions’ of the TEU authorizes a more finely tuned and more coherent approach to the association.

50 Jean Raux

An association with the Community respecting the objectives of the European Union, on the basis of the ‘common provisions’ of the Treaties The concept of association to the European Community alone cannot, however, be envisaged in ignorance of the European Union in which the Community participates and of which it is one of the foundations (Article 1, third indent, TEU). The European Community, most often acting together with its Member States, members of the European Union, cannot disregard the emergence of a Common Foreign and Security Policy, nor the extension of the police and judicial co-operation, and all the more so when it is in the process of ‘communautarisation’. Association, as part of the general and final provisions of the EC Treaty, 18 also confers upon it the authority to share certain perspectives of the European Union opened up by the common provisions of the Treaty on the Union (Articles 1 to 7 TEU). Where necessary, with the help of the Member States on the basis of a mixed agreement, if it departs from the field of competence of the EC, the association to the EC must itself contribute to carrying out the objectives of the European Union, notably to affirming its ‘international identity’ on the international scene (Article 2, second indent, TEU). Therefore coherence is essential. An obligation of coherence governs ‘the external activities of the Union as a whole in the context of its external relations, security, economic and development policies’ (Article 3 TEU). Thus, the ‘association’ seems to be something of a privileged field in which greater coherence can be sought with the other policies within the external policy of the Union. Nevertheless, coherence will have to be optimal when association governs (as in the Mediterranean) or potentially governs (as in the postSoviet space) the ever more sensitive relations with the proximity states. Each of the partners recognizes the other in terms of geographic, demographic, economic, social, cultural, political and strategic identity. The pursuit of mutual interests in the framework of multiple and graduated actions does not prejudice a new status according to the terms of the subsequent evolution, even if, exceptionally, such a status can be confused with that of a Member State, when the associated country has been considered as European and has seen itself recognized as having a right to accession (Turkey). Theoretically, the equation 1 + 1 = 2 constitutes the rule and remains the reality. ‘An ever closer union among the peoples of Europe’ is not an objective shared with the Mediterranean or in the post-Soviet space of the CIS. Partnership implies a legal relationship based on parity, whether involving a bilateral relationship or, rather, a multilateral one at regional level. That being the case, the partnership of proximity implies the most extensive and global intergovernmental co-operation imaginable. The partnership must contribute to structuring the continent and participate in defining the new European

A Pan-Euro-Mediterranean Association of Proximity 51

architecture. It must permit the states bordering the Mediterranean Sea to take up possession of the Mediterranean and to make of it a place privileged with co-operation and peace. The same conclusions are imperative to the Baltic or Black Sea states, in as much as the common frontiers with eastern Europe must be places of trade and peace. To make this scenario a reality, the partners are invited to enter into a political dialogue which is both revealing as well as a catalyst to an ever more rich association. The ‘spirit of partnership’ expresses itself in solidarity and the respect for common values. The respect for human rights, democratic principles and the rule of law constitutes an ‘essential element’ of the partnership association. ‘Good management of public administration’ provides the best evidence of its efficiency. In a general sense, ‘good governance’ could be the best guarantee of it. A global and coherent approach is imperative in the framework of a proximity policy. A globally understood association in the framework of a coherent proximity policy External relations were subjected to a scattered approach. In principle, the Commission acts as a college 19 in carrying out its functions of proposal, negotiation and control coming from the initiatives of the Commissioners and the Directors General over which they have authority. Regarding the field of our study one should note, however, that, under the Santer Commission, one Commissioner (Mr Marin) was in charge of the Mediterranean countries of the southern shore and the Middle East, while another (Mr Van Den Broek) was in charge of the eastern countries which were members of the CIS but without taking account of the associated European MNMCs (Cyprus, Malta and Turkey). The former could not be insensitive to the centrifugal forces at play since he was also in charge of the Latin American countries, naturally privileged partners for every Spaniard, despite being an independent Commissioner. The latter was more inclined to set the CIS against the CEECs over which he also had authority. Fortunately, the Prodi Commission brought resolution to this scattered approach and from then on ‘external relations’ have been principally governed by Commissioner Patten. With the CEECs in a position to become members, the countries of the post-Soviet space, members of the CIS, as a result the more distant partners, are supposed to remain in such a position. If, paradoxically, a terminological rapprochement takes place, it is to clumsily place the candidate countries for admission under an accession partnership, a partnership that is very different from that with the CIS partners. Of the twelve Mediterranean partners, three are considered EU candidates (Cyprus, Malta and Turkey since the 1999 Helsinki European Council), although these three still face uncertainties. Turkey is now a candidate country but accession remains problematic.

52 Jean Raux

Of course, it is for the Council to take decisions, to frame the negotiations conducted by the Commission or to conclude the Agreements, but the Council, considering the opposing national interests within it, can only confirm or amplify the identifiable divergence in approaches at Commission level. Recourse to unanimity for the Association Agreements or for any foreseen co-operation on the basis of the lastresort Article 308 TEU, as well as the intervention of the Member States alongside the Community with their ratification requirements, add to this effect. The hegemony of the various instances of the Council on the subject of the CFSP (or even its own paralysis coming from recourse to unanimity, with the exception of reverting to constructive abstention henceforth possible on the basis of the Amsterdam Treaty) renders the respect for coherence between the procedures making the external action of the Union even more uncertain. A global and coherent approach is vital. No matter how many Commissioners there will be in the future or, possibly, whether a hierarchy of Commissioners will be established, a proximity policy and its translation on the basis of an ‘association of proximity’ would require the appointment of a single Commissioner in charge of all relations with partner countries from Gibraltar over Istanbul to Saint Petersburg. The services of the Commission would have to sketch out and propose to the Council the contours of this Pan-Euro-Mediterranean policy, showing concern for coherence. The global approach concerned with the common development of a proximity zone to treat the countries of proximity tactfully implies homogeneous relations with the partner countries to the South and the East, but it does not have as a corollary a uniform policy. One way or another, certain partners could have a major role to play. By reason of their immediate proximity Morocco, Turkey and the Russian Federation are already in this situation while Belarus and Ukraine will be in a comparable situation when Poland is admitted. The same holds true by reason of their present political weight in the region for Egypt and Israel in the Middle East, or in the region and beyond for the Federation of Russia in the Caucasus and in eastern Europe, if it is not in central Asia, the Black Sea and the Mediterranean. And by reason of its political stability and opening up to democracy (albeit recent): Morocco. Above all, Turkey by reason of its geostrategic position and the Russian Federation by reason of its political power, whether actual or alleged, also have a major role to play. On the basis of their current or future associative relations, Turkey and the Russian Federation call for, in our sense, a specific privileged association in maximum coherence with the external policy of the European Union.

A Pan-Euro-Mediterranean Association of Proximity 53

III. A privileged association between Turkey and the Russian Federation and the EC in maximum coherence with the external policy of the European Union The Pan-Euro-Mediterranean proximity policy cannot be fully expressed on the basis of a ‘partnership association’ with the EC only, even if inspired by the concern for optimum coherence with the external policy of the European Union and modulated to this effect according to the partners. Some associated countries or ‘associable’ partners already occupy specific positions in the foreground or assume such political responsibilities that the European Union must privilege them in order to achieve maximum coherence with its own external policy. Geography, history, mutual interests of the partners and political efficiency conspire to put the Russian Federation and Turkey at the top of the list. Turkey is already a ‘European State’ associated with the EC, a status conferred by the 1963 Association Agreement. Without actually envisaging admission in the short term, Turkey could become ‘associated’ to the European Union. Without expressly mentioning it, the new provisions of the Treaty on European Union could be used in this respect. Already a ‘partner’ of the European Union, before finally being associated to it on a partnership basis, the Russian Federation itself could be an associate of the European Union straight away, so as to share, notably, common objectives in matters of external and security policy, and, if necessary, in matters of police and judicial co-operation at penal level. On this basis, the whole Eurasiatic continent could be remodelled in the interests of peace. Towards a privileged ‘association’ between Turkey and the European Union Turkey in the situation of a privileged partner Turkey is in a privileged partnership situation: between Europe, Asia and the Middle East; at the heart of the oil resources and their transit to the European Union; at the head of a Turkish-speaking area running from the Mediterranean to the Chinese frontier, as far as Almaty, the first capital of Kazakhstan. Turkey is above all a vanguard of NATO no matter what the theatre of operations would be: to contain an Islamic fundamentalism from Iran or Pakistan, to combat the menacing dictatorship in Iraq, to maintain the equilibrium in the Middle East and contribute to the peace process or even to facilitate an intervention in Europe. Because of this specific position Turkey is thus a master component in the Atlantic Alliance and in NATO, with which CFSP of the Union is in the process of being coordinated.20 Associated to the EC with a view to becoming a member, Turkey is equally associated to the Western European Union, considered by the

54 Jean Raux

signatories of the Amsterdam Treaty as the operational arm of the European Union.21 On these two counts, Turkey is thus more engaged in the development of the CFSP than some of the Member States of the European Union, namely those ready to invoke their neutrality. It is important to put all this in the context of the provisions of the Treaty of Amsterdam. Recourse to the new provisions of the Treaty on European Union The new provisions can be used to encourage a new approach to the associative relationship with the EC and to open the way to a relationship with the European Union itself. In contrast with the MNMCs, Turkey, although being a state associated to the EC, did not benefit, in practice, from the financial co-operation to which the Member States signatory to the financial protocols committed themselves. The absence of political dialogue formalized in a bilateral institutional framework hindered any well-considered revival of the association. By its systematic veto, Greece forbade any progress. It remains to be seen whether and to what extent the dynamic of the Helsinki European Council will be able in the future to generate a more constructive approach. ‘Reinforced co-operation’ in the sense of the Amsterdam Treaty (Article 11 EC in conjunction with Articles 43 and 44 TEU) 22 could appear legitimate, since it is by nature, according to Article 43, paragraph 1, TEU, aimed at furthering ‘the objectives of the Union and at protecting and serving its interests’ and that, by hypothesis, ‘the objectives of the … Treaties could not be attained by applying the relevant procedures laid down therein’ (such as the recourse to unanimity foreseen by Articles 300 and 310 EC Treaty combined). Far from ‘affecting’ the acquis communautaire and the measures taken on the basis of the Treaties, the recourse to reinforced cooperation guarantees its application and preservation. Objections could be raised. A priori, the ‘foreseen co-operation’ must not concern ‘fields relevant to the exclusive competence of the Community’. Then again, association is in principle optional and the exclusive competence of the EC. It is the same today for financing since, henceforth, it is charged to the Community budget. The EC can even enjoy a greater autonomy since she has substituted the former financial co-operation agreed in a common agreement on the basis of the financial protocols which have been regularly negotiated but refused by Greece for a unilateral financing instrument. Nevertheless, association is not conceivable other than in a field within the reach of Community competence and in the framework of the Community policies. Thus the European Community cannot escape the cooperation of the Member States and it must revert to the conclusion of a mixed agreement where the Member States enjoy competence. This may be the case for sectors which do not affect the commercial policy referred to as

A Pan-Euro-Mediterranean Association of Proximity 55

‘common’ in the sense of the Opinion 1/94 of the European Court of Justice, other than by the application of Article 113, paragraph 4 of the EC Treaty. Above all, this may be the case from the moment there is any question concerning political dialogue, its institutions, its objectives and its instruments. In the first case, the competence of the Member States could be replaced by ‘reinforced co-operation’ under the conditions foreseen in Article 11 EC Treaty, on condition that a Council Decision was adopted by qualified majority on a Commission proposal and after consultation with the European Parliament. A Member State (Greece?), for ‘reasons of national policy’ (Article 11, paragraph 2, EC Treaty) and in the name of its ‘interests’ (Article 43, paragraph 1, TEU), could attempt to have the matter referred to and decided by the European Council by unanimity, but subject to the precondition that the Council decide to so refer by qualified majority. It is reasonable to think that Greece would not be systematically followed by the other Member States and better still that she would not react. On this basis, but eventually without Greece, association could take shape and comprise a more extensive trade dimension. In the second case, the competence of the Member States on the subject of political dialogue could be replaced by a ‘reinforced co-operation’ under the general conditions foreseen in Articles 43 and 44 TEU. The political dialogue could be established without the participation of one (Greece) or even a few Member States. It would graft on the association, as it results from the exclusive competence of the Community. Nevertheless, one might ask oneself whether a political dialogue in which Greece did not participate would be of any use. Given the fact that the objective of the dialogue is to closely define the problems and attempt to resolve them, setting Greece aside may lead to the problems being denied. On the other hand, to resolve the problems, where ‘necessary’, Article 24 TEU foresees the conclusion of ‘an agreement’ with one or more third states or international organizations, implementing the Title devoted to CFSP or, in parallel, implementing the title on police and judicial cooperation. Without expressly appointing it, the European Union is referred to by this Article in that it is the Presidency of the Union which is the appointed negotiator and which recommends conclusion by the Council. The ‘agreement’ is not qualified, but it is not ruled out that it will be qualified, where necessary, as an ‘association’ agreement with the European Union, complementary to an association agreement with the EC. Let us acknowledge that such a hypothesis would apply perfectly to the case of Turkey, a privileged partner of proximity, if we take into account its strategic importance and the role that it can play in mastering migratory flows and the fight against transboundary crime. Still, the difficulties cannot be minimized, ‘in the current state of the law of the Union’. The procedure has a very intergovernmental character. The decisions are taken on a case-by-case basis by unanimity in the

56 Jean Raux

Council, with the exception of constructive abstention applying to every decision relating to the title devoted to the CFSP (Article 23, paragraph 1, TEU), and negotiation is undertaken by the Council Presidency. Schematically, the states are only bound if they really want to be bound. Nevertheless, in cases of unanimous agreement or in the absence of the express opposition of a state (Greece preferring this substitute over admission), the European Union would have more of a confirmed ‘international identity’. It would even become urgent to confirm the international personality of the European Union and to substitute it for that of the EC. The European Union would then have the international ability to express itself according to the different procedures in the framework of the spheres of competence which are expressly or implicitly recognized by the Community Treaties or sketched out by the Treaty on European Union, but thus ‘developed in practice’. For the moment, only the Member States have the ‘ability’, while the Union has only virtual ‘competences’. At the very most one can conjure up a potential personality for the European Union. The future will decide this. This could be a precedent for another partner of the first order: the Russian Federation. The international situation ought to draw the attention of the Union to the ‘necessity’ of urgently concluding such an agreement with this ‘associable’ partner. Towards a privileged association of the Russian Federation with the European Union The Russian Federation, a politically unavoidable partner The Cold War ended and the Russian Federation took up a chaotic process of transition. The principle heiress of the USSR appears weak, drained and nostalgic. At the mercy of the goodwill of its western lenders, exposed to mafia corruption, the Russian Federation survives in a situation of inflation, public deficit and public debt, which the political class has often been too incompetent to successfully master because it is one of the principle beneficiaries. In this nightmarish adversity, the Russian people, by the greater majority, have shown a patriotic self-sacrifice and an inventive imagination in the quest for survival. However, public opinion in search of a refound grandeur is not sheltered from dream merchants. The former communist becomes pious and is drawn by the memory of his people rooted in Orthodox religion. This orthodoxy, which was able to coexist with Communism in the name of nationalism, called for solidarity with fellow Slavs, notably the Serbs. If the rhetoric of the poor together with that of the humiliated patriots could give birth to nationalistic activity and in so doing cause a fresh line of fracture in the pacification of the continent, threatening the unity of the peoples of Europe on which the European Union is based.

A Pan-Euro-Mediterranean Association of Proximity 57

Facing this situation, the European Union must be very attentive towards the evolution of the Russian Federation and encourage the European opening up which marked the history of the Russia of Peter the Great. The conclusion of a Partnership and Co-operation Agreement expressed the Community’s intention but the European Union has not been able to make any gains at political level. However, the European Union cannot ignore the major political responsibilities of its ‘partner’. The crisis in Kosovo is a reminder. The crisis was aggravated when the Russian Federation participated in the control of the Serb operations in Kosovo, under the aegis of the OSCE of which it is a member, and when she participated in the Rambouillet negotiations and again in Paris within the framework of the ‘Contact Group’.23 In accepting to act as guarantor for Kosovar autonomy, she ought to have aroused the confidence of the Serbs. She could have used her experience to this end since she had concluded stability pacts and agreements of good neighbourliness with the Baltic states where the Russian minority is often very important. As a member of the G8 (ex-G7), she could have favoured the search for a diplomatic solution and, as a member of the IMF, she could have backed the favourable orientation of structural reforms in the future. On the other hand, as a Permanent Member of the Security Council of the UN, she could not have guaranteed a military intervention by NATO, in charge of maintaining international peace and security without being directly associated with it. Moreover, NATO abstained from legitimizing her intervention by not applying for the authorization of the Security Council. The intervention of NATO in the form of ‘air strikes’ has not, for all that, got the better of President Milosevic. The follow-up to the conflict must be envisaged, but its subsequent resolution underlines the need for the assistance of the Russian Federation, as a Permanent Member of the Security Council and the second power keeper of nuclear arms, the threat of which could be stirred up at any moment. Beyond the demonstrations of solidarity towards the Serbs, it is in the interest of the Russian Federation actually to live in good relations with the West in general and with the European Union in particular. Mr Primakov, Prime Minister during the Kosovo crisis, was the first to bend Perestroika in the sense of opening towards Europe. Before even being Minister for Foreign Affairs for Mr Gorbachev, Mr Primakov, the then Director of IMEMO, took a favourable attitude towards the project for a ‘Common European House’. It does not appear that he favoured exacerbating Russian nationalism beyond the borders of the current Russian Federation and he was more inclined to ensure the integration of Russian minorities, whether in Ukraine, Kazakhstan or the Baltic states. This in any case is probably the only solution to reassuring the ‘near abroad’ of Russia and to giving body to the actual CIS. Only the voluntary gathering of the Member States can counteract the play of centrifugal forces of the states of the Caucasus and

58 Jean Raux

those of Central Asia. The maintenance of good relations with the Turkish speaking states in general, and with the partners of Turkey around the Black Sea in particular, requires good relations with Turkey, the associate of the EC, member of NATO and secular state of Muslim religion. The realism of Mr Primakov, once Director of the KGB, is at the other pole of the archaic nationalism of Mr Milosevic and, objectively, closer to the objectives of the European Union, a fortiori when the latter is promoting an autonomous security policy, even within the NATO framework, and in coordination with NATO. This political line is certainly the most reliable. The European Union must therefore come closer to the Russian Federation and associate its efforts with those of its partner in the interests of peace and security on a continental scale – subject to the condition that these efforts are not diminished by the repressive actions driven by the electoral opportunism of President Putin in Chechnya. The provisions of the Amsterdam Treaty give it the opportunity to do so. Recourse to the new provisions of the Treaty on European Union The Common Foreign and Security Policy is placed, by the TEU, under the ‘principles of the United Nations Charter’ (Article 11, paragraph 1). The reference to the United Nations Charter thus legitimizes the actions of the Union, notably regarding the preservation of peace and the strengthening of international security. In this sense, coercive actions of the Member States of the European Union, joined as such or within the framework of NATO, is only conceivable with the authorization of the Security Council and thus in the absence of a veto by a Permanent Member, notably the Russian Federation or China. Recourse to a ‘regional organization’ is legitimate (Article 53, UN Charter), but it requires a preliminary authorization of the Security Council. Failing to have appealed to the Security Council at the appropriate moment and to have been able to prepare the way for an appropriate resolution, comparable to that which legitimized the Gulf War, the Member States of the European Union and NATO exposed themselves to criticism and threw suspicion on the legitimacy of their intervention. A privileged dialogue with Russia, notably in the framework of the Contact Group, a mini Security Council on a European scale, could have convinced the Security Council of the necessity to ‘delegate’ its power.24 In choosing not to take such a route, the Member States of the European Union could nevertheless claim that they behaved in accordance with the objectives henceforth assigned to themselves. The European Union is now based on ‘the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States’ (Article 6, paragraph 1, TEU). Consequently, by natural projection, the Common Foreign and Security Policy, has the following as its objective: ‘to develop and consolidate

A Pan-Euro-Mediterranean Association of Proximity 59

democracy and the rule of law, and respect for human rights and fundamental freedoms’ (Article 11, paragraph 1, TEU). It is in this spirit that the European Union is ready to welcome progressively all the European States (Yugoslavia included) so long as they bend to this shared demand (Article 6, paragraph 1). The Member States of the European Union have assumed their role and have not missed an opportunity to draw arguments from numerous Resolutions of the Security Council. It is in this way that they have referred to Resolutions 1160 (1998), 25 1199 (1998)26 and 1230 (1998)27 of the Security Council adopted on the basis of Chapter VII of the Charter and in which the Council expressed and reaffirmed its ‘support for an enhanced status for Kosovo which would include a substantially greater degree of autonomy and meaningful self-administration’. Equally, they drew arguments from the refusal of the draft Security Council Resolution, submitted not without any ulterior diplomatic motive on the part of the Russian Federation, with a view to demanding the immediate halt to air strikes. The draft Resolution having been refused by 12 votes to 3 (including Russia and China),28 the violation of human and minority rights by Yugoslavia seemed implicitly to be a blow to international security and, as such, a violation of the Charter. Moreover, the Member States of the Union, together with NATO, could argue that the Security Council Resolution was not capable of preventing the fall of Srebrenica and Zepa in July 1995 despite their having been declared ‘security zones’ two years earlier by the Security Council. It was important to act fast in the face of the dictator who had been able to use the negotiating time of Rambouillet and Paris in order to pursue his policy of ethnic cleansing in Kosovo. Interference seemed vital. But, once the Kosovo affair is embarked upon, a political solution will need to be found with serious international military guarantees. Therefore the response of the Security Council remains, more than ever, the order of the day. Everything leads us to believe that such a solution cannot be foreseen unless it is with the active co-operation of the Russian Federation, alone capable of opening the way for the UN; the Russian veto could bring with it a Chinese abstention. The European Union was not prepared for such a situation. She ought to be prepared for the future on the basis of a ‘privileged association’ with Russia with a view to adopting a common position within the UN framework, from the moment that international security is at stake at European level, and possibly even to embark upon common actions. The European Union does not have a seat at the UN. Only two Member States are Permanent Members of the Security Council with a right of veto. These could be involved officially in expressing the consensus of the Member States of the European Union from the moment that they themselves subscribe to it.

60 Jean Raux

Article 24 TEU could be used to secure the conclusion of an ‘association’ of the European Union and the Russian Federation with a view to maintaining peace and security in Europe. In concluding such an agreement, account would be taken of the commitments of the EU Member States with regard to NATO and could draw its inspiration from a ‘common strategy’ under the framework of the CFSP. What good does it serve to foresee NATO intervention if it is not legitimized by the UN? What good does it serve to undertake coercive action under the aegis of NATO if it is not appropriate? The European Union can be considered to be in the best position to seek the co-operation of Russia with a view to action in Europe mandated by the UN. The European Union can be considered the most justified to intervene in Europe, with a NATO guarantee, in order to be the operational master component. She would act alone or where necessary with the co-operation of Russia. Common Positions and Common Actions could pave the way for a revision of the UN Charter with a view to reinforcing its efficiency while, at the same time, a common strategy in the perspective of a partnership association with the Russian Federation could assure its viability in the longer term. Contribution translated from the French by Kirstyn Inglis.

Notes 1. Including Palestine linked to the Community on the basis of an interim Association Agreement: see E. Lannon, ‘L’accord d’association intérimaire Communauté Européenne-OLP: l’institutionnalisation progressive des relations euro-palestiniennes’, RAE/LEA, 1997, 169–90. 2. Without, however, excluding the Caucasus and Central Asian States because of their ties with both the Federation of Russia and Turkey and which, as such, cannot be dissociated from a homogeneous proximity policy. 3. J. Raux ‘Convention de Lomé (Accord de Maurice)’, in Répertoire Dalloz, vol. I, Paris, 1998. 4. See C. Flaesch-Mougin and J. Lebullenger (eds), Le partenariat entre l’Union Européenne et les Amériques (Rennes: Editions Apogée, 1999), notably the contribution of M.-A. Gaudissart himself evoking the ‘banalization’ of Association Agreements. 5. OJ, L69/1, 19 March 1996. 6. Ibid., 21. 7. OJ, L209/1, 19 August 1996. 8. (a) The CEECs (1): (Poland, Hungary, the Czech Republic, Estonia, Slovenia) and Cyprus. (b) The CEECs (2): (Slovakia, Romania, Bulgaria, Lithuania, Latvia) and Malta. (c) Other states of the former Federal Yugoslav Republic: Croatia, Bosnia and Herzegovina, the Former Yugoslav Republic of Macedonia, Yugoslavia (except for new secessions and accession to independence of Kosovo and Montenegro because of the unconsidered policy of the Serbian President of Yugoslavia Milosevic) and Albania (except, for its part, the reconstitution of a state). All

A Pan-Euro-Mediterranean Association of Proximity 61

9.

10.

11. 12. 13. 14. 15.

16. 17. 18. 19.

20.

21. 22.

23.

these states must, to various and differing degrees, demonstrate an indisputable democratic evolution, while the European Union must affirm its determination to contribute to the establishment of peace in the region, for the direct interest of neighbouring Member States, as for its own interest. (d) Turkey sooner or later, subject to a democratic evolution and a global settlement of its most serious problems with Greece and subject to unanimity of the Member States of an enlarged European Union. The hypothetical nature of such a decision, and a fortiori of its ratification, could and even should lead the European Union to make Turkey a master component in its proximity policy between the Mediterranean and the Black Seas and beyond (see below). In parallel, Norway, Iceland, Liechtenstein (EEA) and Switzerland, if they reiterate their call for admission or submit it for the first time, if they accept the acquis communautaire and ratify the Treaties they have signed. The pre-accession strategy was decided at the European Council of Essen in December 1994. The ‘Accession Partnership’ is now the unique instrument applicable to each Applicant State, OJ, C202/1, 29 June 1998. J. Raux ‘Un partenariat aux finalités spécifiques’, in J. Raux and V. Korovkine (eds), Le partenariat entre l’Union Européenne et la Russie (Rennes: Editions Apogée, 1998), 163–78. J. Lebullenger, ‘Un accord de partenariat confronté aux règles du GATT et de l’OMC’, in Raux and Korovkine, op. cit., 199–215, notably 213–15. J. Dhommeaux, ‘Le partenariat sous condition: la clause de conditionalité droits de l’homme’, in Raux and Korovkine, op. cit., 179–99. COM(95)223 Final, 31 May 1995. J. Raux: ‘Association et perspectives partenariales’, in M.-F. Christophe Tchakaloff (ed.), L’association (Brussels: Bruylant, 1999). With the exception of Libya, even though the lifting of the embargo towards this country might incite it to join the other Mediterranean Non-Member Countries. E. Lannon, ‘La déclaration de Barcelone, acte fondateur du partenariat euroméditerranéen’, RMCUE, May 1996, 358–68. V. Baranovsky, ‘Le partenariat en perspective: la Russie sur la scène internationale’, in Raux and Korovkine, op cit., 15–35, notably 25–31. On the basis of Article 310, ‘General and final’ provisions of the EC Treaty in its Amsterdam version, after Article 238 in its Rome and Maastricht versions. It is precisely the absence of such a ‘collegiate system’ that the ‘committee of wise men’, created by a European Parliament in search of censure, challenged. This accusation was no stranger to the collective dismissal of the Commission. See Article 17 (ex-Article J.7) of the Amsterdam Treaty and increasingly convergent interpretation of France and the United Kingdom: St Malo Franco-British Summit of 4 December 1998, Bull.-EU, 15 January 1999, 94. Article 17, paragraph 2, TEU. On reinforced co-operation see notably V. Constantinesco, ‘Les clauses de coopération renforcées’, RTDE, no. 4, October–December 1997, Special issue on the Amsterdam Treaty; F. De La Serre, ‘Une Europe ou plusieurs?’, Politique Etrangère, no. 1, 1999, 21–34; C. Schmitter, ‘Co-opération renforcée et compétences externes de la Communauté, in M. Dony (ed.), L’Union Européenne et le Monde après Amsterdam (Brussels: Université Libre de Bruxelles, 1999), 77–103. Members of the Contact Group are Germany, France, Italy, the United Kingdom the United States and Russia. This group was created on 25 April 1994 in order

62 Jean Raux

24.

25.

26. 27. 28.

to try to find a solution to the Bosnian issue, but its existence was perpetuated beyond the Dayton–Paris Agreements of 14 December 1995. On the notion of ‘legitimation delegation’ see J.-M. Sorel, ‘La place des Nations Unies dans la négociation et la conclusion des accords de paix’, in Y. Daudet and R. Medhi (eds), Les Nations-Unies et l’ex Yougoslavie, Aix-en-Provence Colloquium, 12–13 September 1997 (Paris: Pedone, 1998). S/RES/1160 (1998), Resolution 1160 (1998) on the Letters from the United Kingdom (S/1998/223) and the United States (S/1998/272), adopted by the Security Council at its 3868th meeting on 31 March 1998. Security Council Resolution 1199 (1998) on the situation in Kosovo (FRY), adopted by the Security Council at its 3930th meeting on 23 September 1998. S/RES/1203 (1998), Resolution 1203 (1998), adopted by the Security Council at its 3937th meeting on 24 October 1998. UN Security Council Press Release CS, No. 1036, 26 March 1999.

4 Differentiation and Association within the Pan-Euro-Mediterranean Area Catherine Flaesch-Mougin

Introduction The Pan-Euro-Mediterranean Area seems a particularly rich terrain for experiment in the study of differentiation in the external relations of the European Union, and more especially in the Community component thereof since it is the Community that, to date, holds legal personality. Besides the concessions originating in its autonomous policy and sectoral agreements, the EC has entered into general agreements with most of the countries of the region: only Libya, Bosnia and Herzegovina, Croatia and the Federal Republic of Yugoslavia, although also falling within her sphere of proximity, are an exception because of their political situation, both internally and internationally. Nonetheless, the existing links with all the other countries are varied in nature and the Community has stressed its concern to differentiate between them. Differentiation, defined as ‘the organized and structured form of diversity’,1 constitutes a component of the external policy of the European Union which is being worked out more and more frequently in the framework of a global approach towards a region or a grouping of countries. The determination of a model of relationship proper to each is made taking into account the characteristics of the states of that group, the long-standing relations with Europe and the economic and political interest which they represent for the European Union. Those states which remain outside these models and maintain an atypical link with the European Community are rare. In the Pan-EuroMediterranean Area, this is the case of the micro-states Andorra 2 and San Marino,3 and of Switzerland following its refusal to ratify the European Economic Area Agreement.4 Nevertheless, the existence of a common model of relationship does not exclude a certain degree of differentiation among the states which are part of this model, some benefiting from more or less substantial concessions within agreements or outside agreements. But, the treatment afforded, in terms of a group or a state, does not necessarily respond to the wishes expressed by the third country or countries. 63

64 Catherine Flaesch-Mougin

For example, association, 5 which has always been a ‘must’ in the Community’s external relations, is very attractive. However, until now it has been reserved for a privileged circle; 6 but, even for the states in the zones concerned (ACP, Mediterranean, Europe), no right of association exists and the major division within the Pan-Euro-Mediterranean Area rests on the existence or not of such a relationship. As such, differentiation may be solicited in order to lead to a real strategy pushing third countries aspiring to an associated status towards the political and economic evolution judged desirable and the respect of values drawn on by the Union. But conversely, upholding definitively the division between associated and nonassociated, resented by a third country, can be dangerous. One discovers here the debates that have left their mark upon the reflections on the differentiated co-operation or integration at internal level. From an optimistic perspective, one can see there an incentive, a motor, to stimulate states which are ‘out’ towards a solution from which they, so far, have been held at a distance. From a pessimistic view, differentiation can carry hidden risks of fracture between the ‘ins’ and the ‘outs’, or even bring about the isolation of the latter. This double reading of differentiation reflects perfectly the challenges facing the Community, and by implication the European Union, within the Pan-Euro-Mediterranean Area. Both must take into account not only the reality of the diversity in the situations but also invite their partners of proximity to evolve in a way which is beneficial to the stability of that region of the world and to quell any risk of ‘marginalization’. The examination of differentiation practised there, however, bears witness to the difficulty of the exercise. The division between the associated and nonassociated countries which still constitutes a major differentiation (I) does not seem to be of the kind to offer the perspective of relationship which is sufficiently stimulating to some partners of proximity. As for the possible forms of differentiation between associates abiding by the same model of relationship, the example of southern and eastern Mediterranean countries (II) shows that, even if they commit to a clearly defined strategy, they are hard to handle and the outcome uncertain.

I. A major differentiation within the Pan-Euro-Mediterranean Area: the cleavage between associated and non-associated countries The Pan-Euro-Mediterranean Area, other than the exceptions referred to above, can be subdivided into five zones of relationship more or less homogeneous stemming from association or not: the Agreement on the European Economic Area now only concerning Iceland, Norway and Liechtenstein;7 the Europe Agreements with the ten Central and Eastern European Countries (CEECs); 8 the Euro-Mediterranean Association Agreements (EMAAs)9 coexisting on the one hand with the old Co-operation

Differentiation and Association within the PEMA 65

Agreements, and on the other with associations with Turkey, 10 Cyprus11 and Malta.12 Contrary to the above, the Partnership and Co-operation Agreements (PCAs) with Russia, 13 Ukraine,14 Belarus15 and Moldova16 are not based on Article 310 EC Treaty but, for want of specific Treaty provisions, on various articles from which Community competence flows.17 The troubled area of South-Eastern Europe is far less homogeneous. Even having been tackled by a regional approach, it is characterized by a differentiated situation: only Albania 18 and Macedonia19 are linked to the Community by Co-operation Agreements; in terms of completion and intensity of relationship, this area seems very backwards compared to the other regional models. But in the meantime it is undergoing development following the end of the Kosovo conflict. Among these relationships, association, reserved for some states, is at the origin of a ‘risky’ line of fracture which, from a strategic point of view, ought to be overcome in the case of proximity partners. Association as a foundation of privileged but differentiated relations reserved for certain states in the Pan-Euro-Mediterranean Area The associations with the three European Free Trade Association (EFTA) countries (in the EEA), the CEECs and the Mediterranean Non-Member Countries undeniably constitute the highest level of relations with the Community. Associations are characterized, according to the Court, by the creation of ‘special, privileged links with a non-member country which must, at least to a certain extent, take part in the Community system’.20 The creation of privileged links which are likely to be upgraded These privileged links come into being by means of substantial concessions within the agreement: commercial relations of a preferential nature leading to a free trade zone or a customs union, sometimes even doing so straightaway (as in the case of the EEA); narrow co-operation in different fields opening, for some, the way to the participation of the third country in Community programmes and policies, a more or less strict approximation of laws, and political dialogue between the parties. Moreover, the association brings the parties into a spiralling relationship which is open to constant upgrade by complementary instruments in order to serve the objectives of the association (initial or even redefined as in the case of the CEECs). Examples are specific agreements, whether envisaged or not in the association agreement, such as those on scientific and technical co-operation and those concerning certain products covered, partly or not, by the initial agreement (as is often the case for agricultural products); even autonomous instruments can be mobilized by the Community, more especially financial instruments. The association agreement itself also contains the germs of potential evolution. In fact, it possesses a more or less consistent institutional machinery but has the peculiarity of being made up of mixed institutions equipped

66 Catherine Flaesch-Mougin

with decision-making powers. For example, the EC-Turkey Association Council adopted, on 6 March 1995, the important decision foreseeing the establishment of the Customs Union. Many decisions concerning participation in Community programmes were also taken by the Association Councils set up under the Europe Agreements. Finally, if association finds its basis in the EC Treaty, the presence of states ‘acting within the framework of the European Union’21 alongside the Community makes of it an instrument comprising political and/or judicial co-operation dimensions. As such, it contributes to coherence in the Union’s external action, such as foreseen in Article 3 TEU. Moreover, nothing forbids relations established through an association from being combined with common actions (e.g. the Stability Pact) and, since the Amsterdam Treaty, from taking their roots in common strategies and/or being completed by the agreements under the second and third Pillars (Articles 24 and 38 TEU). Without a doubt, the above-mentioned upgrades are not all reserved for associated countries but they do benefit from them in a privileged and cumulative way. Despite all this, the ‘bonus’ for the associates comes about in a modulated way. The creation of special links implying a diversity of associative models Insisting on the very specificity of the link of association, the Court of Justice of the European Communities implicitly underlines its multifaceted character: the adaptation of the relationship to the characteristics of the partner, to the nature of the traditional links maintained with the partner, to its geopolitical positioning, to its level of economic development. All this opens the way to the various associative models. Within the Pan-EuroMediterranean Area, these models are organized around three formats. The European Economic Area22 rests on a multilateral relationship completed by bilateral agreements specific to the different countries. Thus the homogeneity of the model is large: it extends the Internal Market to Norway, Iceland and Liechtenstein and associates them with the various Community policies. The intensity of the relationship is translated in a concrete way through the participation of Norway, Iceland and Liechtenstein in the Union’s budget, not only for the programmes with which they are associated but also to contribute to the solidarity between the rich and less well off within the European Union. The intensity of the relationship also comes into being through the existence of an institutional mechanism without precedence and the creation of bodies which are consulted on the adoption of Community rules and which guarantee the respect for law henceforth common in the field of the Internal Market and competition. The narrowness of the link of association implying ‘taking part in the Community regime’ is illustrated by the homogeneity of the partners and the existence of privileged relationships ‘based on proximity, long-standing

Differentiation and Association within the PEMA 67

common values and European identity’. 23 The partners have all the qualities for accession but do not wish it. This alternative model to accession has still not prevented Austria, Sweden and Finland, signatories of the Porto Agreement, from leaving the EEA in order to enter the European Union in 1995. Relations with the CEECs are, as such, far more recent. The Europe Agreements, which are of a bilateral character, have been put into place progressively and, without being completely identical, nevertheless have large similarities.24 Moreover, complementary instruments have been used to reach the objectives of the agreements. Association, from the outset, has been presented as a ‘revisited’ model which responds to the peculiar requirements of political and economic transition (progressive and asymmetrical establishment of a Free Trade Area, co-operation finalized with this objective in mind) and includes, for the first time in a ‘Community’ agreement, the establishment of a political dialogue between the partners. But, even though concluded with European states, the Europe Agreements only recognized in their preambles the wish of the partner to join the EU. It was only following the 1993 Copenhagen European Council that this objective also became a mutual one and that the conditions to be respected in order to become a member would be fixed. This in turn set in motion a strategy of pre-accession resting on the Europe Agreements and giving formidable acceleration to the relations (the 1995 White Paper on the preparation for integration into the Internal Market, complementary protocols to the Agreements, the adaptation of the PHARE Programme, structured relations, etc.). Although the preparation of the pre-accession strategy took a common approach towards the partners, progress has been more or less rapid. Only five states, in the term of the 1997 Luxembourg European Council, ‘qualified’ for the first wave of accession negotiations. In the meantime, for them as well as for the other five, an enhanced pre-accession strategy was set up thanks to a new instrument made up of the Accession Partnerships.25 It is a single framework within which preparations were programmed and adapted to each candidate, whether qualified or not. A single document mobilizing all available financial means was integrated into it, notably a substantially increased PHARE. Furthermore, it progressively steers, according to the Commission, each eligible country towards accession in a spirit of differentiation but without discriminating among candidates.26 Thus, the Europe Agreements model differs from the EEA model for various reasons: the objective of the relationship, but also the differences of the respective partners which explains the specific modalities to establish free trade (whether or not staggered in time), the different degree of concessions in certain fields (e.g. free movement of persons), the level of the financial commitments (mobilization in favour of the CEECs whereas the EFTA countries contribute to the European Union’s budget).

68 Catherine Flaesch-Mougin

These two models are themselves original compared to association in the Mediterranean zone which, of the three ‘privileged’ areas within the PanEuro-Mediterranean Area, is certainly the least homogeneous. It is first necessary to distinguish the ‘northern Mediterranean countries’, the Europeans, which are linked by old association agreements. Of a preferential character, these were original in that they foresaw the institution of a customs union in stages. It is this third and last stage which was put in place on 31 December 1995 with Turkey, placing this country in an exceptional position among the highly economically integrated partners to the Community but not assuring it of entry to the EU. At the 1999 Helsinki European Council Turkey obtained candidate status 27 (see M. Maresceau, above). On the other hand, negotiations with Cyprus are ongoing and as a result of the Helsinki European Council accession negotiations with Malta have also started in February 2000. As for the new Euro-Mediterranean Association Agreements, these have only been proposed to the states and territories of the southern and eastern Mediterranean. It concerns important agreements foreseeing a political dialogue between the partners, the progressive completion of a free trade zone and a multifaceted co-operation served by financial assistance resting principally on the autonomous MEDA instrument. Showing certain analogies with the Europe Agreements, they can nevertheless be distinguished from them by the fact that these states cannot accede to the Union and, except for Israel, they are developing countries confronted with the problems of integrating themselves into the world economy and of consolidating their democratic regimes. Besides, only a commitment to this path opens access to these new agreements, failing which the above mentioned old co-operation agreements are maintained. These diverse elements explain that, beyond the existence of a privileged relationship and a global approach brought into being by the Barcelona dialogue,28 the Mediterranean area to date remains heterogeneous. The existence of these differentiated relationships within the Pan-EuroMediterranean Area is justified by the specificity of the state concerned and the objective of the established relationships. All these relations are of a considerable intensity and characterized by the association but should not be confused, nor even considered to lead to interaction. The once proposed hypothesis of the passage of the CEECs via the European Economic Area before their accession has thus been abandoned, to the advantage of the more supple formula provided for in the White Paper. The risk of making their inclusion within the European Economic Area an alternative to accession was certainly curbed but without, however, neglecting the market. Thus these are relatively watertight systems of relationship which respond to their own logic and demand an identical legal instrument in terms of conception but which are plural in both implementation and designation.29 Moreover, in its Communication of 1994 on the Euro-Mediterranean

Differentiation and Association within the PEMA 69

Partnership, the Commission insisted that ‘the Community’s policies towards central and eastern Europe on the one hand and towards its southern partners on the other spring from different geographic, historical, political, economic and cultural circumstances’ and went on to add: It is the Community’s policy to base its relation with each region on its specific needs and capacities. This communication demonstrates that the pre-accession strategy the Community is pursuing with countries in central and eastern Europe in no way interferes with its commitments to developing closer ties with its Mediterranean neighbours.30 For all that, this watertightness in the systems did not exclude solutions experienced in one area from being used as a source of inspiration for another: certain agreements initiated with EFTA served as a model for relations between Israel and the Community. In the same way, the diagonal cumulation of rules of origin experienced with the Visegrad countries could be taken up in the case of the Mediterranean. What is more, links must be interwoven between the subregions of the Pan-Euro-Mediterranean Area in a way that does not institute a ‘hub and spokes’ relationship in which the European Union would be the hub. The Community thus invited its Mediterranean partners to consider the perspective of an enlarged Union and to conclude agreements with the CEECs. Equally, cross-border co-operations concern, besides those of the EU itself, the borders of the CEECs with the MNMCs, as well as those of the CEECs shared with the CIS, but, in the last case, such relations are of a ‘nonprivileged’ nature. In fact, the fundamental problem for the future is to know whether the associated zones, while watertight within, are ready to open up to states which to date have not been associated. So far, the response seems to be negative but that does not exclude new formats for relationship, including the associative kind, from being ‘invented’ for the benefit of the non-associated countries. An associated/non-associated cleavage to be overtaken for the benefit of differentiated associative perspectives on grounds of proximity Association constituted from the very beginning a coveted agreement in the typology of the external agreements of the Community. Over and above the intensity of the established links, it embodies the narrowness of the quasi-political relationship. It is in the context of a possible association with a European state that, for the first time, political considerations were taken into account by the Community leading to a refusal to associate Franco’s Spain. Thus political motives were extended to external relations generally. Moreover, the association assumed a peculiar dimension because, after the agreements with Greece and Turkey, it was perceived as opening the way to possible accession.

70 Catherine Flaesch-Mougin

For these various reasons, association was refused to certain countries in the Pan-Euro-Mediterranean Area. Although justified in itself, this attitude had always to be managed in a constructive way in order to avoid the perception of isolation or ‘marginalization’ by those ‘excluded from association’. Future perspectives, subject to the satisfactory political and economic developments, had to be offered. However, this would appear not to have been the case: the Kosovo crisis had to take place before this type of approach emerged vis-à-vis the states of South-Eastern Europe. A coveted relationship of association refused to certain states of the PanEuro-Mediterranean Area: differentiation or discrimination? In the Pan-Euro-Mediterranean Area, association was not foreseen with the European states of the CIS and it has only been envisaged in the very recent past with the states of South-Eastern Europe. Still, some of these states would have wished, for (sometimes) different reasons, to benefit from an association agreement or the prospect of such a relationship. Thus Russia, to replace the Trade and Co-operation Agreement with the former USSR, had in mind a new agreement based on Article 310 EC Treaty (ex-Article 238).31 The weak progress of the democratic process and economic reforms did not allow this to be considered in 1992 and an association agreement with all its possible implications could, at that time, not be contemplated. Politically it was excluded in order to link the CIS by agreements comparable to those signed with the CEECs. It was these constraints combined with the necessity to create a closer link with a partner of prime importance on the political stage which gave birth to a new type of agreement: the Partnership and Co-operation Agreement. This Agreement, signed by the Community and its Member States with the Russian Federation on 24 June 1994,32 is distinguished by a substantial content, near in certain aspects to the Europe Agreements: political dialogue at the highest level, multidimensional co-operation focusing on support for transition and reverting to the TACIS Programme for its financing, facilities on the subject of establishment and the freedom to provide services. However, despite being matched with a ‘rendez-vous clause’ to open the way to a possible perspective of free trade, the trade concessions are of a nonpreferential character. This new format relationship would, moreover, be taken up with the other states of the CIS, but alone the partnership and co-operation agreements with the European countries of the ex-USSR benefit from the ‘rendezvous clause’.33 However, neither the initial agreement nor the prospects of evolution will lead to association. In fact, even if these partners might come to accept that they are initially to be held at a distance, depriving them of future association could be strongly resented. Accordingly, at the very first meeting of the Co-operation Council under the Agreement with Moldova (14 July 1998), Moldova reiterated its aspiration to become associated with a view to integration into the Union. This assimilation of

Differentiation and Association within the PEMA 71

association with a prospect of membership explains the prudence of the latter to commit to association with countries which, to date, have not been included in the list of candidates for potential accession. The other region initially set aside from association was South-Eastern Europe and, up until very recently, only co-operation agreements – following the example of those with Albania and Macedonia – seemed possible on condition that they satisfied the requirements set down by the General Affairs Council of 27 April 1997 (respect for democratic principles, human rights, the rule of law and minorities, and obligations resulting from the peace agreements as well as those concerning the transition to a market economy and regional co-operation).34 But, as was the case in October 1995 when the Council put forward its wish ‘to establish … a long-term relationship [in] the form of agreements … taking into account, as far as possible, the aspirations of the countries concerned’, no reference was made to the possibility of association, which would have signified being anchored to the European Union in the eyes of those interested. The conditionality policy accompanied by prospects of a specific relationship must be seen in a constructive way (See E. Lannon, K. M. Inglis and T. Haenebalcke below). However, it is not always clear that these prospects are sufficiently attractive, notably with regard to those countries which have undertaken or have committed to undertake huge efforts in order to satisfy them. An examination of the provisions of the co-operation agreement with Macedonia thus translates the gap between the expectation of certain partners and the Community’s response to them. In fact, the preamble refers to ‘a first step of contractual relations between the Community and the former Yugoslav Republic of Macedonia’ and to the desire of the parties ‘to strengthen their contractual relations as soon as possible, taking full account of the aspiration of the former Yugoslav Republic of Macedonia for an advanced relationship with the European Union’. Moreover, Article 45 of the Agreement details this ‘unilateral’ aspiration looking to the development ‘towards an association with the European Community’.35 One inevitably imagines the wording of the preamble in the first Europe Agreements, which merely stated formally the wishes of the Central European states to accede to the Community, to mean that the Community did not wish itself initially to enter into commitments on the matter. The ambivalence in the Community’s intention concerning the open prospect of integrating the CEECs36 emerges here in relation to a possible evolution towards association. But this wait-and-see policy threatens to feed the frustrations of the ‘non-associated’ unless a more constructive approach is undertaken. The opportunity to make differentiation constructive: defining clear and attractive perspectives The differentiation practised by the Community in its association policy could be read in two ways. It could be seen and experienced by the States

72 Catherine Flaesch-Mougin

concerned as a very real discrimination against them. As such, it can reinforce the feeling of isolation, even of marginalization, and be a factor in the resurgence of new dividing lines within the ‘reunified’ Europe. Leshoukov even suggests the idea of a return to the Cold War: The tendency towards growing differentiation between Russia and the rest of Europe entails a risk of ‘normative divide’, and heightening feelings of isolation in Russia. As a result, the conflicting images – the European one of Russia as not pushing for reforms, and the Russian one of the EU as discriminating Russia – will serve the function of a selffulfilling prophecy. This brings us back to the cold ages of divided Europe.37 From a more optimistic perspective, differentiation could also be ‘recovered’ and give rise to a more constructive approach: knowing that association is reserved for states which respect the political and economic principles defended by the Union, it could constitute a strong incentive to satisfying the conditions in order to benefit from such treatment and a stimulant to behaving accordingly. The inherent limit to such a policy remains, as ever, in the reach traditionally extended to ‘European’ associations: an agreement opening the way to accession. Faced with these challenges, the Union has shown prudence, but not inaction. Conscious of the risk of re-establishing watertight frontiers between states of the Pan-Euro-Mediterranean Area, it has undertaken a variety of actions designed to curb it. Thus various European Councils have underlined the importance of regional co-operation to stability and prosperity in Europe.38 Moreover, the Union supports groupings initiated between CEECs, the CIS and beyond in order to reduce, by ‘de facto solidarities’, the potential tensions between the protagonists (for example the Council of the Baltic Sea States, Economic Co-operation in the Black Sea). The Finnish initiative for the development of the northern dimension of the European Union’s policy took up this approach by bringing together on questions of common interest (e.g. the environment but also nuclear security policy and organized crime of international character) EU Member States, CEECs, Norway, Iceland and the Russian Federation.39 Cross-border programmes, in a spirit of INTERREG at the intra-Community level, have also been developed between the regions of the CEECs and the CIS, such as the Euro-region of Bug bringing together local authorities of Poland, Belarus and Ukraine.40 PHARE and TACIS financing, under the cross-border programme, has been mobilized for this type of project, the idea of which is to associate civil society with institutional players. In the same spirit, since 1991 the ECOS-OUVERTURE Programme has associated towns and regions in the Union, CEECs and the CIS with a view to exchanging experiences. Finally, the Union pays particular attention, in this perspective, to

Differentiation and Association within the PEMA 73

the geographically strategic countries such as Turkey and Ukraine. The preamble to the Partnership and Co-operation Agreement with the latter, the drafting of which differs from that with Russia, is revealing. Point eleven puts forward the desire of the Parties ‘of encouraging the process of regional co-operation in the areas covered by [the] agreement with the neighbouring countries in order to promote the prosperity and stability of the region’. Point fifteen notes their consciousness of the fact that the Agreement favours a ‘gradual rapprochement between Ukraine and a wider area of co-operation in Europe and neighbouring regions’.41 Without minimizing the merits of such initiatives which must be pursued and even amplified, they can only constitute an element of a strategy, the objective of which must be clear to the third states and attempt to respond to their wishes. If association is desired and if it constitutes a sufficiently attractive prospect to stimulate the necessary evolution towards stability throughout the continent, new forms adapted to the needs concerned must be contemplated. The Community, on the basis of the relatively scant provisions of the Treaty of Rome, has been able to show great inventiveness when facing the transformation of Eastern Europe. Such a transformation constituted a challenge to the legal tools which the Community had at its disposal in the field of external relations. 42 Seen in this context, the Community should continue in this direction and wipe out the associated/non-associated cleavage between proximity states. The Kosovo conflict and the threats linked to the instability of the region have led the European Union to steer along this path vis-à-vis the countries of South-Eastern Europe. In the context of the stabilization process, ‘a new kind of contractual relationship’ was offered to them.43 The Stabilization and Association Agreements thus advocated by the European Commission44 ought to constitute ‘an important political and economic incentive’ and respond to the need to ‘define a new approach to the changed general circumstances (internal and external), and to overcome the failure of the countries to adequately respond to the incentives already offered’. Thus it contains implicit recognition of the inadequacies of the previous Union policy. Consequently, one of the aims of the new agreements is to offer, in the words of R. Prodi, a credible European future to these countries, allowing those among them which agree to undertake the developments hoped for to progress in stages towards full association, once the preliminary phase of association/stabilization has been completed. In the end integration into the European Union is possible. Today, it seems to be imperative that a new format of association is ‘invented’ for future relations with the European countries of the CIS. So far, they are effectively excluded from such prospects within the Pan-EuroMediterranean Area and this situation appears politically untenable. A partnership association possibly with the European Union45 could constitute a suitable model reflecting the status of these partners. But it is necessary to

74 Catherine Flaesch-Mougin

situate this in relation to accession and, in so doing, anticipate special treatment for Russia. The Mediterranean example shows nevertheless that such possibilities of differentiation exist and that they can be used in a strategic way between countries united by the same model of relationship.

II. Possible forms of differentiaton between associated countries within a common model of relationship: the example of the southern and eastern Mediterranean countries The Mediterranean basin has always represented an important dimension to the external relations of the Community. Today, it is ‘an area of strategic importance for the Community’46 and stands among the primary priorities of Europe. The Union effectively committed itself, in the mid-1990s, to the creation of an ambitious Euro-Mediterranean Partnership. Its aim is fundamentally political: to create an area of security and stability on the doorstep of Europe and to take up the many challenges likely to threaten it. But its privileged carrier is economic and rests upon the bringing into being of a Euro-Mediterranean free trade zone by 2010. The approach, global in many ways, rests on a multilateral dialogue initiated by the Barcelona Declaration of 28 November 199547 and on the bilateral relations with each of the third states (or entities). Contrary to the Declaration and its work programme which are only of political value, these rest on legally binding instruments, first and foremost the EuroMediterranean Association Agreements signed 48 with Tunisia, Morocco, Israel, Jordan and the PLO for the benefit of the Palestinian Authority 49 and, thereafter, on the Community’s MEDA Programme of financial assistance thereto50 which constitutes the operational arm. Differentiation is carried out at this second level and constitutes a strategic component of the Union’s policy: it is a means of reaching its ends, and notably of bringing the Euro-Mediterranean free trade zone into being by 2010. However, the relatively slow start-up of this policy has uncovered hurdles of a kind capable of hindering it from taking further shape. Differentiation – a strategic component of the Mediterranean policy The Mediterranean policy of the European Union cannot be reduced to a mosaic of relationships and a merely differentiated approach. On the contrary, when compared to the previous situation, it seeks a greater unity and a common format of relationship is suggested to any willing partner. However, that does not exclude certain differences: ●

the conclusion of the Euro-Mediterranean Association Agreements, being staggered over time, resulting today in a legal situation which varies from partner to partner;51

Differentiation and Association within the PEMA 75 ●

● ●

specific provisions within the Mediterranean agreements, in spite of their common structure and a content which is often very similar, except in the case of Israel; the volume of financial aid, notably under the MEDA programme; sectoral agreements and/or complementary autonomous measures specific to certain states.

These forms of differentiation exemplify the Union’s concern to organize its relations according to the differences between the states. However, the justification used varies. Sometimes in a neutral way, it involves taking into due consideration ‘the characteristics and distinguishing features of each of the countries’;52 sometimes in a more ‘humanist’ way, it takes account of the ‘specific needs and capacities’ of each state; 53 but also, in a more ‘activist’ way, it makes use of the new Euro-Mediterranean Association Agreements not only to safeguard but also to ‘accentuate the specific nature of each of those bilateral relations within the new multilateral framework’.54 In fact, differentiation responds to a double logic in the Union’s approach. It aims both to be respectful of national identities and to be used as an incentive, seeking to reconcile the contradictions harboured by these two approaches. Differentiation respectful of national identities In any regional approach, even following a common model of relationship, the characteristics of the states concerned are taken into account: wealth, population, production models, geographical position, special links with the Union or certain Member States. This can be seen, for example, in the agreements by the specificity of the concessions given in the field of agriculture, by the rhythm at which tariffs are dismantled which varies according to the sensitivity of the products within a transitional period lasting a maximum of twelve years common to all states, and by the sectors of privileged co-operation or provisions on social issues. This differentiation, respectful of national identities, in line with the principle confirmed as regards the European Union at constitutional level (Article 6 TEU), however, becomes particularly relevant with regard to Mediterranean partners. First of all, from now on the relationship is in ‘a spirit of partnership’, clearing away any trace of the ‘colonial taste’ which lingered in the preceding agreements (deliberately denominated as ‘co-operation agreements’). Based on the principles of reciprocity and mutual interest, partnership implies recognition of ‘the other’ in all its sovereign component parts and does away with the idea of the traditional forms of assistance in the relations, with due regard for, in accordance with the Barcelona Declaration, ‘the characteristics, values and distinguishing features peculiar to each of

76 Catherine Flaesch-Mougin

the participants’.55 The preambles of all the new Agreements refer to it, albeit in a formula adapted to each partner.56 Moreover, the Euro-Mediterranean project is a bold venture aiming at structuring a profoundly heterogeneous grouping of states, having among themselves limited trade relations57 and sometimes even political conflicts. A realistic concern required, at least initially, respect for national sensibilities. The choice of agreements for subregions has been clearly rejected since the first Commission Communication of 1992 with regard to the Maghreb. According to this Communication: The new Community approach will be implemented through agreements concluded with each of the three States separately, following the same general outline but with timetables and procedures tailored to meet the needs of the specific country.58 This appeared as a first step in every subsequent regional approach and remains the objective sought after. Moreover, the preambles of each of the new agreements make reference to the need to reinforce regional cooperation and integration and various provisions59 are designed to underpin these efforts, with the financial support of MEDA.60 Such a perspective assumes, however, that those interested themselves act accordingly. Nevertheless, the weak progress made in the field of South–South cooperation and the reiterated importance of the latter in order to bring about the horizontal dimension of the Euro-Mediterranean free trade zone61 could lead the Community to a policy which is, at the same time, more proactive and based on incentive.62 This would have, additionally, the benefit of tempering the perverse effects of a ‘pure and strict’ bilateralism pitching the states into competition rather than enticing them to co-operate. Finally, differentiation respectful of national identities is also vital because the completion of the Euro-Mediterranean project presupposes considerable efforts by the states concerned, particularly so in terms of opening up their economies and the various reforms involving significant costs and representing what are not negligible political risks. These efforts imply a personalized treatment, which is careful to take account of the difficulties and needs specific to each. This concern to ensure a ‘made to measure’ treatment can be seen within the Euro-Mediterranean Association Agreements in the provision for a ‘dialogue’ in various fields (economy, finance, social, etc.). One of the aims of these agreements is to act in common in identifying the problems and seeking adequate solutions.63 The Council Decision of 6 October 1996 concerning the adoption of guidelines for the National Indicative Programmes relating to the MEDA Programme64 should be seen in this same perspective and bears witness to the concern to adapt to the economic and social realities of the partner. In fact, ‘the priorities are to be decided taking into account the stage of development of each

Differentiation and Association within the PEMA 77

country’s economy and society as well as the capacity of its institutions’.65 However, this approach implies the prior commitment by the partner to meeting the challenges facing the region and responding to the objectives of co-operation with the European Union. Thus a more activist facet of differentiation becomes apparent. Differentiation as an incentive Differentiation is also conceived of as a ‘lever’ within the strategy of the European Union. It serves the political and economic ends accepted by the signatories of the Barcelona Declaration, but also expresses the will of the Union to affirm its identity on the international scene (Article 2 TEU). Thus, specific, differentiated treatment will be accorded to those countries which respond to the strategy. Conversely, the new advantages of the reinforced Mediterranean policy will be denied or, at best, grudgingly offered to those not committing to the Union’s wishes. The Euro-Mediterranean Association Agreements, notably, according to the terms established by the Council,66 will make it possible to ‘safeguard or even accentuate the specific nature of each of these bilateral relations within the new multilateral framework’, and will at the same time ‘constitute one of the main instruments’ for implementing the objectives of the Euro-Mediterranean Partnership. Chronological differentiation, 67 seen in the calendar of the EuroMediterranean Association Agreements, can be explained in part by considerations of this nature. In fact, these are meant to represent an important political signal for the southern and eastern Mediterranean countries accompanied by increasing financial support and even additional benefits. However, they are reserved for those which commit to decisive political and economic reforms, not excluding at least a temporary differentiation between potential beneficiaries. Besides Israel, the first countries to have negotiated,68 Tunisia and Morocco, were those which achieved ‘considerable progress made … towards achieving their objectives of full integration’ of their economies into the ‘world economy and participation in the community of democratic nations’. 69 Jordan, moreover, with which negotiations began a year later (July 1995) was also one of the countries to experience rapid growth as a result of the reforms. Consequently, ‘the need to strengthen the process of social and economic modernisation that Jordan has undertaken’ was incorporated in the Agreement. 70 With other countries, on the other hand, negotiations were launched much later and have not yet been completed. The strategy developed rests on the idea that signature of the first agreements would pull them into reform processes judged as unavoidable by all parties in order to ensure sustainable economic development. It is also important as an incentive to the ‘poor students’ not to be left behind by the ‘good students’. Nevertheless, for its part, the Community runs a progressive policy

78 Catherine Flaesch-Mougin

of encouragement in order to make it easier to satisfy the economic and political requirements. These are both cumulative, even if the latter are of a quasiexistential nature since the respect for democratic principles and human rights constitutes an ‘essential element’ of all Euro-Mediterranean Association Agreements71 and of the MEDA Regulation.72 Yet, appreciation of the threshold of the commitment in the reform process is the object of an exclusive decision of the Union. In principle, the partner must not only commit, without ambiguity, to the ‘Barcelona acquis’ but also give tangible evidence that it is being put into practice. However, the European strategy is sophisticated and is not wholly ignorant of the reality. In fact, the Union relies on every slightest indication to influence developments and to preserve contacts with all the states. Certain aspects of the relations with Algeria are, in this regard, rich with example. Algeria’s request to participate in the negotiation process for the Euro-Mediterranean Association Agreements, like Morocco and Tunisia, was received at the beginning of 1994 ‘with satisfaction’. But the political support of the Twelve was only promised on the condition that progressive advances be made in economic stabilization and political dialogue and that a precise electoral calendar be established.73 Nonetheless, ‘informal exploratory’ talks took place shortly thereafter, following the signature of an agreement with the IMF, and Algeria received financial support from the Community. These talks were themselves followed by ‘exploratory contacts’ which were extended to the beginning of 1996. Having secured certain promises from the Algerian authorities, the Commission considered the economic evolution sufficient and proposed that the Council open official negotiations, despite the lack of progress74 and also despite the persisting instability in terms of security. The lenient attitude is not extraneous to the risk of marginalizing Algeria within the Maghreb, nor, without doubt, to Algeria’s importance in terms of energy (providing 35 per cent of the Union’s gas). In practice, the negotiations started on 4 March 1997 but are still not completed. In fact, the continuation of the negotiations, like the signature and the conclusion of the agreement proper, follow the rhythm of the commitments undertaken by the third country. It is even possible to drag out the negotiations just as it is possible that a third country’s efforts could be rewarded by speeding up signature of the agreement and through granting certain (notably financial) benefits. As such, the MEDA instrument plays an important complementary role in the differentiation strategy to take account of national identities and to act as an incentive. The progress towards the conclusion of a EuroMediterranean Association Agreement thus has financial implications. In this sense, the Commission mentioned in its MEDA Report 1996/1997 that the criteria applied to establish the initial indicative country allocations are, over and above the traditional criteria (population size, per capita income), efficiency in implementation as well as progress in structural

Differentiation and Association within the PEMA 79

reform and foremost progress towards the conclusion of the EuroMediterranean Association Agreements. This latter criterion is particularly important since it effectively justifies a substantial increase in fund allocation, with the aim of accompanying the transition process to an economy integrated with the EU-market.75 Tunisia, with which the Agreement was first signed, thus obtained an initial allocation in excess of the average percentage of the growth in financial aid effected in the Mediterranean zone.76 The incentive to obtain rapid signature of an agreement, thereafter, continues for the most ‘active’ partners. In fact, contrary to the preceding system of protocols which assured the third country a determined financial input (until its exhaustion), the allocations are only indicative; they give an ‘idea of the resources’ available and one of the ‘important principles of the new programming approach’ is that they can be reviewed according to the results obtained. 77 Moreover, a degree of subtlety is maintained for adapting the aids, outside the programming, to the rhythm of the reforms and progress accomplished.78 No doubt, it is from this angle that Tunisia, having committed from 1996–97 the whole amount of the funds foreseen for the period 1996–98, was able to benefit from a supplementary amount of 71.75 m euro for MEDA projects.79 As well as more or less rapid access to the Euro-Mediterranean Association Agreements and to increased financial support, differentiation between states can also be made by means of specific concessions provided for in the agreements and the mobilization of complementary instruments. Certainly, these specificities can be explained by their own characteristics, even in their negotiating capacity, but the grant of certain advantages also comes from the deliberate will of the Union. The example of Israel is topical in this regard. Israel benefits from specific treatment as a result of reasons relating to its level of economic development compared to that of the other southern and eastern Mediterranean states. But, over and above this, for more strategic reasons, in anticipation of the objectives of Barcelona and to serve the essential interests of the Union in the short term, the 1994 Essen European Council granted it ‘special status’.80 The rapid negotiation and then signature on 20 December 1995 of the ‘new formula’81 Euro-Mediterranean Association Agreement expressed this ‘special status’, as did the subsequent sectoral82 agreements in order to gain ground in the relations. The objectives of the 1975 Agreement had already been reached, notably the free trade in industrial products and economic co-operation, so that it was then considered necessary to foresee new reciprocal concessions on agricultural products and services as well as to allow Israel to participate in Community research programmes and thus to contribute to the development of high technology. The Commission’s will to react quickly, moreover, can be seen in the existence of an Interim

80 Catherine Flaesch-Mougin

Agreement which allowed Israel, as of 1 January 1996, to benefit from the provisions relating to trade and accompanying measures set out in the Association Agreement.83 What is more, the sectoral agreements came into force before the implementation of the Association Agreement. This mechanism also aimed at reducing the significant deficit in the Israeli balance of trade84 and to make loyal a country that, despite already having significant relations with the European Union, is increasing its free trade zones with other partners. But, above all, the privileged treatment reserved for Israel stems from the will of the European Union to bring, in the terms of the Essen European Council, ‘a significant economic and political contribution in support of the Middle East peace process’. It is a question of leaning on the ‘dynamizing’ virtues of the Israeli economy in order to reinforce regional development in the Middle East, ‘including in the occupied territories’. Effectively, ‘it is essential to improve economic conditions in the region in order to weaken the extremist factions on both sides which are posing an obstacle to peace.’85 However, the support for Israel cannot be dissociated from the unerring support afforded by the Community and the Union to the Palestinian people. Thus, it is interesting that before the European Parliament, the Commission was careful to mention that the Palestinian People benefited from a more favourable preferential regime than that provided under the Israeli Agreement and that this new Agreement would not affect the economy of the Palestinian Territories in the short term.86 Moreover, since the 1980 Venice Summit, the political declarations in favour of the creation of a Palestinian state have multiplied and have been completed by common positions and actions under the CFSP. 87 Exports of Palestinian products have also been afforded trade concessions, and financial support, on a per capita basis, is higher than anywhere else in the Mediterranean area or even in the world.88 Above all, the European Community signed an agreement with the PLO ‘for the benefit of the Palestinian Authority of the West Bank and the Gaza Strip’ 89 which is particularly original in so many ways. The Agreement has been possible only through a judicious use of the EC Treaty provisions on development co-operation as they refer to ‘countries’, rather than those on association which target ‘states’. 90 Its heading, despite its legal foundation (ex-Article 130Y), made reference to association as with the other Mediterranean Non-Member Countries. It is the first time that one can see this dissociation of the qualification of the agreement from its legal basis bearing witness to the Union’s willingness to look to the future and, as far as possible, to assimilate the treatment of this entity with that of the other MNMCs. Undoubtedly, the Agreement is only an interim one91 but its structure and content, over and above certain peculiarities bound up with the field of Community competences and the situation of the partner, bring it closer to many of the other Agreements. Also worth bearing in mind is that this Agreement was a pure Community agreement

Differentiation and Association within the PEMA 81

which was made possible to avoid the heavy institutional Community machinery relative to the Euro-Mediterranean Association Agreements, and which started in anticipation of the process of differentiation. Obstacles that might disrupt the differentiation strategy in the Mediterranean: 2010 – a mythical date? In spite of the considerable development and deepening of the partnership provided by the 1999 Stuttgart Conference and in spite of the fact that it has proved viable in difficult circumstances, take-off remains slow and most MNMCs have deplored the delays in the completion of the association agreements.92 In terms of bilateral relations, the situation has only progressed a little since the Malta Conference of 1997 which underlined notably the need ‘to implement rapidly and in an efficient and careful manner financial assistance’.93 Two years later, little has changed: only the Agreements with the PLO94 and Tunisia have entered into force and that with Jordan was signed at the end of 1997. Probably the freeze in the Middle East Peace Process, which one would have preferred to see dissociated from the Barcelona Process, is an explanatory factor. Nevertheless, there are undeniable institutional obstacles on the Community side. The weight of unanimity upon the key instruments of the partnership, the mixed nature of the association agreements, the difficulty of predicting the reactions of the European Parliament: all are elements which often limit the flexibility of the instruments, this flexibility being indispensable to differentiation. All this renders uncertain the target date of 2010 for the completion of the free trade zone.95 The weight of unanimity upon the key instruments of the Euro-Mediterranean Partnership With future enlargements in mind, the 1996 Intergovernmental Conference sought to reduce the significance of unanimous voting but it remains one of the key instruments in the Mediterranean policy. It must be remembered, however, that the positions of the Member States in this zone are particularly diverse as much because of political considerations (e.g. past colonial links, sensitivities concerning Israel and the Palestinians) as because of economic considerations (e.g. competition in Mediterranean production, energy interests, fisheries issues) and also social considerations (e.g. the weight of ‘foreign’ communities in certain Member States). This gives rise to the risk of numerous blockages in terms of the level of association agreements and that of the MEDA Programme. Based on Article 310 EC Treaty, the Euro-Mediterranean Association Agreements, because of their importance, carry the mark of unanimity. This conditions every step of their elaboration at Council level: setting the mandate for their negotiation on the basis of the Commission’s recommen-

82 Catherine Flaesch-Mougin

dations, potential amendment (where necessary) of the mandate during the negotiations, the signature of the Agreement and the subsequent decision on its conclusion. These all constitute steps where the opposition of one Member State suffices to throw off balance compromises which have been difficult to build. Effectively, it is a dual negotiation: at internal level, first of all, between the Fifteen to finalize, often laboriously so, a mandate leaving the Commission little margin for manoeuvre; then, at the negotiations themselves, with a more or less ‘resistant’ third country. This situation is not uncommon if we consider the length of the negotiations which characterize the Euro-Mediterranean Agreements: two years with Morocco, 28 months with Jordan, nearly four years with Egypt. In fact, the initial offer of the Community deeply disappointed those southern and eastern Mediterranean countries of which great reform efforts had been demanded. The attractiveness of the proposed model lay more in the political anchorage to Europe and future perspectives deriving from free trade than in the short-term concessions which the agreements provided.96 In reality, it was for the Mediterranean partners to progressively abolish their tariff protection in order to offer European products concessions equal to those from which they benefited on the Community market. Yet, for its part, the European Community intended to guarantee the existing concessions to the associates97 but not to afford them any new ones – notably for agricultural products, the principle focus for argument during the negotiations. As a result of the fears of competition emanating from the southern Member States of the EU, paradoxically the firmest advocates of the reinforcement of the Mediterranean policy, agreement could not be reached on better access for Mediterranean agricultural exports. The concessions have been put off until later since the agreements foresee greater reciprocal liberalization of trade in agricultural produce only coming about gradually98 and the situation will be re-examined from 1 January 2002,99 with a view to applying liberalization measures as of the following 1 January. However, the Mediterranean partners considered a Community effort in this regard to be fundamental just as they considered financial support to be fundamental. 100 The reaction of Morocco, a substantial exporter, was very strong when it presented a Memorandum which was perceived as amounting to a counter-proposal to the Community’s offer. 101 According to the partner’s attitude 102 with regard to its agricultural exports and its power of influence, negotiation was made rather difficult on that basis – but it is clear that the Commission has lacked the necessary flexibility to adapt to the specificities of the partner and secure the rapid conclusion of negotiations in line with the envisaged timetable. 103 Moreover, in its 1994 Communication, the Commission noted that the attainment of the latter objective required ‘flexibility on the part of the Council, in particular as far as agricultural trade and financial support (were) concerned’. Unless the Community wants to be

Differentiation and Association within the PEMA 83

reproached for having side-stepped the fixed guidelines, something which may well have been the case, 104 the Commission must return before the Council to request the extension of its mandate. This has always been difficult to do and signature in itself has often stumbled at the final bargaining stage relating to products which are of great importance to the partner. 105 Nevertheless, if the Commission’s impact study on the concessions awarded to MNMCs106 is to be believed, some supplementary quotas would not have rocked internal balances. The bilateralism adopted in the relations with the MNMCs accentuates once again the inconveniences of unanimity because the search for compensation is more limited for the concerned Member States unless the partner has ‘external’ assets (as in the case of Morocco which was able to secure certain concessions against the maintenance of fishing rights, notably to the advantage of Spain), or if, at Community level, arrangements can be found (as in the case of Portugal which benefited from the support of 2.2 m euro for its canning industry in exchange for a compromise on the import of tinned Moroccan sardines).107 Moreover, the need for unanimity in the negotiation phase and the conclusion of the association agreement does not preclude its requirement at a later date, with the same lack of operational flexibility in the implementation of the agreements. In the hypothesis of additional protocols amending the provisions of the initial agreements, such as in the case of the Union’s enlargement, the rules of procedure for agreements based on Article 310 EC Treaty will apply. Since the Amsterdam Treaty, these will also be required for the purposes of ‘establishing the position to be adopted on behalf of the Community in a body set up by these agreements’. Where previously the Treaty rules corresponding to the concerned field were applicable108 and so majority voting often applied, the new Article 300 EC Treaty requires unanimity. Furthermore, unanimity on the basis of Article 300 EC Treaty will also be required for the suspension of the application of an association agreement should an essential element, such as a breach of democratic principles, be lacking. This requirement is an onerous and difficult one because the weight of the economic and political interests of a Member State can prevent a decision from being taken and thus throw doubt upon the credibility of the Union’s declarations defending such values. In any case, its differentiation policy requires that a third state violating them be sanctioned rapidly. Otherwise, the Council’s procrastination could be synonymous with complaisance and have the opposite effect. No doubt, other autonomous instruments are less difficult to suspend, but the symbolism underpinning association agreements, an essential element of the partnership, is in question here. The unanimity that permeates the Association Agreements can also be found in the MEDA programme, the principal instrument of the

84 Catherine Flaesch-Mougin

Euro-Mediterranean Partnership in terms of non-refundable aid: for the period 1996–99, 3425 m euro of the five-year package of 4685 m euro approved at the 1995 Cannes European Council. But the regulation governing this programme was founded upon Article 308 (ex-Article 235) EC Treaty which requires unanimity and allows each Member State to control its adoption. Recourse to this legal basis was justified by the fact that Israel was one of the beneficiaries, which, as a result of its level of development, excluded the possibility of reverting to Article 179 (ex-Article 130 W) EC Treaty on development co-operation policy. However, it seems that Israel, in as much as it is cited in the MEDA Regulation, according to the Commission’s 1997 report, has not profited from any financing under this heading and that this country is not even cited in the Council Decision setting out the guidelines for the indicative programmes for each country. Paradoxically enough, on the other hand, it is interesting to note that Israel has received support under the ECIP, 109 it in turn being based on Article 179 (ex-Article 130W) EC Treaty. 110 But whereas the latter requires a qualified majority, Article 308 (ex-Article 235) EC Treaty enables unanimity to be retained. This voting mechanism is no stranger to the difficulties in the adoption of the 1996 MEDA Regulation where a variety of delicate questions had to be settled: the adoption procedure for the indicative programme guidelines, the nature of the committee taking decisions on the financing by the Commission, the duration of the regulation, the degree of transparency in tendering procedures and the mechanisms for the suspension of aid should an essential element be lacking. The difficulties were such that the adoption of the latter was put back to a later date in order not to block the adoption of the basic Regulation.111 Also here, unanimity is capable of delaying Community support for otherwise (preferably) rapid reforms. Not only does the instrument become less of an incentive but it causes third parties to doubt the will behind the support of certain states of the Union. Happily, it was decided that these subsequent decisions taken by the Council on the national guidelines or any suspension of aid would be adopted by qualified majority. This is undeniable progress, as noted by Commissioner Gradin before the European Parliament: ‘The introduction of qualified majority voting also ensures that necessary decisions can be taken quickly and effectively. This strengthens the Union’s credibility.’112 However, at the level of carrying out the MEDA Programme, the obstacles remain and it seems that Member States have excessive powers in financial decision-making and even in the field of calls for tenders.113 In the short term the main problem again is the adoption of the new MEDA Regulation, which will amount to a test of European commitment. Already, as a result of the resignation of the European Commission 114 in 1999, there have been delays and the then Commissioner Marin, in his speech to the Stuttgart Conference, mentioned the ‘the risk of a legal and

Differentiation and Association within the PEMA 85

financial void from the end of this year, upon expiry of Meda I’. 115 Actually, as has recently been confirmed by the European Court of Justice, no financial commitments under MEDA II will be possible in the absence of a legal basis.116 And what is more, the adoption of the latter is only a first step in the settlement, in conjunction with the Mediterranean partners, of the guidelines for the National Indicative Programmes and the subsequent signature of the Financing Framework Conventions for disbursement. Once again, unanimity threatens the speedy adoption of a text that carries a fundamental political and financial weight, notably for those states which have engaged in the desired reforms and which need urgent financing. Moreover, such a delay would further confirm the impression of slowness given by the Euro-Mediterranean Association Agreements. The mixed nature of the Euro-Mediterranean Association Agreements – an additional cause of delays in the entry into force of the agreements Already slowed down by the length of the negotiations, the application of the agreements is threatened by delicate problems linked to the dividing up of competences within the Union and to their mixed character. Indeed, as a result of their contents, which echo the three baskets of the Barcelona Process, the new agreements go beyond the field of exclusive Community competences and require the intervention of the Member States as well as the Communities. This is so notably in the political dialogue established in the agreement, in the various provisions on the subject of the struggle against the traffic of drugs, on cultural co-operation and relating to certain aspects of trade in services or linked to intellectual property rights. Accordingly, the concluding phase demands, over and above the Community process, the approbation of the agreement by each of the Member States. This amounts to an ever uncertain process since a single state can make it fail and it seems it will be difficult to get around this risk by reverting to the provisions on reinforced co-operation. 117 Be that as it may, the mixed procedure remains a great cause of additional delay to the entry into force of the agreements. As is demonstrated by the following example, specific blockages can arise. Thus Belgian senators blocked the ratification of the Euro-Mediterranean Association Agreement with Israel 118 because of the hurdles which the Israeli Prime Minister presented to the peace process. While this attitude falls perfectly within the spirit of the Union’s differentiation strategy, sometimes the considerations are less ‘noble’ and well organized lobbies can play procedural imperatives in order to delay the national ratifications. Even without specific difficulties, long months are always needed for ratification – and sometimes even years. In this context, Commissioner Marin reminded the European Parliament of the difficulties experienced when starting up the association strategy and stated that on average two years and four months were needed for ratification of the agreements.119 This situation has been revealed over and

86 Catherine Flaesch-Mougin

again but, in spite of urgent demands addressed to the Member States, 120 things continue to evolve slowly. From this, one better understands the reason behind maintaining a purely Community procedure which does not need the ratification of the states and which is based on a legal foundation which does not impose unanimity, following the example of the Interim Association Agreement with the PLO. The delays to the entry into force of the new agreements may have negative implications on the global Mediterranean strategy. This strategy relies on the progressive implementation of the new agreements and the dynamizing virtues of the most advanced states, on economic reforms and the opening up of frontiers allowing for the deepening of free trade with Europe and on the stimulation of intra-regional co-operation. But, in the absence of the entry into force of the new provisions and unless specific provisions are adopted, the previous co-operation agreements will remain applicable so that the new clauses will not apply, particularly those on free trade, political dialogue and new fields of co-operation. Therefore the Community has sought to minimize the negative consequences of these delays. Thus the financial advantages of MEDA I have not been linked to the formal conclusion of the agreement, but to the progress made with a view to this conclusion. Moreover, the conclusion of sectoral agreements, even where evoked within the association agreements, is not dependent on the entry into force of the latter, as is illustrated by the existence of agreements on scientific and technical co-operation with Israel.121 Besides, the Community has the opportunity to anticipate the application of certain provisions in the Euro-Mediterranean Association Agreements when it is ‘in the interest of the Parties to implement as speedily as possible’,122 as mentioned in the Interim Agreement with Israel on trade and trade related matters.123 As regards the other countries (Tunisia, Morocco, Jordan), this solution has not been taken up and only the new agricultural concessions have been put into practice by autonomous measures. This choice, at first sight less favourable, effectively leaves the Mediterranean partners additional time for adaptation in order to prepare themselves for the ‘opening shock’, but there is nothing obliging them to do so. In terms of the agreements the calendar for dismantling the barriers will actually only start on the date of their entry into force.124 These solutions, designed to alleviate the inconveniences of the delayed entry into force of the agreements, however, give no legal guarantee as to the creation of the free trade zone by the 2010 deadline. Bearing in mind the twelve-year transitional periods, and given the lack of (unlikely) measures to accelerate matters, only Tunisia will be in a position to meet the deadline. No doubt it is a sort of political reference date 125 essentially designed to mobilize the European and Mediterranean partners. However, certain imperatives external to the area cannot be ignored. In the trade competition between Europe and the United States, first of all, it is in the

Differentiation and Association within the PEMA 87

interests of the European Union to actively bring about its regionalist EuroMediterranean policy in response to the activist strategies of the United States, especially on the American continent. Moreover, the Mediterranean states themselves could suffer the negative consequences of competition with the more successful of the Latin American countries. 126 Indeed the Community and its Member States – in order to curb the risk of eviction from the entire American continent – undertook commitments through preferential agreements, thus completely breaking away from their previous policy towards this part of the world.127 What is more, the WTO constraints threaten to make the position no more comfortable. The reciprocity of the concessions envisaged in the new association agreements respond to the concern to ensure conformity with the WTO requirements. However, at present these commitments are more a declaration of intent rather than a reflection of the reality. As the agreements are not in force, a system of non-reciprocal preferences remains applicable as foreseen in the preceding co-operation agreements, with the exception of Israel. In view of the numerous problems arising caused by the delays pending the Member States’ ratification, one can only hope that the new provisions of Article 300 EC Treaty will be used for the signature of the next agreements. This would allow the Council to provide for their provisional application. For this to happen, however, the Member States will have to accept this for the entirety of the agreement. Also, the European Parliament has no more than a right to be kept informed and a situation where it feels that it has been bypassed should be avoided. To do otherwise may provoke its negative reaction when consulted under the assent procedure for the conclusion of an agreement of which the trade chapters are already in force. The problem of predicting the attitude of the European Parliament The European Parliament, thanks to its many powers, has the opportunity to oppose the Council, even to reorient its decisions. As such, it can strengthen but also contradict or simply make slight modifications to certain aspects of the differentiation strategy applied to the Mediterranean. Thus one may recall that the European Parliament, strong from its power of assent on the subject of association agreements given to it by the Single European Act, has not hesitated to play the role of ‘trouble-maker’ in the Mediterranean policy. Thus it withheld its opinion on a number of protocols based on Article 310 (ex-Article 238) EC Treaty, as it considered the third state did not sufficiently respect democratic principles and human rights.128 This attitude, not without criticism in the name of a certain political realism, nevertheless pushed the Community to adopt a more systematic assertion of these values. In the light of evolution in the world context, these values became an essential element in the strategy pursued in the Mediterranean. How does it stand today?

88 Catherine Flaesch-Mougin

On the subject of the conclusion of an association agreement founded on Article 310 EC Treaty, the European Parliament always possesses a power of assent and, consequently, also a potential veto. This power has even been extended by the Maastricht Treaty to other agreements. 129 In practice, however, this power has been withheld from the European Parliament in financial matters. Actually, the financial protocols bound up with the cooperation agreements and based on Article 310 EC Treaty have been replaced by an autonomous instrument under which the European Parliament is consulted only for its opinion. Thus, it is essentially at the conclusion of the association agreements that the EP is able to exercise its power of assent. At this level, if the risk of blockage continues, certain developments must be taken into account, apparently making that risk less significant than previously. In the first place, the voting requirements have been made more flexible by the Maastricht Treaty. 130 Moreover, because from now on the European Parliament has at its disposal significant legislative powers, it has less need to play all its trump cards in its strategy to establish its institutional position in external matters. Above all, the European Parliament reflects an attitude that is more pragmatic than before. In this way, facing regimes which are not ‘ideal democracies’ such as Morocco or Tunisia,131 the European Parliament has given its assent, 132 taking the view that the existence of strong relations makes potential sanctions or pressure on the partner more effective. Such an ‘understanding’ presupposes, however, that the differentiation–sanction policy of the European Union towards any state making a serious violation of human rights and democratic principles is effective. Yet, on the subject of the suspension of agreements or aid under MEDA, the European Parliament is deprived of the right to hold up the Council and is not even consulted upon the final decision. 133 Where there is too much laxity, there is a chance that the European Parliament will be more reticent in any future examination of association agreements, and all the more so since the political situation of certain states might become ‘even less ideal’. Nevertheless, the European Parliament would, no doubt, be sensitive to the risk of marginalizing these countries within the Mediterranean area and could, in this light, make it more inclined to grant its assent in return for closer monitoring of these countries. Concerning the autonomous dimension of the Mediterranean policy, the European Parliament, in spite of the changes resulting from the Amsterdam Treaty, only possesses the power of consultation in fields as important as agriculture, trade policy or financial aid under the MEDA Regulation. 134 Should it disagree with the Council on matters it considers to be determining factors in the Mediterranean strategy, the European Parliament could attempt to lean on the Council via other powers, be they through the budget or judicial actions. The adoption of the MEDA II Regulation could provide the opportunity for the Parliament to act in this way. It has already

Differentiation and Association within the PEMA 89

been said that it might be possible to contest the legal basis of the preceding Regulation. If reverted to again, the European Parliament, availing itself of its power of co-decision under Article 179 (ex-130W) EC Treaty, could threaten an action for annulment of the envisaged text should it not be satisfied with the provisions. It could even point to the non-compulsory character of spending for MEDA credits135 and use its powers on that matter to justify a refusal to allow their inclusion in the budget. But to do so would further stretch the delay in the adoption or implementation of a long awaited text.136

Conclusion In conclusion, the example of the Union’s relations within the Pan-EuroMediterranean Area shows how differentiation constitutes an important component of the European Union’s external policy. Beyond taking into account the specificities of a third country, it seeks to engender proactive, stimulating effects. This presupposes, first of all, that a coherent policy vision of these relations with all regions of the world is defined and that such a vision rests on instruments flexible enough to implement it. As far as the association policy of the Union towards this proximity area is concerned, neither of these aspects appears to have been mastered properly. Contribution translated from the French by Kirstyn Inglis.

Notes 1. This quotation is a translation of P. de Schoutheete’s definition of differentiation: ‘la forme organisée et structurée de la diversité’, in Une Europe pour tous (Paris: O. Jacob, 1997), 110. 2. Agreement between the EEC and Principality of Andorra, OJ, L374/13, 31 December 1990. 3. Agreement on Customs Union and Co-operation between the EEC and the Republic of San Marino, OJ, C124/1, 21 April 1997. 4. The Free Trade Agreement of 1972 (OJ, L300/189, 31 December 1972) is still in force but a package of seven sectoral agreements is on the verge of signature: Bull.-EU, June 1999, point 1.3.6. 5. We take it to mean the relationship resting on the agreement founded on Article 310 (ex-Article 238) EC Treaty since the denomination does not always make express reference to it. This is the case, for example, for the European Economic Area where the term association does not appear. 6. Even though not yet in place, this is the fixed objective of the future relationship with Chile and MERCOSUR: see M.-A. Gaudissart, ‘Vers une association avec certains partenaires latino-américains?’, in C. Flaesch-Mougin and J. Lebullenger (eds), Le partenariat entre l’Union européenne et les Amériques (Rennes: Apogée, 1999), 205. 7. OJ, L1/1, 3 January 1994.

90 Catherine Flaesch-Mougin 8. Europe Agreements between the European Communities and their Member States (see the appendix at the end of the book). 9. The Euro-Mediterranean Association Agreements establishing association between the European Communities and their Member States and Tunisia, Israel, Morocco and Jordan have been signed, but only the first is in force: see OJ, L97/1, 30 March 1998; SEC (95) 1719, COM(95)740 Final, 20 November 1995 and COM(97)554 Final, 29 October 1997; moreover, an Interim EuroMediterranean Association Agreement exists with the PLO; OJ, L187/1, 16 July 1997. 10. OJ, 217/3685, 29 December 1964. 11. OJ, L133/1, 31 May 1973. 12. OJ, L161/1, 14 March 1971. 13. Partnership and Co-operation Agreement between the EC and their Member States and the Russian Federation, OJ, L327/1, 28 November 1997. 14. OJ, L49/1, 19 February 1998. 15. The procedures on the conclusion of the agreement are suspended because of the situation in the country. 16. OJ, L181/1, 24 June 1998. 17. Articles 54, paragraph 2; 66; 73C, paragraph 2; 75; 84, paragraph 2; 99; 100; 113; 235 in conjunction with Article 238, paragraph 2 on procedure. 18. The Co-operation Agreement between the EC and Albania on trade and trade and economic co-operation, OJ, L343/2, 25 November 1992. 19. Agreement between the EC and the Former Yugoslav Republic of Macedonia of 29 April 1997, OJ, L348/1, 18 December 1997. 20. ECJ, 30 September, Meryem Demirel v. Stadt Schwäbisch Gmünd, Case 12/86, ECR, 1987, 3751. 21. See the designation of the ‘European party’ of the Europe Agreement with Slovenia, OJ, L51/1, 1 February 1999, above. 22. For analysis of the Agreement, see O. Jacot Guillarmod, L’accord EEE: analyse et commentaire (Zurich: Schulthess, 1992), and for a recent appraisal see J. Forman, ‘The EEA Agreement five years on’, CML Rev., 1999, 151. 23. Preamble to the Agreement, OJ, L1/1, 1 January 1994. 24. There is an abundance of literature on the subject; for an analysis of the agreements and the evolution of the relations, see in particular M. Maresceau (ed.), Enlarging the European Union, Relations Between the EU and Central and Eastern Europe (London and New York: Longman, 1997). 25. OJ, L85/1, 20 May 1998. 26. As for the Commission position and some reactions, see S. Holveque, ‘L’Union européenne s’ouvre à l’est’, RMCUE, no. 421, 1998, 514–23. 27. 1999 Helsinki European Council, Presidency conclusions. 28. See G. Edwards and E. Phillipart, ‘The Euro-Mediterranean Partnership: fragmentation and reconstruction’, RAE/LEA, no. 2, 1997, 465. 29. The qualification of the new generation of agreement with the Mediterranean countries has long since remained suspended, certain Member States wishing, so as to properly differentiate them from the CEECs, that reference to Association does not appear. 30. COM(94)427 Final, 19 October 1994, 4. 31. See J. Raux and V. Korovkine (eds), Le partenariat entre l’Union Européenne et la Russie (Rennes: Apogée, 1998). 32. OJ, L327/1, 1 December 1997.

Differentiation and Association within the PEMA 91 33. For an analysis of these agreements, see C. Hillion, ‘Partnership and Co-operation Agreements between the EU and NIS’, EFA Rev., vol. 3, 1998, 399–420. 34. See Bull.-EU, April 1997, point 1.4.67 and COM(98)618 Final, 28 October 1998. 35. OJ, L348/169, 18 December 1997, 3 and 10. 36. In this sense, see P.-C. Müller-Graff, ‘Legal framework for EU–CEEC relations’, in Enlarging the European Union, above, 27. 37. I. Leshoukov, ‘Beyond satisfaction: Russia’s perspectives on European integration’, Discussion Paper, C26/1998, Center for European Integration Studies, Bonn. 38. See, for example the Conclusions of the 1997 Luxembourg European Council, point 67, Agence Europe, 14 December 1997. 39. Conclusions of the 1997 Luxembourg European Council, point 68, above and COM(98)589 Final, 26 November 1998. 40. J. Blaha, D. Heimerl, ‘Les co-opérations transfrontalières’, Courrier des pays de l’Est, no. 413, October 1993, 28. 41. OJ, L49/1, 1 March 1998. 42. Translated from a French quotation: ‘mis à l’épreuve l’arsenal juridique dont [elle] dispose dans le domaine des relations extérieures.’ 43. 1999 Cologne European Council Conclusions, point 72, Agence Europe, no. 7480, 6 June 1999, 17. 44. COM(1999)235 Final, 26 May 1999. 45. See the contribution of Jean Raux. 46. Report of the Council to the Essen European Council, Annex V of the Presidency Conclusions, Bull.-EU, 12, 1994, point 1.55. 47. Bull.-EU, 11, 1995, 153. Signatories thereto are: the Council, the Commission, the Fifteen Member States, the three ‘northern States’ capable of acceding to the Union (Turkey, Malta and Cyprus), the three Maghreb states (Tunisia, Morocco, Algeria), the four Mashrek states (Jordan, Syria, Lebanon, Egypt) as well as Israel and the Palestinian Authority. Libya, sanctions having been lifted, was invited to the Stuttgart Conference as a special guest and could soon join the process if it accepts ‘the Barcelona acquis’. Mauritania is an observer, as is the Arab Maghreb Union (AMU) and the Arab League, but would like to become a full member. 48. By the European Community and the ECSC and their Member States other than the Agreement with the PLO. 49. For references see appendix at the end of the book. 50. Council Regulation 1488/96 of 23 July 1996 on financial and technical measures to accompany (MEDA) the reform of economic and social structures in the framework of the Euro-Mediterranean Partnership, OJ, L189/1, 30 July 1996. 51. See appendix at the end of the book. 52. Position of the European Union before the Barcelona Conference, Bull.-EU, June 1995, point 1.49. 53. Report of the Council to the Essen European Council, above. 54. Position of the European Union before the Barcelona Conference, above. 55. See E. Lannon, ‘La déclaration de Barcelone, acte fondateur du partenariat euro-méditerranéen’, RMCUE, May 1996, 358–68. 56. Reference is made to the relations based on ‘reciprocity, partnership and codevelopment’ (Tunisia) to which ‘solidarity’ is added for Morocco; the

92 Catherine Flaesch-Mougin

57. 58. 59.

60.

61.

62.

63.

64.

65. 66. 67. 68. 69. 70. 71. 72. 73.

Agreement with Jordan and that with the PLO make no mention of co-development. Bearing in mind that intra-regional trade is estimated as representing 5 per cent of the total foreign trade. Sec (92) Final, 30 April 1992, 12. It is foreseen in the common provisions under the heading free movement of goods that the agreement ‘shall not preclude the maintenance or establishment of customs unions, Free Trade Areas or arrangements for frontier trade insofar as they do not have the effect of altering the trade arrangements provided for in this Agreement’. Similarly under the heading devoted to economic co-operation, regional integration (or co-operation) is considered to be part of the general objectives to be pursued and reference is also made to certain specific domains of co-operation. Next to these provisions common to all agreements, declarations are annexed on possible granting by the Community of cumulation of rules of origin in case of the conclusion of free trade agreements among MNMCs. One must recall that support for regional and cross-border co-operation is part of the objectives of the Programme (Annex II of the Regulation of 23 July 1996, above) representing 10 per cent of the total financial input. See in this sense the Conclusions of the 1997 Malta Ministerial Conference, Agence Europe, no. 2035, 16 May 1997 and those of the 1999 Stuttgart Conference, Documents d’actualité internationale, no. 12/99, 484, where the issue is tackled within the preliminary provisions (point 3: ‘Ministers emphasised the fundamental importance of intra-regional and sub-regional co-operation and integration in all three chapters’), and then within the framework of the financial and economic basket (notably at points 21, 22 and 27). The Ministers at the Stuttgart Conference asked the Commission ‘to contribute a reflexion paper on the methodology for regional co-operation’; this had tackled the problem in the two Communications of 1998, COM(98)538 Final concerning the Euro-Mediterranean Partnership and the Single Market on the one hand and COM(98)254 Final on the Euro-Mediterranean cumulation of rules of origin on the other. See, for example, the economic dialogue on the macroeconomic and financial problems (Article 44 of the heading on economic co-operation and Article 77 of that on financial co-operation in the Tunisia Agreement, OJ, C97/12–18, 30 March 1998, above. Council Decision of 6 December 1996 concerning the adoption of the guidelines for the indicative programmes concerning financial and technical measures to accompany the reform of economic and social structures in the framework of the Euro-Mediterranean partnership (MEDA), OJ, L325/20, 14 December 1996. Point 11 of the above Decision, 23. Bull.-EU, June 1995, point 1.49. See appendix at the end of the book. Opening negotiations at the beginning of 1994. See the preamble to the Euro-Mediterranean Association Agreements with Tunisia and Morocco. See the Preamble of the Agreement. Including in the Interim Agreement with Israel (Article 1). Article 3 also aims at the respect of law and fundamental freedoms. Agence Europe, no. 6166, 9 February 1994, 8.

Differentiation and Association within the PEMA 93 74. Agence Europe, no. 6719, 1 May 1996, 8. 75. COM(1998)524 Final, 14 September 1998 on the implementation of the MEDA Programme. 76. Aproximately 258 m euro being twice the amount of the preceding protocol over a shorter period (three instead of five years), see Agence Europe, no. 6524, 17–18 July 1995, 1. On the preceding system of financial protocols see E. Lannon and J. Raux ‘La co-opération financière et technique bilatérale avec les Pays de la Méditerranée Sud et Est’, in Jurisclasseur-Europe, relations extérieures, fascicule 2233, éditions Techniques, Paris, May 1995. 77. Council Decision below, point 4.21. 78. Point 3 of the above Council Decision. 79. See the implementation report, below, 10. 80. Conclusions, Bull.-EU, December 1994, point 1.14. 81. It should be recalled that association status had been refused for Israel for 1975. This Agreement itself was based on Article 113 and not further qualified. 82. Agreements between the EC and the State of Israel on procurement by telecommunications operators and government procurement, OJ, L202/72–85, 30 July 1997; Agreement for scientific and technical co-operation, OJ, L209/22, 19 August 1996, followed by a new agreement consequent to the adoption of the fifth Framework Programme, OJ, L83/50, 27 March 1999. 83. OJ, L71/1, 20 March 1996, 1. 84. One must recall that, in 1994, trade with the European Union represented 35 per cent of Israeli exports, 50 per cent of its imports and 85 per cent of its trade deficit. 85. Caligaris Report on the proposal for a decision of the Council and the Commission on the conclusion of a Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, on the one part and the State of Israel on the other part, A4–21/96, 30 January 1996. 86. OJ Series of Debates, no. 4–472, 307. 87. See E. Lannon, ‘La PESC et le processus de paix au Moyen-Orient: bilan et perspectives offertes par le traité d’Amsterdam’, in M. Dony (ed.), L’Union Européenne et le Monde apr e` s Amsterdam (Brussels: Université Libre de Bruxelles, 1999), 259. 88. 258.7 euro per capita as opposed to 11.2 throughout the rest of the Mediterranean and 23.2 for Lomé countries: see COM(97)715 Final, 11 March 1999 on ‘The role of the European Union in the peace process and its future assistance to the Middle East’. 89. Euro-Mediterranean Interim Association Agreement. 90. For an exhaustive study of the Agreement and its political significance, see E. Lannon, ‘L’accord d’association intérimaire Communauté Européenne-OLP: l’institutionnalisation progressive des relations euro-palestiniennes’, RAE/LEA, 1997, 169–90. 91. However, it remains in force until the conclusion of the (definitive) Association Agreement for which the preparatory negotiations ought to have started 4 May 1999 (Article 75). 92. Agence Europe, no. 7447, 17 April 1999, 9. 93. Agence Europe, no. 2035, 16 May 1997, 4. 94. This Interim Agreement did not pose problems to ratification comparable to the other agreements (see below). 95. Conclusions of the Malta Conference, above.

94 Catherine Flaesch-Mougin 96. See E. Rhein, ‘Europe and the Mediterranean: a newly emerging political area’, RAE/LEA, 1996, 83. 97. Bearing in mind that the Mediterranean countries benefit from a more or less privileged access for their agricultural exports to the Community market and from a quasi-free access for industrial products. 98. See, for example, Article 16 of the Tunisia Agreement. 99. Article 17, Jordan Agreement. 100. COM(94)427 Final, 19 October 1994, 10. 101. Agence Europe, no. 6172, 17 February 1994, 9. 102. With Tunisia, olive oil proved a major difficulty but this country is a lesser exporter of agricultural produce than Morocco where it makes up 30 per cent of export receipts, and it has directed its negotiating strategy towards increased financial support and the rapid conclusion of the Agreement. 103. A situation which continues according to the report of J. Sakellariou containing the European Parliament’s proposal for a recommendation to the Council on the European Union’s Mediterranean policy, A4–95/99, 25 February 1999, 5. 104. The delay between the initialling and the signature of the Agreement with Jordan thus takes root in the opposition of Spain to the insertion of a clause to allow the Association Committee to revise the allowable quotas in terms of exemption from obligations where those quotas have been exhausted. The Council reproached the European Commission for having stepped outside of its mandate by inserting this provision which was subsequently deleted and the compensation for this was an increase in the quotas for imports of Jordanian tomato concentrate. See the EP Report of Mrs Aelvoet, A4–0165/98, 28 April 1998. 105. Thus the signature of the Agreement with Morocco was delayed by the opposition of certain states to the level of quotas for flowers (the Netherlands, Germany, Belgium, France) and the signature of the Agreement with Tunisia stumbled as a result of Spain and Italy’s attitude to the access regime for guaranteed imports of olive oil. 106. COM(97)477 Final, 1 October 1997. 107. Agence Europe, no. 6604, 13–14 November 1995, 4 and 5. 108. See Article 2 of the Decision on the Conclusion of the Agreement with Tunisia which, since the entry into force of the Amsterdam Treaty, becomes obsolete as a result of the provisions of Article 300 EC Treaty. 109. See the ECIP Progress Report (1997), Annex 5.1. 110. Council Regulation of 29 January 1996, OJ, L28/2, 6 February 1996. 111. The definitive procedure in terms of Article 16 of the MEDA Regulation ought to have been determined before 30 June 1997; the Regulation was not actually adopted until 7 April 1998: OJ, L113/3, 15 April 1998, 3. 112. OJ, Series of Debates, no. 4–516, 12 March 1998, 271. 113. M. Gianni, ‘L’architecture décisionnelle du programme MEDA’, Collegium, no. 16, VI-1999, 17. 114. The Commission considered such a question was not part of its current and urgent business. 115. Agence Europe, no. 7447, 17 April 1999, 10. 116. ECJ, Case C-106/96, United Kingdom v. Commission, 12 May 1998, ECR, 1998, 2729. 117. In view of the conditions of Article 11 EC Treaty.

Differentiation and Association within the PEMA 95 118. The text was kept out of the current and urgent business of the European Commission for Foreign Affairs and even after approbation was again put back. In parallel, the Agreement was not put before the French National Assembly. See La Libre Belgique, 18 December 1998. 119. Plenary session of the EP of 11 March 1998, Agence Europe, no. 7423, 4. 120. See, for example, the Resolution of the EP of 14 May 1998 on the EuroMediterranean agreements, OJ, C167/196, 1 October 1998 and the Conclusions of the Malta Conference, above, 4. 121. The motivation behind the Decision recalls that the two Parties ‘have signed a Euro-Mediterranean association agreement providing for the negotiation of a co-operation agreement in the field of science and technology’ (OJ, L209/22, 19 August 1996). For a contrary view see Article 38 of the Agreement with Jordan which foresees specific Agreements on the subject of transport to be negotiated, if necessary, following the entry into force of the Association Agreement. 122. Motivation behind the Interim Agreement with Israel, OJ, L71/2, 20 March 1996. 123. This Agreement includes provisions that precede the exclusive Community competences and substitute those of the Agreement of 1975 which remain in force in other areas (Article 40). 124. See, for example, Article 11 of the Tunisia Agreement. 125. Bearing in mind the fact that it appears in the Barcelona Declaration and has regularly been reconfirmed in Ministerial Conferences, especially in Stuttgart (Conclusions, point 19) but does not appear in the Euro-Mediterranean Association Agreements 126. See already in the investment field, ECIP Progress Report, 1997, 8: ‘The growth performance, local economic, political, regulatory and legal environments … are less favourable to incoming European investors than in Asia and Latin America.’ 127. See J. Lebullenger, ‘Les relations de partenariat de la CE et de ses Etats membres avec le Mercosur et le Chili’, in Le partenariat entre l’Union européenne et les Amériques, above, 179. 128. Protocols with Syria (OJ, C39/52–55, 17 February 1992), Morrocco (OJ, C39/54, 17 February 1992, 54) and Israel (OJ, C94/55–56, 11 April 1998). 129. This is the case for the fisheries Agreement with Morocco because of its noteworthy implications for the budget (OJ, C141/94, 13 May 1996). The European Parliament is scrupulous in its surveillance of respect for its rights; see ECJ, Judgment of 8 July 1999, in the case European Parliament v. Council, C189/87, not yet published. 130. The vote is taken by the majority of those expressed and not by the majority of the members. 131. Von Habsburg report on the proposal for a Council Decision on the conclusion of a Euro-Mediterranean agreement establishing an association between the European Communities and their Member States, of the one part, and the Kingdom of Morocco, of the other part, A4–173/96, 29 May 1996. 132. OJ, C181/15, 24 June 1996 and C17/190, 30 March 1996. 133. See Article 300 EC Treaty, paragraph 2, for the agreements and Article 16 modified by the 1998 Regulation, above, for MEDA. 134. Even if, as a result of the financial implication applying to the procedure of legislative involvement, the European Parliament has no veto under Article 308 EC Treaty (ex-Article 235).

96 Catherine Flaesch-Mougin 135. See the classification annexed to the interinstitutional Agreement of 6 May 1999, OJ, C172/18, 18 June 1999. 136. Concerning the litigation threat, this is a minimum risk since the Court can provide that the effects of the text will not be annulled until the adoption of a replacement and often makes use of this possibility in cases between the Council and the Parliament.

5 The Many Faces of EU Conditionality in Pan-Euro-Mediterranean Relations Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

Introduction: conditionality – a multifaceted and evolving concept The use by a state, a regional or an international body of political, diplomatic and economic instruments and policies in order to influence the internal and external policies of a third state is nothing new in international relations. The collapse of the USSR, however, marked a turning point as during the Cold War what was generally referred to as ‘linkage’ was used mostly as a policy tool in the context of the bipolar confrontation. Throughout the last decade, the somewhat ambiguous concept of ‘conditionality’ has also begun to take shape in European spheres. Such an evolution is borne out by the progressive institutionalization of internal and external conditionality within the treaties. Whereas the Treaty of Rome envisaged only socio-economic rights, 1 the Single European Act gave the Community the ‘responsibility for promoting the principles of democracy, the rule of law and respect for human rights’ and gave the European Parliament (EP) a right of veto within the framework of the external relations of the EEC. With the Treaty on European Union (TEU) adopted in Maastricht arose the Union’s self-appointed mission to propagate human rights and democracy. The development and consolidation of democracy and the rule of law as well as respect for human rights and fundamental freedoms were to be fostered within the framework of the development co-operation policy on the one hand, and as an objective of the emerging Common Foreign and Security Policy (CFSP) on the other. As a result of the Amsterdam Treaty, certain significant developments regarding internal conditionality merit special attention. One should recall the introduction of Article 7 which states that ‘the Council, acting by a qualified majority, may decide to suspend certain of the rights’ of the Member State in question, ‘including the voting rights of the representative of the government of that Member State in the Council’ in case of a 97

98 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

‘serious and persistent breach by a Member State’ of principles mentioned in Article 6 TEU.2 Certainly the insertion within the EC Treaty of provisions on the respect of fundamental social rights is of importance regarding conditionality3 – as is, in the framework of the TEU, the mention of the promotion of ‘economic and social progress’ to achieve ‘balanced and sustainable development’ as the very first objective of the Union.4 Despite the improvements of the new Treaty, the proposal that the EU have its own Bill of Rights is still on the table. In the field of external conditionality one must refer, in the framework of the EC Treaty, to Article 60 relating to measures that may be adopted for ‘serious political reasons’ against a third country with regard to capital movements and payments. Article 300, requiring a unanimous decision of the Council for the conclusion and decision to suspend the application of an agreement based on Article 310, is also fundamental. Within the TEU, it is important to recall Article 49, devoted to principles and conditions of membership. Specific references should also be made, in the field of the CFSP, to the access of the EU to an operational capability notably in the context of the Petersberg tasks (peacekeeping tasks, tasks of combat forces and so on) that in theory might be used to implement coercive actions or as preventive measures.5 The Kosovo war, however, reflected the absence of the Western European Union. Lack of credible military capacity deprives the EU of the most powerful tool to influence a third state – even if certain Member States may, of course, participate in operations under the aegis of the UN and/or NATO. The growing importance of the third pillar, especially provisions devoted to the ‘area of freedom, security and justice’ – and its external dimension: the ‘soft security’ aspects (migration, terrorism and so on) – is finally to be underlined. Justice and Home Affairs concerns must be, according to the conclusions of the 1999 Tampere European Council, integrated in the ‘definition and implementation of other Union policies and activities’.6 Conditionality – a concept difficult to circumscribe Conditionality as a concept is difficult to circumscribe as it is still in its infancy. Proper delimitation of conditionality will therefore always require the assessment of its application in the light of the specific bilateral relationship. The overall economic and (geo)political context must also, of course, be taken into account. The carrot and the stick One may, at a preliminary stage, try to distinguish between a positive approach, encouraging or rewarding a third country, and a restrictive/negative one potentially leading, in the last resort, to a sanction. It is, however, increasingly hard to draw the dividing line between these two approaches. Indeed, the EU nowadays has the instruments at its disposal to establish

The Many Faces of EU Conditionality 99

bridges and formal links between policies. Moreover, synergy and complementarity between the positive and negative approaches are expected. Preconditions, conditions, incentives and other instruments to influence the EU’s partners’ internal and external policies One can identify three main instruments used for conditionality purposes: preconditions, conditions and incentives. Again, strict delimitation of such instruments is not always obvious. Preconditions. Preconditions might be defined as political and economic criteria to be fulfilled by a third country before it may benefit from a specific relationship with the Community or as prerequisites to EU membership. The decision to establish contractual relations with a third country and consequently negotiate an agreement was increasingly used by the Community as a way of promoting economic and political reforms. The Community made its preconditions explicit, for example when negotiating the Europe Agreements (EAs). 7 The negotiations for nine EuroMediterranean Association Agreements (EMAAs) also demonstrated that the new conditionality provisions were carefully taken into account by Europe’s Mediterranean partners. One should note that the political pressures on entry into force of the EMAAs is also imposed by EU Member State legislative bodies through the ratification process of the mixed association agreements.8 As the conclusion of an association agreement requires the European Parliament’s assent, the EP has not shied away from using this as a veto in order to impose its ‘own’ preconditions. To take as an example the EAs with Romania and Bulgaria, the European Parliament made its assent subject to assurances that reforms would be pursued and respect for human and minorities rights ensured.9 Similar political pressures were experienced by the Mediterranean Non-Member Countries (Morocco, Israel and Syria) in the field of bilateral contractual financial assistance. So far, the EP has not used its veto for the first EMAAs but one should follow the ongoing negotiations as it may be expected to revert to this tool more frequently.10 The preconditions for accession have, for their part, an important degree of appraisal flexibility and are of a very political nature. Apart from the well-known Copenhagen Criteria, with which compliance ‘is a prerequisite for the opening of accession negotiations’, 11 one must recall here that the 1994 Corfu European Council made clear that implementation of the Europe Agreements was one of the ‘essential conditions for accession’. The 1994 Essen European Council, for its part, stressed that the promotion of good neighbourly relations and ‘intra-regional co-operation between the associated countries themselves and their immediate neighbours’ were of particular importance. Membership of the Council of Europe and of the

100 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

European Convention for the protection of Human Rights and Fundamental Freedoms has also become an implicit precondition for accession to the EU.12 Preconditions for accession also cover the whole acquis communautaire. Thus, the adoption of the acquis communautaire may be interpreted as a strict precondition because eventual accession might be rejected failing its full adoption. As stated by the 1999 Helsinki European Council ‘progress in negotiations must go hand in hand with progress in incorporating the acquis into legislation’. The prospect of membership is therefore a ‘unique incentive to the applicants to speed up the implementation of policies which comply with the Union acquis’. Integration of the acquis ‘is necessary, but is not in itself sufficient; it will also be necessary to ensure that it is actually applied.13 Conditions. Explicit conditions proper, adopted in the framework of external relations, might be defined as a set of legal provisions inserted within the body of a financial or trade regulation adopted unilaterally by the EC or in a contractual framework. Such conditions are considered as being the ‘essential elements’ of the regulation or the contractual relation. If the conditions are not fulfilled the Community may adopt ‘appropriate measures’. If such explicit conditions are to be considered as ‘hard conditionality’ in the sense that they might induce a sanction, for the time being they are circumscribed to the political and to a certain extent socio-economic spheres. Thus, environmental conditionality would appear more ‘soft’ in that it is unlikely to induce a sanction. Moreover, recent developments show that explicit conditions proper must have a high degree of flexibility and are also to be used as incentives. Such a discourse also aims to impose EU conditionality in a more palatable way from the viewpoint of third countries. Incentives. Incentives may be defined as measures aiming to encourage or reward a third state’s progress towards political and socio-economic reforms. Incentive measures are adopted within a constructive approach framework and are now considered by the EU as being the preferred option. However, if incentive measures are not legally binding instruments and therefore cannot de jure lead to sanction, they may de facto penalize countries which are unable to fulfil certain criteria in order to benefit from financial aid or an economic advantage. Among the various forms that such measures may take, one should mention the ‘incentive clauses’ inserted within agreements, autonomous trade regulations or co-operation programmes. In this respect, the progressive development of regional, social and environmental incentive clauses must be underlined.

The Many Faces of EU Conditionality 101

Unilateral initiatives of the EU promoting political, social and economic rights and rewarding third states for their progress in these fields are also increasingly apparent in the EU’s external relations. 14 In the Pan-EuroMediterranean Area, PHARE, MEDA and TACIS Democracy Programmes – and the European Initiative for Democracy and Human Rights – are to be mentioned. The enlarging scope of conditionality: exporting the Community Model? Another aspect of EU external conditionality is its widening scope. Increasing use of social, environmental and regional incentives and even sometimes social or hygiene conditions, to some extent reflects the will of the EU to export what is commonly referred to as the ‘Community Model’. One of the aims of the present paper is to highlight these new trends. Social conditionality The introduction of EC tariff preferences through the Community’s General System of Preferences15 (GSP) to promote observance of labour and environmental standards shows the increasing importance granted to social conditionality. GSP may also be withdrawn in cases of significant violation of fundamental labour standards, as was the case in 1997 for the Union of Myanmar on account of the use of forced labour.16 There seems, however, to be an overall trend away from a strict social conditionality in favour of a minimum standard level. The International Labour Organization adopted conventions of principles concerning fundamental workers’ rights but to date a number of Member States have not ratified the key conventions among them. Labour standards nevertheless are insisted upon within the GSP, thus establishing a minimum level required by the Community. Moreover, replies to questionnaires forwarded to the nominee Commissioners referred to minimum labour standards. Although there exists an international convention for labour standards, there is no equivalent for environmental standards (other than those touched upon within the auspices of the UN’s CODEX Alimentarius food standards) despite the potential barriers which they present at the WTO level. Environmental conditionality A growing environmental conditionality can be traced throughout the evolution of the Community’s external relations, particularly in trade and development. Internal environmental conditionality is the basis for this external environmental conditionality.17 But the Member States and the EC act using mixed agreements for multilateral treaties to bind themselves to given ends while, conversely, multilateral co-operation is not binding other than at operational level through the management and application of the

102 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

incentive ‘carrot’ of aid and technical assistance. Indeed, Principle 12 of the Rio Declaration 1992 advocated co-operation based on international consensus over binding fixed commitments. At WTO level, the developing countries, in Marrakesh in 1994, expressed fears of environmental protectionism by the industrialized countries and, since 1996, the WTO’s Trade and Environment Committee has been researching the ‘cluster approach’ under the themes of market access and the linkages between the multilateral environment and trade agendas. 18 Multilateral co-operation, based on implementation, was preferred to fixed agreements requiring negotiation and updating before enforcement could be undertaken. Compared to political conditionality, for example, environmental conditionality takes the form more of the means of implementing an existing relationship.19 In external trade relations, the explicit use of hygiene conditions has long been used in respect of food imports, for example. Moreover, the EU has been pressing for the incorporation of the precautionary principle in respect of human health within the context of the beef hormones dispute and, in the context of the escalating dispute over genetically modified organisms (GMOs) and the labelling of the GMO content of food for the benefit of consumer choice. Regional conditionality Regional co-operation, or even integration, incentives are implicitly derived from the very nature of the European integration model. If Community regional co-operation programmes are numerous but financial resources continue to be limited, regional integration or co-operation cannot yet be considered as an ‘essential element’ within bilateral agreements, trade regulations or aid programmes. The reactivation of the subregional dimension of the Barcelona Process following the 1999 Stuttgart Euro-Mediterranean Conference and the adoption of a regional approach to the countries of South-Eastern Europe, however, demonstrate the increasing importance given to regional incentives. As was recalled by the 1999 Cologne European Council the ‘immediate neighbourhood’ of the EU is fundamental to the stability and security of the entire European continent. Nevertheless, the relationship which the EU has built with neighbouring Central and Eastern European Countries (CEECs) and Mediterranean Non-Member Countries (MNMCs) does not yet take root in any EU ‘pan-Euro-Mediterranean external relations policy’. This applies equally to the conditionalities incorporated into the EU’s external relationships with their CEEC and MNMC partners, be they political, economic, social, regional, environmental or otherwise. Within the framework of the next section below, emphasis is laid on the ‘EU conditionality towards (potential) applicants for membership’. The following section is devoted to the increasing conditionality facing southern

The Many Faces of EU Conditionality 103

and eastern MNMCs within the context of the Euro-Mediterranean Partnership (EMP).

EU conditionality towards (potential) applicants for EU membership In order to illustrate the general trend in conditionality towards more flexibility and differentiation and as a means, among others, to promote the export of the Community Model, we will successively examine: the emerging conditionality in eastwards relations, the tremendous development of conditionality within the regional approach to the countries of SouthEastern Europe and finally the specificity of pre-accession conditionality. The progressive and inconsistent introduction of conditionality into eastwards relations An overview of the progressive emergence of conditionality into eastwards relations20 is necessary to evaluate the evolution of the strategy and practice, as is a comparison with EMAAs which is made in the following section. The introduction of ‘essential element’ clauses First of all one must recall the absence of proper conditionality clauses within the body of the first Agreements concluded with OSCE participants.21 Following the Declaration on human rights adopted by the 1991 Luxembourg European Council22 and the Resolution of the Council on human rights, democracy and development,23 the Council adopted a Declaration on 11 May 1992 stressing that ‘respect for democratic principles and human rights, as defined by the Helsinki final Act and the Charter of Paris for a new Europe, and the principles of Market economy are essential components of co-operation or association agreements between the Community and its CSCE partners’24 (emphasis added). The reasons for the introduction of such an ‘essential element clause’ were, according to the Commission, that it made human rights the ‘subject of common interest, part of the dialogue between the Parties and an instrument for the implementation of positive measures, on a par with other key provisions.’25 Also it enabled the parties to take ‘restrictive measures in proportion to the gravity of the offence’ allowing the ‘parties to regard serious and persistent human rights violations and serious interruptions of democratic process as a material breach of the Agreement’ and thus constituting ‘grounds for suspending the application in whole or in part in line with the procedural conditions laid down in Article 65’ 26 in line with the Vienna Convention on the Law of Treaties 27 (VCLT). This was confirmed by the ECJ when it stated that the introduction of such an essential element clause may be, among other things, an ‘important factor for the exercise of the

104 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

right to have an agreement suspended or terminated where the nonmember country has violated human rights’.28 However, such a clause ‘does not transform the basic nature of agreements which are otherwise concerned with matters not directly related to the promotion of human rights. It simply constitutes a mutual reaffirmation of commonly shared values and principles, a precondition for economic and other co-operation under the agreements.’29 The insertion of an appropriate suspension/non-execution mechanism operational in emergencies It was its Haitian and Yugoslav experiences that confronted the Community and its Member States with numerous political and legal problems regarding the immediate unilateral suspension of relations 30 and which led the Council31 in its above-mentioned Statement of 1992 to request the Commission to act in order ‘to ensure that agreements to be concluded by the Community contain an appropriate mechanism which is operational in emergencies, including provisions relating to non-fulfilment of obligations’.32 In order to provide for an immediate response in a case where serious breach of the essential provisions occurs, additional clauses were inserted in the body of the Agreements thus offering an alternative to the procedure laid down in the VCLT, notably regarding notification and delay requirements.33 In the TCAs concluded in 1992 with the Baltic states and Albania,34 complementary to the ‘essential element’ clause an ‘explicit suspension clause’ was inserted. According to this so-called ‘Baltic clause’: ‘The parties reserve the right to suspend the agreement in whole or in part with immediate effect if a serious violation occurs of the essential provisions of the present agreement.’35 Major inconveniences of the Baltic clause were that it was indeed too vaguely formulated and therefore opened the way to arbitrary or abusive application by both parties to the Agreement. A more appropriate ‘general non-execution clause’ was inserted within the Agreements concluded with Bulgaria, Ukraine and Romania, for example. This so-called ‘Bulgarian clause’ states: If either Party considers that the other has failed to fulfil an obligation under this Agreement it may take appropriate measures. Before so doing, except in case of special urgency, it shall supply the Association Council with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Parties. In the selection of measures, priority must be given to those which least disturb the functioning of the Agreement. These measures shall be notified immediately to the Association Council and shall be the subject of consultations within the Association Council if the other Party so requests.36

The Many Faces of EU Conditionality 105

The advantages of the Bulgarian clause were obviously numerous in comparison with the Baltic clause. It provided for preliminary consultations and a conciliation procedure within the framework of the Association Council and was designed to keep the agreement operational wherever possible. One of the problems was that the link between the cases of ‘special urgency’ and human rights violations was still not clear enough nor were any ‘appropriate measures’ clearly defined. An ‘increasingly varied range of interpretative Declarations’37 were adopted consequently in order to ‘regain the flexibility lost in the clauses themselves’. 38 In this respect one should mention here that during the negotiation of the EAs with the Czech Republic and Slovakia the latter requested the insertion of a Joint Declaration in order to ‘prevent the Community from using the Bulgarian clause for economic reasons’.39 The adoption of a more consistent approach post-Maastricht In response to the ‘disparate nature of the references’ in Agreements concluded with third countries the Commission decided to adopt a nondiscriminatory approach by proposing guidelines and negotiating directives on conditionality. The Commission stressed the ‘need to improve the consistency, transparency and impact of Community policy, while at the same time allowing for the sensitivity of the countries concerned and respecting the principle of non-discrimination’.40 Following the request of the EP, the Commission adopted on 23 May 1995 a Communication ‘on the inclusion of respect for democratic principles and human rights in agreements between the Community and third countries’ (COM(95)216). After an evaluation of the strategy, examined partly above, and an attempt to justify the Community approach, a standard wording for conditionality clauses and interpretative declarations was proposed. The proposal provided for an extension of the legal scope of the wording intended to be included in ‘all draft negotiating directives for Community agreements with third parties’. The system proposed was composed of an ‘essential element’ clause (Article X) ‘to be adapted to circumstances’ and complemented by an article regarding non-execution (Article Y, i.e. the Bulgarian clause), accompanied by two interpretative declarations. The two interpretative declarations were formulated as follows: (a) The parties agree, for the purpose of the correct interpretation and practical application of this Agreement that the term ‘cases of special urgency’ in Article Y means a case of the material breach of the Agreement by one of the Parties. A material breach of the Agreement consists in: (i) repudiation of the Agreement not sanctioned by the general rules of international law; or

106 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

(ii) violation of essential elements of the Agreement, namely its Article X. (b) The parties agree that the ‘appropriate measures’ referred to in Article Y are measures in accordance with international law. If a party takes a measure in case of special urgency as provided for under Article Y, the other party may avail itself of the procedure relating to settlement of disputes. Such interpretative clauses circumscribed the use of the non-execution clause. According to the Commission, the use of the concept ‘special urgency’ opened an option ‘without creating an obligation’ and therefore, by referring to ‘appropriate measures’, allowed the parties ‘to gauge what measures they should take’.41 The Commission Communication also stressed that the inclusion of such conditionality clauses required, among other things, special analysis with a view to defining ‘the criteria that must be met before establishing contractual relations thereby enabling a non-discriminatory approach’. The importance of ‘continuous dialogue’ with the third country and consultation was also considered as being ‘the only way of promoting a flexible approach that makes due allowance for the cultural sensitivities and specific needs of the countries concerned, while ensuring that the Union’s priorities are also respected’. However, even if significant improvements were achieved, important problems still remained. First of all, the timing was disastrous. The Communication was published after the end of negotiations (or, in some cases, after entry into force) of most Europe Agreements and before the finalization of the negotiations on the mid-term revision of Lomé IV where the ‘appropriate mechanism’ is much more detailed.42 Moreover, the strategy was adopted after the end of negotiations of the EMAAs with Israel and Tunisia which consequently contain no interpretative declaration. The precise delimitation of essential elements is still clouded and subject to ad hoc analysis. Recourse to immediate suspension in cases of ‘special urgency’ seems to be inadequately circumscribed as it is, for example, in the Lomé Common Declaration.43 The EP also regretted ‘the ambiguity of the positions adopted by the Commission’ concerning the fact that priority must be given to measures which least disturb the functioning of the Agreement.44 The use of the immediate suspension procedure is not purely theoretical, although it will only be used in the last resort. 45 Examples of use of the suspension clause of the somewhat specific Lomé Mauritius Convention46 demonstrate that, if necessary and if internal and international political conditions are fulfilled, such suspension or non-execution clauses will be reverted to. In a second Communication, adopted on 22 November 1995 and entitled ‘The European Union and the external dimension of human rights

The Many Faces of EU Conditionality 107

policy: from Rome to Maastricht and beyond’ (COM(95)567), the Commission carried out an assessment of the various instruments and objectives and defined a grand strategy ‘designed to improve the consistency and impact’ of the EU’s activities in this field. As recognized by the Commission itself it was ‘the first exercise of its kind’. In the framework of the ‘positive, practical and constructive approach’, the search for synergy between the objectives and the activities of the various European organizations is highlighted. Lists of instruments, priorities and targeted groups (national minorities) and specific initiatives (education on human rights) are established. One must also underline the mentioning of the GSP as ‘countries undertaking to respect ILO conventions on freedom to form unions, the right to collective bargaining and child labour, will benefit from certain additional trade concessions’. Reference to WTO and OECD initiatives are also made (points 66–8). In the contractual field, the approach ‘should not be seen as imposing conditions, but in the spirit of a joint undertaking to respect and promote universal values’ (point 63). The list of appropriate measures of COM(95)216 is completed by the mentioning of possible interventions in international forums and participation in international and regional enquiries. The need to ensure that the populations are not penalized is also stressed. Regarding financial assistance programmes, Regulation 443/92 of 25 February 1992 (Asia and Latin America), TACIS Regulation and the then proposed MEDA Regulation are mentioned alongside the ‘suspension’ clause and the very detailed consultation mechanism of the mid-term review of Lomé IV.47 The tremendous development of conditionality within the regional approach to the countries of South-Eastern Europe The implosion of the former Yugoslavia led to a tremendous development of conditionality. The fear of experiencing again the disastrous repercussions of the recognition of the former Yugoslav republics 48 led to progressive definition of a conditionality strategy regarding the countries of South-Eastern Europe.49 The Co-operation Agreement concluded with the Former Yugoslav Republic of Macedonia The Agreement concluded with the Former Yugoslav Republic of Macedonia50 (FYROM) is a good example of a bilateral agreement inserting, in the body and in one and the same Article (Article 1), political and economic conditions alongside strong regional and social incentives. According to this article, the ‘readiness’ of FYROM to enter into ‘cooperative and good neighbourly relations with the other countries of the region including the promotion of economic co-operation and trade, constitutes an important factor in the development of the relations and

108 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

co-operation’ between the Community and FYROM. Such an ‘evolutionary clause’ spelt out the essential preconditions for a further development of relations with the Union. Respect for the democratic principles and human rights established by the Universal Declaration of Human Rights, the Helsinki Final Act and the Charter of Paris for a New Europe ‘underpins the internal and international policies’ of the Community and of FYROM, and ‘constitutes an essential element’ of the Agreement. The same applies to the ‘principles of a market economy as reflected in the document of the Bonn Conference on Economic Co-operation’. Finally, the parties have acknowledged ‘the importance of social development which should go hand in hand with any economic development’ and added that they ‘give particular priority to the respect for basic social rights’. According to the Joint Interpretative Declaration of the Agreement, a material breach of the Agreement consists in a repudiation of the Agreement not sanctioned by the general rules of international law or the ‘violation of the essential elements of the Agreement set out in Article 1(3) and (4)’. In other words, it is only nonrespect for democratic principles and human rights and the principles of a market economy that constitutes an essential element of the agreement. To confirm this general trend of reinforcement and differentiation of conditionality within contractual relations one should also refer, for example, to the Partnership and Co-operation Agreement concluded with Georgia,51 where respect for ‘international law’ is, alongside democracy, human rights and the principles of a market economy, considered an essential element. The adoption of a ‘conditionality strategy’ regarding the countries of SouthEastern Europe In order to define a consistent approach towards countries in South-Eastern Europe ‘without Association Agreement’ (Bosnia and Herzegovina, Croatia, FRY, FYROM and Albania), the Council adopted, in April 1997, conclusions on the ‘application of conditionality with a view to developing a coherent EU strategy’.52 According to the Council, the EU agreed to establish political and economic conditions ‘as the basis for a coherent and transparent policy towards the development of bilateral relations in the field of trade, of financial assistance and economic co-operation as well as of contractual relations, allowing for the necessary degree of flexibility’. Moreover, it was stressed that the EU strategy ‘should serve as an incentive, and not an obstacle, to the countries concerned to fulfil these conditions’. Regarding principles and guidelines, it was stressed that the approach had to be ‘graduated’ (‘trade preferences, the extension of financial assistance and economic co-operation as well as the establishment of contractual relations are subject to different degrees of conditionality’). The renewal of autonomous trade preferences was clearly linked to respect for the

The Many Faces of EU Conditionality 109

fundamental principles of democracy and human rights and to the readiness of the countries concerned to allow the development of economic relations between themselves. Implementation of the PHARE Programme ‘could be considered subject to evidence of a country’s credible commitment to democratic reforms and progress in compliance with the generally recognised standards of human and minority rights’. Preconditions upon the negotiation of Stabilization and Association Agreements The Council, in defining the conditionality strategy, also stressed that the application of conditionality had to be seen as ‘an evolutionary process’ – the start of the negotiations requiring ‘a lower level of compliance than the conclusion of the agreements. At each stage, including after the conclusion of agreements, the situation should be monitored and, in accordance with the relevant articles of the agreement, its application could be suspended in case of serious non-compliance.’ To allow the beginning of negotiations, ten general preconditions 53 applying to all countries concerned were listed alongside specific preconditions devoted to Croatia, Bosnia and Herzegovina and the FRY. More recently,54 with regard to the possible start of negotiations of a new kind of contractual relations – Stabilization and Association Agreements (SAAs) – the Commission stated that given its positive record to date, and its compliance with the relevant conditions, it is likely that negotiations will first be opened with FYROM. It would not yet be appropriate to consider the opening of negotiations with Bosnia and Herzegovina or Croatia, as the relevant conditions have not yet been fulfilled. The FRY has the ‘same general perspective as the other States once it respects the relevant conditions. At present, it disregards the most fundamental of these.’55 According to the Sarajevo Summit Declaration of 30 July 1999,56 endorsing the purposes and principles of the ‘Stability Pact for South Eastern Europe’, regional co-operation will also serve ‘as a catalyst to the aspirations of the countries in the region to integrate themselves into broader structures’. The specificity of pre-accession conditionality The start-up of the accession train has reoriented the incentive in the EU’s use of conditionality towards candidates but the EAs remain the basis for relations. Three milestones stand out in this inconsistent reorientation of the incentive towards accession: the 1993 Copenhagen European Council; the 1995 Commission’s White Paper on the preparation for integration of the CEECs into the Internal Market; 57 and the Agenda 2000 Communication which includes the enlargement strategy. 58 Whereas the

110 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

Europe Agreements were, at least from the side of the EC, not originally considered as pre-accession instruments, the Copenhagen European Council amounted to a unilateral, political reorientation of the EAs for both the EU and the associates.59 The Agenda 2000 reorientation also maintained flexibility as regards the (political) differentiation of candidates. In the reorientation of the incentive, the introduction of more coherence into the conditionality becomes apparent but there is a reluctance to commit to prioritizing candidates in the short to medium term. The aim is more to keep flexibility within the broad differentiation of the pre-accession train in the context of the region rather than to risk diminishing the incentive that accession provides in the subregion of the candidate CEECs. The progressive reorientation and introduction of more coherence into financing conditionality Both PHARE, established in 1989 for the CEECs, and TACIS, established in 1991 applying to the NIS and Mongolia, were essentially technical assistance programmes. PHARE’s evolution reflects the reorientation towards accession of the CEECs, and the increased use and reorientation of the conditionality therein bears this out.60 Originally, it was intended to be a partnership between the EC and the recipient countries, designed to respond to the demands of the beneficiaries. Conditionality attached to European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) funds are also to be mentioned. The EBRD was established in 1990 in direct response to the upheavals in Central and Eastern Europe of the late 1980s and its stated purpose is to foster the transition towards open market oriented economies and to promote private and entrepreneurial initiative in those CEECs ‘committed to and applying the principles of multi-party democracy, pluralism and market economies’ (Article 1 of the EBRD Charter 61). The recipient CEECs and CIS committed to establishing political and economic systems which mirror the western model and membership of the Bank may be suspended, or operations suspended, modified or terminated, should a member implement policies which are inconsistent with Article 1. Thus, in 1991 the EBRD suspended operations in the Federal Republic of Yugoslavia and Bosnia and Herzegovina.62 The search for complementarity and flexibility of financing conditionality while maintaining differentiation between candidates and non-candidates The lack of proper conditionality provisions within PHARE funding and regulation was obvious during the first years of its implementation. One must recall that the PHARE regulation was adopted long before the 1995 strategy (see below). One must also not forget that the absence of proper conditionality provision within PHARE was progressively

The Many Faces of EU Conditionality 111

counterbalanced by other types of pre-accession conditionality (e.g. the Copenhagen criteria, the Europe Agreement’s conditionality, Accession Partnerships and so on). At the operational level, an interim evaluation of PHARE published in 1997 by the European Commission states that: ‘The lack of commitment devices in Phare programmes themselves, through financial, political and other forms of conditionality, weakened the partners’ commitment to good programme performance.’63 A second study, of November 1998, produced by an independent consulting firm (GOPA) for the European Commission on the ‘evaluation of Phare Restructuring and Privatisation Programmes’ stresses, for its part, that: Phare is a policy taker. There have been no conditionalities associated with either changing policies to more realistic ones, or to maintaining a period of policy stability. To improve the effectiveness and impact of Phare funding and project outputs, conditionality should be introduced explicitly, as is for instance the case in the recently adopted Accession Partnerships. Conditionality should cover both upstream conditions to be fulfilled before the programme or project is launched and downstream conditions for their continued implementation.64 Such lack of conditionality provisions was partially solved by two distinct regulations adopted in 1998 and 1999 the scope of which is, however, limited to the pre-accession strategy and, therefore, only applies to candidate countries. Significantly, the Council built into the pre-accession strategy Regulation 622/9865 enabling it to suspend pre-accession assistance. According to Article 4 of Regulation 622/98: Where an element that is essential for continuing to grant pre-accession assistance is lacking, in particular when the commitments contained in the Europe Agreement are not respected and/or progress towards fulfilment of the Copenhagen criteria is insufficient, the Council, acting by a qualified majority on a proposal from the Commission, may take appropriate steps with regard to any pre-accession assistance granted to an applicant State [emphasis added]. First, it is important to note that insufficient progress towards fulfilment of the Copenhagen Criteria is specified as an essential element alongside commitments under the EAs. Thus, this Regulation upgrades the Copenhagen Criteria from political preconditions of the European Council to legally binding conditions, subject to sanctions, alongside the conditions contained in the EAs. Regulation 622/98 also shows the intent to introduce complementarity into the pre-accession financing conditionality.

112 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

Second, Regulation 622/98 does not list the essential elements but, rather, leaves them to the ‘political’ decisions of the Council acting by qualified majority. Flexibility is introduced by the wording in particular, and/or, and the mention of appropriate steps to be compared with appropriate measures used in the Bulgarian clause and interpretative declarations of the EAs. In June 1999, Regulation 1266/99 – on ‘coordinating aid to the applicant countries in the framework of the pre-accession strategy and amending Regulation (EEC) No 3906/89’ 66 (PHARE) – incorporated an explicit reference to pre-accession conditionality and introduced differentiation among candidate and non-candidate countries within the body of the PHARE Regulation. The new paragraph 3 to Article 3 of PHARE Regulation reads as follows: ‘For applicant countries with accession partnerships with European Union funding under the PHARE programme shall focus on the main priorities for the adoption of the acquis communautaire’ (Article 4 of Regulation 1266/99). This provision is, however, not comparable to the ‘essential element’ clause of the 622/98, MEDA, OBNOVA67 or TACIS68 regulations. In other words, at the time of writing, the PHARE Regulation, as amended by Regulation 1266/99, still does not contain a proper ‘essential element clause’ nor a procedure for adopting ‘appropriate measures’ in case of special urgency. Candidate countries benefiting from PHARE funding are nevertheless subjected to the preaccession conditionality based on a wide range of preconditions, conditions and incentives, e.g. the Copenhagen criteria, the preconditions and conditions attached to EAs, conditions in the implementation of preaccession financial assistance (notably Regulation 622/98), conditions laid down in the Accession Partnerships. One of the aims of Regulation 1266/99 is also to reinforce coordination between the various instruments of assistance granted in the framework of the pre-accession strategy and, consequently, the conditionality applying in the single pre-accession financial assistance framework. According to Article 6 of Regulation 1266/99 (this time not technically amending the PHARE Regulation): Financing of the schemes or measures provided for in this Regulation shall be subject to compliance with the undertakings contained in the Europe Agreements as recalled in Regulation (EC) No. 622/98 and with the conditions laid down in the Accession Partnerships, as well as to the relevant provisions of Regulations (EEC) No. 3906/89 [PHARE], (EC) No. 1267/1999 [structural instrument for transport and environment], (EC) No. 1268/1999 [agricultural instrument] and of this Regulation. The mounting EU differentiation strategy between candidate and noncandidate countries in the implementation of PHARE activities is, as

The Many Faces of EU Conditionality 113

already mentioned, also increasingly apparent. As stressed by the Commission: As the role of Phare in the accession process has grown, it has become clear that a conceptual distinction needs to be drawn between activities in the candidate countries and those in Albania and the Former Yugoslavia (except Slovenia), which have not applied to join the Union, and whose programmes do not, therefore focus on accession [emphasis added].69 In other words, the general guidelines of the pre-accession process apply only to PHARE activities in the candidate countries. As underlined by the 1999 Helsinki European Council, there is a need for a ‘single regulatory framework for financial assistance which should contribute to more effective action on the ground and co-operation in [South-Eastern Europe]’. Of course, this differentiation does not mean that the countries not (yet) included in the pre-accession strategy are not subject to conditionality. As regards Croatia, for example, the Commission mentioned that ‘in order to lift the suspension of PHARE, further progress towards democracy will be necessary, inter alia, in the fields of media reform, electoral reform, and refugee return, in accordance with the 29 April 1997 conditions’.70 That is to say that the South-Eastern European countries, eligible for PHARE but not included in the pre-accession strategy, are subjected to the specific ‘South-Eastern conditionality strategy’ (see above). Coordination and coherence of assistance granted in the framework of PHARE has therefore a limit: the differentiation strategy applying to European countries. An increasing use of the positive approach An increasingly constructive approach began to emerge in the conditionality arising in the use of assistance and funding to the CEECs. Examples include the introduction of the PHARE Democracy Programme in 1992 or the specific 10 per cent allocation of PHARE funds to environmental projects. Regional conditionality had already become apparent in the EAs which, in the framework of economic co-operation, provided for special attention to be devoted to measures designed to foster co-operation between CEECs. As already mentioned, this regional conditionality was clearly reinforced following the 1994 Essen European Council. The Cross Border Cooperation Programme,71 introduced in 1994 within the PHARE Programme, was designed to encourage strategic planning in the development of the border regions of the EU and PHARE eligible countries. Thus a variety of bilateral CEEC agreements on good neighbourly relations and co-operation grew up. The positive approach in the use of pre-accession assistance and funding is also apparent in the reoriented pre-accession conditionality of the Agenda 2000 strategy.72 The programming documents for projects under

114 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

PHARE73 have been replaced by the APs (which establish the multi-annual programming) and Commission Decisions fixing the annual financing for project implementation. The operational level: the search for the ‘maximum multiplier effect’. At an operational level, financial investment has been reinforced by reformed administrative methods, including the continuation of decentralized management in favour of beneficiary countries. Two entirely new funds supplement PHARE as of the year 2000, for agriculture (SAPARD) and for structural adjustment (ISPA), facilitating the absorption of the candidates upon eventual entry. The key phrase, ‘maximum multiplier effect’, guides all the EC aid measures so that ‘all of these resources can be mobilized in pursuit of the objectives of the pre-accession strategy through improved interlinking, particularly through the APs and within the framework of the administrative responsibilities already devolved to the Commission’.74 Not forgetting that PHARE funds must be supplemented by the applicants, the idea is that joint financing must follow the rules of EU Structural Funds and PHARE grants will act as a ‘catalyst’ to private and public loans. Moreover, Framework Agreements are envisaged by Agenda 2000 with the EIB, the EBRD and the World Bank which lend in profit-yielding sectors such as trans-European networks (TENs) and telecommunications. In the nuclear safety sphere, PHARE and EURATOM lending will also be coordinated with the various lenders implicated. Importing the ‘acquis communautaire’ The 1995 White Paper set out a detailed approximation programme for legislation directly affecting the Internal Market (and, thus, to the exclusion of whole tracts of other chapters of the acquis communautaire) and this prompted the autonomous adaptation by the candidates to that programme. Agenda 2000 distanced itself from the tunnel vision of the 1995 White Paper and reorientated the incentive, elaborating upon the Copenhagen Criteria within a strategy for accession, albeit without a timetable (other than in the short, medium and long terms). The pre-accession strategy was reinforced 75 by the bilateral Accession Partnerships76 (APs) which establish the short-term priorities and intermediate objectives necessary for accession negotiations to commence. The APs follow closely the Council Decisions of 30 March 199877 on the principles, priorities, intermediate objectives and conditions in the APs together with the future financial framework. While the APs incorporate the word ‘partnership’, they take the form of a Commission Decision taken after consultation with the applicant country. 78 They are implemented through National Plans for the Adoption of the Acquis (NPAAs), which lock the candidates into their timetables, but also through national benchmarks contained in country-specific ‘road maps’ drawn up with Commission

The Many Faces of EU Conditionality 115

guidance or technical assistance. A pre-accession financing package is built into this, as are bilateral and multilateral dialogues in order to deal with the anticipated increasing intensity in negotiations for which the structured dialogue ‘no longer appear(ed) appropriate’.79 PHARE now concentrates on the adoption of the acquis communautaire 80 and, more particularly, on institution building (30 per cent) and the financing of investment (70 per cent) of the PHARE budget for each applicant. Here also, prior to Agenda 2000, approximation to EC standards had been contained in the EAs, and references to social and environmental conditionalities, for instance, had been included. Their inclusion was not, however, systematic or coherent. Thus, while social justice was referred to in the EA with Hungary, no other EA contains such a commitment. As regards essential element clauses, for example, EAs do not contain any explicit environmental conditionality although action on the environment is foreseen in the field of approximation of laws and in the field of economic co-operation. The priorities highlighted in the articles of the EAs which are dedicated to environmental co-operation, however, differ from one country to another according to the environmental concerns arising in the bilateral context. And environmental protection or sustainable development or both are mentioned explicitly under the heading of energy and nuclear safety but not always under the section for co-operation in agriculture, transport, regional development or industry. While the conditionality on the approximation of environmental standards for the purposes of trade was made an imperative, the environmental conditionality under economic co-operation by its very nature seemed weaker, it being an expression of an aim rather than any obligation to take action. As referred to above, the Copenhagen Criteria, later upgraded to legally binding conditions by Regulation 622/98, effectively imported the acquis communautaire into the relations between the EU and the CEECs – but then, in direct response to the 1995 White Paper, the candidates set about autonomously approximating with the Internal Market model. The apparent priority afforded to Internal Market legislation over other chapters of the acquis was questionable, not only in terms of the legitimacy of prioritizing one chapter of the acquis over others but also, for example, in terms of how the jurisprudence of the ECJ would be included in that chapter. Beyond the accession strategy requiring adoption of the acquis communautaire, certain chapters of the acquis have already been identified for transitional arrangements post accession. The environment, for example, is one area where there is considerable opportunity for clashes between the acquis on the functioning of the Internal Market and protection of the environment/sustainable development. Indeed, in the White Paper itself, the Commission recognized the need to complement the environmental legislation having a ‘direct bearing on the Internal Market’ – basically product-related Directives and

116 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

Regulations. EU measures aimed primarily at environmental protection, taken under the legal basis of Article 175 (ex-130s) EC Treaty, allow for stricter national measures. In practice, the distinction is not clear and stringent standards under ‘pure’ environmental legislation in the past have involved the adoption of standards that have a direct impact on products or their free movement within the Internal Market.81 Agenda 2000 strives to correct the impression of the 1995 White Paper that the acquis communautaire is divisible. Only one month after Agenda 2000, the Commission issued a staff working paper 82 to the CEECs which ‘takes the approach of the White Paper a step further’. A later Commission Communication83 dedicated to the environmental aspects of the next enlargement serves as guidance to the applicants and to complement the APs. Transitional measures are to be the exception, not the rule, and new projects must meet all environmental standards (including the Internal Market standards) and the CEECs should be capable of keeping up with the evolution of the acquis. At operational level, the apparent prioritization of the Internal Market acquis over other chapters of the acquis was equally apparent. Even at administrative level, the incentive of accession appeared to concentrate on the Internal Market. Set up under the 1995 White Paper, the Technical Assistance Information Exchange Office (TAIEX) of the Commission was concerned with Internal Market legislation only. TAIEX was split off from the DISAE office,84 for example, and only took over its operations in 1998 as a result of the Agenda 2000 reorientation. A fundamental criticism of TAIEX was the fact that the assistance it provided was independent of the various other Directorates General which would have provided useful insight to the candidates. Added to the criticisms must be the fact that only applicant governments had access to it until Agenda 2000 opened the doors of TAIEX to firms. Its information role was extended to the entire acquis and active participation in EC programmes (research and development, culture, transport, SMEs) and increased contacts with EC agencies (the Medicines Evaluation Agency or the European Patent Office are examples) are also central components of the strategy for approximation with the acquis. Generally, it is difficult to evaluate the CEECs’ progress in importing the acquis and, consequently, the actual effect of this pre-accession conditionality. A variety of Commission reports on their progress towards accession provide little more depth of insight into their progress than did the Commission Opinions accompanying the Agenda 2000 Communication and the ‘screening process’ is no more transparent. Increasingly, however, questions are being raised as to the appropriateness of requiring the CEECs to import the Community Model. As regards the competition chapter of the acquis, for example, detailed approximation by the transition economies has been questioned on the grounds that it might even reduce

The Many Faces of EU Conditionality 117

their overall readiness for membership or ‘deflect attention from more serious problems of ensuring that the application of competition law and policy should remain reasonably objective in the face of the substantial political pressures to distort it for the private advantage of particular interest groups’.85 The appropriateness of the adoption of the environmental acquis by the CEECs is another example. Agenda 2000 provides for adoption of the acquis without exception. Fundamental policy gaps exist in the environmental acquis, such as the lack of provision for responsibility for the clean-up of contaminated land which is a determining factor in securing external investment and therefore necessary to long-term competitiveness. In adopting the acquis, the CEECs are being steered away from tackling their own pressing environmental needs, generally more acute than those of the Union. Transitional measures are anticipated for legislation such as that for large combustion plants, 86 conceived at Community level precisely because of the favourable effects on the quality of Europe’s environment.

Conditionality facing MNMCs within the context of the Euro-Mediterranean Partnership The deep change that has occurred in the nature of Euro-Mediterranean relationships, since the adoption of the Barcelona Declaration, has also led to an important development of conditionality. The analysis will concentrate on the countries on the southern and eastern shores of the Mediterranean basin which are, contrary to Cyprus, Malta and Turkey, not eligible for EU membership. The creation of a multilateral framework of relations based on a spirit of partnership: the Barcelona Declaration From the Barcelona Declaration to the ‘Barcelona acquis’ The Barcelona Declaration (BD), the founding act of the EuroMediterranean Partnership (EMP), is not legally binding. It is a political declaration based on common principles and objectives establishing a multilateral and multisectoral framework of dialogue and co-operation between 27 Euro-Mediterranean partners. The draft declaration was submitted as such for appraisal to the twelve MNMCs a few months before its adoption,87 and therefore mutually agreed. Moreover, the final declaration was not even signed by the participants.88 The BD is now considered a Euro-Mediterranean political acquis for potential members of the EMP (such as Libya and, more surprisingly, also Croatia89). As stated by the Chairman’s Formal Conclusions of the third Euro-Mediterranean Conference of Foreign Ministers held in Stuttgart in April 1999: ‘Ministers agreed that Libya, which participated as a guest of the Presidency, will become a full member of the Barcelona Process as soon

118 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

as the UN Security Council sanctions have been lifted and Libya has accepted the whole Barcelona acquis.’ 90 In other words, the latter are two preconditions to be fulfilled by Libya before it envisages becoming a partner of the EU. Within the preamble of the Barcelona Declaration two elements are of particular importance. First of all, one must underline that the ‘strengthening of democracy and respect for human rights, sustainable and balanced economic and social development, measures to combat poverty and promotion of greater understanding between cultures’ are ‘all essential aspects of partnership’. Second, it is said that the 27 partners are resolved to establish a multilateral and lasting framework of relations ‘based on a spirit of partnership, with due regard for the characteristics, values and distinguishing features peculiar to each of the participants’. The limits of the consensual approach immediately become apparent. On the one hand the EU is willing to promote ‘universal values’ and export, to some extent, the ‘Community Model’, while at the same time it remains conscious of the danger of adopting a too paternalistic or neocolonial approach that could be harmful to the declared ‘spirit of partnership’ of the Barcelona Process. On the other hand, the MNMCs are aware of the necessity to comply with certain ‘common agreed international principles’ but each MNMC is also willing to affirm its identity and preserve its own interests. This nearly contradictory approach appears again within the first part of the Declaration devoted to the ‘political and security partnership’, where the participants agreed to develop the rule of law and democracy in their political systems, while recognizing in this framework the ‘right of each of them to choose and freely develop its own political, socio-cultural, economic and judicial system’. However, one must stress the importance and specificity of such a consensual approach compared with, on the one hand, the unilaterally imposed conditionality for candidate countries and the regional approach adopted towards the countries of South-Eastern Europe on the other. The adoption of a ‘declaration of principles’ within the framework of the political and security basket of the Euro-Mediterranean Partnership Within the first part of the Barcelona Declaration, the participants have undertaken a ‘declaration of principles’. This declaration of principles is composed of a list of political principles, inter-states rules of conduct and guidelines regarding security issues, with a view to the creation of an ‘area of peace and stability in the Mediterranean’. The participants agreed to act in accordance with the UN Charter and with the non-legally binding Universal Declaration of Human Rights, as well as ‘other obligations under international law, in particular those arising out of regional and international instruments to which they are party’. Respect for human rights and fundamental freedoms and the

The Many Faces of EU Conditionality 119

guarantee of the effective legitimate exercise of such rights and freedoms includes, in the terms of the declaration, ‘freedom of expression, freedom of association for peaceful purposes and freedom of thought, conscience and religion, both individually and together with other members of the same group, without any discrimination on grounds of race, nationality, language, religion or sex’. Racism and xenophobia are also mentioned as well as the importance of ‘diversity and pluralism’ and the need to ‘combat manifestations of intolerance, racism and xenophobia’. The question of the rights of minorities, envisaged in the early drafts of the Barcelona Declaration, was not explicitly mentioned. Only the vague formula mentioned above was finally adopted. The mention of respect of ‘sovereign equality’ as well as the ‘equal rights of peoples and their right to self-determination’ and the ‘territorial integrity of States’ must be observed in the light, for example, of the Israeli–Palestinian and Kurdish issues. According to the second part of the declaration of principles, which is in fact the embryo of a long expected ‘Euro-Mediterranean Charter for Peace and Security’ (EMCPS), the parties shall, among other things: promote regional security by acting in favour of nuclear, chemical and biological non-proliferation; pursue a ‘mutually and effectively verifiable Middle East Zone free of weapons of mass destruction’; promote conditions likely to develop good neighbourly relations among themselves; and support processes aimed at stability, security, prosperity and regional and subregional co-operation. According to the guidelines adopted in Stuttgart in April 1999 the EMCPS will be a non-legally binding political instrument founded on the global security concept. The implementation of the EMCPS will be based on a consensual approach. Confidence-building measures, preventive diplomacy initiatives and crisis management will apparently constitute the main instruments while promotion of human rights, democracy, regional cooperation and social development will be considered as essential objectives. Finalization of the EMCPS is expected to take place during the 2000 French Presidency. An economic and financial partnership based on the principles of market economy, promoting sustainable and balanced development and regional integration Within the framework of the second basket of the BD the participants emphasized the importance they attached to ‘sustainable and balanced economic and social development’, to the promotion of ‘regional co-operation and integration’ and to the ‘development of policies based on the principles of market economy’. First of all, one should mention that the participants established a clear link between, on the one hand, the political and economic issues and, on the other, the social and human factors, declaring they were ‘all essential aspects of partnership’. Second, even if the

120 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

participants to the Conference have affirmed that regional co-operation is to be implemented on a ‘voluntary basis’, it is clear, from the design of the reinforced Mediterranean policy, that the EU wanted to try to impose a certain degree of regional conditionality (i.e. offer the cumulation of origin to MNMCs that concluded free trade zone agreements with their neighbours91) especially after the signature of the Oslo Agreements. This was obviously very difficult to achieve given the poor neighbourly relations among the MNMCs. More innovative is the recognition of the importance of social development which ‘must go hand in hand with any economic development’. The necessity of respecting ‘fundamental social rights, including the right to development’ was also stressed. The relationship with the MNMCs in the field of environmental protection is more one of economic co-operation and concerted action in areas where environmental problems arise which necessitate a regional approach and increased co-operation. The implementation of the aims of achieving an ‘environmental equilibrium’ depends very much on the implementation of Community assistance for economic transition. The Declaration in the context of economic co-operation and concerted action makes explicit reference to the environment, social issues and in particular the importance of the key role of women, the energy sector, fish stocks, the water sector and environmentally friendly agriculture. All of these themes are taken up separately in the work programme adopted by the Conference – except for the role of women in society. Regarding environmental matters, the very first focal point for co-operation set out in the work programme attached to the Barcelona Declaration is ‘the need to assess the environmental problems in the Mediterranean region and defining, where appropriate, the initiatives to be taken’. Thus, key to any future approach to the problems at hand is the evaluation of the actual environmental situation in the region. In terms of social conditionality, the promotion of the active participation of women in economic and social life and the creation of employment is highlighted. To this shopping list can be added cooperation towards harmonizing environmental standards in multi-modal combined sea and air transport and the use of international and European standards. The role of civil society and decentralized co-operation in the promotion of support for democratic institutions and for the strengthening of the rule of law Within the third part of the Declaration devoted to partnership in social, cultural and human affairs, the participants stressed that ‘dialogue and respect between cultures and religions are a necessary pre-condition for bringing the peoples closer’. A clear link between political conditionality and the participation of civil society, notably via decentralized cooperation, was established in the Declaration. The participants recognized

The Many Faces of EU Conditionality 121

the ‘essential contribution’ civil society can make in the process of development of the EMP and that it is an ‘essential factor for greater understanding and closeness between people’. With that aim in mind they agreed to promote ‘actions of support for democratic institutions and for the strengthening of the rule of law and civil society’. In this respect, the role of the Euromed Civil Forum is to be underlined. Conditionality within Euro-Mediterranean Association Agreements A network composed of nine Euro-Mediterranean Association Agreements92 (EMAAs) with a view to establishing a free trade area and three association agreements establishing customs unions constitute the bilateral legal framework of the EMP. We will use the Agreement concluded with Tunisia in our examination. Comparisons will be made with the Interim Agreement concluded with the PLO (for the benefit of the Palestinian Authority) and with the three EMAAs already signed with Israel, Jordan and Morocco. The preambular provisions of the EMAAs: the ‘very basis of the Association’ In the Euro-Tunisian Agreement, the Parties underline the importance they ‘attach to the principles’ of the UN Charter, ‘particularly the observance of human rights and political and economic freedom, which form the very basis of the Association’ and recall the commitment of both the EC and Tunisia ‘to free trade, in compliance with the rights and obligations arising out of the General Agreement on Tariffs and Trade’. All EMAAs already concluded contain such a ‘very basis preambular clause’ but mention of the ‘respect of democratic principles’ is added in the Israel, Jordan, Moroccan and PLO preambular provisions. This is, however, not really of much importance as respect of democratic principles is mentioned in the essential element clause. The essential element clauses inserted in the body of the EMAAs: the respect for human rights and democratic principles Regarding the body of the Tunisian EMAA, and as stated in Article 2: ‘Relations between the Parties, as well as all the provisions of the Agreement itself, shall be based on respect for human rights and democratic principles which guide their domestic and international policies and constitute an essential element of the Agreement’ (the provisions of the Accords concluded with Israel, Jordan, Morocco and the PLO, are similar). This ‘essential element clause’ is practically identical to those generally inserted in the Europe Agreements (see previous section). However, the ‘Helsinki Final Act and the Charter of Paris for a New Europe’ are not mentioned and the ‘principles of the market economy’ are not considered as essential elements. This seems to be somewhat ambiguous as one of the goals of the EMP is to establish a free trade area in conformity with WTO rules. However, according to the 1995 guidelines such provision was to be

122 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

applied to all OSCE participants, ‘and to other countries at the discretion of the Council’.93 One of the other main innovations of the Euro-Mediterranean Association Agreements, in comparison with the co-operation agreements concluded in the 1970s, is the inclusion of a political dialogue covering all issues of common interest to the Parties ‘in particular the conditions required to ensure peace, security and regional development through support for co-operation’ (see Articles 3, 4 and 5 of the Tunisia Agreement). The provisions devoted to the adoption of ‘appropriate measures’ if a Party has failed to fulfil an obligation under the Agreement are to be founded in Article 90. This clause is in fact the so-called ‘Bulgarian clause’ (see previous section). EMAAs concluded with Jordan (Article 101), Morocco (Article 90) and Israel (Article 79) also contain the same provision. However, the Interim Agreement concluded with the PLO (Article 70) is different in one respect: a Joint Committee replaces the Association Council. There are, in the proposals for the conclusion of the agreements establishing an association with Morocco and Jordan, joint interpretative declarations relating to the additional Bulgarian clause. These declarations follow the wording proposed in 1995 (see previous section). No such declaration is inserted in the agreements concluded with Israel and Tunisia because negotiations were finalized before the adoption of the 1995 strategy. The principles of market economy and GATT conformity As mentioned above ‘the principles of market economy’ are not considered, contrary to the Europe Agreements, an essential element of the EMAAs. Economic freedom forms only the ‘very basis of the Association’ and is limited to the preamble. However, most of the MNMCs are founding members of the WTO and subject to structural adjustment programmes (SAPs) under the aegis of the Bretton Woods institutions. In other words, they must on the one hand respect obligations undertaken in the WTO framework and on the other follow the specific conditions of SAP in order to benefit from Community aid. The second title of the EMAAs is devoted to the free movement of goods. A first and noticeable condition is included in Article 6 where it is said that: The Community and Tunisia shall gradually establish a Free Trade Area over a transitional period lasting a maximum of 12 years starting from the date of the entry into force of this Agreement in accordance with the provisions of this Agreement and in conformity with those of the General Agreement on Tariffs and Trade 1994 and the other multilateral Agreements on trade in goods annexed to the Agreement establishing the WTO. Tunisia, as a founding member of the WTO, is legally subject to the ‘principle of conformity’ adopted in Marrakesh implying the inclusion of such a

The Many Faces of EU Conditionality 123

provision as ‘Each Member (of the WTO) shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.’ 94 Of course, such a condition applies equally to the EC and its Member States because of the mixed nature of the EMAA. Jordan is not yet a WTO member but a WTO conformity clause has been inserted in anticipation of its accession (Article 6). The same applies to the Interim Agreement concluded with the PLO (Article 4). According to the Agreement, the objective of economic co-operation shall be to support Tunisia’s own efforts to achieve sustainable economic and social development. The link between economic and social development must be underlined especially, as it is made within the framework of the objectives of the co-operation. A regular dialogue on any social matter which is of interest to the Parties is also scheduled (Article 69) and a chapter (III) is devoted to co-operation in the social field in the EuroMoroccan and Euro-Tunisian agreements. Regional integration and co-operation incentives Regarding regional incentives, Article 43, paragraph 3, provides that ‘cooperation shall foster economic integration within the Maghreb using any measures likely to further such relations within the region’. Article 45 adds that ‘in order to make the most of this Agreement, the Parties shall foster all activities which have a regional impact or involve third countries’. 95 Regarding the Agreement concluded with Israel one should note a specific common declaration where regional co-operation is directly linked to the Middle East Peace Process. Other types of declaration made by the Community relating to rules of origin must also be mentioned as they represent regional incentives. The declaration relating to Article 29 of the Euro-Tunisian Agreement states, for example, that ‘if Tunisia concludes agreements with other Mediterranean countries with a view to establishing free trade, the Community is willing to consider cumulation of origin in its trade with those countries.’ The promotion of sustainable development as a central component of the various fields of Euro-Mediterranean co-operation Under the title on economic co-operation, in Article 43, paragraph 4, establishing the scope for co-operation, preservation of the environment and ecological balance is identified as a central component of the various fields of co-operation. Article 48 is dedicated to environmental co-operation for environmental preservation and improvement and for sustainable development. The environment is selected for co-operation in the field of regional co-operation in Article 45, paragraph (b). Conditionality within the framework of the MEDA Programme From the mid-1970s, financial co-operation with the MNMCs was implemented through bilateral technical and financial protocols annexed to the

124 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

agreements. These protocols were of a contractual and binding nature and submitted to the assent of the European Parliament. The EP used its right of veto several times.96 From traditional bilateral and contractual financial assistance to autonomous unilateral measures to accompany the reform of the MNMCs Council Regulation 1488/96 of 23 July 1996 ‘on financial and technical measures to accompany [MEDA] the reform of economic and social structures in the framework of the Euro-Mediterranean Partnership’, based on Article 235 (now Article 308 EC Treaty) is the main instrument for implementing financial assistance towards the MNMCs. According to a Council Decision of 6 December 1996 concerning the adoption of the guidelines for the indicative programmes: ‘After four generations of financial protocols with the Mediterranean partners it has become necessary to seek an improvement in the system of delivery of co-operation activities.’ 97 There was especially a need for increasing flexibility in the programming, avoiding dispersion of the co-operation effort and adapting the financial allocations to the pace of reform and to the progress achieved in macroeconomic stabilization. A very explicit political conditionality In the preamble of the MEDA Regulation it is stated that: The Community’s Mediterranean policy must play a part in achieving the general objective of respect of human rights and fundamental freedoms and of the promotion of good-neighbourly relations, while respecting international law and the territorial integrity and external frontiers of the Member States and Mediterranean Non-Member Countries. Article 3 of the Regulation adds that the latter is based on ‘respect for democratic principles and the rule of law and also for human rights and fundamental freedoms, which constitute an essential element thereof, the violation of which element will justify the adoption of appropriate measures’. Indeed, it constitutes a very explicit political conditionality. It is appropriate to underline the reference to ‘fundamental freedoms’ and, therefore, the implicit link made with the European Convention on Human Rights and Fundamental Freedoms (ECHR). Finally, in this regard, Article 2, paragraph 1, states that the purpose of the MEDA Regulation is to contribute to initiatives of joint interest in the three sectors of the EMP, the first sector being, according to the wording of the Meda Regulation: ‘the reinforcement of political stability and of democracy.’ One should notice that ‘the reinforcement of political stability and of democracy’ is not exactly the same as the original formula used for the

The Many Faces of EU Conditionality 125

first basket of the Barcelona Declaration which reads as follows: ‘Political and security partnership: establishing a common area of peace and stability.’ The word ‘democracy’ has been added unilaterally into the autonomous Regulation. Progress towards structural reform as a cornerstone of Euro-Mediterranean co-operation and financial assistance Economic performance is a cornerstone of the EMP and one should stress that the passage from a logic of assistance to a logic of partnership is the novelty of the EMP in the field of financial assistance. Regarding the link established between the economic, regional and social dimensions one should note that the support measures shall be implemented ‘taking account of the objective of achieving long-term stability and prosperity, in particular in the fields of economic transition, sustainable economic and social development and regional and cross-border cooperation’. Following these general considerations a much more explicit economic conditionality appears in Article 5, paragraph 1: Measures to be financed under this Regulation shall be selected taking account, inter alia, of the beneficiaries’ priorities, evolving needs, absorption capacity and progress towards structural reform. Selection shall also be based on an assessment of the effectiveness of those measures in achieving the objectives aimed at by Community support, in line, where appropriate, with the provisions of Association or Co-operation Agreements. The issue of ‘good governance’ One of the most interesting points included in Annex II to the MEDA Regulation is the mention of ‘good governance’. According to point IV: Good governance shall be promoted by supporting key institutions and key protagonists in civil society such as local authorities, rural and village groups, mutual-aid associations, trade unions, the media and organisations supporting business, and by assisting in the improvement of the capacity of the public administration. One should underline the fact that good governance is not mentioned in either the Barcelona Declaration or in the bilateral agreements but is explicitly mentioned in MEDA. In the MEDA Regional Indicative Programme, the moves towards ‘greater respect for human rights, the strengthening of democracy, good governance and the emergence of civil society’ is also underlined. In other words, ‘good governance’, 98 even if it cannot be put on the same footing as respect for human rights, might in the future be considered, if not de jure, de facto – as a condition for aid allocation in the EMP context.

126 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

Environmental and social incentives compared In the MEDA Regulation, the Community undertakes to support, inter alia, the efforts of the MNMCs to mitigate social and environmental consequences resulting from economic development for economic and social reform. Of course, the building of civil society is essential to the long-term success of environmental management. The first two paragraphs of Article 2 give an idea of the priority afforded environmental protection in the hierarchy of conditionality: the former makes clear that, as already mentioned, the goal of the Regulation is ‘reinforcement of political stability and of democracy, the creation of a Euro-Mediterranean free-trade area, and the development of economic and social co-operation, taking account of the human and cultural dimension’; the latter only requires that measures in support of these goals ‘take account of the objective of achieving long-term stability and prosperity, in particular in the fields of economic transition, sustainable economic and social development and regional cross-border cooperation’. While no express reference is made to environmental considerations involved in ‘sustainable economic and social development’, Annex II to the Regulation sets out the objectives and rules for the implementation of Article 2 and provides a weaker environmental conditionality of general application when compared to the economic and social conditionalities. Social conditionality, however, is more clearly delineated in relation to support measures for economic transition and the establishment of a EuroMediterranean free trade zone, or to achieving a better socio-economic balance. For regional and cross-border co-operation a general proviso is made that account be taken of promotion of the role of women in economic and social life. Special importance shall be attached to education and the creation of jobs for women. The measures shall also take account of the need to promote education and the creation of jobs for young people in order to facilitate their social integration. Also, the classification of human rights and fundamental freedoms as ‘essential elements’ in financial and technical measures under the EMP makes these conditions more certain than environmental considerations. In case of violation of essential elements, the Council may take ‘appropriate measures’ to (presumably) suspend, restrict or withdraw financing by qualified majority. No such opportunity for sanctions exists in respect of failure to meet environmental or social conditions. The procedure for adopting ‘appropriate measures’ Article 3 of MEDA provided that the definitive procedure for adopting the ‘appropriate measures’ where an essential element for the continuation of support measures to a Mediterranean partner was lacking had to be

The Many Faces of EU Conditionality 127

determined by 30 June 1997. It was consequently necessary to amend the MEDA Regulation in order to adopt such a procedure. This is the aim of Council Regulation 780/98 of 7 April 1998. This Regulation states, in its Article 1, that Article 16 of the MEDA Regulation shall be replaced by the following: ‘When an essential element for the continuation of support measures to a Mediterranean partner is missing, the Council may, acting by a qualified majority on a proposal from the Commission, decide upon appropriate measures.’ In other words, a Member State cannot impose its veto in order to avoid the adoption of such ‘punitive measures’ towards a MNMC. It is, however, doubtful that sanctions could be adopted without consensus among the Member States.

The guidelines adopted by the Council for the adoption of Bilateral and Regional Indicative Programmes The Council Decision of 6 December 1996 ‘concerning the adoption of the guidelines for the indicative programmes concerning financial and technical measures to accompany the reform of economic and social structures’ in the framework of the EMP, 99 adopted consequent to Article 9 of the MEDA Regulation, is also to be mentioned. According to these guidelines, and among other things, first, the Commission should include ‘appropriate conditionality’ in the project proposal and ensure coherence with Bretton Woods criteria when necessary (point 6). Secondly: Concerning the bilateral programmes, the priorities are to be decided taking into account the stage of development of each country’s economy and society as well as the capacity of its institutions. In the light of the conclusion or implementation of association agreements, the indicative programmes are to be decided taking into account the needs of the Mediterranean partners, their capacity to absorb funds and the progress made in structural reform process … A considerable effort will be made to promote programmes which could contribute to the development of democracy and respect for human rights. (point 11) Last but not least, the ‘economic viability’ and ‘cost-effectiveness’ of the various activities are to be taken into account. Particular attention will also be paid to ‘the way in which the indicative programmes and projects have addressed the key issues set out in these guidelines. The results of such analyses will be shared with the Member States’ (point 22). One of the major novelties relating to financial assistance is the linkage established between the legal framework level and the operational level (i.e. the indicative programming). The new indicative programming system is expected to generate a competitive effect.

128 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

The National Indicative Programmes (NIPs), concluded in 1995 and 1996 and covering three-year periods, involve nine of the twelve Partners: Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia, Turkey and the Palestinian Territories. 100 NIPs shall, according to Article 5 of the MEDA Regulation: take into account the priorities identified with the Mediterranean partners, including the conclusions of the economic dialogue … define the main objectives of, the guidelines for and the priority sectors of Community support … together with factors for the evaluation of the programmes … include indicative amounts (overall and by priority sector) and list the criteria for funding the programme concerned … The programmes may be amended taking into account experience acquired, the progress achieved by the Mediterranean partners in structural reform, macroeconomic stabilization and social progress as well as the results of economic co-operation under the new Association Agreements. The NIPs are binding on both parties to the association agreement to ensure that the recipient country applies the priorities established under the Barcelona Process. Regional initiatives complement the bilateral ones. They are designed to reflect the progress made in the framework of the Barcelona Process in taking action at multilateral level on issues of common concern, and will support decentralized co-operation. The Regional Indicative Programme (RIP) was concluded in 1998. All twelve Mediterranean partners are eligible for regional activities within the MEDA RIP. One should finally mention the Financing Framework Conventions which are the legal documents for (monitoring) the implementation of projects/programmes and defining, among other things, the roles and obligations of the different parties. During the first phase of the implementation of the Barcelona Process (1995–99) there has been a clear reinforcement of conditionality mainly because of internal developments in the EU (adoption of the 1995 strategy, entry into force of the Amsterdam Treaty). Some agreements were negotiated before the adoption of the 1995 guidelines and the MEDA indicative programmes were adopted after them. Sectoral multilateral conferences such as the Valencia ‘Euro-Mediterranean Conference on Regional Integration’ 101 of January 1999 have also influenced the process. Conditionality was therefore again introduced in a quite inconsistent manner and MNMCs are entitled to complain of a discriminatory approach. All the above developments indicate the foreseeable reinforcement of conditionality within the coming MEDA II Programme. At the time of writing, the Commission’s proposal relating to MEDA II has not yet been

The Many Faces of EU Conditionality 129

published. However, it seems that, essentially, conditionality will be reinforced at the operational level, notably in terms of progress achieved by each MNMC in structural reform and macroeconomic stabilization, as well as in the political, social and environmental fields. An indispensable simplification and rationalization of (decision-making) procedures requested by the MNMCs is also expected.

Conclusion At present, Community conditionality is still full of contradictions. There is undoubtedly a need for a more coherent approach even if considerable flexibility is required to take account of the specificity of each situation or country. The reverse effect of such a necessary amount of flexibility, though, is that the Community is sometimes accused of implementing its conditionality in a discriminatory manner. The political decision to apply conditionality strictly may well be counterproductive. Pragmatism is and, therefore, will be the rule regarding conditionality. Among the achievements, the principles of universality, indivisibility of human rights, the interdependence between human rights, democracy and development, the relativity of the principle of non-interference and the principle of proportionality between the breach of an agreement and the degree of reaction, as well as non-discrimination, are now considered as bases of the EU’s external conditionality. The human and social factors are wholly taken into account and directly linked to the political and economic issues, for example sanctions should not affect populations and humanitarian aid must be maintained. The increasing complementarity between the positive and negative approaches of conditionality is illustrated by the suggestion of the 1999 Helsinki European Council to draw the consequences from the [intense bombardments of Chechen cities]: – for the implementation of the European Union’s Common Strategy on Russia, which should be reviewed; – for the Partnership and Co-operation Agreement, some of the provisions of which should be suspended and the trade provisions applied strictly; – for TACIS, the budgetary authority is asked to consider the transfer of some funds from TACIS to humanitarian assistance. Finance in the budget for 2000 should be limited to priority areas, including human rights, the rule of law, support for civil society and nuclear safety.102 The assumption that there is a kind of emerging European way or policy of conditionality must be tempered by the fact that Community conditionality, essentially because of the absence of a ‘European Bill of Rights’, is still

130 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

largely based on international and regional conventions. In that respect, participation of the EU and Member States in international conferences is fundamental to the promotion and defence of the ‘European Model’. The need to avoid duplication or even conflicting positions with the UN, OSCE and Council of Europe is also fundamental. One should also remember, especially regarding the Pan-Euro-Mediterranean Area, the importance of UN resolutions, for example in the case of sanctions adopted towards the ex-Yugoslav republics, the role of NATO and of the OSCE, and the binding commitments for WTO members. The crucial role played by the ECJ and the EP, in order to take into account the specificity of the ‘European Model’, is to be underlined. One must, however, ask whether conditionality is really playing a useful role in supporting economic and political reform in a country having different cultures, systems, resources and priorities. If conditionality is counter-productive it may challenge the Community’s credibility. Conditionality can therefore essentially be judged in terms of its effectiveness. Nevertheless unresolved issues are numerous. The mixed nature of European integration – the well-known intergovernmental approach versus supranational concessions of sovereignty of the Member States – is certainly one of the most problematic. The sovereignty issue arises equally with regard to third countries. On the grounds of different priorities and values with different resources and approaches and, consequently, different timetables, sovereignty has long been argued by weaker developing countries to resist social, political and policy preferences of the more wealthy. The interdependence of countries due to the transboundary nature of environmental pollution is used to counter such sovereignty arguments for the export of Community environmental standards and to justify concerted action in the interests of the global environment at international level. In fact, glaring anomalies undermine the Community’s ethical justification for the export of the Community Model. Thus, for example, following the Kyoto Protocol, countries likely to fall below the CO 2 emission targets are now proposing to sell the remaining emission allowance (emission trading) to countries wishing to exceed their targets. Certain dangerous wastes banned from intra-Community export nevertheless continue to be exported to developing countries. As regards the implementation of conditionality at the operational level, the Commission’s role is fundamental. Thus, for example, where guidelines incorporate conditionality, their implementation will depend heavily on the role played by the Commission’s external service in the administration of projects with third countries. Moreover, where states cannot administer the conditionality, economic operators may also find themselves penalized. For example, importers entitled to benefit from trade preferences for labour, environment and anti-drug measures under the Community’s GSP may not receive the preferences to which they are entitled as a result of

The Many Faces of EU Conditionality 131

inadequacies of that country’s administrative co-operation with the Commission. The Commission services, recognized as desperately understaffed, must implement much of the softer conditionality at an operational level, for environmental conditionality, for example, through carrying out environmental impact assessments of projects before they are allowed to go ahead. However, the lack of transparency in the work of these services makes it difficult to evaluate the application of conditionality. While the Commission undertakes to carry out environmental impact assessments in Declaration 12 to the Amsterdam Treaty, there is no obligation on the Commission to make them public. The Relex Common Service for the management of Community aid to third countries is only operational as of January 1999 which makes it difficult to evaluate the streamlining of the Commission services in order to eliminate the inefficiencies and inadequacies of the external assistance 103 so publicly lamented by the EP and the Court of Auditors. A greater socio-economic selectivity in projects and programmes in the EU’s external relations is expected to be the rule in the coming years as the allocation of Community resources will be based not only on needs but also on merits (progress reforms, performance of the recipient country in terms of commitments and disbursements of financial aid, promotion of regional integration and sustainable development, and so on). The economic ‘viability’ of financial programmes will now be taken into account. Such a conditionality may affect the poorer and the weaker countries, in other words the countries in need of the highest financial and technical assistance. How to evaluate or measure the political and economic performances of a third country is another question. More worrying is the fact that the considerable flexibility required could lead to abuses as conditionality may be used to safeguard EU co-operation budgets or as a form of disguised protectionism. The use of sanctions, the negative or punitive approach of conditionality, is obviously much more controversial than the positive one and is generally used sparingly as the last resort. Sanctions are therefore only the tip of the ‘iceberg of conditionality’. At the international level, economic and political sanctions applied in the 1990s on the basis of multilateral, regional or unilateral decisions are numerous. In 1998, the US International Trade Commission identified 142 provisions in 42 federal laws applying US unilateral economic sanctions to 29 third countries: 7 designated terrorismsponsoring countries, 11 other countries for foreign policy or security reasons, and also 11 countries were subject to unilateral economic sanctions that prohibit certain imports from these countries for ‘environmental protection objectives’. 104 Sanctions adopted within the framework of the WTO in the context of what some journalists call a ‘trade war’ between the US and the EU should also be mentioned. Jurisprudence of the Dispute

132 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

Settlement Body of the WTO and evolution of GATT/WTO rules may also have, depending on the results of the next round, a strong impact on the development of conditionality especially in the social and environmental field.105 Comparing the CEECs and the MNMCs in the light of the sanctions adopted by the Community one should note that numerous and strong sanctions were adopted in the Pan-Euro-Mediterranean Area even before the implementation of the Maastricht Treaty.106 Such sanctions were generally the result of serious human rights violation. However, some major human rights violations have not been sanctioned. As stressed by the EP, the Union is at a crossroads: ‘the first stage has been completed: human rights are now fairly consistently referred to in texts.’ However, a ‘second stage must now begin, consisting in making these commitments effective, monitoring their implementation and penalising failure to implement them’.107 There is undoubtedly a need for a more consistent approach. It seems hypocritical that the EU, still suffering its own democratic deficit, imposes108 in its relations with third countries the obligation to respect commitments that the EU or its Member States are still unable or even unwilling to undertake.109 The lack of legal foundation, albeit partially solved with the adoption of the Maastricht and Amsterdam Treaties and the mounting jurisprudence of the Court, becomes a question of principle: the principle of reciprocity which is one of the foundations of the EAs and EMAAs. There is no doubt that EU external conditionality will be a significant and strategic issue in the coming years. The next Intergovernmental Conference and WTO Millennium Round will be occasions to demonstrate that there is indeed a European Model of reconciliation and integration and an emerging European political identity aimed at promoting peace, security and progress in Europe and in the world.

Notes 1. Although it did make reference to the UN Charter in its preamble. 2. Liberty, democracy, respect for human rights and fundamental freedoms and the rule of law. 3. See Article 136 EC Treaty mentioning fundamental social rights. 4. Article 2 TEU. 5. Article 17 TEU. 6. See the conclusion of the paper by Kris Pollet below, and the 1999 Tampere European Council, Presidency Conclusions, point D: ‘Stronger external action.’ 7. EAs were only offered to those CEECs that showed practical evidence of their commitment to introduce the rule of law, respect human rights, create a pluralist democracy, organize free and fair elections and carry through economic liberalization with a view to the establishment of a free market economy.

The Many Faces of EU Conditionality 133 8. See C. Flaesch-Mougin on the role played by the French and Belgian legislative bodies regarding the delay in the ratification of the EMAA signed with Israel. 9. Agence Europe, 26–27 April 1993, 13–14. 10. See ‘Annual Report on human rights in the world in 1997 and 1998 and European Union human rights policy’, A4-0410/98, 6 November 1998, 20. 11. 1999 Helsinki European Council, Presidency Conclusions. 12. COM(95)567 Final, 22 November 1995, 8. 13. 1997 Luxembourg European Council, Presidency Conclusions, point 23. 14. See Council Regulation 975/1999, OJ, L120/1, 8 May 1999 and Council Regulation 976/1999, OJ, L120/8, 8 May 1999. 15. Council Regulation 2820/98 of 21 December 1998 applying a multiannual scheme of generalized tariff preferences for the period 1 July 1999 to 31 December 2001. OJ, L357/1, 30 December 1998. 16. Council Regulation 3281/97 of 24 March 1997 temporarily withdrawing access to GSP from the Union of Myanmar. OJ, L85/8, 27 March 1997. See B. Brandtner and A. Rosas, ‘Human rights and the external relations of the European Community: an analysis of doctrine and practice’, EJIL, 9, 1998, 468–90. 17. Treaty amendments were necessary to establish a Community environment policy. The Community’s environmental acquis, effectively split between the Internal Market legal basis (Article 95 – ex-Article 100a) and the environment legal basis (Article 175 – ex-Article 130s), has been used both to justify external environmental policy and to shape it. The Amsterdam Treaty makes further amendments (Article 3C) to integrate environmental requirements into the definition and to implement the Community’s policies and activities with a view to promoting sustainable development. The 1998 Cardiff European Council included a statement of objectives for the integration of the environmental policy into other policy areas. 18. Decision on Trade and Environment, Marrakesh, 15 April 1994, 3. 19. C. Flaesch-Mougin ‘Vers une conditionalité environementale?’, in J.-C. Masclet (ed.), La Communauté européenne et l’environnement (Paris: La Documentation Française, 1997), 185–208. 20. For a deeper analysis see M. Maresceau (ed.), Enlarging the European Union: Relations between the EU and Central and Eastern Europe (London and New York: Longman, 1997); on EAs see K. Pollet, ‘Human rights clauses in Agreements between the European Union and Central and Eastern Europe’, RAE/LEA, 1997, 290–301. On Russia, see J. Raux and V. Korovkine (eds), Le partenariat entre l’Union européenne et la fédération de Russie (Rennes: Apogée, 1998). 21. See the TCAs concluded with the ‘Hungarian People’s Republic’, OJ, L327/1, 30 November 1988 and the ‘Polish People’s Republic’, OJ, L339/1, 22 November 1989, and the first Europe Agreements, signed with Poland and Hungary (see appendix at the end of the book). 22. Bull.-EC, June 1991, 17. 23. Bull.-EC, November 1991, 122. 24. Bull.-EC, May 1992, 82. The Declaration was adopted on the same day as the Council decision authorizing the Commission to open negotiations with Romania and Bulgaria with a view to concluding EAs containing an ‘essential element clause’. 25. COM(95)216 Final, 23 May 1995, 7. 26. COM(95)216 Final, 7.

134 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke 27. One of the main requirements of Article 60 of the Vienna Convention is the existence of a ‘material breach’ invoked by one of the parties as a ground for terminating or suspending the Treaty in whole or in part consisting in a repudiation of the Treaty not sanctioned by the Convention or the violation of a provision essential to the accomplishment of the object or purpose of the Treaty. 28. Case C-268/94, Portuguese Republic v. Council of the European Union, ECR, 1996, I-6177, paragraph 27. 29. Brandtner and Rosas, op. cit., 474 . 30. See P. J. Kuyper, ‘Trade sanctions, security and human rights and commercial policy’, in M. Maresceau (ed.), The European’s Community’s Commercial Policy after 1992: The Legal Dimension (Dordrecht, Boston and London: Martinus Nijhoff, 1993), 401–38. 31. Such a statement closely followed the discussions held at the COREPER level regarding the negotiations of a trade and co-operation Agreement with Korea. 32. Bull.-EU, May 1992, 82, italics added. 33. The party must notify the other parties of its claim. The notification shall indicate the measure proposed to be taken with respect to the treaty and the reasons therefore: Article 65(1). The other main condition involves allowing a period that shall not be less than three months between the notification and the suspension, except in cases of special urgency: Article 65(2). 34. See appendix at the end of the book. 35. Article 21 of the Agreement between the EEC and Estonia, italics added. 36. Europe Agreement concluded with Bulgaria, OJ, L358/1, 31 December 1994, Article 118, paragraph 2. 37. See COM(95)216 Final, 23 May 1995, Annex I. 38. COM(95)216 Final, 11. 39. Pollet, op. cit., 294. 40. COM(95)567 Final, 22 November 1995, 16. 41. A list of ‘measures that may be taken in response to serious human rights violations or serious interruptions of the democratic process’ is introduced: ‘alteration of the contents of co-operation programmes or the channels used; reduction of the cultural, scientific and technical co-operation programmes; postponement of a Joint Committee meeting; suspension of high-level bilateral contacts; postponement of new projects; refusal to follow up the partner’s initiatives; trade embargoes; suspension of arms sales and military co-operation or suspension of co-operation’, COM(95)216 Final, Annex 2. 42. Article 366a states, among other things: ‘to hold consultations (unless there is special urgency) with a view to assessing the situation in detail and, if necessary, remedying it.’ The consultations shall begin no later than 15 days after the invitation and as a rule last no longer than 30 days. It is stressed that ‘suspension would be a measure of last resort’. The party concerned shall also receive ‘prior notification of any such measure which shall be revoked as soon as the reasons for taking it have disappeared’, OJ, L156/6, 29 May 1998. 43. Joint declaration on Article 366a (extracts): ‘The Contracting Parties will not have recourse to the provision of “special urgency” in Article 366a, other than in exceptional cases of particularly serious and flagrant violations that, because of the response time required, render any prior consultation impossible. 2. In the event that either Contracting Party has resort to this measure, the relevant Party undertakes to make arrangements to consult with the other expeditiously with a view to assessing the situation in detail and, if necessary, remedying it.’

The Many Faces of EU Conditionality 135 44. Annual Report ‘on human rights throughout the world in 1995–1996 and the Union’s human rights policy’, A4-0400/96, point 18, 28 November 1996. 45. Thus, for instance, when a number of undemocratic practices by the Slovakian authorities provoked an EP Resolution pointing out that continuous ‘insufficient respect for democracy, human and minority rights and the rule of law’ would make it necessary for the EU to ‘reconsider its programmes of assistance and co-operation under the Europe Agreement which might have to be suspended’ (OJ, C323/116, 4 December 1995), the matter was settled shortly afterwards. See Agence Europe, 29 November 1995, 14. 46. See Council Decision of 17 May 1999 repealing Common Position 98/614/CFSP concerning Nigeria, OJ, L133/5, 28 May 1999. 47. See J. Raux, ‘Convention de Lomé (Accord de Maurice)’, Répertoire communautaire Dalloz, May 1998. 48. See O. Paye, ‘Le processus de reconnaissance des républiques ex-yougoslaves: un précédent dangereux pour les états multi-nationaux’, Transitions, I and II, 1995, 73–86; J. Charpentier, ‘Les déclarations des Douze sur la reconnaissance des nouveaux Etats’, RGDIP, 1992, 343–55. 49. See P. Renauld, ‘La stratégie de conditionnalité et l’approche régionale de l’Union européenne dans ses relations avec la Bosnie Herzégovine’, RAE/LEA, 1997, 445–9. 50. OJ, L348/2, 18 December 1997. 51. PCA between the EC and their Member States and Georgia, OJ, L205/1, 4 August 1999. 52. 2003rd Council Meeting, General Affairs, Luxembourg, 29/30 April 1997. 53. Among them: ‘credible commitment to engage in democratic reforms and to comply with the generally recognised standards of human and minority rights’; ‘holding of free and fair elections’; ‘implementation of first steps of economic reform’; ‘proven readiness to enter into good neighbourly and cooperative relations with its neighbours’. 54. See also on ‘Regional approach to the countries of south-eastern Europe: compliance with the conditions in the Council Conclusions of 29 April 1997’: COM(1998)618 Final, 28 October 1998; on the launching of the Stability Pact of the EU on South-Eastern Europe: 2177th Council Meeting, 17 May 1999; on ‘Stabilisation and Association Process for Countries of south-eastern Europe’: COM(1999)235 Final, 26 May 1999. 55. COM(1999)235 Final, 26 May 1999, 5. 56. Stability Pact for South Eastern Europe, Press Release 3789/1/99, Brussels, 30 July 1999, point 6. 57. COM(95)163 Final and Final/2, 3–10 May 1995. See M. -A. Gaudissart and A. Sinnaeve, ‘The role of the white paper in the preparation of the eastern enlargment’, in M. Maresceau (ed.), Enlarging the European Union, op. cit., 41–71. 58. Agenda 2000, Vol. I, II and III, COM(1997)2000 Final, 15 July 1997. 59. See P. C. Müller-Graff, ‘Legal framework for relations between the European Union and Central and Eastern Europe: general aspects’, in Enlarging the European Union, op. cit., 27–40. 60. PHARE Regulation 3906/89, OJ, L375/11, 23 December 1989, as last amended by Regulation 1266/99, OJ, L161/68, 26 June 1999; TACIS Regulation 1279/96, OJ, L165/1, 4 July 1996. 61. Article 1 of the EBRD Charter of 29 May 1990; Council Decision of 19 November 1990 on the conclusion of the agreement establishing the EBRD,

136 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke

62.

63.

64.

65.

66. 67.

68.

69.

70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80.

81. 82.

OJ, L372/1, 31 December 1990; Agreement establishing the EBRD, OJ, L372/4–26. Until 1998, only two instances (in 1991) of suspension of operations (in Bosnia and Herzegovina and the FRY) have provided examples of this: see A. Slim, ‘L’aide occidentale à l’Europe de l’Est: les leçons d’un demi-siècle d’aides au developpement ont-elles été tirées?’, Transitions, II, 1998, 29–73. ‘The Phare Programme: An interim evaluation’. Report produced by the Evaluation Unit of the European Commission in 1997 (http://europa.eu.int/ comm/scr/evaluation/phare/Phareinterim-r.html). ‘An Evaluation of Phare Restructuring and Privatisation Programmes, Final Report’, November 1998 (http://europa.eu.int/comm/scr/evaluation/phare/ 951409-r.html). Council Regulation 622/98 of 16 March 1998 on assistance to the applicant states in the framework of the pre-accession strategy, and in particular on the establishment of Accession Partnerships, OJ, L85/1, 20 March 1998. Council Regulation 1266/1999, OJ, L161/68, 26 June 1999. Article 2: ‘This Regulation is based on respect for democratic principles and the rule of law and for human rights and fundamental freedoms, which are an essential aspect. The specific conditions laid down by the Council for the implementation of co-operation with former Yugoslavia are also part of this Regulation.’ Regulation 1268/96 of 25 July 1996, OJ, L204/1, 14 August 1996. Article 3, paragraph 11: ‘When an essential element for the continuation of co-operation through assistance is missing, in particular in cases of violation of democratic principles and human rights, the Council may, on a proposal from the Commission, acting by a qualified majority, decide upon appropriate measures concerning assistance to a partner State.’ Regulation 1279/96 of 25 June 1996 concerning the provision of assistance to economic reform and recovery in the New Independent States and Mongolia, OJ, L165/1, 4 July 1996. Guidelines for PHARE Programme Implementation in Candidate Countries, 1998–1999, 27 March 1988 (http://europa.eu.int/comm/enlargement/pas/phare /implementation/guidelines/98–99.htm). COM(99)235 Final, 26 May 1999. Regulation 1624/94, OJ, L171/14, 6 July 1994. Agenda 2000, Vol. II, A.5–A.8. Country Operational Programme (COP), Sectoral Operational Programme (SOP), Strategy Papers (SP), etc. See Agenda 2000, Vol. II, A. 9. Agenda 2000, Vol. II, A.7–8. Agenda 2000, Vol. I, 62. OJ, C202/1, 29 June 1998. Council Decision of 30 March 1998, OJ, L121/1, 23 April 1998. Agenda 2000, Vol. II, A, 8–9 Agenda 2000, Vol. I, 62. See Council Regulation 1266/99 on coordinating aid to the applicant countries in the framework of the pre-accession strategy, OJ, L161/68, 26 June 1999. See L. Kramer, EC Treaty and Environmental Law (London: Sweet & Maxwell, 1998), 87–91 and section 3.11 in particular. SEC (1997) 1608, 25 August 1997, 3.

The Many Faces of EU Conditionality 137 83. Communication on ‘accession strategies for environment: meeting the challenge of enlargement with the candidate countries of central and eastern Europe’, COM(1998)294 Final, 20 May 1998. 84. Development of Implementation Strategies for Approximation in Environment – which aimed to help CEECs with the adoption of the environmental acquis. 85. See J. Fingleton et al., Competition Policy and Transformation of Central and Eastern Europe (London: Centre for Economic Policy Research, 1996). 86. See Directive 86/609/EEC, as amended, OJ, L336/1, 18 December 1986. 87. See Agence Europe – Europe Document, No. 1930/31, 27 April 1995. 88. According to the declaration of Javier Solana made to Agence France Presse following the end of the Barcelona Conference. 89. According to Egypt, see Agence Europe, 6 February 1999, 10. 90. Conclusions of the third Euro-Mediterranean Conference, Stuttgart, April 1999, point 37. 91. See contribution by S. Inama and A. Tovias, ‘The EU and Mediterranean countries’, in P. Demaret, J.-F. Bellis and G. Garcia Jimenez (eds), Regionalism and Multilateralism after the Uruguay Round (Brussels: European Interuniversity Press, 1997), 95–113. 92. Including the specific Euro-Mediterranean Interim Association Agreement on trade and co-operation between the European Community and the Palestine Liberation Organization (PLO) for the benefit of the Palestinian Authority of the West Bank and the Gaza Strip. 93. COM(95)216 Final, 23 May 1995, 13. 94. Article XVI (4) of the Marrakesh Agreement establishing the World Trade Organization. 95. Notably: (a) intra-regional trade within the Maghreb; (b) environmental matters; (c) the development of economic infrastructure; (d) research in science and technology; (e) cultural matters; (f) customs matters; (g) regional institutions and the establishment of common or harmonized programmes and policies. 96. See, for example, OJ, C39/50, 17 February 1992. 97. OJ, L325/20, 14 December 1996. 98. On good governance within the Lomé framework see J. Raux, ‘Le respect des droits de l’homme, des principes démocratiques et de l’Etat de droit, sous le signe de “la bonne gouvernance”, principe fondamental “essentiel” de l’après Lomé IV’, in Liber amicorum en l’honneur du Recteur Jacques Georgel, La liberté dans tous ses états (Rennes: Apogée, 1998). 99. OJ, L325/20, 14 December 1996. 100. The NIP for the Palestinian Territories is supplemented with an aid programme which falls under the support framework of the Peace Process. The NIPs of Cyprus and Malta are funded outside the scope of MEDA while that of Turkey is supplemented with a pre-existing financial instrument. Israel is not entitled to an NIP on account of its high level of development: ‘Main principles of the Meda programme’, European Commission, DG1, 1999. 101. See Council of the EU, Press Release, 5460/99. 102. 1999 Helsinki European Council, Presidency Conclusions, Annex II. 103. COM(1999)180 Final, 23 April 1999. 104. USITC Report on US Unilateral Economic Sanctions, USA Text, US Mission to the EU, USAT TR 38, 11 September 1998.

138 Erwan Lannon, Kirstyn M. Inglis and Tom Haenebalcke 105. See the Opinion of the Economic and Social Committee on the ‘World Trade Organization (WTO)’, OJ, C101/43, 12 April 1999. 106. See: T. De Wilde d’Estmael, La dimension politique des relations économiques extérieures de la Communauté Européenne (Brussels: Bruylant, 1998). 107. Report ‘on human rights throughout the world in 1995–1996 and the Union’s human rights policy’, Explanatory Statement, A4-0400/96, 28 November 1996. 108. Reluctance of Egypt regarding the contents of the essential element clause of the new EMAA (still to be concluded) may, for example, be mentioned. 109. See EP Report on ‘respect for human rights in the European Union (1995)’, A40112/97, 20 March 1997.

Part II The Economic and Financial Dimension

This page intentionally left blank

6 Agenda 2000 and EU Budget Strategy: Funding Enlargement and Relations with Eastern and Southern Neighbours Geoffrey Denton Introduction The European Union is in the centre not only geographically, but also because the countries to the East and to the South are to a large degree dependent on the EU for trade access, budgetary transfers and investment. There is in the short term competition between East and South for limited fiscal resources, for investment and for political and bureaucratic attention from the EU. There is a well-known perception in the southern Member States of the EU that the priority given to Central European states 1 since 1989 diverts attention and resources from the Mediterranean. They have been since 1989 in an analogous situation to that of the southern EU Member States after the demise of undemocratic regimes in the mid-1970s. This imbalance is inevitable since the EU’s immediate East consists of states that are European and, since the demise of communism, becoming democratic and market oriented. They are therefore not only potential full members of the Union but a programme leading to their accession during the next decade was adopted at the Copenhagen Summit in June 1993. Among the Mediterranean Non-Member Countries (MNMCs) Cyprus and Malta are treated as prospective members while Turkey, which formally applied for membership in 1987, obtained the status of candidate country at the 1999 Helsinki European Council. The states of North Africa and the Middle East are not European, do not meet all the criteria of democracy, and have economies that are far from meeting the Copenhagen economic criteria. They are not even potential candidates for full membership; their relationship with the EU is analogous to that of the CIS states, not to that of the Central European applicants. But this essential difference should not imply confrontation between eastern and southern objectives of the EU. In the long term neither economics nor security are zero-sum games. The EU benefits from policies that bring countries to the East and to the South into the Union as full members, or into closer political and economic relations falling short of 141

142 Geoffrey Denton

full membership; otherwise it would not pursue those policies. And if it benefits, there is no reason why it should not pursue at the same time integration where that is relevant, and co-operation where integration is not feasible, with both the East and the South. The EU is already pursuing three strategies for its immediate environment: a strategy of integration by enlargement to Central and SouthEastern Europe, an eastern co-operation strategy for the CIS states, and a southern co-operation strategy for North Africa and the Middle East. Given the short time horizons of its politicians and electorates, it fails to make available for any of these adequate resources to ensure success in meeting its objectives. Given the greater ambition of the Central European than the eastern and southern objectives, a high proportion of the limited resources that will be made available are earmarked for Central Europe. After Central European enlargement has been completed, the larger EU will still have both an eastern strategy, concerned with the CIS states, and a southern strategy, and may then be willing to divert more resources to ensuring the success of both.

Central European enlargement and Agenda 2000 budgetary proposals At each successive enlargement of the EU in 1973, 1981, 1986 and 1995, new Member States were assimilated into the budgetary system by means of transitional periods phasing in their contributions to and receipts from the budget. Accession of new Member States in the 1973 (Denmark, Ireland and the United Kingdom) and 1995 (Austria, Finland and Sweden) enlargements increased net budgetary resources, and thus reduced the budgetary cost of membership to existing Member States. In the 1981 (Greece) and 1986 (Spain and Portugal) enlargements, net resources were reduced and the budgetary burden on existing Member States therefore increased. The response to the accession of the three poor southern Member States in 1981 (Greece) and 1986 (Spain and Portugal) was a substantial increase in the size and redistributory use of the budget, designed to bring assistance to the economic development of the new Member States and their adjustment to membership.2 The need to allocate funds to support Central European enlargement has been an important issue in the negotiations among the EU Fifteen on the new Financial Framework for the period 2000–06.3 Most of the applicants are more dependent on agriculture and all are much poorer than the EU Fifteen average GDP per capita, and so expect to be net recipients from the budget. Existing CAP price levels are considerably higher than those in Central European states, and their application to new members would be damaging to their economies as well as costly for the EU budget. Application of the Structural Funds in the new Member States will entail further burdens. The debates about the Financial Framework took place in an unfavourable climate. EU Member States had been absorbed over much of the 1990s with

Agenda 2000 and EU Budget Strategy 143

meeting the convergence criteria for EMU and, after EMU Stage III began on 1 January 1999, with meeting the terms of the Stability Pact which imposes fiscal discipline on EMU members. All feel pressure also to reduce high rates of national taxation so as to become more competitive and reduce the current high levels of unemployment. Budgetary provision for enlargement, or for external strategies, therefore has to be made against the background of intense competition among the EU Fifteen Member States to retain current levels of net receipts from the budget, or to reduce current levels of net contributions. Reforms of the CAP and revision of the Structural Funds were proposed to meet existing concerns about budgetary and other effects of these policies, as well as to release funds for enlargement. WTO ministerial talks on world trade at Seattle in November 1999, which may initiate a new round of trade negotiations, are certainly expected to include discussion of proposals for further reductions in levels of agricultural protection, and therefore to add to the pressure for reform of the CAP. The Commission’s proposals in Agenda 2000, published in July 1997, reflected these economic and political realities.4 They were based on retaining the ceiling of 1.27 per cent of EU GDP, set in 1992, until the end of the next Financial Framework in 2006, and envisaged that EU spending commitments would not rise above 1.22 per cent. This target would be achieved by tight control over spending in the EU Fifteen, holding it to a maximum of 1.10 per cent of EU GDP, with a provision of 0.12 per cent of EU GDP for enlargement. The ‘agricultural guideline’ would continue to limit increases in CAP spending to 74 per cent of the increase in nominal GDP. Proposed price reductions of 30 per cent for meat, 20 per cent for cereals and 10 per cent for dairy products could reduce expenditure on supporting agricultural prices, though their impact on total CAP spending would be offset in the short term by the need to compensate farmers by increasing spending on direct income support and rural development policies. Real expenditure in the EU Fifteen would increase by only 3.5 per cent in 2000–06, with a further real increase of 13.6 per cent in the budget to finance accession of new Member States. Transfers within the EU Fifteen were expected to be scaled down as some regional GDPs rise above the 75 per cent of average EU GDP per capita criterion for the main Objective 1 programme of assistance from the Regional Fund, and this would make room for the allocation to Central Europe. The proposed increase in total real spending of 17.1 per cent compared with a real increase of 31.6 per cent in the previous framework period, 1993–99, is a measure of the greater budgetary stringency now proposed.

The battle over the new Financial Framework Three major interests had to be reconciled in the new Financial Framework: those of the net contributors within the EU Fifteen; those of the net recipients within the EU Fifteen; and those of the future new Member States in

144 Geoffrey Denton

Central Europe. Two of the interests are inside the Union and have substantial power to affect the outcome. The third interest, that of the newcomers, is outside and has little power to affect the outcome. The British position on the Financial Framework for 2000–06 was that the rebates negotiated at Fontainebleau in 1984 must be retained.5 Although substantial reforms have taken place, especially the MacSharry reforms to reduce CAP price levels agreed in 1992, the structure of EU policies remains inappropriate to Britain’s economic structure, and the UK’s GDP per capita remains slightly below the EU average. The British position is indirectly supported, under the Labour government since May 1997 as under the previous Conservative government, by reference to the perceived superiority of British economic policy, which emphasizes: firm control over public budgets and debt; the avoidance of excessive prospective burdens of financing public pensions on an unfunded, ‘pay-as-you-go’ basis; privatization of industry and the elimination of subsidies; flexible labour markets designed to avoid high unemployment and the resulting burden on business of high social contributions. There is a public perception that in many of these respects policy in other EU Member States is not so sound, and that it is unjustified to expect British consumers and taxpayers to increase, or even to maintain, their net contribution in order to support those with less admirable policies.6 Other EU governments took a similarly nationalistic point of view to the British. The German government had given notice over many years that it would not forever act as the EU’s ‘Zahlmeister’, and reiterated its position at the 1998 Vienna Summit. Its determination to reduce its large net contribution to the EU budget was reinforced because its relative GDP per capita fell after unification, and was only 108 per cent of the EU Fifteen average in 1997. The Netherlands, with the highest net contribution per capita, and France and Italy which are also net contributors, also oppose any increases in the budget total and in the transfers within it. Among the net recipients, Ireland alone appears to acquiesce to an eventual reduction in its net receipts following its remarkable success in catching up with average EU GNP per capita during the 1990s, but even so will seek to defer these cuts as long as possible. The southern Member States insist on their right to continuing transfers through the Regional Fund for regional development and through the Coherence Fund for adjustment to EMU. Spain has been by far the most significant net recipient, with 23 per cent of the 1993–99 138 billion euro allocation to Structural Funds, and 55 per cent of the 1993–99 14.5 billion euro Cohesion Fund. Spain insisted that it still needs regional transfers to reduce the gap of 22 per cent between its GDP per capita and the EU average, that the Cohesion Fund, designed to assist compliance with the financial convergence indicators for entry into Stage III of Economic and Monetary Union, should continue even after the start-up of EMU, and that the solution to the budgetary problem of enlargement could lie in increasing the budget ceiling above 1.27 per cent, thus pushing the problem back onto the net contributors.

Agenda 2000 and EU Budget Strategy 145

The Commission’s Agenda 2000 proposals probably represented what in the Commission’s judgement was the extreme limit of the Member States’ willingness to finance enlargement in 2000–06. Even so, in its discussions on the Financial Framework at the 1998 Vienna Summit, the European Council appeared to take an even more parsimonious view than the Commission. Calls were made for a freeze on total spending, meaning that real expenditure would fall as a percentage of a growing EU GDP over the period 2000–06. To meet the problem that desired agricultural reforms would require in their early years an increase in total spending on the CAP, it was proposed that part of agricultural spending should be transferred to Member States’ budgets, a ‘renationalization’ of agricultural policy. At the 1999 Berlin Summit the European Council negotiated a series of compromises to reach agreement on the Financial Framework. 7 They agreed total commitments amounting to 640 billion euro, estimated at only 1.07 per cent (compared to Agenda 2000: 1.22 per cent of expected GDP over the seven years). This appeased the net contributors, allowing a small reduction in the estimated net contribution of Germany. Minor technical adjustments to the British rebates meant that this British acquis remained virtually unscathed. Revision of the regions eligible for regional assistance allowed Structural Funds commitments to be reduced over the seven-year period from 32 045 m euro in 2000 to 29 170 m euro in 2006, while a small increase in the Cohesion Fund to 18 000 m euro met Spain’s demands to retain this benefit. A much diluted package of agricultural reforms met French concerns. Past experience shows that setting targets for commitments over such a long period is fraught with uncertainty; all that is certain is that the outcome will be different from the intention. Whatever the actual outcomes may be, these compromises allowed the Council to find 3.12 billion euro for commitments to pre-accession expenditure in applicant countries, and funding for new Member States starting at 4.14 billion euro in 2002, rising to 14.21 billion euro in 2006, all at 1999 prices. The allocations to new Member States start at 4.4 per cent of total commitments in 2002, and rise to 7.1, 9.7, 12.7 and 15.9 per cent in subsequent years, reaching 15.9 per cent of total commitments in 2006. The spending over the five years, 2002 to 2006, for which there are allocations to new Member States, amounts to 9.9 per cent of total commitments in those years. The 15.9 per cent of total commitments allocated to new Member States in 2006, a total sum of 14 220 m euro, compares with 29 170 m euro allocated in that year to structural operations within the EU Fifteen.

The need for transfers to Central Europe That the new Central European Member States need substantial transfers through the EU budget to assist their adjustment to EU policies and their economic development can hardly be doubted. In 1997 the GDPs

146 Geoffrey Denton

per capita, at purchasing power parity exchange rates, of Poland, Hungary and the Czech Republic were 32, 37 and 54 per cent of the EU average, compared with 61, 72 and 78 per cent for Greece, Portugal and Spain.8 Thus GDPs per capita for Hungary and Poland are around half the level of the EU’s Mediterranean Member States, which have benefited from substantial transfers of funds through the EU budget since accession in 1986. Their people suffered reductions in real incomes for several years after 1989 as their former markets in the Soviet Union collapsed. They continue to undergo a harsh transition from socialist to market economies. Continuing instability in Russia, other CIS states and the Balkans has created further setbacks. Average real incomes have been rising since about 1995, but so far they remain below or around the 1989 level, except in Poland where successful transition policies had raised them by 1998 to 17 per cent above the 1989 level. Moreover, even as average real incomes begin to rise they are unevenly distributed, so social conditions remain under strain even if a minority are benefiting from new opportunities. Accession to the EU also requires new adjustments. Since the pre-accession ‘Europe Agreements’ opened up two-way trade, the Central European countries have had large deficits in their balances of trade with the EU. 9 Their enormous needs for transport and communications infrastructure, vital if they are to become attractive markets for West European business, can only be met by attracting large inflows of private-sector foreign investment. But public funds are needed also, to ensure non-exploitative terms from private investors. Central European prosperity is strongly in the economic self-interest of the EU Fifteen, since a wider Internal Market will bring gains from the reallocation of resources and economies of scale to all European business, and contribute to the competitiveness of the whole of Europe vis-àvis other parts of the world. 10 But such long-term economic benefits are overlooked in the political and media obsession with short-term budgetary accounts. Budgetary transfers towards Central Europe are not a matter of generosity, or even of some notion of equity, on the part of the EU and NATO. European security is also at stake. NATO membership in 1999 for Poland, the Czech Republic and Hungary, followed around 2004 11 by their accession to the EU, will not project the desired security into Central Europe if economic and social strains overwhelm their political systems. And if these pressures should in turn lead to conflict, the costs of peacekeeping and reconstruction, as in Bosnia and Kosovo, and in Serbia after Milosevic, could be greater than the transfers needed to help ensure that enlargement succeeds. However, burden-sharing wrangles, similar to those within the EU, surround the eastern enlargement of NATO, especially between the US and the European NATO members. Even if NATO has adopted a rather relaxed attitude towards the need for modernization of the new Member States’ military forces and equipment, the Central Europeans’ own

Agenda 2000 and EU Budget Strategy 147

contribution to financing NATO membership is a further prospective burden on poor economies already under great strain. Central Europe is in geostrategic terms more significant than the European regions involved in the previous north-western (1973), southern (1981, 1986) and northern (1995) enlargements. These incorporated into the EU peripheral peninsulas and islands. Central Europe is not a periphery but a bridge towards eastern Europe and Asia. Investments in infrastructure, and in the economic recovery and security of Central Europe, in addition to their own immediate return, will have a substantial pay-off in terms of influencing developments in, and improving access to, countries further East.

EU financial transfers to Southern Europe, Central Europe and the Mediterranean What do the allocations in the new Financial Framework mean in terms of the level of transfers to Central Europe compared with the transfers to existing Member States? Agenda 2000 proposed budget lines allocating a total of 45 000 m euro of Structural Funds to new Member States in the seven years 2000 to 2006, most of it after 2003, while 230 000 m euro was allocated for Structural Funds transfers to existing EU Member States. The Framework agreed at the Berlin Summit allocated 45 400 m euro to new Member States, and 212 830 m euro to structural operations within the EU Fifteen. If the first two years, when no allocations were made for new members, are excluded, the allocations within the EU Fifteen are 149 330 m euro. Even on this more favourable comparison, the new members will receive in 2002–06 only 30 per cent of the allocation for structural operations within the EU Fifteen. There is a remarkable demographic symmetry between the existing net recipients of the bulk of transfers within the EU Fifteen and the prospective net recipients in Central Europe. In each case there is one state of around 40 million people (Spain; Poland), and two states of around 10 million people (Greece and Portugal; the Czech Republic and Hungary). This means that roughly 150 euro per capita per annum has been allocated for 60 million people in Poland, the Czech Republic and Hungary in 2002–06. This is a big advance on the quantitatively insignificant, though important, assistance of the PHARE technical assistance programme. 12 But the 150 euro per capita EU budget allocation per head for Central Europe is about 30 per cent of the 500 euro per capita per annum within the EU Fifteen, and mainly benefiting 60 million people in Spain, Greece and Portugal. On any objective assessment of needs this is a strange disproportion, however well it may be explained by reference to political realities. The comparison between EU budgetary commitments to Central Europe and those to the Mediterranean shows similarly vast disproportions but

148 Geoffrey Denton

this time in favour of Central Europe. Security challenges (political instability, economic malaise, legal or illicit emigration to the EU, crime and terrorism) are a major reason why the EU Fifteen, especially Germany and Austria who are in the EU’s ‘front-line’ with Central and South-Eastern Europe, favour enlargement to Central Europe and are willing to envisage what they regard as substantial budgetary transfers being devoted to achieving it. The Mediterranean presents similar security challenges for the southern EU Member States, but the EU Fifteen’s willingness to devote funds to meeting them is less because the countries to the South and East of the Mediterranean are not prospective members of the EU. This leaves the southern EU Member States on the northern shore of the Mediterranean in an awkward and contradictory position on the external commitments of the EU budget. They resist the call to ‘graduate’ from being large net recipients from the EU budget so that funds can be diverted to Central Europe; this encourages the net contributors to take a similarly firm stance against any increase in the size of the budget and in their net contributions. At the same time the southern Member States demand that more funds should be devoted to Mediterranean policy, the case for which rests on similar grounds.

Budgetary accounting v. real costs and benefits With public debate in all Member States sharply focused on simplistic ‘league tables’ of national net contributions to the budget, the true impact of the budget itself, the wider economic effects of policies and even the political significance of integration and of enlargement tend to be overlooked. As the European Commission pointed out in a working paper, national budgetary balances ‘either misrepresent or are inadequate measures of the benefits of EU membership’.13 But the degree to which the conventional debates on the EU budget mislead the public and distort EU policies is even greater than the Commission suggests. The EU budget is a set of accounts that mixes different kinds of receipts and payments in ways which conceal the true incidence on the individual Member States of both contributions and receipts, and certainly does not reflect the real economic effects of EU policies. This is not the place for a detailed account of these technical, but also politically sensitive, issues.14 The following is a list of the main issues that call into question many of the interpretations of relative burdens of the EU budget on the Member States: ●

Relative prosperity and contributive capacity of Member States are often confused;

Agenda 2000 and EU Budget Strategy 149 ●

● ● ● ● ● ●

●

EU budget expenditures in Member States on goods and services are matched by the costs of providing those goods and services, and are not comparable with transfer payments through the Structural Funds; Tax revenues may have their real economic incidence in Member States other than those in which they are collected; Budgetary expenditures in one Member State may confer real economic benefits in other Member States; Net budgetary transfers are assumed to be net economic costs; A wider Internal Market will bring substantial economic gains which are not recorded in the budgetary accounts; Economic gains from projecting security are ignored;. Budgetary transfers can promote private investments and have a multiplied effect on the growth of poorer Member States, thus increasing the economic gains to the whole EU; Enlargement will contribute to the competitiveness of EU business.

Conclusion: the need for a positive and integrated approach If the EU is to enjoy the full potential benefits of enlargement, the negative and competitive approaches to minimizing the budget, described above, must be replaced by a more positive approach to sharing in the opportunity to invest in the integration of Central Europe into the Internal Market. A similar constructive approach is called for to that which followed the accession of the southern Member States in the 1980s. At the same time, there must be realistic funding for programmes to promote stability among neighbouring countries both in the Mediterranean and in the CIS. The net contributors must accept that their net contributions should continue Unless some Member States make net contributions there can be no net transfers to assist the poorer Member States. Germany must cease to complain of being the ‘Zahlmeister’ of the EU and recognize that it already enjoys the largest economic benefits from the Internal Market, and for geographical reasons will be by far the largest beneficiary, economically as well as politically, from the Central European enlargement. This requires that any adjustment to Germany’s net contribution must be modest, so that a substantial net transfer continues. The rebates of net contributions should be re-examined In the light of the considerations raised above about the true budgetary incidence and the economic benefits of EU membership, the UK must

150 Geoffrey Denton

accept that its support for enlargement requires some financial commitment to ensure it succeeds, and that this means the generous budgetary rebates should be scaled down. The present net recipients must ‘graduate’ through a phased reduction and eventual cessation of net budgetary transfers Financial transfers through the Structural Funds were introduced as a temporary measure to improve Community solidarity by assisting the poorer Member States to adapt to the Internal Market and to catch up with the rest of the EU. They have been remarkably successful in reducing the income disparities that gave rise to them. The negotiation of a new Financial Framework was the right occasion to reconsider them in the light of the needs of much poorer new Member States after enlargement, but the opportunity has not been taken. The smaller net recipients (Ireland, Portugal and Greece) have enjoyed annual transfers between 4 and 7 per cent of their GDPs, and have grown faster than the rest of the EU. The first Member State to graduate should be Ireland, which has been remarkably successful in the 1990s in building on generous transfers through the Structural Funds and the CAP over the 25 years since accession in 1973 by attracting foreign direct investment. With growth rates sustained for several years well above 5 per cent per annum, the GDP per capita of this ‘tiger’ economy has risen to near the EU average. Spain, with a GDP per capita approaching 80 per cent of the EU Fifteen average, should be the next to graduate, followed by Portugal and eventually Greece. If no budgetary solution can be agreed, extra-budgetary sources of funds should be considered, for example the use of excess reserves created by EMU The establishment of the euro will generate a considerable amount of excess reserves available to the European Central Bank, and thus poses the question of their use in the transition period and in the longer term. Once the amount of reserves needed to cope with the transition period is determined, the problem remains of allocating the remainder. Many alternative uses have been suggested in a 1998 TEPSA study.15 Estimates of the size of such excess reserves vary, but the mid-range value is about $100 billion. The paper focused on two options for their use, both related to EU enlargement: debt-relief operations in Central and Eastern European states, and the financing of a ‘convergence fund’ for the new Member States. The possible availability of excess reserves thus appears to offer the EU a unique opportunity to remove political obstacles and accelerate progress towards enlargement. There is thus an important potential positive linkage between EMU, the financing of a successful enlargement and political union, with the further bonus of a strengthening of future transatlantic relations.

Agenda 2000 and EU Budget Strategy 151

Conclusion The failure over many years to set EU budgetary discussions in their proper context of the inadequacies and misrepresentation inherent in budgetary data, and of the wider, non-budgetary, economic benefits of the EU, has done serious damage to the integration process by exacerbating nationalistic approaches to policy discussions. In the context both of Central European enlargement and of strategies for the Mediterranean and the CIS, it appears likely to cause more harm unless attitudes can be changed. Politicians and the media believe they understand the budgetary data. They know they do not understand the economic effects, which are indeed difficult, though not impossible, to measure and interpret, so they are either ignored, or worse, there is a selective quotation of some negative aspects, such as jobs lost to competition from Central Europe,16 to support tendentious arguments against any increases in budgetary spending. Political discussion is accordingly distorted, and public opinion is stirred up against the EU and against enlargement. There is a strong case for a positive approach to investing in a successful enlargement, not as an act of generosity towards Central Europeans, but in the economic and political interest of the EU Fifteen peoples themselves. But attention in the EU Fifteen has been focused on how to limit the supposed ‘costs’ of enlargement: by deferring accession of new Member States; by imposing long transition periods designed to reduce their net receipts from the budget; or by changing policies to reduce the budgetary costs of extending them to new Member States. If the enlargement is to succeed, a more balanced approach is required that takes into account the positive economics of enlargement as well as the short-term financing needs. This account has focused, as the title required, on the budgetary issues surrounding the prospective accession to the EU of new Member States in Central Europe. Similar conclusions apply to the funding of the EU’s external policies for the Mediterranean area, and in the CIS states, except that, since membership is not yet on the agenda, the prospects for substantial transfers must be even less than for the Central European applicants.

Notes 1. For the purposes of this paper the expression ‘Central Europe’ or ‘Central European’ refers to the area East of the EU and West of the CIS. 2. The Delors I Financial Perspective for 1988 to 1992 planned to increase structural spending from 7 790 m euro in 1988 to 13 450 m euro in 1992; the Delors II Financial Framework for 1993 to 1999 planned to increase this spending from 26 329 m euro in 1995 to 32 956 m euro in 1999. 3. The Financial Frameworks set the guidelines for the annual budgets, and determine the broad outlines of spending and revenue-raising. Known by the names of the Commission Presidents, the Delors I Framework covered the five years

152 Geoffrey Denton

4. 5. 6.

7.

8. 9. 10. 11.

12. 13. 14. 15.

16.

from 1988 to 1992, Delors II the seven years 1993 to 1999. The Santer I Framework also covers seven years, 2000 to 2006. European Commission, Agenda 2000: Financing the European Union, COM(97)2000, July 1997, and Bull.-EU, Supplement, February 1998. See Denton, ‘Re-structuring the EC budget: implications of the Fontainebleau Agreement’, JCMS, vol. XXIII, no. 2, December 1984. These views, and the positions held by British governments since the 1970s, do not take into account important questions about the interpretation of budgetary accounts. A good account of these decisions, with commentary on how the compromises were reached and their implications for the different Member States and interests, is to be found in the Financial Times, 27–28 March 1999. Economist Intelligence Unit, Europe Regional Overview. In 1997 the EU had a surplus in trade with all the Central European economies except Bulgaria: see Eurostat, April 1998. See, for example, R. Portes, ‘Bigger is better: the positive economics of enlargement’, Centre for Policy Research, London, 1997. The EU has entered so far into no firm commitment to specific dates for accession of any new members. The applicants have their own target dates for accession, but for the moment there is no formal agreement on this issue. This financing is supplemented by bilateral programmes, but these also are quantitatively not very significant. EU Commission, Budget contributions, EU expenditure, budgetary balances and relative prosperity of the Member States, Brussels, 9 October 1997. For a more detailed, though now outdated, examination, see G. Denton, The British Problem and the Future of the EEC Budget (London: Federal Trust, 1982). See S. Manzocchi and P.-C. Padoan, ‘The euro–dollar exchange rate, use of excess reserves and transatlantic monetary relations’, in The New Transatlantic Agenda (Brussels: TEPSA, June 1998). See R. Faini and R. Portes, European Union Trade with Eastern Europe (London: Centre for Economic Policy Research, 1995) for an overall positive assessment of the impact of trade with Central and Eastern Europe on the economies of the European Union.

7 The Optimum Strategy for a Spoke: Linking with Other Spokes or Other Hubs? Alfred Tovias

Introduction: a dynamic context facing the Mediterranean Non-Member Countries This chapter on policy is based on some analytical thinking and some practical experience gained by Israel over recent years. This country has, since the mid-1980s, adopted a strategy which conforms pretty well to the theoretical line followed later in the chapter. After reviewing Israel’s experience (section I), I explore the relationships of a Mediterranean Non-Member Country (MNMC) so-called ‘spoke’ (e.g. Israel) with the two relevant socalled ‘hubs’ (the EU and the US) in the developed world (section II). I look then into the inadequacies of the Euro-Mediterranean Partnership (EMP) agreed upon in Barcelona in 1995 between the EU and 12 MNMCs (section III) and the different strategies open to deepen the EMP (section IV). The question arises then as to what any MNMC should try to do regarding relations with its neighbouring countries, i.e. other MNMC spokes and other non-member countries in the EU’s periphery (section V). Ranking the different options in terms of policy priorities is presented by way of conclusion. But first, what is the context in which all these decisions must be taken by the MNMC? To begin with, the success of the Uruguay Round and the creation of the WTO in 1994 has not meant that the move towards the creation of huge regional trading blocs and the conclusion of numerous Regional Integration Agreements (so-called RIAs) has been stopped. The US and the EU seem to have lost interest over the last couple of years in the multilateral process of negotiations and sometimes have resorted to bilateral reciprocity for the granting of trade concessions. More recently the US is again imposing unilaterally retaliatory measures and resorting to threats. What the MNMCs perceive is that since at least the mid-1980s the process of economic and political integration of Europe is constantly being deepened (the so-called ‘deep integration’ by economists such as Ethier or Sapir – see bibliography) and the number of European countries taking part in this 153

154 Alfred Tovias

process is increasing. This is inevitably interpreted as a danger for them, given their trade, investment, aid and migrant remittance dependence on the EU. Access to each other Member States’ markets constantly improves and therefore there is a tendency for MNMCs’ relative privileges to be decreased. The EU’s monetary union, initiated in 1999, has further eroded the prevailing privileges (since exchange rate volatility is a barrier to trade) as has periodically any enlargement of the integration process to take in more countries (in 1986 to Spain and Portugal; in 1990 to Eastern Germany and in 1995 to Austria, Sweden and Finland). Negotiations for the full integration into the EU of four Central European countries, Estonia and Cyprus started in 1998. And the Internal Market for goods, services, capital and manpower has been completed by now. Ceteris paribus, the larger the area of geographic market discrimination, the more non-members in the periphery suffer from exclusion. We are not mainly speaking here about tariffs but rather about NTBs. The discriminatory removal of NTBs among members of the European Economic Area (EEA) grants an advantage to EEA-based exporters in relation to MNMCs. Between the latter and EU Member States there is no mutual recognition of laboratories and tests, or of academic diplomas for that matter. As third states, MNMCs do not participate in decision-making on norms and standards concerning them. They do not even participate in decision-shaping, as EEA members, like Norway, do. Adding to that, MNMCs must also take notice of the movement towards continental-wide regionalism in the western hemisphere, in the wake of the creation of NAFTA and MERCOSUR. The so-called ‘hub-and-spoke system’ around the US seems confined for the moment to FTA-plus agreements, but very important from an MNMC’s perspective is the fact that they cover agricultural goods. Of course, the third element to be taken notice of is the future implementation of the trade aspects of the EMP which will deepen the ‘hub-andspoke system’ which the EC had put in place in the mid-1970s (the so-called Global Mediterranean Policy). This system will be even more lopsided than it already used to be, once the EMP is implemented by 2010, promoting EU exports to Arab MNMCs, partly at the expense of other OECD countries’ exports. Finally, eastern MNMCs must take notice of the economic implications of the Peace Process, which is far from being completed. Arab states of the Middle East, excepting Egypt and Jordan, have no direct economic relations with Israel, the most dynamic and advanced economy in the subregion.

I. Israel’s trade policy as a particular case Israel has understood since early on that, being small, it needs to maintain export markets for sheer economic survival. Obsession with market access

The Optimum Strategy for a Spoke 155

has dominated trade policy since the early 1960s. Supporting the GATT system was part of Israel’s overall strategy. But in the wake of the energy crisis of the 1970s and ensuing economic recessions, it was felt that the fate of GATT or of the Tokyo and Uruguay Rounds was uncertain and would not be decided anyway in Jerusalem. Being a ‘pariah’ state in the UN system augured no good for Israel in case the GATT system should break down. Some policy-makers felt that it would not be capable of imposing discipline on or of restraining Israel’s major trading partners (the EC and the US). It should not be forgotten here that most-favoured-nation treatment (MFN) guaranteed to Israel under the GATT was without consequence in those countries applying a de jure or de facto boycott on Israeli goods. More than tariffs or QRs, it was the absence of formal diplomatic relations with a large number of UN members which was the critical trade barrier. Thus attention turned all the more naturally towards the EC and US markets. Some liberal-minded public officials at the Ministries of Finance, Industry and Trade and at the Bank of Israel, already in the 1970s and even more so in the 1980s and 1990s, thought that concluding bilateral agreements with Israel’s major trading partners (first the EC, then the US) would have disciplining effects on a ‘corporatist’ economy dominated by public and private monopolies and oligopolies and by an all-encompassing labour union (the Histadrout). At the same time these agreements would take care of the need for Israel to increase access to key markets. This strategy has clearly succeeded. For example, notwithstanding the fact that GATT still considers Israel a developing country, the latter has never been submitted to the rigours of the Multifiber Arrangement (MFA) and has never been restrained by MFA quotas imposed by the EC or the US. Why? Because Israel had FTA agreements with the EC and the US based on reciprocity. Reciprocity also has the advantage of minimizing as far as possible the temptation by the EU and the US to apply political pressure on Israel. Concluding numerous bilateral FTA agreements has allowed Israel to penetrate key markets without having to forsake an independent trade policy. Any potential partner knows that Israel will not be part of another customs alliance, customs union or trading bloc. This can be called, following De Sebastian (1995), ‘polilateralism’. In fact most of Israeli foreign trade (74 per cent in 1997) is, nowadays, covered by FTA agreements: 67 per cent of Israeli exports and 79 per cent of Israeli imports for the same year. Israel signed a free trade agreement with the European Economic Community as early as 1975, with the United States in 1985 and with EFTA in 1992. For a decade now, Israel and the European Community have applied a full-scale free trade regime to industrial products on a reciprocal basis, but Israeli agricultural products enjoyed EC duty-free treatment on limited quantities only. The 1995 Agreement ‘establishing an association’ between Israel and

156 Alfred Tovias

the EC (see official title of the Agreement in the bibliography below) contains more trade concessions on agricultural products by the EC, reciprocated by Israel. Another industrial and agricultural free trade agreement between Israel and the US, signed in 1985, was fully implemented as of 1 January 1995. The 1992 free trade agreement between Israel and EFTA aligned the trade regime between the sides to the Agreement to the Israel–EC regime. As of early 1995 it only applies to the four remaining EFTA members, Iceland, Liechtenstein, Norway and Switzerland. In 1996, Israel signed four additional FTA agreements with Canada, Turkey, the Czech Republic and the Slovak Republic, all of which entered into force on 1 January 1997. Then, also in that year, similar agreements were signed with Hungary, Poland and Slovenia, which entered into force at different dates during 1998. At the time of writing, formal negotiations with Mexico and Bulgaria are already engaged, while negotiations with Romania and MERCOSUR have reached ‘only’ a preliminary stage. Finally, it is worthwhile mentioning here that Israel and Jordan concluded a partial preferential agreement in 1995 and that Israel and the Palestinian Authority concluded a customs union agreement (with some loopholes characteristic of free trade area regimes) in 1994 for an interim period of five years. To sum up, Israel realized before other countries that FTAs were a good solution to getting tariff- and quota-free access to key markets more rapidly than by negotiating under the GATT, while obliging its industrialists to compete openly with OECD firms. Building coalitions within the GATT to launch or obtain concessions in multilateral trade negotiations (MTNs) of particular interest to Israel did not seem practical, the example of the Cairns Group notwithstanding. The principal problem posed by individual FTAs for Israel was the inherent cost of trade diversion in favour of the preferred trade partner: first an economic cost, because third-country imports are substituted by more expensive imports from the preferred partner; second, a political cost, because you not only discriminate ‘in favour of some country’ but by definition also ‘against other countries’. This explains, as a matter of fact, why Israel had no other remedy but to sign in 1985 an FTA agreement with the US, Israel’s strategic ally, once the results of eliminating tariffs on EC-originating products began to be felt. Incidentally, multiplying the number of FTAs signed has had the advantage of decreasing the trade diversion costs imposed on the Israeli consumer over time. And the proliferation of FTAs does not seem to pose Israel particular problems in the GATT or the WTO, since FTAs are accepted under Article XXIV GATT. The problem with FTAs, as seen from Israel, is that they take care ‘only’ of tariffs and QRs. In general, eliminating other NTBs requires a degree of intimacy, harmonization and political understanding with your trade partner extending beyond the level of commitment which the latter is prepared to undertake. Also, reaching an understanding with

The Optimum Strategy for a Spoke 157

one partner might be incompatible with future arrangements with other partners.

II. The relations of an MNMC spoke with developed hubs: trade-offs Using Krugman’s terminology, the EU is the ‘natural trading block’ with which any MNMC has an interest to be linked. The main reason is economic geography combined with the economic muscle of the EU Fifteen. In distribution activities, what counts is the time of delivery and economic distance and this is valid for MNMCs as well. It is particularly relevant for highly perishable, service-intensive or bulky products, as well as goods dependent on fashion. The short geographic distance facilitates real-time commercial intercourse (e.g. opening and closing times are practically the same; quick feedback from markets is possible; highly perishable products are tradable). MNMCs and parts of western Europe share the same sea and meteorological factors, conferring easy knowledge of the natural conditions prevailing in the trading partner. And any EU enlargement increases mechanically the relative importance of the EU for all MNMCs as a trading partner, e.g. in relation to the US or Japan. This being said, the main problem for MNMCs is that the widening EU is also a confederation in the making and MNMCs, except Cyprus and Malta, are not a part of this double process. They are not being consulted, and sometimes not even informed, in time. The EU is a moving target. Catching up with it is difficult per se and is aggravated by the fact that the EU has other priorities than deepening its relations with the MNMCs, assuming that this is what the latter wish or need (e.g. going beyond tariffand quota-free trade). The EU also has limited time to devote to MNMCs. One possibility is of adjusting progressively and unilaterally to the acquis communautaire (as proposed currently to the MNMCs in the context of the EMP, under the name of Approximation of Legislation). Apart from the cost of trade diversion, a disadvantage is that MNMC exporters would not try to adjust to world standards but rather to the hub’s standards. This is what Australia did in the 1950s and 1960s when it decided to follow British patterns with very bad results. The same applies to the case of the eastern European members in the ex-COMECON. And unilateral adherence to the hub’s rules will be increasingly unacceptable for democratic countries on the periphery (such as Israel or Turkey) which do not participate in the decision-making process of the hub, or even in the decision-shaping. If allowed, small countries should try to enter or be closely associated with more than one hub, if it appears that formal participation in the decision-making process in one of the hubs is excluded. True enough, the EU has never said that its free trade agreements with third countries are incompatible with FTAs which the US might have with the same third countries.

158 Alfred Tovias

Neither has the US said anything of the kind about the EU. However, there may be limits to such a strategy, if the MNMC thinks of eliminating some NTBs in trade with the natural trading hub, the EU. It might be to the detriment of relations with other key economic partners, such as the US. Consider also future dilemmas in managing the euro–dollar relationship for MNMCs, which have been using until now the dollar as their international unit of account, their vehicular currency and their main reserve currency, and which might be tempted to link their currency to the euro, given existing trade dependency on the EU.

III. The inadequacies of the Euro-Mediterranean Partnership project Among the Presidency Conclusions of the 1995 Cannes European Council the following items dealt with the trade aspects of what was later to become the Euro-Mediterranean Partnership: The ongoing negotiations between the Union and Mediterranean Non-Member Countries will be concluded as soon as possible and, in parallel, similar free-trade agreements should be negotiated between the Mediterranean countries themselves. As a second stage, the Mediterranean countries could be encouraged to negotiate free trade agreements with the CEECs associated with the Union. In order to facilitate trade, the partners would propose: –

– –

– –

to progress by stages towards cumulation of origin among all the parties, in accordance with conditions comparable to those envisaged by the Union vis-à-vis the countries of Central and Eastern Europe; to adopt broadly similar rules of origin via the development of customs co-operation amongst all partners; to improve certification procedures to facilitate mutual recognition of certificates of conformity and, in the longer term, harmonization of standards; to adopt the highest possible standards of protection for intellectual property (TRIPS); to adopt similar competition rules.

The liberalization of services would be the subject of special agreements, to be negotiated as soon as possible.1 To begin with the negotiation of FTAs between the EU and MNMCs, they exclude agriculture and services for all practical purposes. In industry, in relation to past Mediterranean policy agreements, MNMCs’ market access to the

The Optimum Strategy for a Spoke 159

EU has not improved more than marginally; some (quite ineffective) textile quotas or voluntary export restraints (VERs) imposed by the EU on some Arab MNMCs (but not Israel) have been phased out, but they would have been eliminated anyway with the phasing out of the MFA. Third, in the reverse direction, the fact that MFN tariffs of most MENA countries are, on average, high (more than 25 per cent in Jordan or Egypt) points to huge trade diversion and shifting that effects losses to be borne by MNMCs. The EU finds it natural to be given huge tariff preferences. Needless to say, all this reflects the lack of bargaining power of MENA countries in negotiations with the EU Fifteen. In fact, the EMP must be criticized not because it is too liberal (as some intellectuals in MENA countries argue), but because it is not liberal enough. None of the agreements signed provide for the automatic removal of significant technical barriers facing MNMC exports to the EU, such as obligatory testing or certification of conformity by local EU authorities for many goods, because mutual recognition agreements (MRAs) are not part of the present deals. MRAs on standards are not even contemplated. According to the 1995 Cannes European Council Conclusions, there is some talk of future standards harmonization but, in fact, the idea is that MNMCs shall accept the acquis in so far as standards are concerned. Participation in European standards institutions is a privilege apparently reserved to present and future EEA members only. This and other second-generation issues are not only important for Israel or Turkey but for all MENA countries. But, in fact, the EMP in its economic basket has all the ingredients of the relatively outdated North–South approach. The EU allocates massive development aid to Arab MNMCs although, obviously, not to Israel, a developed country. In exchange, the EU wants market access to MENA countries for its industrial products and that is all. Then there are suggestions, not concessions, being made to MNMCs which the latter may or may not accept, for example that they conclude FTAs among themselves (see the Cannes Conclusions above). Incidentally, MNMCs could conclude such agreements without reference to the EMP. It is true that in so far as some MNMCs have been, in the past, belligerent towards each other, they might engage more willingly in such agreements under the EMP umbrella, a framework for cooperation both with Europe and with neighbours in the MENA region. Finally, the EU has promised to consider diagonal cumulation of origin among all the 27 partners to the EMP (see S. Inama, below). But many difficulties have yet to be surmounted. Now, some four years into the Partnership, this important item in its economic basket is still not in place.

IV. Deepening the EU–MNMC relationship: the EEA v. the Turkish route The status of MNMCs remains and will remain inferior to that awarded to the three EFTA countries in the EEA and Switzerland, and even to the status

160 Alfred Tovias

of those Eastern European countries conducting negotiations for entry into the EU. To enter the EEA the first step is to become an EFTA member. Enlarging EFTA membership to some MENA countries might be acceptable to both sides to a deal. Clearly, EFTA countries see economic integration as an end in itself, suiting perfectly the needs and aspirations of MENA countries. It is a free trade area, thus allowing for independent trade policies by the different member countries. What would EEA membership offer to MNMCs that the EMP agreements do not? Quite simply, something close to full membership in the European Single Market. This includes items which are totally ignored in the current agreements such as the mutual recognition of professional qualifications and diplomas or participation in the decisionshaping process regarding essential requirements and harmonization of technical regulations. The relevance of these items for MENA countries will, in the future, only grow with time.2 Take the case of Israel. Its relative factor endowments will be increasingly skewed towards human capital, which will be relatively cheap compared to European competing factors. Thus Israelis will be inclined to sell professional services and technology (whether embodied or disembodied). But for such a strategy to succeed, participation in the Single Market seems a must. Currently, the issue is ignored in Israel, inter alia because, given current supply, access to the US market seems adequate. But with increasing amounts of human capital being educated at Israeli universities and technology institutes, new markets will be sought. For the kind of services mentioned above, physical proximity between supplier and customer seems in many cases to be a necessary condition.3 Israel’s expertise has been sold for years in many far-away developing countries (e.g. Africa, Latin America, the Far East) which quite obviously were not asking for homologizing with local professional standards. On the other hand, many of these business relations implied the permanent and at best the temporary expatriation of the Israeli expert (which, in passing, is anathema for Zionists). But modern communication now allows for Israeli experts to operate outside Israel if the service is supplied in Europe and the Middle East. The Peace Process might open possibilities in this last geographical area but the market is limited. The same can be said of Eastern Europe or the CIS. All this only serves to stress the importance of being part of a larger and barrier-free human capital market such as the EEA.4 For the moment, the EU does not contemplate opening EEA membership to MENA countries, but it does not seem unreasonable to think that at some stage the EU might consider the creation of a Euro-Mediterranean Internal Market for goods and services. The other option would be to follow the Turkish model of concluding a customs union agreement with the EU, a step implemented as from 1 January 1996. The advantage of such an agreement over the EMP FTAs is

The Optimum Strategy for a Spoke 161

the elimination of the need for origin certificates, an awesome and cumbersome NTB facing MNMCs in trade with the EU. But even assuming that the EU would accept such a type of agreement, MNMCs should carefully weigh up whether the above-mentioned advantage regarding rules of origin compensates for the need to renounce an autonomous trade policy (and with it, all FTAs signed with countries other than the EU). On top of this, we are not speaking about a real customs union since, as for Turkey, the EU would request that the MNMCs accept its own trade policy acquis (including the CCT negotiated in GATT/WTO rounds), and this without any prospect of becoming an EU member, at least in the short term.5

V. What to do with the other spokes?6 To begin with, all empirical studies, relying principally on gravity models,7 indicate that there is limited trade potential within the Mashrek and within the Maghreb themselves beyond that which there is already (see Ekholm et al., 1995). In particular, there is no empirical justification for the oftenheard assertion that the share of intra-MNMC trade in terms of overall trade is abnormally low and that the conclusion of integration agreements among MNMCs would make a big difference. Clearly, this assertion has much to do with the MNMC in question. In the case of Israel, the normalization of trade relations with all Arab countries would make a substantial difference because the prevalence of the primary Arab boycott means that direct trade between Israel and the Arab world (excluding Jordan, Egypt and the PA) is not allowed even today. In fact, for trade purposes, Israel was an island until 1979 and, because of the cold peace with Egypt, continued to be treated as such until 1995 when a peace treaty with Jordan was signed. Another point that can be made with some certainty is that the boycott has prevented the integration of Israel into the European system of intra-industry trade. The lack of open borders with Israel has had very negative consequences for some Arab countries such as Jordan. Not only was access to a neighbouring country twelve times as large (in economic terms) as Jordan itself precluded8 but easy access to the Mediterranean Sea and to all northern Africa was also precluded. To begin with the latter item, the Arab boycott has had the result of imposing excessive transportation costs on the regional and extra-regional trade of Jordan. Open borders and the use of sea and land routes, disrupted since 1948, would also benefit Syria, Lebanon and even Turkey. In reference to the phasing out of the primary boycott and the application of MFN tariffs by Israel, both measures should be particularly rewarding for all its neighbours (e.g. Syria and Lebanon), because the Israeli market is a very open one. The trade policy reform of September 1991 had reduced most MFN industrial tariffs on a unilateral basis to 8 per cent and

162 Alfred Tovias

to 12 per cent by September 1998. This rule will also apply to the remaining products (some textiles) by September 2000. In another corner of the MENA region, the Maghreb, intra-regional trade currently is abnormally low because for several years now the border between Morocco and Algeria has remained closed as a result of tensions due to the unresolved conflict in the ex-Spanish Sahara and the undeclared civil war in Algeria. It is clear that trade relations across formerly closed borders (due to war, tension, etc.) could create a high degree of (reverse) trade diversion, thereby contributing to the welfare of all producers. The reason for this phenomenon is that before entering trade relations, neighbouring countries were procuring goods and services outside the region at high prices. Normalization of trade relations can only increase welfare, never decrease it. By dropping trade boycotts and mutually granting MFN status, 9 intraarea exports and imports would replace extra-area ones, just as they did in post-Cold War Europe, where renewed trade channels have been established across the former Iron Curtain. Other welfare-enhancing factors are new exports of products and output resulting from proximity and economies of scale.10 Industries can reduce production costs in the long run by using inputs imported from former enemy countries and exploiting complementarities with them. The question arises as to whether the implementation of real GATT-type relations is enough or whether an extra push should be given, through the conclusion of bilateral integration agreements, to artificially promote trade relations among Maghreb and Mashrek countries. The stronger economic arguments (see, for example Havrylyshyn, 1997: 25) which have been put forward in favour of such a strategy are designed to prevent some nasty effects deriving from the application of the EMP (!). Two such effects come to mind: first that, all other things remaining equal, FDI would tend to concentrate in the EU (the MNMC’s hub) once the bilateral North–South FTAs are in place; second that trade diversion in favour of the EU would have negative effects on intra-MNMC trade (e.g. Israel’s exports to Jordan). There are also political arguments in favour of integration. First, it would put an end to, or at least limit, Israel’s trade discrimination in favour of all its FTA partners, something which might offend neighbouring countries at peace with Israel. Second, it binds former enemies or rival countries together, developing over time habits of co-operation, eventually leading to irrevocable interdependence, as in post-1945 Europe, making war impossible. It can be shown, however, that because of the underlying economic structures, the share of intra-MNMC in their total trade even in the case of concluding FTAs would remain low and their main trade partner would remain the EU.11 The next question is which kind of integration agreement among MNMCs one should look for. Industrial FTAs (the current EMP model) are

The Optimum Strategy for a Spoke 163

not advisable due to wide gaps in the level of external industrial protection in the different MNMCs. The lion’s share of the benefits of creating horizontal industrial FTAs would go to the Israeli producer and Treasury: producers would have higher sales volumes with higher margins, and the fiscal authorities would collect more duties on local production-replacing imports from third-party countries (e.g. eastern Asia). Moreover, large tariff differences among FTA member countries tend to create trade deflection, leading them to tighten the application of border controls. This goes against the principal aim of FTAs, namely to facilitate the movement of goods so as to promote exchange and understanding among its members. If, notwithstanding these drawbacks, the FTA model is selected, then there is no doubt that agricultural trade should be included since MNMCs have a comparative advantage in the production of Mediterranean agricultural products. It so happens that the obligation of all WTO members, including many MNMCs, to proceed with the tariffication of their NTBs has made agricultural protection more transparent than before. And unlike industrial products, most agricultural products are entirely locally produced, thus simplifying the issue of product origin definition. This observation leads to the next one. A more suitable integration formula among MNMCs might be sectoral integration, following the ECSC example in post-Second World War Europe. When dealing with complementary economies, it makes solid economic sense to adopt a sectoral approach to regional trade liberalization. Global agreements such as FTAs are more suitable to partner countries whose economic structures are relatively similar and diversified. The most suitable sectors for regional integration in this perspective would be textiles and processed food. In an earlier study I have explored the prospects of creating an FTA in textile and clothing between Egypt and Israel,12 and it is clear now that the more MNMCs join such agreements, the higher their chances of success. Every country in the Mashrek and Maghreb has some relative advantage in a particular segment of the production processes related to these two sectors. For the sectoral approach to work, however, there is a need for each MNMC to secure from third parties with which it has an FTA the right to cumulate value added among MNMCs for the purpose of complying with origin rules. It may be difficult to obtain such rights from partners in industrialized countries, where the sectors are particularly sensitive. The observations on sectoral integration and cumulation of origin lead to the next question: why should integration agreements signed by an MNMC be confined to other MNMCs? Actually MNMCs have an interest in concluding agreements with other non-member countries in the EU’s eastern periphery. The EU Fifteen have already acquired ample market access in Eastern Europe through application of the Europe Agreements of the early 1990s. MNMCs should not wait until the different CEECs become members

164 Alfred Tovias

and automatically apply the acquis in their external relations. That could take easily from 10 to 20 years (e.g. in the case of Romania). As a precautionary measure, MNMCs should ask to be included in what is called PanEuropean Cumulation, launched in January 1998, rather than content themselves with the diagonal cumulation system proposed by the EU. Regarding diagonal cumulation as contemplated by the 1995 Cannes European Council, the EU set two principal preconditions to such cumulation: first, that FTAs be concluded between the Community and the relevant MNMC in the context of the Euro-Mediterranean Partnership; and second, that bilateral FTAs be concluded thereafter between those MNMCs wanting to benefit from diagonal cumulation. The economic logic underlying the preconditions to diagonal cumulation set by the EC is not clear. The rationale behind the first condition is evident: to avoid a free-rider situation where a party which refuses to exchange trade concessions with the Community (through an FTA) will enjoy similar preferential treatment through the cumulation arrangements with other MNMCs. The economic reasoning behind the second prerequisite to diagonal cumulation (i.e. establishing FTAs between MNMCs) is less clear. From the standpoint of enhancing co-operation, this requirement seems pretty odd. Cumulation of origin among former enemies is generally considered an initial measure towards stimulating economic co-operation among former enemy countries and, if successful, it might then be followed by the conclusion of a bilateral FTA. Placing the establishment of an FTA as a precondition to cumulation puts the various stages in developing co-operation in reverse logical sequence. In fact, diagonal cumulation should be one of the initial steps in achieving the European Commission’s long-term objective of creating a EuroMediterranean free trade area by 2010 (see S. Inama, below). The MEFTA, the ‘Mediterranean Free Trade Area’ as it called by the Commission, should closely follow the pattern set by EFTA in 1960 and by CEFTA, the FTA established among Central European countries in 1993. Eventually, by 2010, a huge Euro-Mediterranean free trade area of 600 to 800 million people and about 40 countries should emerge. About 60 per cent of their total trade would be within the region. The reason behind the Commission imposing the second precondition to cumulation may lie in the economic reality within the Community. The enhanced economic integration within the EC exposes Community producers to harsher competition and what is almost a natural tendency is not to easily accept the additional exposure to foreign competition deriving from the application of cumulation of origin. An aggravating factor here is that the prime candidate sectors for co-operation among MNMCs are textiles, food processing and, perhaps, some chemicals. These sectors are particularly sensitive for the EU and the latter is not readily amenable to granting trade concessions in such spheres.

The Optimum Strategy for a Spoke 165

Conclusion: getting your priorities right Underlying all the strategies explored in this paper is the fact that relative economic size matters. As important as horizontal economic relations are from a political viewpoint, if the main objective of MNMC policy-makers is to achieve a rapid improvement in the economic situation of their countries, they should focus on deepening their institutional trade relations with the EU. This could be done by signing improved agreements in order to facilitate their access to markets over 100 times larger than the largest market in North Africa and the eastern Mediterranean (i.e. Israel). In fact, one apparently minor agricultural concession by the EC within the framework of a future EC–Egypt FTA, such as higher quotas on onions, may create more jobs in Egypt than across-the-board preferential tariff reductions on industrial imports by Jordan. The economic clout of the EU is also important in another respect. It is not the intensification of relations among the MNMCs’ spokes which is likely to lead to the kind of irrevocable interdependence prevailing in Europe nowadays and which will reduce the likelihood of war in the MENA region. It is more the deepening of relations of the spokes with the EU hub which is likely to intensify the MNMCs’ dependence on the EU in such a way that the latter could, in the future, find itself in the position of threatening to freeze its economic relations with the MNMC spoke if the latter dared to make war on another MNMC. Of course, the larger the trade balance in the MNMC’s favour, the stronger the deterrent power of the EU will be. Economically speaking, it is of primary importance that MNMCs deepen their relations with the EC (their ‘natural’ trading bloc), in particular to prevent the gap from widening between the treatment offered on the one hand to EU members, future members or other spokes and, on the other, to themselves. However, a second priority should be to conclude FTAs with other important trade partners, such as the US to reduce the trade diversion costs and the political dependence on the EU. A third priority should be to completely normalize economic relations with neighbouring countries. Only at that stage does it make sense to ask the EU for diagonal cumulation among MNMCs, although there is no particular economic reason to confine this to the MENA countries. Joining pan-European cumulation would be better. The next step should be to consider concluding sectoral FTAs in different segments of the same production process in sectors where the MNMCs concerned are competitive. If any global FTA solution at all is to be found, it should include agriculture. But regional FTAs should not in any case be a delaying factor in terms of standards for any of the MNMCs participating in the venture. In other words, the regional FTA should adopt the hub’s standards or, even better, global ones. But the spoke should fight for the right to be part of European standard-setting institutions such as CEN or CENELEC.

166 Alfred Tovias

Finally, the relative importance of getting ‘normal’ (MFN) market access in other MNMCs, compared to ‘preferred’ market access, depends on the MFN level of tariffs applied by these other MNMCs. For Syria, it is far more important to get MFN treatment from Israel than to go all the way in opening up industrial trade with her. On the other hand, for Israel, ‘normalization’ might not mean much since Syria is still a fairly closed country as far as trade and investment is concerned.

Notes 1. Bull.-EU, June 1995, 25. 2. Another more recent formula which has sometimes been evoked as a future model for the Israel–EU relationship is the formula chosen by Switzerland and the EU, based on a series of separate agreements reached on the basis of sector-bysector negotiations. The latter were signed on 21 July 1999 (for texts see COM(1999)229 Final 2, 4 May 1999), but a referendum had to be held in Switzerland in May 2000 to approve some of the most problematic items (e.g. overland transport). On these Agreements, see ‘Bilateral Swiss–EU Negotiations: an Overview – January 1999’ (http://www.europa.admin.ch/e/int/fs-resume.htm). 3. A recent article in Ha’aretz states that this is the main reason for the more recent brain drain to the US of some of the best Israeli hi-tech experts – see Ha’aretz, 15 January 1999. 4. The incorporation of Israel in the EU’s Single Scientific Space, i.e. participation in the EU’s R&D Framework Programmes, must be seen as a first step in the direction pointed in this chapter. 5. Regarding the important subject of agriculture, according to information obtained by this author, Turkey is being asked to adjust first to the EC’s CAP in coming years, but with no prospect of free trade in agricultural products in the near future. 6. For a systematic exploration of the options open to the partners of the Middle East Peace Process, see A. Tovias, Options for Mashrek–Israeli Regionalism in the Context of the Euro-Mediterranean Partnership, Brussels, Center for European Policy Studies, CEPS Paper No. 67, 1997. 7. The idea behind the use of this kind of model is to estimate the ‘normal volume of trade’ in the absence of political conflict, with or without trade barriers, on the basis of what happens in the rest of the world among open economies that are not at war. 8. In 1996, Israeli GNP reached $90 billion and Jordan’s was $7 billion: see World Bank Atlas (1998). 9. MFN treatment requires granting a new partner, including a former enemy country and/or a country previously boycotted, the same treatment previously granted to a third party. 10. R. Arad, S. Hirsch and A. Tovias, The Economics of Peace-Making: Focus on the Egyptian–Israeli Situation (London: Macmillan, Trade Policy Research Centre, 1983), 59–63. 11. The only item where irrevocable interdependence in its distribution and use could prevent war in the Middle East is water.

The Optimum Strategy for a Spoke 167 12. A. Tovias and H. Wolpert Silver, ‘Co-operation between the textiles and clothing industries of Egypt and Israel’, in H. Ben Shahar et al. (eds), Economic Cooperation and Middle East Peace (London: Weidenfeld & Nicolson, 1989), 203–24.

References Arad, R., Hirsch, S. and Tovias, A., The Economics of Peace-Making: Focus on the Egyptian–Israeli Situation (London: Macmillan, Trade Policy Research Centre, 1983). Bensidoun, I. and Chevallier, A., Europe-Méditerranée: Le pari de l’ouverture (Paris: Economica, Collection CEPII, 1996). Bistolfi, R. (ed.), Euro-Méditerranée: une région à construire (Paris: Publisud, 1995). Cable, V. and Henderson, D. (eds), Trade Blocs? The Future of Regional Integration (London: RIIA, 1994). Curzon, V., The Essentials of Economic Integration (London: Macmillan, Trade Policy Research Centre, 1974). De Sebastian, L., ‘Trading blocs and the stranded countries’, in E. Ahiram and A. Tovias (eds), Whither Israel and the European Union? (Frankfurt: Peter Lang, 1995), 147–64. Ekholm, K., Torstensson, J. and Torstensson, R., ‘The economics of the Middle East Peace Process: are there prospects for trade and growth?’, The World Economy, vol. 19, no. 5, 1996, 555–74. El-Erian, M. and Fischer, S., Is MENA a Region? The Scope for Regional Integration, IMF Working Paper WP/96/30, 1996. Ethier, W., ‘The new regionalism, preliminary version’, unpublished paper, February 1997. Euro-Mediterranean Agreement Establishing an Association Between the European Communities and Their Member States, of the One Part, and the State of Israel, of the Other Part. See appendix at the end of the book. Frankel, J. and Wei, S., Open Regionalism in a World of Continental Blocs, IMF Working Paper WP/98/IO, 1998. Geiger, T. and Kennedy, D. (eds), Regional Trade Blocs, Multilateralism and the GATT (London: Cassell, 1996). Havrylyshyn, O., A Global Integration Strategy for the Mediterranean Countries. Open Markets and Trade and Market Reforms (Washington, DC: International Monetary Fund, Middle Eastern Department, 1997). Hirsch, S., Katznelson, S. and Sasson, D., The Economics and Politics of a Free Economic Zone and Port in the Gaza Region, Tel Aviv, The Israel Institute of Business Research, Working Paper No. 39/93, September 1993. Kleiman, E., Economic Integration in the Middle East, talk given at a conference on Economic Co-operation in the Middle East organized by the Konrad Adenauer Foundation, Jerusalem, 1–2 August 1995. Krugman, P., ‘Is Bilateralism Dead?’, in E. Helpman and A. Razin (eds), International Trade and Trade Policy (Cambridge, Mass.: MIT Press, 1991), 9–23. Oman, C., The Policy Challenges of Globalisation and Regionalisation, OECD Development Centre, Policy Brief No. 11 (Paris: OECD, 1996). Sapir, A., The Political Economy of EC Regionalism, paper presented at the 12th Annual Congress of the European Economic Association, Toulouse, 31 August – 2 September 1997.

168 Alfred Tovias Shibata, H., ‘A theory of free trade areas’, in C. Shoup (ed.), Fiscal Harmonization in Common Markets, Vol. 1 (New York: Columbia University Press, 1967). STIMENA, Regional Economic Development – A Contribution to the Middle East Peace Process; Trade Relations Among the Core Parties and with Key Third Parties (Geneva: STIMENA Secretariat, 1997). Tovias, A., ‘Implications of the creation of the European Economic Area on nonmember countries and on peripheral regions of member countries – a qualitative assessment’ (in Hebrew), in M. Zimmerman and W. Weidenfeld (eds), European Integration (Jerusalem: Akademon, 1996), 213–24. Tovias, A., Options for Mashrek–Israeli Regionalism in the Context of the EuroMediterranean Partnership, Brussels, Center for European Policy Studies, CEPS Paper No. 67, 1997. Tovias, A. and Wolpert Silver, H., ‘Co-operation between the textiles and clothing industries of Egypt and Israel’, in H. Ben Shahar et al. (eds), Economic Co-operation and Middle East Peace (London: Weidenfeld & Nicolson, 1989), 203–24. The World Bank, World Bank Atlas (Washington, DC: 1998).

8 Free Movement of Services and the Right of Establishment in a Pan-Euro-Mediterranean Economic Area: Between EU Membership and the GATS Lode Van Den Hende Introduction In most of the preferential relationships established by the EC with countries at its ‘periphery’, emphasis is placed clearly on trade in goods. This is no different for the legal frameworks analysed in this paper and which form the starting point for the subject of this book, namely ‘Pan-Euro-Mediterranean Regional Integration’:1 the Europe Agreements (EAs) with the countries of Central and Eastern Europe that are listed for EU membership, the EuroMediterranean Association Agreements (EMAAs) and the Partnership and Cooperation Agreements (PCAs) with the countries formerly part of the USSR. Trade in services, however, is rapidly expanding and said to be ‘the key to the future of the world economy’.2 For that reason services and establishment will become an increasingly important part of this Pan-Euro-Mediterranean integration process. At first sight this development will be more beneficial for the well-developed services sectors in the EU than for the (probably) less developed services sectors of the partner countries. Indeed the EU makes no secret of wanting to negotiate market access opportunities for sectors such as financial services where its companies have a strong competitive position.3 Moreover, there is certainly a degree of truth in the view that countries with lower levels of economic development see the liberalization of trade in services with the EU as a concession that will first of all benefit the EU (and that this concession is made as a quid pro quo for better market access in goods sectors, such as agriculture, where their competitive position is better). On the other hand, however, countries with a lower level of economic development also seem to express a clear interest in the liberalization of those service sectors where they are competitive and which would allow access for natural persons to EU territory for the purposes of providing services on a temporary or even permanent basis (either as an employee of a foreign (owned) company or as a self-employed person).4 169

170 Lode Van Den Hende

This paper is based upon the legal analysis of the existing agreements between the EU and its ‘Pan-Euro-Mediterranean’ partner countries, placed in the somewhat broader legal and political framework of expected developments at regional and multilateral level. It is divided in two main parts. Section II analyses the provisions of the existing agreements on services and establishment and compares them with each other as well as with those of the EC Treaty and the General Agreement on Trade in Services (GATS). Section III deals with the less traditional but increasingly important issue of barriers to trade resulting from regulatory heterogeneity and the possibility of resolving it through regional harmonization modelled on EU rules. First, however, Section I attempts to shed some light on the often confusing and diverse terminology of the different treaties.

I. Terminological confusion and clarification One of the problems experienced when comparing economic integration agreements is the different terminology used. In the area of services and establishment, differences in terminology are linked to (and aggravated by) the fact that it becomes increasingly difficult to make a clear distinction between concepts such as free movement of services, right of establishment, free movement of capital and rules on international investment. 5 These concepts relate to different issues but, at the same time, are all intrinsically linked. The EC Treaty has separate chapters on the right of establishment, the (free movement of) services and the (free movement of) capital and payments. Most legal texts on the free movement of services and the right of establishment in the EU handle these as closely intertwined and overlapping issues to which largely identical rules apply. 6 The reason for this is probably that most legal problems arising in the area of establishment were related to the provision of services on a permanent basis. The right of establishment in the EC Treaty, however, also covers the right to set up, for example, a goods-producing factory in another Member State. Furthermore, and adding to the terminological confusion, the EC Treaty provisions on establishment also have an impact on Member States’ rules in the area of foreign investment, which is a matter normally dealt with under the rules on the (free movement of) capital and payments.7 The WTO General Agreement on Trade in Services (hereafter GATS) deals with services but this includes ‘commercial presence’ on the territory of another WTO member, which implies a form of establishment. The GATS also contains most of the WTO’s more compelling rules on investment (albeit limited in scope to trade in services), where one would expect to find these in the Agreement on Trade-Related Investment Measures (TRIMs)8). The EAs, EMAAs and PCAs also contain provisions on services, establishment and movement of capital. Here too, however, it seems that

Free Movement of Services and the Right of Establishment 171

terminological overlap might complicate the legal appraisal of certain situations. The 1998 Commission Report on the Czech Republic’s ‘progress towards accession’, for example, considers a Czech statute providing that companies with foreign ownership could not receive a licence to operate lotteries as a breach of the EA’s provisions on the free movement of capital.9 Such an infringement, however, seems rather a breach of the EA’s rules on establishment than an issue relating to the underlying capital flows. However, the practical relevance of this terminological discussion should not be overestimated. For that reason the issue will not be developed further here and this paper will deal with the issue of services and establishment in the usual way under EC law. It remains important, however, to bear in mind that this problem of terminological overlap exists in order to neutralize beforehand any potential confusion that might arise when comparing different types of agreements.

II. The issue of market access The provisions in the agreements that are examined here, including those of the provisions on services in the EC Treaty itself, are mainly traditional ‘market access’ provisions. They describe the extent to which an economic operator originating in one Party can (temporarily or on a fixed basis) enter the other Party’s market to provide services (the entry-stage) and the conditions under which it can operate there (the post entry-stage). The provisions of the EAs, EMAAs and PCAs are analysed and compared to a ‘framework for reference’. The framework for reference: the EU’s Single Market and the GATS An analysis of the EAs, the EMAAs and the PCAs would not be complete without placing these into their wider ‘natural environment’, a framework of reference composed of, on the one hand, the EC Treaty and, on the other hand, the multilateral GATS Treaty. The EC Treaty is the basis of the EU’s Internal Market, which clearly forms the core of economic integration in Europe. The GATS, on the other hand, is part of the multilateral framework of the WTO which is open to ‘any state or separate customs territory possessing full autonomy in the conduct of its external commercial relations’.10 Most of the countries with whom the EU has concluded bilateral agreements are WTO members or have filed an application to join.11 Thus the EC Treaty and the GATS form the two extremes of the ‘natural’ reference framework against which these agreements should be measured. The level of market access that the countries concerned will be able to obtain through a Pan-Euro-Mediterranean regional integration will never be better than that granted by the EC Treaty. On the other hand, these countries will expect to obtain a better access through this regional integration than through the multilateral WTO framework.

172 Lode Van Den Hende

Freedom of establishment and freedom to provide services in the EU’s Internal Market The provisions on the right of establishment and the free movement of services in the EC Treaty have become one of the most successful examples of regional integration in this sector. 12 To a large extent this is due to the broad interpretation that the European Court of Justice has given to these provisions. In spite of this extensive case law, however, the precise meaning of these provisions is not completely clear. One of the main points of discussion is whether the Treaty’s rules in this area lay down a ‘simple’ non-discrimination rule 13 or a further-reaching rule that requires the ‘removal of all barriers’ to the practical exercise of these freedoms. Article 43 EC (ex-Article 52) for example provides in its first paragraph that: ‘restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited’. The second paragraph, however, explains further that (emphasis added): ‘Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings … under the conditions laid down for its own nationals.’ Article 49 EC (ex-Article 59) provides that: ‘restrictions on freedom to provide services within the Community shall be prohibited’, while Article 50 EC (ex-Article 60), however, provides that (emphasis added): ’the person providing a service may, in order to do so, temporarily pursue his activity in the State where the service is provided, under the same conditions as are imposed by that State on its own nationals.’ The issue is further complicated, at least in theory, by the fact that it is far from clear whether it is actually possible for a certain trade restrictive rule or practice of a Member State to be seen as a forbidden barrier to intraEU trade while it could not be qualified as a de facto discrimination. In other words, it is not clear whether the Court would ever oppose a rule or practice of a Member State that could not qualify as a de facto discrimination.14 The distinction between the two concepts is especially difficult if the ban on de facto discrimination prohibits every measure that makes it more difficult for a foreign service supplier to develop its market position or places the service supplier in a less advantageous competitive position vis-àvis service suppliers of the country concerned. Taking into account the approach taken by the Court in the Keck case, the latter is probably the best concise analysis that can be made of the Court’s case law on free movement.15 Thus it seems that the obligation resulting from Articles 43 (exArticle 52) and 49 (ex-Article 59) EC is indeed first and foremost a broad ban on de jure and de facto discrimination. In the context of this paper, where the commitments imposed by the EAs, EMAAs, PCAs and the GATS are compared to those imposed by the EC Treaty, this issue is important for the purpose of measuring the difference between the level of market access offered by the EC Treaty on the one

Free Movement of Services and the Right of Establishment 173

hand and the EAs, EMAAs, PCAs and GATS on the other hand. The EC Treaty is the only text that provides for something that seems to go beyond non-discrimination. Since, however, this additional obligation provided by the EC Treaty seems, at least in practice, not a substantial supplementary obligation but another way of saying the same thing, the impact of this terminological difference between the EC Treaty and the other treaties will be limited. The EC Treaty grants this non-de facto discriminatory treatment for establishment through branches (without separate legal personality) as well as through subsidiaries (that have a separate legal personality from the mother company in the service supplier’s country of origin).16 It applies to both ‘legal’ and ‘natural’ persons who are nationals of a Member State, which implies that it can be invoked by self-employed individuals. 17 It applies to the entry stage as well as to the post-entry stage. Furthermore it provides an exception for activities connected with the exercise of official authority18 and a legal basis for the Council to issue directives on the mutual recognition of diplomas, which has been used quite extensively.19 The latter provisions also apply with regard to the free movement of services which has been interpreted by the Court of Justice as to cover, crossborder supply (service provider and buyer are in different Member States but the service is sold at a distance), supply abroad (the service supplier goes to the country of the buyer of the service) and consumption abroad (the buyer goes to the country of the service provider).20 The distinction between establishment and free movement of services is not made on the basis of the existence or non-existence of a form of physical infrastructure. It is made on the basis of the existence or absence of a stable and continuous basis in the economic life of a Member State other than the State of origin of the service provider.21 The General Agreement on Trade in Services The main elements of the GATS are the general ‘most favoured nation’ (MFN) clause, the rules on national treatment and those on market access. Article II:1 provides for a general MFN obligation for all services sectors: ‘each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than it accords to like services and service suppliers of any other country’. This sets a standard of non-discrimination vis-à-vis services and service suppliers from other foreign countries. WTO members’ ‘schedules’, however, contain a number of time-limited exceptions to that rule, allowing a WTO member to grant more favourable treatment to the country or countries specified in the schedule. These ‘schedules’ are lists of detailed commitments that explain in a precise way market access commitments accepted by the WTO member concerned. The schedules are an integral part of the GATS and were part of the ‘overall deal’ that was concluded

174 Lode Van Den Hende

when the Uruguay Round Agreements were signed. By signing, all WTO members accepted that the ‘commitments’ offered by the other WTO members in their GATS schedules offered an acceptable level of liberalization of trade in services. Article XVI GATS, the ‘market access’ provision, provides that all WTO members must give access to their market to foreign services and foreign service suppliers, as provided for in their ‘schedules’. The Article mentions six types of limitations on market access that can only be applied in ‘scheduled sectors’ if the limitations are explicitly mentioned in the schedules.22 Article XVII GATS is the most far reaching GATS rule, providing that a WTO member must grant national treatment (or non-discrimination vis-àvis domestic services and service suppliers) to foreign services and foreign service suppliers. This obligation only applies, however, ‘in the sectors covered by its schedule, and subject to any conditions and qualifications set out in the schedule’. The latter is the main difference between the EC Treaty’s rules on establishment and services on the one hand and the GATS on the other hand. The EC’s non-discrimination rules apply as a general obligation to all service sectors. This most meaningful GATS obligation, however, only applies to the extent that this is explicitly provided for, for each particular sector, in the schedule of the WTO member concerned. 23 Furthermore, it seems that the non-discrimination or national treatment obligation of GATS only applies to the post-entry stage and not to the entry stage of a service supply or an establishment. The latter is subject to discussion but the lack of legal clarity seems very much connected to the type of terminological confusion discussed under section I and the fact that Article XVI GATS and the schedules provide for specific rules on ‘market access’ which are to be distinguished from the Article XVII GATS obligation to ensure national treatment.24 The GATS covers four ‘modes of supply’: cross-border supply of services, consumption abroad, commercial presence on the territory of the host country and presence of natural persons. The extent to which a certain mode of supply is accepted by a WTO member in a certain sector depends on the contents of that member’s schedule. One of the most striking limitations that the EU (together with many other developed WTO members) has written into its schedule is the limitation on the provision of services through the presence of natural persons. 25 As with most other developed countries, it has not made commitments with regard to the supply of services by self-employed natural persons. 26 The EU limits supply of services through the ‘presence of natural persons’ to persons employed by a legal person and belonging to the following categories: senior management, specialists possessing ‘uncommon knowledge’ and occasional business visitors.27 In negotiations undertaken after the Uruguay Round this was expanded (for periods up to three months) to natural persons employed by a juridical person who has no commercial presence in the EU and upon the

Free Movement of Services and the Right of Establishment 175

condition that the natural person supplies a service for which his employer has obtained a contract in the EU (furthermore this only applies to ‘knowledge-intensive’ services such as legal, architectural and engineering services).28 The non-application of the liberalization of trade in services to self-employed individuals and the limited scope for free movement of natural persons in general is another important difference between the GATS and the EC Treaty. Furthermore, the EU’s GATS schedules only grant national treatment to subsidiaries formed in accordance with the law of a Member State and not to branches that do not have a separate legal personality. Finally it should be mentioned that, unlike the rules of the EC Treaty and the other agreements that are examined here, 29 the rules of GATS do not apply to purchases of services by governments for their own use.30 The GATS also provides a link to preferential trade agreements, which is certainly relevant for the subject that is dealt with in this paper. Article V GATS allows an exception to MFN treatment for ‘economic integration’ agreements that liberalize trade in services (which enables parties to grant better treatment to each other than to other WTO members). This is the counterpart of Article XXIV GATT 1994 and only applies if two conditions are fulfilled. First the agreement must have ‘substantial sectoral coverage’. In a footnote to the Article it is added that in order to meet this condition, agreements may not a priori exclude one of the ‘modes of supply’. The second condition is that the agreement must provide for the absence or elimination of substantially all discriminations. In evaluating these two conditions, however, the fact that the countries concerned are developing a ‘wider process of economic integration or trade liberalisation’ may be taken into account.31 Furthermore, extra flexibility is provided for if the agreement involves developing countries.32 The existing preferential agreements The Europe Agreements The EAs33 follow the structure of the EC Treaty and have separate, but overlapping, chapters on the separate, but overlapping, subjects of the right of establishment and the free movement of services. All EAs have a Title IV on ‘Movement of Workers, Establishment, Supply of Services’, neatly divided into three chapters on ‘Movement of Workers’, ‘Establishment’ and ‘Supply of services’. The first of these chapters falls outside the scope of this paper.34 Establishment. The EAs provide for non-discrimination (or national treatment) with regard to establishment of companies and natural persons of one party in the territory of the other party. 35 The non-discrimination applies to the ‘right of establishment’ (entry stage) itself as well as to the ‘operation’ (post-entry stage) of the established entity or person. Natural persons are allowed to pursue an activity as self-employed persons or to set up a company. For legal entities or ‘companies’, establishment implies the

176 Lode Van Den Hende

right to take up economic activities by means of setting up subsidiaries (with separate legal personality) or branches (without separate legal personality).36 All EAs also provide for a ‘standstill clause’ (which prohibits the introduction of new discriminations) that is applicable during the transitional periods foreseen in respect of the different EAs. Because the EAs do not allow the free movement of workers, the EAs provide in a very precise way to what extent a company establishing itself in the territory of the other Party, may employ nationals of its country of origin in that subsidiary.37 This is limited to senior management staff or persons with very specific or uncommon qualifications or knowledge that is relevant for the activity of that subsidiary (wording that is very close to the wording used in the EC’s GATS schedule). Apparently the EU wanted to avoid a repetition of the situation that led to the Rush Portugesa judgment of the European Court of Justice. In that case the provisions on free movement of services were used to circumvent the long transitional period after the accession of Spain and Portugal to the EEC during which the free movement of workers was not applicable to these countries. 38 It was decided there that a Portuguese company providing construction services in France could use its own Portuguese workforce for that purpose, despite the fact that movement of workers was not yet liberalized with regard to Portugal.39 Furthermore all EAs contain a clause comparable to Article 47 EC (exArticle 57) which provides that the Association Council ‘shall examine’ and ‘may take all necessary measures’ related to mutual recognition of qualifications.40 To our knowledge no measures have been taken in this area. All EAs also contain an ‘infant industry’ protection clause allowing the CEECs to derogate from the liberalization commitment to protect ‘newly emerging industries’ or industries that are ‘undergoing restructuring’, or are facing ‘serious difficulties’ or the ‘elimination or a drastic reduction of the total market share’.41 However, applications of this provision are very exceptional. A general escape clause allows exceptions on grounds of public policy, public security or public health and contains a provision similar to Article 45 EC (ex-Article 55) excluding all activities ‘which in the territory of each Party are connected, even occasionally, with the exercise of official authority’.42 Finally all EAs exclude the application of the provisions on establishment to air transport services, inland waterway transport services and maritime cabotage transport services, 43 and each EA has a specific regime of transitional periods and exclusions for certain sectors or certain types of establishment. The financial services sector is in all EAs subject to such a specific regime.44 Cross-border supply of services. With the exception of transport services, the EAs provide nothing substantial on cross-border supply of services

Free Movement of Services and the Right of Establishment 177

between the EC and the CEEC concerned without establishment. It is only said that: The Parties undertake … to take the necessary steps to allow progressively the supply of services by Community or Hungarian companies or nationals who are established in a Party other than that of the person for whom the services are intended taking into account the development of the services sector in the Parties.45 Up till now, no such steps have been undertaken. The ‘third-generation’ Europe Agreements add, however, that these measures must be taken by the Association Council at the latest eight years after the entry into force of the Agreement. Account shall be taken, however, ‘of the progress achieved by the Parties in the approximation of their laws’.46 Link to GATS. All EAs provide a clause the purpose of which is to ensure that the treatment granted through a Europe Agreement is not less favourable than treatment granted (to other countries) under the GATS. The commitment to reach that objective, however, is formulated in a far less obligatory way in the ‘third-generation’ EAs than in the first- and second-generation EAs. Article 58(2) EA Hungary, for example, provides that the Association Council shall adjust the EA’s provisions on establishment and services ‘to ensure that under any provision of this Agreement a Party grants the other Party a treatment no less favourable than that accorded under the provisions of a future General Agreement on Trade and Services (GATS)’. Article 59 EA Latvia, however, is much more careful in this respect (which is probably related to the fact that the ‘third-generation’ EAs were signed after the conclusion of the Uruguay Round). It provides that: The provisions of this Title shall be progressively adjusted by the Parties. In formulating recommendations to this effect, the Association Council shall take into account the respective obligations of the Parties under the General Agreement on Trade in Services (GATS), and in particular of its Article V. Comparison. While the EAs have little or no impact on the issue of (crossborder) movement of services, they clearly bring about a meaningful liberalization in the area of establishment. The relevant basic provisions seem very close to those applying within the EU (see also below the subsection on the scope and interpretation of the preferential agreements). Compared to GATS, the EAs’ provisions on establishment offer a broader market access, most notably because they apply to self-employed natural persons who fall outside

178 Lode Van Den Hende

the scope of the EU’s GATS obligations and because the liberalization applies ‘across the board’ (despite certain exceptions) and not on a limited, ‘scheduled’ basis. The GATS, however, also allows cross-border supply of services, something which is not covered by the EAs. The Euro-Mediterranean Association Agreements With regard to establishment and services three types of EMAAs are apparent. The ‘mainstream’ EMAAs with Tunisia, Morocco and Israel (for which the EMAA Tunisia is taken as a model), the EMAA with Jordan and the special case of Turkey and its Association Agreement already signed in 1963 (the ‘very special’ case of the Agreement with the PLO is not dealt with here as it does not cover services and establishment). EMAAs with Tunisia, Morocco and Israel. Article 31(1) of the Association Agreement with Tunisia contains a provision on establishment and the provision of services that is as open-ended as the EA’s provision on crossborder supply of services: ‘The Parties agree to widen the scope of the Agreement to cover the right of establishment of one Party’s firms on the territory of the other and liberalization of the provision of services by one Party’s firms to consumers of services in the other.’ Article 31(2) and Article 32 refer to GATS. These ‘reaffirm’ the Parties’ obligations under GATS. Furthermore they explicitly refer to Article V of the GATS. According to Article 32(2)(a) a Party to the Agreement can grant, on the basis of Article V GATS, more favourable treatment to other countries. This clause enables the EC to grant more favourable treatment to countries such as the CEECs or the members of the European Economic Area. The Agreement with Jordan. Compared to the other Euro-Mediterranean Association Agreements, the Agreement with Jordan contains a much more detailed title on ‘Right of Establishment and Services’. This seems to be related to the fact that Jordan is not (yet) a WTO member, which made it impossible to simply refer to GATS. 47 This longer text, however, does not grant Jordan a better position than ‘mainstream’ EMAAs with Tunisia, Morocco and Israel. ●

Establishment. In the area of establishment the rights and obligations of both parties are not fully reciprocal. EU companies obtain a better access to the Jordanian market than Jordanian companies to the EU market. Jordan grants EU companies national treatment for establishment (entry stage) as well as with regard to the ‘operations’ (post-entry stage) of those that are established (subsidiaries and companies alike). The EU grants MFN treatment to Jordanian companies with regard to

Free Movement of Services and the Right of Establishment 179

●

●

establishment (entry-stage) and with regard to post-entry stage ‘operation’ of branches. It grants national treatment only with regard to the post-entry stage ‘operation’ of subsidiaries. Natural persons are not covered. The Agreement contains no standstill provision comparable to the one provided for in the EAs. Both parties only commit to ‘use their best endeavours’ to avoid making establishment in and operation on each other’s territory more restrictive for each other’s companies. 48 On the other hand, the Agreement does contain a provision similar to those in the EAs on the possibility of employing key personnel.49 Furthermore air transport, inland waterway transport and maritime transport are excluded from the field of application of the general rules50 but there is a specific provision for international maritime services. 51 Article 35 provides that the Association Council ‘shall examine’ the issue of mutual recognition of qualifications (as in the EAs). Cross-border supply of services. The Agreement provides for a special provision for transport and a general ‘open-ended’ provision which is similar to the provisions in the first- and second-generation EAs. 52 Unlike the provisions of the EAs, however, the provision of the Agreement with Jordan only covers companies, not natural persons. Link to GATS. The Agreement with Jordan contains a provision that is the complete opposite of what was said in this regard in the ‘first-generation’ EAs. Article 44 explicitly provides that: ‘Treatment granted by either Party to the other hereunder shall … in no case be more favourable than that accorded by such first Party under the provisions of GATS.’ Moreover Article 40(1) provides that: ‘The Parties undertake to consider development of this Title with a view to the establishment of an ‘economic integration agreement’ as defined in Article V of GATS.’

The special case of Turkey. Services (and the issue of establishment) are not covered by the Association Agreement between the EU and Turkey, nor by Decision 1/95 of the EC–Turkey Association Council on the Customs Union.53 Articles 13 and 14 of the original Association Agreement only provide that the EC and Turkey ‘agree to be guided’ by Articles 52, 55, 56 and 58 to 65 of the EC Treaty (new Articles 43, 45, 46 and 48 to 54) with regard to the realization of the right of establishment and the free movement of persons.54 Article 41 of the 1970 Additional Protocol55 introduced a standstill clause according to which: ‘The Contracting Parties shall refrain from introducing between themselves any new restrictions on the freedom of establishment and the freedom to provide services.’ Moreover, Article 41 added that the Association Council would determine a timetable to realize this liberalization. Twenty-five years after the 1970 Additional Protocol, however, and although Decision 1/95 of the

180 Lode Van Den Hende

EC–Turkey Association Council has completed the Customs Union, no progress is made in the area of services and establishment. Proposals of that nature were blocked by several Member States although establishment and services were reported to be a ‘key issue’ for the Turkish government. 56 In the meantime, it seems that ‘explanatory contacts’ on an agreement on the liberalization of services started in April 1998.57 Comparison. It follows clearly from the analysis made above that the level of liberalization of trade in services (and the right of establishment) that is brought about by the EMAAs is low. 58 If the idea behind the EuroMediterranean free trade zone or ‘economic area’ is to create a level of market access that is somewhere between EU membership and the multilateral WTO framework, then this is certainly not yet the case in the area of establishment and services. On the contrary, it is the explicit objective of the EMAAs to grant a status that is not better than the multilateral GATS status. Thus, the EMAAs are clearly not to be seen as ‘economic integration’ agreements within the meaning of Article V of the GATS. This follows very clearly from the GATS-related provisions of the Agreement with Jordan. The same conclusion can also be drawn with regard to the ‘mainstream’ EMAAs with Tunisia, Morocco and Israel. These merely confirm existing GATS obligations and explicitly mention the possibility of concluding more favourable ‘economic integration’ agreements with other countries. Taking into account the level of development of the services sector in most of the countries concerned compared to that of the EU, this situation is perhaps not surprising. If the reason is purely economic, however, it is difficult to see why the EA with Romania provides ‘economic integration’ in the area of services and the EMAA with Israel does not. Moreover, it is difficult to deny that the fact that the EMAAs are not economic integration agreements somehow conflicts with the general perception of the concept ‘association agreement’. It is likely that the EU preferred not to develop the EMAAs into such ‘economic integration’ agreements to avoid criticism from other WTO members that the agreements do not fulfil the conditions of Article V GATS. However, if the EU is genuinely determined to have a free trade area and the liberalization of trade in services in place by 2010, maybe it should be less reluctant. All the more since, as mentioned above, Article V GATS does provide that ‘a wider process of economic integration’ will be taken into account when an agreement is tested against the conditions of Article V GATS. The preferential agreement that is currently being negotiated in the field of services with Turkey, might be a first step in that direction. The Partnership and Co-operation Agreement with Russia The EU has signed a ‘Partnership and Co-operation Agreement’ with eleven countries that were formerly part of the USSR: Russia, Ukraine, Belarus, Moldova, Armenia, Azerbaijan, Georgia, Kazakhstan, Uzbekistan,

Free Movement of Services and the Right of Establishment 181

Turkmenistan and the Kyrgyz Republic. The analysis in this paper is limited to the PCA Russia. This contains in Title IV ‘Provisions on Business and Investment’ and within that same Title Chapter II relates to ‘Conditions affecting the establishment and operation of companies’ while Chapter III concerns ‘Cross-border supply of services’. Establishment. In Article 28(1), the EU and Russia grant each other MFN treatment with regard to the establishment of companies (entry stage). This provision only applies to companies, not to natural persons. Furthermore, the PCA provides reciprocal national treatment with regard to the ‘operation’ (post-entry stage) of subsidiaries (with legal personality) that are established in the territory of the other Party. Both the EC and Russia annexed a list of reservations concerning this second commitment.59 With regard to the ‘operation’ of branches (having no legal personality) the PCA goes no further than to grant MFN treatment. 60 The PCA contains a provision similar to those in the EAs and the EU’s GATS schedule on the possibility of employing key personnel.61 In Article 33, the EU and Russia agree that they will ‘consider’ granting each other full national treatment with regard to the establishment and operation of companies. Article 34 states that parties ‘shall use their best endeavours’ to ensure that establishment and operation will not be rendered more restrictive than ‘on the date of signature of the Agreement’. This ersatz standstill obligation must be reviewed three years after the signature of the Agreement and, from then on, on an annual basis. There are special provisions for the financial services sector and the transport sector is largely excluded from the scope of Article 28, the basic ‘liberalization provision’. There is, however, an exception to this as there are special rules for services relating to international maritime transport.62 The PCA provides nothing on mutual recognition of qualifications. Cross-border supply of services. The EU and Russia grant each other MFN treatment with regard to the cross-border supply of services by companies (not natural persons) for a series of sectors explicitly listed in Annex 5 to the Agreement (and a limited possibility for temporary movement of natural persons in relation to such cross-border supply63). The ersatz standstill provision is even weaker here than in the area of establishment as parties only agree that three years after the signature the parties will examine whether it is possible to assume a standstill obligation. 64 Maritime transport, on the other hand, is to a large extent liberalized. 65 There are also special provisions on the ‘space launching and transportation market’ and on telecommunication services. Furthermore, it is noteworthy that the Agreement contains a very explicit clause which clearly provides that natural persons cannot derive rights of

182 Lode Van Den Hende

entry or employment in the other party’s territory66 (without prejudice to the limited possibilities offered in the framework of an establishment or a cross-border supply67). Link to GATS. The PCA with Russia contains a number of references to GATS. First, the development of GATS will be taken into account when the ‘further liberalisation of trade in services’ is discussed68 and it is made clear that treatment granted by the Agreement can in no case be more favourable than that accorded under GATS to WTO members.69 Moreover it is one of the stated general principles of the Partnership Agreement that it will be re-examined in the event of accession by Russia to the WTO.70 Comparison. The conclusion made with regard to the EMAAs also applies to the PCA Russia: the level of liberalization of trade in services is low and is clearly lower than the level achieved in the WTO. The difference with most of the Mediterranean Non-Member Countries, however, is that Russia is not a WTO member. While the EU and those Mediterranean NonMember Countries that are WTO members have access to each other’s liberalization commitments made under GATS, this is not the case for Russia. Scope and interpretation of the preferential agreements The main commitment that appears in all of the treaties discussed above is that of national treatment or non-discrimination vis-à-vis services and service suppliers of the host country. As indicated above, the ‘coverage’ of these non-discrimination rules is not always the same. The sectoral coverage differs considerably from agreement to agreement. Furthermore, some agreements apply to natural persons as well as to companies while others apply to companies only (in some cases branches and subsidiaries and in other cases subsidiaries only). These differences are straightforward, clearly flowing from the text of the agreements, and have been discussed above. The question dealt with here is whether the non-discrimination provisions in these different agreements have the same meaning. As explained previously (see the subsection above on the freedom of establishment and freedom to provide services in the EU’s single market), the non-discrimination provision of the EC Treaty is interpreted in a very broad way covering all types of de jure as well as de facto discrimination. However, in Polydor v. Harlequin, one of the classic cases of EC law, the European Court of Justice decided that provisions in agreements with third countries that are similar or even identical to provisions of the EC Treaty will not necessarily be interpreted in the same broad way as the corresponding provision of the EC Treaty.71 In the context of this paper, this begs the question as to the extent to which the non-discrimination provisions on establishment in the EAs,

Free Movement of Services and the Right of Establishment 183

EMAAs and PCAs ought to be interpreted in the same broad way as those of the EC Treaty. In view of the lack of authoritative case law it is not possible to provide a clear answer to that question. However, in a number of cases concerning prostitutes originating from EA countries but working on a selfemployed basis in the Netherlands, Dutch courts found that the ‘service providers’ concerned could not be refused a residence permit on the basis of public policy and public morality arguments to the extent that Dutch nationals were allowed to exercise this ‘economic activity’. 72 These decisions clearly echo the Adoui and Cornuaille Judgement of 1982 where the European Court of Justice ruled that a Member State may not consider prostitution to be a threat to public order under Article 46 EC (ex-Article 56) when it does not combat such conduct by its own nationals. 73 In at least one of the Dutch cases the court concerned refuted the argument that the scope of the EA Poland was less far reaching than that of the EC Treaty and, for that reason, could not be interpreted as broadly as the EC Treaty. When rejecting that argument the Dutch court concerned referred to that part of the preamble of the EA Poland which mentions that the Parties recognize the fact that it is Poland’s ultimate objective to become an EU member and that the EA amounts to a step towards helping Poland reach that objective.74 The GATS agreement is also of interest here. In the Bananas III case, the WTO’s Appellate Body has interpreted the national treatment provision of Article XVII GATS as prohibiting de facto as well as de jure discrimination.75 Moreover, the text of Article XVII GATS mentions in literal terms that a certain treatment shall be considered ‘less favourable if it modifies the conditions of competition in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member’. The latter seems very close to the test that is applied by the European Court of Justice with regard to Article 43 EC (ex-Article 52). This implies that, at least for those EAs that explicitly provide treatment no less favourable than under the GATS and at least for those sectors that are covered by the EU’s GATS schedules, the non-discrimination rule should be applied in an equally broad way as Article 43 EC (ex-Article 52). Furthermore, it could be argued that in any event provisions of EAs, EMAAs and PCAs with WTO members should be interpreted in light of the GATS as Article 31, paragraph 3(c) of the Vienna Convention on the Law of Treaties provides that, among other things, any relevant rules of international law applicable in the relations between parties should be taken into account when interpreting treaties.76 Future developments in the area of market access Apart from the fact that a number of the EA countries will become EU Member States in the not too distant future, it is hard to predict how the regulation of services and establishment will evolve, if at all. Every agree-

184 Lode Van Den Hende

ment under discussion here provides for the continued liberalization of trade in services in one way or another. It is doubtful, however, whether this reflects the reality. A similar commitment to liberalization contained in the 1963 Association Agreement with Turkey remains a distant promise.77 The situation is very different for GATS where new negotiations were written into the Uruguay Round text and in the meantime have led to new liberalization commitments in areas such as basic telecommunications services and financial services). Article XIX GATS requires WTO members to ‘enter into successive rounds of negotiations, beginning not later than five years from the entry into force of the WTO Agreement and periodically thereafter, with a view to achieving a progressively higher level of liberalization’. In the meantime this new ‘Millennium Round’ was launched at the WTO Ministerial Meeting in Seattle on 30 November 1999. The logical conclusion is that the scope for further development of ‘market access’ for services and service providers at the regional level of the EAs, EMAAs and PCAs is limited. To the extent that there is progress, it will probably take place in the multilateral framework of GATS (a conclusion which is confirmed by the fact that the EMAAs and the PCAs provide explicitly that they will not grant a better status than that provided for under GATS). Thus, it seems, at least in the area of services and establishment, that the regional integration agreements of the EU may be overtaken by the multilateral framework of the WTO. In one area, that of movement of natural persons, this may be different. As far as market access for services and establishment is concerned it seems that, in practice, the main supplementary advantage offered by the EAs to the CEECs when compared with GATS is the possibility of the establishment of natural, self-employed persons. Apparently the EC was willing to accept such movement of persons with neighbouring countries in Central and Eastern Europe but not with virtually every country in the world. While it seems very unlikely that the EU would accept such a commitment with all WTO members in the foreseeable future, it does not seem unrealistic that the EU might undertake this commitment with regard to neighbouring countries in the South with whom it has a special relationship, and which already count for a considerable part of the immigrated population in the EU.

III. Harmonization of legislation: removal of technical and administrative trade barriers While the impact of a ‘Pan-Euro-Mediterranean regional integration’ might remain limited in the traditional area of market access (because of parallel or more far-reaching developments in the GATS) it may be very meaningful for the less traditional, but increasingly important, area of removal of technical and administrative barriers to trade. It seems

Free Movement of Services and the Right of Establishment 185

generally accepted that blunt market access restrictions are becoming less important in international trade as international economic law seems to become more and more successful in the removal of these traditional instruments of protectionism. 78 Once such measures have been removed, however, attention shifts to other types of trade barriers, first of all technical barriers to trade resulting from diverging regulation in different countries. The EU experience has shown the importance and the impact of this issue. 79 It has also shown that it is often much more difficult to remove this type of barrier than to remove traditional trade barriers. The EU has provided a double answer: harmonization of Member States’ legislation combined with the ‘Cassis de Dijon’ and ‘mutual recognition’ case law of the European Court of Justice. The EEA Agreement has taken over much of the EU’s technical harmonization legislation as well as the jurisprudence of the European Court of Justice through a special legal arrangement. 80 The same was largely done for trade in goods via Decisions 1/95 and 1/97 of the EC–Turkey Association Council. 81 The EAs do not provide for a legally binding framework for such harmonization but EA countries were already starting to adapt their legislation to (parts of) the so-called acquis communautaire very soon after the historic changeover in Central and Eastern Europe in the late 1980s. In June 1995 the Commission presented the so-called ‘White Paper’, a ‘guide’ for CEECs preparing for EU membership. 82 This document referred to the principle of mutual recognition and listed the EU legislation that the CEECs could adopt. It also contained a work programme identifying key measures that first had to be dealt with and gave indications of the administrative and organizational structures required for the implementation of the legislation. The EU has also funded technical assistance programmes to help the CEECs in the adaptation process. 83 More recently the EU has launched comparable programmes for the Mediterranean Non-Member Countries.84 A very important feature of the ‘White Paper approach’ used by the EU towards the CEECs in the area of legislative harmonization is the fact that it is not based upon legally binding ‘contractual’ 85 commitments between the EU and the CEECs. The White Paper is a purely unilateral document of non-binding nature and is presented under the sole responsibility of the Commission. However, there was and remains a clear interest and willingness among the CEECs to implement this harmonization programme as this is considered the best way to prepare for membership and/or to associate their economy with the EU’s Internal Market. Currently, the lack of a clear legal framework for this harmonization process probably affects its effectiveness only marginally. On the other hand, this ‘informal’ approach offers a high level of flexibility which, for now, seems more necessary than a strictly defined legal environment.

186 Lode Van Den Hende

If a similar ‘autonomous adaptation’ approach were also to be followed in the Mediterranean area, this might have a substantial impact on the removal of technical barriers to trade. Harmonization of legislation at the global level of, for example, the WTO seems, at the moment, a very difficult process. As the experience in Central and Eastern Europe has shown, such a process is less burdensome (although far from easy) on a smaller, regional scale. Moreover, it is mainly a ‘one-way’ process whereby the countries on the periphery of the EU align their legislation with that of the EU. This makes difficult negotiations between more ‘equal’ partners such as the EU and the US unnecessary. Furthermore, it offers the possibility of narrowing trade ties without immediate collision with WTO rules. Finally, this process would also benefit the EU as it would give its services industry a ‘technical regulation zone’ stretching far beyond the borders of the EU.

Conclusion: what role for a Pan-Euro-Mediterranean Economic Area? The role of a Pan-Euro-Mediterranean Economic Area for services and establishment could be twofold. Firstly, in the area of market access measures, it may well offer the possibility of widening access to self-employed individuals originating in EMAA and/or PCA countries. Secondly, it certainly offers prospects with regard to regulatory harmonization. The latter process of regulatory harmonization is well under way in the CEECs and is now also under way in the Mediterranean Non-Member Countries. To date the process has functioned without the support of a legal mechanism and has focused mainly on the formal adaptation of national legislation. When attention shifts from formal adaptation to correct implementation, however, it will probably become necessary to introduce mechanisms to solve disputes and to safeguard the homogeneous interpretation and correct application of the rules concerned in all countries that participate in this Pan-Euro-Mediterranean Economic Area. At the moment the only treaty that provides for such a ‘homogeneity’ procedure is the EEA Agreement, and the coming into being of this procedure was not without legal difficulties.86 If the Pan-Euro-Mediterranean Economic Area is to develop further towards an area that takes over large parts of the acquis communautaire (just as the EEA Agreement has done) it will become necessary to introduce a system for dispute settlement and ‘homogeneous interpretation’ that is very likely to be similar to that of the EEA Agreement. In view of the objections made by the European Court of Justice with regard to a first, more far-reaching, version of the EEA Agreement’s ‘homogeneity procedure’, it seems that there is little scope for something other than the EEA system. Finally, the EEA model has the advantage of being a multilateral instrument. Market access and ‘legal homogeneity’ would not only be

Free Movement of Services and the Right of Establishment 187

achieved in relation to the EU but also between all the partner countries concerned (which is said to be a crucial element to their further development). Thus, with regard to services and establishment, the conclusion appears to be that the (legal) future of the Pan-Euro-Mediterranean Economic Area lies with the EEA. This conclusion is hardly surprising as the EEA is probably as close to the Internal Market as a non-EU member can get. On the other hand, this comparison with the EEA should not be applied too strictly. It is clear that the economic differences between the members of the EEA are, and were, much smaller than the economic differences between the members of a potential Pan-Euro-Mediterranean Economic Area. Furthermore the extension of the level of free movement of persons that exists in the EEA to a Pan-Euro-Mediterranean Economic Area would be, to say the least, highly controversial. It is the legal mechanisms that the EEA Treaty provides which make it an interesting precedent. However, for these mechanisms to work in a more heterogeneous environment, it will probably be necessary to make use of the type of ‘variable geometry’ or ‘à la carte integration’ introduced into the EU and EC Treaties by the Treaty of Amsterdam. This would enable both the EU and the third countries concerned to select those areas where they are willing and able to apply the rules of the acquis communautaire and would allow the process of legal integration to grow gradually and in line with socio-economic realities.

Notes 1.

2. 3.

4.

5.

It seems incorrect to use the more convenient term ‘Euro-Mediterranean Economic Area’ for this integration scheme, as it seems to be reserved for the ‘economic area’ that is being set up between the EC and the Mediterranean NonMember Countries (and which does not include the CEECs) – see the Commission Communication on The Euro-Mediterranean Partnership and the Single Market, COM(1998)538 Final, 23 September 1998. European Commission, DG I, Trade in services: key to the world economy’s future (http://www.europa.eu.int/comm/dg01/trade3.htm, visited on 16 March 1999). European Commission, DG I, Opening world markets for services – towards GATS 2000 (http://gats-info.eu.int/gats-info/g2000.pl?NEWS=aa, visited on 16 March 1999). This was also the case during the Uruguay Round negotiations – see WTO Secretariat, Guide to the Uruguay Round Agreements (The Hague: Kluwer Law International, 1999), 179, and UNCTAD Secretariat, The Outcome of the Uruguay Round: An Initial Assessment. Supporting Papers to the Trade and Development Report (New York: United Nations, 1994), 184. See, for example, the Note by the WTO Secretariat on Bilateral, regional, plurilateral and multilateral agreements for the WTO Working Group on the relationship between trade and investment (WT/WGTI/W22, 26 January 1998) analysing the provisions on establishment of the EC Treaty, the Europe Agreements and the PCA Russia from the point of view of investment (paragraphs 20–6); see also UNCTAD, Admission and establishment and Scope and definition, UNCTAD Series

188 Lode Van Den Hende

6.

7.

8.

9. 10. 11.

12. 13. 14.

15.

16. 17. 18. 19. 20. 21.

22.

on Issues in International Investment Agreements (New York and Geneva: United Nations, 1999). See, for example, the opinion of Advocate General La Pergola in Case C-124/97, Läärä, not yet reported, paragraph 26, and also V. Hatzopoulos, ‘Exigences essentielles, impératives ou impérieuses: une théorie, des théories ou pas du théorie du tout’, RTDE, 1998, 191–236. This terminological and practical overlapping even appears in the text of the EC Treaty. Article 57 (ex-Article 73c), for example, is part of Chapter 4 (Capital and Payments) but mentions direct investment as well as establishment. P. Sauvé, ‘Regional versus multilateral approaches to services and investment liberalization: anything to worry about?’, in P. Demaret, J.-F. Bellis and G. García Jiménez, Regionalism and Multilateralism after the Uruguay Round (Brussels: European Interuniversity Press, 1997), 437. European Commission, Regular report from the Commission on Czech Republic’s progress towards accession, COM(1998)708 Final, 17 December 1998, 22. WTO Agreement, Article XII:1; at the time of writing the WTO had 134 members. An up-to-date list is available at http://www.wto.org. WTO members: Bulgaria, the Czech Republic, Hungary, Latvia, Poland, Romania, the Slovak Republic, Slovenia, Cyprus, Egypt, Israel, Malta, Morocco, Tunisia, Turkey, the Kyrgyz Republic, Mongolia. Candidate WTO members: Estonia, Lithuania, Algeria, Jordan, Belarus, Moldova, the Russian Federation, Ukraine, Armenia, Azerbaijan, Georgia, Kazakhstan, Uzbekistan. Countries that have not made an application: Lebanon, the Palestinian Territories, Syria, Turkmenistan, Tajikistan. See B. Hoekman and P. Sauvé, ‘Regional and multilateral liberalisation of services markets’, JCMS, 32, 1994, 283–317. Or ‘national treatment’ in WTO terms. See on this issue the impressive analysis of the Court’s case law in D. Martin, ‘“Discriminations”, “entraves” et “raisons impérieuses” dans le traité CE: trois concepts en quête d’identité’, CDE, 34, 1998, 261–318 and 561–632; see also C. Hilson, ‘Discrimination in Community free movement law’, ELRev., 24, 1999, 445–62. Joined cases 267–268/91, Keck & Mithouard, ECR, 1993, I-6097; see also the alternative for the Keck case-law proposed by Advocate General Jacobs in his opinion in case C-412/93, Leclerc-Siplec, ECR, 1995, I-182. Article 43 EC Treaty (ex-Article 52). Article 48 EC Treaty (ex-Article 58). Article 45 EC Treaty (ex-Article 55). Article 47 EC Treaty (ex-Article 57). ECJ, Cases 286/82 and 26/83, Luisi and Carbone, ECR, 1984, 377, paragraph 10. ECJ, Case C-55/94, Gebhard, ECR, 1995, I-4165, paragraph 25. In that case it was also decided that a physical infrastructure may be necessary to provide a service. Consequently the essential element in deciding whether to apply the provisions on services or those on establishment is not the use of fixed infrastructure but the fact that the provision of the service is temporary. In that respect the duration of the provision of the service is not the only important element that must be considered, but also its regularity, periodicity and continuity. (a) limitations on the number of service suppliers; (b) limitations on the total value of the service transactions or assets; (c) limitations on the total number of service operations or on the total quantity of service output; (d) limitations on the total number of natural persons that may be employed in a particular service

Free Movement of Services and the Right of Establishment 189

23. 24. 25.

26.

27. 28.

29.

30.

31. 32. 33.

34.

35.

sector or that a service supplier may employ; (e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; (f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment. Furthermore the GATS contains special rules in special annexes for air transport, financial services, telecommunications and maritime transport. On this issue, see A. Mattoo, ‘National treatment in the GATS: corner-stone or Pandora’s box?’, JWT, 31, 1997, 107–35. For a more detailed analysis, see E. Guild and P. Barth, ‘The movement of natural persons and the GATS: a UK perspective and European dilemmas’, EFA Rev., 1999, 395–415. See the ‘horizontal section’ of the EC’s GATS schedule in Uruguay Round of multilateral trade negotiations – Legal instruments embodying the results of the Uruguay Round of multilateral trade negotiations done at Marrakech on 15 April 1994, Vol. 28, GATT Secretariat, Geneva, 23 563; and WTO Secretariat, Guide to the Uruguay Round Agreements (The Hague: Kluwer Law International, 1999), 191–2. Uruguay Round of multilateral trade negotiations, op. cit., 23 563. These additional commitments were the result of continued GATS negotiations on the movement of natural persons which resulted in the Third Protocol to the GATS signed on 24 July 1995. The EC’s supplementary commitments can be found in GATS/SC/31/Suppl. 2. The EAs contain a provision declaring the rules on establishment applicable to the awarding of public contracts (Article 66 EA Hungary; Article 68 EA Latvia). The EMAAs contain only open-ended provisions on public procurement (Article 41 EMAA Morocco; Article 58 EMAA Jordan). The same is true for the PCA Russia (Article 59). Article XIII GATS. Government purchases are covered, however, by the WTO Agreement on Public Procurement, which does not apply to all WTO members but only to those who have explicitly accepted to be bound by it. Article V:2 GATS. Article V:3 GATS. Generally a distinction is made between three ‘generations’ of Europe Agreements: the first (EA Poland, EA Hungary and EA Czechoslovakia), the second (Romania, Bulgaria, Czech Republic and Slovak Republic) and third (Estonia, Latvia, Lithuania and Slovenia). Most references in this paper are to one first-generation EA (Hungary) and one third-generation EA (Latvia). See Table annexed. For a more ‘person-oriented’ overview that does include the free movement of workers, see M. Cremona, ‘Free movement of persons and services in the wider Europe’, in P. G. Xuereb (ed.), Malta, the European Union and the Mediterranean: Closer Relations in the Wider Context (Malta: EDRC, University of Malta, 1998), 94–119. Article 44(1) and (3) EA Hungary; Article 44 EA Latvia. Each EU Member State grants treatment no less favourable than that granted to its own companies and nationals. Thus the benchmark for discrimination is the treatment by a Member State of its own companies and nationals, not that of companies and nationals from other Member States. It must also be mentioned that the ‘third-generation’ EAs with Latvia, Lithuania and Estonia only provide for the establishment of companies, not of natural persons. The EA Slovenia, however, does cover natural persons.

190 Lode Van Den Hende 36. The legal concepts ‘branch’ and ‘subsidiary’ are only defined in a precise way in the ‘third-generation’ EAs – see, for example, Article 46 EA Latvia. 37. Article 52 EA Hungary. The provisions of a ‘third-generation’ EA in this area are formulated more precisely – see, for example Article 49 EA Latvia. The same wording can also be found in the PCA Russia (Article 32) and the EMAA Jordan (Article 34). 38. Case C-113/89, ECR, 1990, I-1417; see also Case C-43/93 Vander Elst, ECR, 1994, I-3803. See also Cremona, op. cit., 116–19. For a more detailed analysis, see J. Tiedje, ‘La libre prestation des services et les ressortissants de pays tiers’, RMCUE, 1999/2, 73–105. 39. The question can be raised whether it was necessary to include such a provision in the EAs because the Rush Portugesa case relates to free movement of services, without establishment, which is not provided for by the EAs (see section on cross-border supply of services, below). 40. Article 46 EA Hungary; Article 50 EA Latvia. 41. Article 50 EA Hungary; Article 51 EA Latvia. 42. Article 53 EA Hungary; Article 55 EA Latvia. 43. Article 51 EA Hungary; Article 45 EA Latvia. 44. On this issue, see M. Tison, Harmonisation and legal transplantation of EU banking supervisory rules to transitional economies. A legal approach, Financial Law Institute, Universiteit Gent, July 1999, Working Paper 1999–12, 1–7 (available at www.ssrn.com). 45. Article 55(1) EA Hungary. 46. Article 52(3) EA Latvia. 47. Cremona, op. cit., 113. 48. Article 33 EMAA Jordan. 49. Article 34 EMAA Jordan. This provision is very similar to the provision on this issue in the ‘third-generation’ EAs. 50. Article 31(1) EMAA Jordan. 51. Article 31(2) EMAA Jordan. 52. Article 37 EMAA Jordan. 53. OJ, L35/1, 13 February 1996. 54. Agreement establishing an association between the EEC and Turkey, OJ, No. 217, 3685, 29 December 1964. 55. OJ, L293/1, 29 December 1972. 56. S. Peers, ‘Living in sin: legal integration under the EC–Turkey Customs Union’, EJIL, 7, 1996, 427; Agence Europe, 15 February 1995, 10. 57. European Commission, Regular report from the Commission on Turkey’s progress towards accession, COM(1998)711 Final, 17 December 1998, 38. 58. Cf. M. Mohieldin, ‘The Egypt–EU Partnership Agreement and liberalisation of services’, in A. Galal and B. Hoekman (eds), Regional Partners in Global Markets: Limits and Possibilities of the Euro-Med Agreements (London: CEPR/ECES, 1997), 242. 59. See Annexes 3 and 4 PCA Russia. 60. Article 28(4) PCA Russia. 61. Article 32 PCA Russia. 62. Article 35 PCA Russia. This corresponds to the special provisions on this issue in the Association Agreement with Jordan (Article 31 EMAA Jordan). 63. Article 37 PCA Russia. This provision is less broad than the possibilities opened up in the EC’s GATS schedule. 64. Article 38 PCA Russia.

Free Movement of Services and the Right of Establishment 191 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75.

76.

77. 78.

79.

80. 81.

82.

83. 84. 85.

86.

Article 39 PCA Russia. Article 50 PCA Russia. Articles 32 and 37 PCA Russia. Article 47 PCA Russia. Article 51 PCA Russia. Article 4 PCA Russia. Case 270/80 Polydor v. Harlequin, ECR, 1982, 329; see also Case 125/88, Nijman, ECR, 1989, 3543. See R. H. van Ooik, ‘Vrije vestiging van Oost-Europese prostituees in Nederland’, Nederlands tijdschrift voor Europees recht, 3, 1997, 245–8. Joined cases 115 and 116/81, Adoui and Cornuaille, ECR, 1982, 1665. A similar consideration appears in all EAs. European Communities – Regime for the Importation, Sale, and Distribution of Bananas (WT/DS27), paragraphs 231–4 of the Appellate Body report (available at www.wto.org). See also, for example, ECJ: Case C-163/90, Legros, ECR, 1992, I-4625 (interpretation of the EC–Sweden Free Trade Agreement of 1972 in the light of GATT). See text accompanying footnote 56. See, for example, A. O. Sykes, ‘The (limited) role of regulatory harmonization in international goods and services markets’, Journal of International Economic Law, 1999, 49–70. See also B. Hoekman and D. E. Konan, Deep integration, nondiscrimination and Euro-Mediterranean free trade, World Bank Policy Research Working Paper No. 2130, May 1999. Article 6 EEA. Decision 1/95 of the EC–Turkey Association Council of 22 December 1995 on implementing the final phase of the Customs Union, OJ, L35/1, 13 February 1996, (especially Article 66) and Decision 2/97 of the EC–Turkey Association Council of 4 June 1997 establishing the list of Community instruments relating to the removal of technical barriers to trade and the conditions and arrangements governing their implementation by Turkey, OJ, L191/1, 21 July 1997. White Paper on the ‘Preparation of the Associated Countries of Central and Eastern Europe for integration into the Internal Market of the Union’, COM(95)163 Final, 3 May 1995. On the White Paper, see, more extensively, M.-A. Gaudissart and A. Sinnaeve, ‘The role of the White Paper’, in M. Maresceau (ed.), Enlarging the European Union: Relations between the EU and Central and Eastern Europe (London and New York: Longman, 1997), 41–71. See Chapter 5 of the introductory part of the White Paper. See Communication from the Commission on the Euro-Mediterranean Partnership and the Single Market, COM(1998)538 Final, 23 September 1998. The term is borrowed from P.-C. Müller-Graff, ‘Legal framework for relations between the European Union and Central and Eastern Europe: general aspects’, in Maresceau, op. cit., 33. The European Court of Justice declared a first version of the EEA Agreement incompatible with the EC Treaty because of the structure of the proposed ‘homogeneity procedure’ involving an EEA Court, the rulings of which would be binding for the Court of Justice. In the second and final version the proposed mechanism was replaced by a less binding procedure that was accepted by the Court of Justice (Opinion 1/91, ECR, 1991, I-6079 and Opinion 1/92,

192 Lode Van Den Hende ECR, 1992, I-2821). See M.-A. Gaudissart, ‘Entre autonomie et homogénéité: l’ordre juridique communautaire en péril’, RMCUE, 1992/2, 121–36; C. Reymond, ‘Institutions, decision-making procedure and settlement of disputes in the European Economic Area’, CML Rev., 1993, 449–80. For a comparison with the (lack of) mechanism in the customs union with Turkey, see S. Peers, ‘Living in Sin: Legal Integration Under the EC–Turkey Customs Union’, EJIL, 1996, 424–5.

9 Towards a Pan-Euro-Mediterranean Integration: a Survey of Issues in the Agricultural Sector Marianne Dony

Introduction The problems particular to farming led the six signatory states to the Treaty of Rome to adopt specific measures in favour of their agricultural sectors. These measures were based on a more or less developed regime of border control of imported goods and a policy of intervention in their domestic agricultural markets. Within this context, the authors of the Treaty made two fundamental decisions. First, they placed agriculture within the framework of the Common Market,1 thus distinguishing the EC from other regional economic integrations which had left agriculture to one side, in recognition of its complexity and the high risks it entailed.2 Yet at the same time, the authors of the Treaty recognized that agriculture could not simply be left subject to market rule. They therefore decided that the development and operation of the Common Market should be accompanied by the creation of a Common Agricultural Policy (CAP), 3 with the following objectives: to increase agricultural productivity; to ensure a fair standard of living for the agricultural community; to stabilize markets; to ensure the availability of supplies; and to ensure that supplies reach customers at reasonable prices.4 The Common Agricultural Policy which came to be implemented comprises two parts. The first and principal part is the market policy, which consists of a set of mechanisms designed to regulate the agricultural markets by means of action on the domestic market (fixed prices, accompanied by intervention to sustain the price) and measures relating to trade with non-EC countries (import duties and ‘exports refunds’). From 1972 onwards, this market policy has been completed by a policy relating to agricultural structures, which has gradually been integrated into the larger framework of the Community’s regional policy. Its initial mechanisms have undergone considerable modification during the 1990s for both international and domestic reasons. International pressures are typified by the Uruguay Round negotiations which saw vociferous 193

194 Marianne Dony

criticism, particularly by the USA, of the external aspects of this market policy and the extent of domestic subsidies. Domestic reasons for change also demanded that various shortcomings of the Common Agricultural Policy be remedied: the considerable surpluses which had resulted from the excessively protectionist policy of price regulation and intervention as well as from technical progress were increasingly burdensome on the Community budget; the income of farmers, and in particular small farmers, was in a state of stagnation; finally, the exodus from the countryside was steadily increasing. In June 1992, the Council of Ministers adopted measures to reform the Common Agricultural Policy, concentrating on cereals and other crops, as well as on cattle-products classified as northern.5 The reform principally took the form of significant price reductions, counterbalanced by subsidies which bore no relation to productivity and which were accompanied by measures limiting the use of means of production (fallowing arable land, limits on the number of animals per hectare, quotas). In December 1993, the Uruguay Round negotiations came to a close. The final act was signed at Marrakesh on 15 April 1994. The agricultural section of these agreements comprises, on the one hand, a limit on the global volume of domestic support of agricultural products and, on the other hand, the gradual elimination of variable levies on agricultural products, to be replaced by customs duties. The first requirement was implemented as part of the 1993 reforms, the second by Council Regulation 3290/94 of 22 December 1994.6 At the dawn of the twenty-first century, the Common Agricultural Policy and European agriculture must meet new challenges in the general context of renewed Uruguay Round negotiations. They must define and implement new Euro-Mediterranean relations, and face the challenge of enlarging the EU towards Central and Eastern Europe.

The Common Agricultural Policy in Euro-Mediterranean relations This is a familiar problem. A declaration annexed to the Treaty of Rome invited independent countries within the franc zone (and in particular Morocco and Tunisia) to conclude economic association agreements, primarily in order to maintain and strengthen traditional trade flows. Thereafter, bilateral co-operation agreements were negotiated with Maghreb and Mashrek countries within the framework of the Global Mediterranean Policy. These agreements included a trade chapter which provided these countries with trade preferences in the form of reduced customs tariffs. Moreover, a specific preferential trade agreement aimed at

Pan-Euro-Mediterranean Integration and Agriculture 195

establishing an industrial free trade zone and providing for concessions in the agricultural sector was concluded with Israel. The enlargement of the Community to include Spain and Portugal allowed these countries to reap the rewards of the free movement of goods within the Common Market, with the result that the other Mediterranean countries lost any benefit they had previously derived from these tariff concessions, despite the conclusion of adaptation protocols in 1987 and 1988. From 1992 onwards, the Community implemented a Renewed Mediterranean Policy. Within this framework, Regulation 1764/92 of 29 June 19927 provided for a two-stage elimination of all customs duties, yet this was confined to those products which accounted for traditional trade flows, as defined in the framework for the tariff quotas. Furthermore, a certain number of ‘sensitive’ products (in particular citrus fruits, tomatoes and dessert grapes) were covered by a specific regime which allowed for modulated import prices in order to avoid disruptions of the Community Market. A new bridge was crossed with the Barcelona Declaration in November 1995. This affirms the principle of the creation of a free trade area but ‘the participants have set 2010 as the target date for the gradual establishment of this area which will cover most trade in accordance with the obligations specified by the WTO’. It is anticipated that agricultural trade will ‘gradually [be] liberalised by means of reciprocal preferential access between the parties, departing from the traditional trade flows, within the limits set out by the different agricultural policies and in accordance with the results of the GATT negotiations.’ Economic co-operation will primarily entail modernization and restructuring of agriculture and promoting integrated rural development. The work programme pertaining to the Euro-Mediterranean Partnership anticipates ‘the elimination of unjustified technical obstacles to agricultural trade and the adoption of appropriate measures with regard to rules on fertilizers and veterinary practices, and other foodstuff regulations’ as well as agricultural co-operation.8 These adjustments are being introduced progressively by new EuroMediterranean Association Agreements concluded with the Mediterranean Non-Member Countries. Thus the agreement concluded with Tunisia 9 provides that: ‘The Community and Tunisia agree to the gradual implementation of greater reciprocal trade liberalisation with regard to agricultural produce and fish’ (Article 16) and that ‘From 1 January 2000, the Community will examine the trade situation with a view to establishing further reciprocal trade liberalisation … to be applied from 1 January 2001’ (Article 17). In this way, the Community’s Mediterranean production faces the risk of direct competition from the Mediterranean Non-Member Countries in the future and must take measures to adapt to a fundamentally different environment.

196 Marianne Dony

The Common Agricultural Policy and relations with the countries of Central and Eastern Europe For many years, relations between the Community and Central and Eastern Europe were characterized by mutual neglect, and agricultural trade was limited to operations such as subsidized sales of butter and cereals to the USSR or food aid for Poland, as well as to agreements with Poland and Hungary10 concerning beef. The situation has, however, undergone a rapid and profound evolution over the past decade. From 1991 onwards, the Community has signed ‘European Agreements’ with almost all the countries of Central and Eastern Europe. These comprehensive association agreements comprise an agricultural chapter which, while significant, is a far cry from the expectations of the countries concerned, reflecting more the desire of the Community, led by France, to protect its agriculture and the Common Agricultural Policy. At present, attention is focused primarily on the accession of several of these states to the EU. This, in itself, poses serious problems for the agricultural sector. Studies undertaken by the European Commission 11 have shed light on the distinctive features of agriculture in Central and Eastern European Countries. While agriculture occupies an important place in the economies of these states, far greater than is the case in the EU, it has long been collectivized and large-scale agrarian reform would be necessary in order to privatize it successfully. Furthermore, prices are generally significantly lower than those in the EU. Given these conditions, the integration of Central and Eastern European Countries into the Common Agricultural Policy will be a delicate operation. Both because of the weak state of agriculture and the food sector in the candidate countries, and the likelihood of differences between prices practised on their markets and those of the EU, the Commission has underlined the need for a transitional period with a duration which could vary from country to country. Such a period should ease the process of the necessary price adjustment while also avoiding the exposure of the processing industries of the candidate countries to sudden, brutal competition. Renewed reform of the Common Agricultural Policy will, however, prove necessary in order to avoid negative repercussions of enlargement on European agriculture and the Community budget. The Council of Ministers for Agriculture agreed on the principal elements of such a reform on 11 March 1999. In terms of agricultural sectors, the main budget areas to be affected are crops, milk, beef and wine. At Member State level: ●

Member States must define appropriate environmental standards to be respected by farmers, and must specify appropriate sanctions in the case of abuse.

Pan-Euro-Mediterranean Integration and Agriculture 197 ●

●

Member States must establish systems for the receipt of direct payments per farm, within certain limits, based on the number of employees on the farm and its overall prosperity. The funds raised by a reduction in subsidies will be available to states in the form of Community aid.

The Common Agricultural Policy will also be accompanied by a new rural development policy, designed to implement a coherent and lasting framework to guarantee the future of rural areas in Europe. These rural development measures will form a coherent package and there will be three possible forms of support: reinforcement of the agricultural and forestry sectors; improvement of the competitiveness of rural areas; conservation of the environment and the rural heritage of Europe. The reformed Common Agricultural Policy is based on two fundamental principles: flexibility and decentralized responsibility. The Berlin European Council of 25–26 March 1999 approved the basic tenets of this reform and considered that the reform ‘would ensure durable, competitive, multi-purpose farming, spread across the entire EU including regions with particular problems; a type of farming capable of preserving the countryside and making an essential contribution to the livelihood of its inhabitants, while meeting the concerns and demands of the consumer regarding the quality and safety of foodstuffs, environmental conservation and the protection of animal welfare’. The Berlin European Council also led to an agreement on EU financial prospects and expenditure for a seven-year period (2000–06), in accordance with a work plan which provided for the accession of several new Member States from 2002 onwards. The main areas of expenditure in the agricultural sector are as follows. For a 15-state EU, the current agricultural policy is to be maintained, resulting in the financial prospects shown in Table 9.1. Table 9.1 2000

Financial prospects from maintaining current agricultural policy 2001

2002

2003

2004

2005

2006

Agricultural policy 36 620 38 480

39 570

39 430

38 410

37 570

37 290

Rural development and accompanying action 4 300 4 320 4 330 4 340

4 350

4 360

4 370

520

520

520

520

Additional expenditure linked to accession 1 600 2 030 2 450 2 930

3 400

Pre-accession expenditure 520 520

520

Source: 1999 Berlin European Council. All figures in m euro.

198 Marianne Dony

Conclusion Pan-Euro-Mediterranean regional integration will not be achieved without significant repercussions for the Common Agricultural Policy. Although planning for the accession of CEECs to the EU now seems well under way, progress remains necessary with regard to the prospect of a EuroMediterranean free trade area for Mediterranean agricultural products. Reforms affecting these products began only in June 1998 with an adjustment to the EU market organization for olive oil. In the future it is likely that further reforms will have to take place, despite the fact this will not be easy because, for a long time, the CAP has proved very hard to change. In particular, further nationalization is gaining ground. The main arguments in favour of this solution stem from the financial pressure of the CAP on the European budget but also from an increasing need for more flexibility in the agricultural policy so as to consider the needs of the different regions.12

Notes 1. 2. 3. 4. 5. 6. 7. 8.

9. 10. 11. 12.

Article 32, paragraph 1 (ex-Article 38). C. Blumann, Politique agricole commune (Paris: Litec, 1996), 8. Article 32, paragraph 4. Article 33 (ex-Article 39). P. Baudin, ‘La fixation des prix agricoles pour 1998/1999’, RMCUE, 1998, 524. OJ, L349/105, 31 December 1994. OJ, L181/21, 1 July 1992. Strengthening the Mediterranean policy of the European Union: Establishing a Euro-Mediterranean partnership. Bull.-EU, Supplement, February 1995. See J. -L. Reiffers (ed.), La Méditerranée aux portes de l’An 2000 (Paris: Economica, 1997), 102. OJ, L97/1, 30 March 1998. See M. Somai, Agricultural Aspects of Hungary’s Accession to the Working Paper no. 93, Institute for World Economics, Budapest, June 1998. ‘Agenda 2000, for a stronger and wider Union’, Bull.-EU, Supplement, May 1997. See Marjoleine Hennis, ‘Protectionism in a globalized food system’, in Alan Cafruny and Patrick Peters (eds), The Union and the World: The Political Economy of a Common European Foreign Policy (The Hague: Kluwer Law, 1998) 271–83; F. Dehousse and P. Vincent, ‘La réforme de la politique agricole européenne. Entre l’élargissement de l’Union et l’OMC’, Courrier Hebdomadaire, no. 1609, CRISP, 1998, 5–44.

10 Pan-European Rules of Origin and the Establishment of the Euro-Mediterranean Free Trade Zone Stefano Inama

Introduction For those who have been acquainted with the question of rules of origin through their professional careers, it has been quite surprising to see that the issue of rules of origin has even found its place in the 1995 Cannes European Council conclusions. Moreover, terminology usually confined to customs officials like ‘diagonal cumulation’ is increasingly quoted in senior official meetings discussing the Euro-Mediterranean initiative as a trade policy incentive for regional integration and industrial development. Then, bearing in mind the fact that rules of origin have been traditionally considered a rather obscure subject reserved for technicians, a spontaneous question may arise: why all this attention devoted to origin? Why make it an issue in the context of the Euro-Mediterranean policy? And finally, is it a new or an old issue? The most direct answer is that it is an old issue belonging to the evolving nature of the ‘acquis communautaire’. From the entry into force of the Treaty of Rome, the EC started to establish its network of preferential agreements with a variety of countries. This tendency has been proliferating in the course of the development of the external trade policy to the generation of what was later called the ‘pyramid of privileges’. Preferential tariffs normally granted under these different arrangements were and still are accompanied by and conditional upon the compliance with origin requirements. The existence of rules of origin assured the EC trade policy-makers that the preferential treatment granted to the partner countries was confined to goods genuinely produced in those countries and not to third countries’ goods simply transhipped or having undergone minimal working or processing operations. The preoccupation with trade deflection or tariff circumvention has constantly been one of the main tenets of the EC policy in this field. The unfolding of the EC trade policy and agreements with third countries meant a parallel expansion of rules of origin sets to accompany these initiatives. Invariably, all preferential trade agreements whether contractual 199

200 Stefano Inama

or unilateral contained a detailed protocol on rules of origin. However, the different timing, content, tariff concessions and trade policy objectives of these trade agreements resulted in about 16 overlapping rules of origin systems, which were similar but not totally compatible. 1 The differences existing among the various rules of origin protocols created difficulties for customs administrations and industrialists in importing and exporting countries. Most importantly the complexity and stringency of the rules were such that in some cases the exporters were forgoing the tariff preference rather than complying with origin requirements. These difficulties first emerged in the framework of the web of bilateral agreements that the EC concluded with the EFTA countries and it reached its climax with the entry into force of the Europe Agreements and the establishment of the EEA. The much overdue need for reform was first acknowledged at the 1993 Copenhagen European Council where the Commission was invited to study the process of harmonization and rationalization of the various rules of origin systems. This new policy was first launched in the context of a Commission Communication prepared for the 1994 Essen European Council and was originally part of the preparation for accession of Central and Eastern European Countries (CEECs). The Mediterranean Non-Member Countries (MNMCs) were not explicitly part of the initial plan.

I. The main features of the EC protocols on rules of origin Invariably, all EC unilateral or contractual preferential agreements contain a detailed protocol on rules of origin. As a traditional feature of the agreements, the products were considered as originating if they were: 1. wholly obtained; 2. sufficiently worked or processed. In general, products such as minerals and fruits which do not contain any imported inputs were considered wholly obtained. These products were enumerated in a list. The matter was more complex in cases where imported inputs were utilized in the production of the finished product. In general, inputs had to undergo sufficient processing. The general rule is the following: non-originating materials are considered to be sufficiently worked or processed when the product obtained is classified in a tariff heading which is different from that in which all the non-originating materials used in its manufacture are classified.2 However, for a number of products there were exceptions to the general change in tariff heading (CTH) rule. In fact, the harmonized system was conceived as a customs nomenclature and not for rules of origin purposes. Accordingly, in some instances even minimal working or processing could

Pan-European Rules of Origin 201

entail a CTH. Thus, a variety of products were covered by a so-called single list, which indicated the working or processing that should be carried out on the non-originating materials. The list contained a large number of particular products for which specific conditions should be fulfilled, instead of the CTH requirement. The ‘pan-European’ rule of origin does away with the general CTH requirement. All requirements to be fulfilled, in order to acquire originating status, are now contained in a list attached to the protocol on rules of origin. At a conceptual level the contents of this list are similar to those utilized under the previous arrangements – in fact the current list contains a mixture of CTH requirements, specific working or processing and ad valorem percentages. However, additional features and differences are contained in these new protocols. The second important feature of the EC agreement is the so-called ‘cumulation’. Normally, rules of origin in the context of autonomous or unilateral contractual preferences are to be complied with within a customs territory of the partner country. However, it was considered early on that this requirement per se was not adequate or conducive to the trade and industrial policy objectives underlying the preferential agreement, nor did it match the existing industrial capacity in certain countries, and finally it did not take into account the regional trade initiatives taking place among them. Moreover, isolated and stringent requirements to comply with rules of origin may demand excessive ‘verticalization’ of production which does not exist in developing countries. Second, an excessive requirement implying multistage or value-added operations would frustrate trade creation effects expected in a regional trade area. Three kinds of cumulation have been used, as far as qualitative aspects are concerned, in autonomous or unilateral contractual trade preferences: ● ● ●

full cumulation; diagonal or partial cumulation; bilateral cumulation or donor country content.

As far as quantitative and geographical aspects are concerned, the concept of cumulation is linked to geographical extension of the cumulation. The most delicate and complex differences relating to cumulation belong to the distinction between full and partial cumulation. This distinction may have decisive economic effects on the functioning and utilization of trade agreements, especially on the part of the EC partner countries. Generally speaking, full cumulation of origin allows more scattered and divided labour operations among the beneficiary countries since, in order to fulfil the origin criteria, the distribution of manufacturing may be carried out according to business exigencies within the members of the regional grouping, i.e. working or processing may start in A, continue in B

202 Stefano Inama

and finish in B according to a cost/benefit analysis. This perspective seems to match the globalization and interdependence of production, whereby developed countries may be attracted to farming out low-tech or labourintensive production processes in low-cost countries. Diagonal cumulation does not particularly favour this approach since it requires higher value added or more complicated manufacturing processes. On the other hand, and in view of preference-giving countries, partial cumulation may be able to attract more capital-intensive investments accompanied by improved technical know-how and labour skills. Deeper economic consideration of the impact of full or partial cumulation suggests that full cumulation allows the massive employment of low-wage, low-skill labour, which some may argue to be a potentially negative factor since these workers often receive less than the average wages and save less than the average workers. Reality shows, however, that in spite of the argument of some countries suggesting a long-term objective of industrial policy through the adoption of restrictive rules of origin labour-intensive lighter industries tend to compete most effectively with similar industry in developed countries. Thus, the argument for full cumulation is strengthened. Through its different sets of rules of origin, the EC, like the other main trading partners, has traditionally utilized a variety of options in the cumulative rules of origin. Sometimes it has graduated them according to its trade policy objectives. In the case of the Pan-European Rules of Origin, the EC has taken a decisive step in adopting an across-the-board approach towards a general adoption of the diagonal cumulation. The diagonal cumulation concept is the key policy aspect of the harmonization and simplification policy of the Commission. Per se diagonal cumulation is not a new concept in the EC since it has been traditionally adopted in the context of the EC GSP since 1985 for the regional cumulation among ASEAN countries. However, besides diagonal cumulation the more liberal form of full cumulation has existed in the acquis communautaire at least as long as, if not before, diagonal cumulation. In its Communication, the Commission acknowledged that full cumulation was not adopted because it could create problems for EC industries allowing a greater source of inputs from third countries. The relevance of the difference between the two cumulative systems may play a crucial role in the future development of the Euro-Mediterranean policy. Moreover, the attention devoted in all official documents and statements on diagonal cumulation calls for further clarification in this rather complex area.

II. The new EC policy on preferential rules of origin: the progression of the Pan-European Rules of Origin Community policy towards the progressive harmonization of preferential rules of origin proceeded from the consideration that the systems of

Pan-European Rules of Origin 203

cumulation detailed in the agreements which make up the Community/EFTA/CEEC zone only provided for cumulation to take place between partners in the same agreement (or set of agreements), and that there was no link between the different sets of agreements. For example: ● ●

●

The original agreements between the Community and the CEECs did not provide for any cumulation with the EFTA countries. The Central European Free Trade Agreement did not provide for cumulation between the Visegrad countries (Poland, Hungary, the Czech and Slovak Republics) and Bulgaria or Romania. The free trade agreements between the Community and the EFTA countries and the EEA Agreement did not provide for cumulation with the CEECs.

The harmonization process required the progressive elimination of all differences among the various sets of rules of origin through their alignment with the EEA model. Among these differences, some of which have been mentioned above, the Commission singled out those discussed below. The alternative percentage rules In the lists of working or processing required to be carried out on nonoriginating materials so that the product manufactured can obtain originating status, usually annexed to the protocols on rules of origin, some agreements contained alternative percentage rules. These rules, based on rules which simply specify that the total value of non-originating materials used should not exceed a certain percentage of the ex-works price of the product, applied to certain products in the EC–EFTA/EEA agreements and in the EFTA–CEEC agreements, but not in the original Protocols on Rules of Origin of the Europe Agreements. General tolerance To facilitate trade, a provision for derogation from the working or processing requirements of up to 10 per cent was introduced for certain materials into the EEA Agreement and the EC–EFTA agreements. It entered into force on 1 January 1994. However, such a provision was not contained in the original protocols of the Europe Agreements (Article 6, paragraph 2, of the new Czech protocol on rules of origin incorporates this feature). Relaxation of the principle of territoriality Rules of origin are based on a principle of territoriality which requires that the conditions for the acquisition of originating status be fulfilled without interruption in one or more of the territories of the contracting parties. As with the introduction of a general tolerance, a provision for limited derogation from the territorial principle of up to 10 per cent was introduced into

204 Stefano Inama

the EC–EFTA/EEA agreements on 1 January 1994 in order to facilitate trade. This feature is not included, however, in any other EC preferential arrangement, except the EC–Israel Euro-Mediterranean Association Agreement, nor has it been included in the new protocols for the Central and Eastern European Countries (see, for example, Article 12 of the Czech protocol). Administrative co-operation Differences between the agreements with regard to the procedures concerning administrative co-operation reflect the extent of partners’ trade development and can be seen in the different types of proof of origin required. For example, EUR.1 movement certificates and in certain cases invoice declarations are acceptable evidence of origin under the EEA Agreement, whereas under the original protocols to the EC–CEEC agreements EUR.1 movement certificates or EUR.2 forms were still required. No-drawback rule The no-drawback rule refers to a provision included in the EEA Agreements, the bilateral EC–EFTA Agreement and the Stockholm Convention, but not in the Europe Agreements and the old generation of Mediterranean Agreements.3 This procedure is a common customs procedure whereby imported inputs for further manufacturing and re-export are not charged any customs duty in the country of manufacturing. The no-drawback rule prohibits such customs procedure. In practice, the consequences of the absence of the no-drawback rule in the Europe Agreements are best described by the example provided by the Commission: Alternators destined for the EC market are manufactured in Poland from components originating in Taiwan. Without a no-drawback rule, no customs duty is paid on the components in Poland. Neither is any customs duty paid in the EC, for the alternators are considered to originate in Poland within the meaning of the Europe Agreement. If the alternators had been manufactured in the EC and put onto the EC market, the Taiwanese components would have been subject to 5.6 per cent customs duty. Similarly, Polish manufacturers would have to pay customs duties on components imported from Asia and used in the manufacture of a product destined for the Polish market, whereas an EC manufacturer would avoid paying duties for the same components when the manufactured product was exported to Poland.4 The absence of a no-drawback rule may thus lead to undesired effects and is also an incentive to import third-country materials rather than utilize the inputs originating in the free trade area – which is exactly the situation that the EC wished to avoid.

Pan-European Rules of Origin 205

This process of harmonization and simplification proposed by the Commission was supported by further studies on the impact of the proposed rules on three sectors – automobiles, textiles and consumer electronics – and was approved at the 1994 Essen European Council. Since then, therefore, the Commission has prepared the necessary amendments to carry out its programme of harmonization and simplification, amendments which are gradually being implemented: ● ● ●

extension of the diagonal cumulation to Bulgaria, Romania, the Baltic states and Slovenia; introduction of the diagonal cumulation between the EC/EFTA countries treated as a single territory (full cumulation) and the CEECs; harmonization of the rules of origin requirements through the EC–EFTA/CEECs agreements, and progressively also of the EuroMediterranean Agreements.

The implementation of the Commission’s strategy is dependent on the partners’ coordination efforts. EFTA countries which have free trade agreements with CEECs should introduce the same provisions and the CEECs should do likewise among themselves. The proposed amendments contain a number of modifications. First, the harmonization effort is based on the EEA set of rules and is intended to introduce a system of diagonal cumulation between the EEA (EC, Norway and Iceland as one single customs territory) and the CEECs and Switzerland. This will be achieved through replacing or modifying the protocol on rules of origin of the various agreements described below. EC–CEECs Agreements The simplification and harmonization arrangements are carried out by replacing the original protocol of the Europe Agreements by a new protocol extending diagonal cumulation to the Baltic states (Latvia, Lithuania and Estonia), Romania, Bulgaria, Iceland, Norway and Switzerland. The new protocol aligned to the EEA protocol contains the no-drawback rule, a revised single list and simplified provisions for origin administration and documentary evidence. The progressive implementation of the ‘panEuropean’ rules of origin has entailed the amendment of the original protocols, including those attached to the EEA Agreement, 5 the Europe Agreements with the Czech Republic, the Slovak Republic, 6 Lithuania,7 Poland,8 Hungary,9 Romania,10 and Bulgaria.11 The recently signed Europe Agreement with Slovenia12 adopted the new protocol directly. The EEA Agreement The amendment made to the protocol on rules of origin of the EEA introduced full cumulation13 among EEA contracting parties and adopted diagonal

206 Stefano Inama

cumulation between EEA contracting parties, CEECs and Switzerland. The main differences between the EEA protocol and the protocol to be adopted by all CEECs concerns the relaxation of the principle of territoriality,14 full cumulation among EEA countries and some administrative procedures. The new single list of working and processing operations, explanatory notes and documentary evidence As previously mentioned, the harmonization process initiated by the Commission relies on the adoption of a new single list which is different from the usual single list adopted under, for instance, GSP and Lomé Convention preferential arrangements. The use of this list will be progressively extended 15 to all current and future trade agreements concluded by the EC as mentioned above. It is therefore particularly relevant to point out the main differences in relation to the previous list and to provide some examples. First, through the harmonization of the single list and its explanatory notes, the traditional EC differentiated trade policy on rules of origin will be focused on the extension of the diagonal or full cumulation possibilities to the other contracting parties. At a more detailed level, the new single list drastically changes the structure of the preferential rules of origin, that is the core provision which determines when sufficient working or processing has occurred has been substantially modified.16 At a glance, the EC appears to have abandoned its tradition of adopting the CTH test as the central criterion by replacing it with a single list of origin-conferring operations. The adoption of a new single list of working or processing operations was drawn from the EEA experience and replaced the old architectural format of the rules. The main modifications concerned the replacement of the general rule of change of tariff heading coupled with the single-list rules for specific products with a comprehensive list of requirements covering all products. The CTH rule was then no longer applied across the board as it was found to leave too much scope for possible loopholes. In fact, this change matured over the experience gained with the administration of the rules where it was experienced that the simple CTH was too flexible. Obviously, this change introduced another element of rigidity into the new system. Another new feature was the introduction of alternative rules of origin for the same product. According to the Commission these rules were introduced to facilitate the application of the rules by manufacturers.

III. The state of play of the Euro-Mediterranean Association agreements and the progressive adoption of the pan-European rules of origin The first kind of regional cumulation granted by the EC to Mediterranean Non-Member Countries (MNMCs) was originally limited to the Maghreb

Pan-European Rules of Origin 207

countries (Algeria, Morocco and Tunisia) and contained in the agreements concluded in the 1970s, and the cumulative option for other MNMCs such as Lebanon and Egypt was limited to the ‘bilateral cumulation’ with the EC. Similarly, the original protocol on rules of origin contained in the Europe Agreements provided only bilateral cumulation and diagonal cumulation among Poland, Hungary, the Czech Republic and the Slovak Republic. The Euro-Mediterranean Association Agreements that have already been signed with Morocco, Tunisia and Israel have also started to be the subject of the Commission’s harmonization effort, with mixed results.17 Thus, the protocols on rules of origin attached to these Agreements are partially modelled according to the new EEA protocol and are substantially similar to the new protocol adopted by the CEECs. However, at this stage of the harmonization process, the following main differences may be noted: ● ● ● ● ●

the maintenance of the CTH rule as central criterion (Article 7, paragraph 1, of the Tunisian Agreement); the granting of full cumulation to countries of the Maghreb Union 18 (Algeria, Morocco and Tunisia); the non-inclusion of the no-drawback clause in the Tunisia and Morocco Agreements;19 the inclusion of the relaxation of the principle of territoriality and the no-drawback clause in the Israel Agreement;20 other differences concerning the single list, the simplified procedure for the issuance of form EUR.1 and the cumulation administrative procedures.

Surprisingly enough, the full regional cumulation granted to the Maghreb countries remained unchanged in the new Euro-Mediterranean Association Agreements. Because of the complexity of the relevant article in the protocol, this fact is not obvious. However, a comparison with a similar provision in the original EC–Czech Agreement 21 may better clarify where the difference in the wording might entail consequences in the content. The following are excerpts from the original protocol on rules of origin of the EC–Czech Agreement before the adoption of the pan-European rules of origin, which determines the rules for bilateral and diagonal/partial cumulation. Mutatis mutandis, the same provisions are contained in the protocol to the new EC–Tunisia Agreement. Article 1, paragraph 2, of the Agreement: Products originating in the Czech Republic: (a) products wholly obtained in the Czech Republic within the meaning of Article 4 of the Protocol; (b) products obtained in the Czech Republic incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing in the Czech Republic within the meaning of Article 5 of this Protocol.

208 Stefano Inama

Paragraph 2 of Article 2 (entitled ‘Bilateral Cumulation’), which is contained in Protocol 4 concerning the definition of the concept of originating products and method of administrative co-operation: Notwithstanding Article 1(2)(b), materials originating in the Community within the meaning of this Protocol shall be considered as materials originating in the Czech Republic and it shall not be necessary that such materials have undergone sufficient working or processing … provided however that they have undergone working or processing going beyond that referred to in Article 5(3) of this Protocol [emphasis added]. Paragraph 1, indent (b) of Article 3, entitled ‘Cumulation with materials originating in Poland, Hungary or in the Slovak Republic’: (b) Notwithstanding Article 1(2)(b) and subject to the provisions of paragraphs 2 and 4, materials originating in Poland, Hungary or in the Slovak Republic within the meaning of Protocol 4 annexed to the Agreements between the Community and these countries shall be considered as originating in the Czech Republic and it shall not be necessary that such materials have undergone sufficient working or processing there, provided however that they have undergone working or processing going beyond that referred to in Article 5(3) of this Protocol [emphasis added]. The highlighted words in the above excerpts emphasize the fact that the cumulation is allowed only with ‘materials originating in Poland, Hungary or in the Slovak Republic’. This means that the materials must have already acquired their originating status in those countries according to the rules contained in the single list before being used as inputs for further manufacturing in the Czech Republic. According to this reasoning, if these materials have undergone working or processing in their own country which is insufficient for the acquisition of originating status, they cannot be considered as originating in the Czech Republic and will be considered as imported inputs which have to comply with the specific rule. However, the same reasoning cannot be applied under the Tunisian Agreement, in which the insertion of Article 5 in the protocol on rules of origin provides for full cumulation and further clarifies the difference between that form of cumulation and diagonal cumulation. This Article reads as follows: 1.

For the purpose of implementing Article 2(1)(b), working or processing carried out in Tunisia, or when the conditions required by Article 4, paragraphs 3 and 4 are fulfilled in Algeria or in Morocco shall be considered as carried out in the Community, when the products obtained undergo subsequent working or processing in the Community.

Pan-European Rules of Origin 209

2.

For the purpose of implementing Article 2(2)(b), working or processing carried out in the Community or when the conditions required by Article 4, paragraphs 3 and 4 are fulfilled in Algeria or in Morocco shall be considered as carried out in Tunisia, when the products obtained undergo subsequent working or processing in Tunisia.

The addition of this article to the Tunisian Agreement means that full cumulation is granted to Algeria, Morocco and Tunisia. Accordingly, not only the originating material may be counted as original materials but also all the working and processing carried out in one of the above-mentioned Member States may be added up, even if they have not acquired origin, to meet the origin criteria set out in the list for the specific product. Thus, in partial contrast with the declared aim of harmonizing rules of origin in EC trade agreements with third countries, the above-mentioned full cumulation system among the Maghreb countries has been retained in the new Euro-Mediterranean Association Agreements even though the wording is substantially different from that of the former co-operation agreements. At the time of writing, in spite of the harmonization efforts under the pan-European Rules of Origin, the full cumulation granted to Algeria, Morocco and Tunisia represents an exception. Under the new protocol to the Czech Agreement adopting the panEuropean rules of origin, Article 4 spells out the conditions for diagonal cumulation: 1.

2.

Subject to the provisions of paragraphs 2 and 3, materials originating in Poland, Hungary, the Slovak Republic, Bulgaria, Romania, Latvia, Lithuania, Estonia, Slovenia, Iceland, Norway or Switzerland within the meaning of the Agreements between the Community and the Czech Republic and these countries shall be considered as originating in the Community or in the Czech Republic when incorporated into a product obtained there. It shall not be necessary that such materials have undergone sufficient working or processing. Products which have acquired originating status by virtue of paragraph 1 shall only continue to be considered as products originating in the Community or in the Czech Republic when the value added there exceeds the value of the materials used originating in any one of the other countries referred to in paragraph 1. If this is not so, the products concerned shall be considered as originating in the country referred to in paragraph 1, which accounts for the highest value of originating materials used. In the allocation of origin, no account shall be taken of materials originating in the other countries referred to in paragraph 1 which have undergone sufficient working or processing in the Community or in the Czech Republic.

210 Stefano Inama

3.

The cumulation provided for in this Article may only be applied where the materials used have acquired the status of originating products by an application of rules of origin identical to the rules of origin in this Protocol. The Community and the Czech Republic shall provide each other, through the European Commission, with details of agreements and their corresponding rules of origin which have been concluded with the other countries referred to in paragraph 1.

Obviously, this new article expands substantially the geographical coverage of diagonal cumulation. However, there is no change in the ‘quality’ of cumulation since only diagonal cumulation is provided for. Moreover, and most importantly for Mediterranean Non-Member Countries, the new formulation adopted in the pan-European rules of origin makes the application of this principle conditional on the existence of a free trade area among them.22 In fact, although stated repeatedly in the press and in official statements, diagonal cumulation finds little place in the operational paragraphs of the Jordan Agreement where it is mentioned only in the ‘Joint Declaration on Article 29’ attached to the Agreement: In order to encourage the progressive establishment of a comprehensive Euro-Mediterranean Free Trade Area, in line with the conclusions of the Cannes European Council and those of the Barcelona Conference, the Parties: –

–

agree to provide the Protocol 3 on the definition of ‘originating products’, for the implementation of diagonal cumulation before the conclusion and entry into force of free trade agreements between Mediterranean countries; reaffirm their commitment to the harmonization of rules of origin across the Euro-Mediterranean Free Trade Area. The Association Council shall take, where necessary, measures to revise the Protocol with a view to respecting this objective.23

Similarly, other draft agreements do not contain explicit references in the operational paragraphs but the mentioning of the diagonal cumulation applicable in the Euro-Mediterranean area is contained only in a joint declaration. Be this as it may, the requirement to make diagonal cumulation conditional on the existence of free trade areas is like some authors have defined ‘putting the cart before the horse’. The second requirement is related to the fact that as the pan-European rules of origin are progressively adopted, it will also be required to apply identical rules of origin between the Mediterranean Non-Member Countries who have entered into FTAs among themselves.

Pan-European Rules of Origin 211

Conclusion At the EC level there is little doubt that the progressive adoption of the pan-European rules of origin is widely necessary and is considered as an improvement. With certain modifications and qualifications, the same may be affirmed in respect of the CEECs when the situation outlined before the adoption of the pan-European rules of origin is compared with the rationalization efforts undertaken with the new origin protocols. Even in this latter case, much criticism and complaints were voiced by these latter countries when the new protocols were negotiated; the insertion of the no-drawback clause in particular was not welcomed. The progressive adoption of the pan-European rules of origin for Mediterranean Non-Member Countries continues, even though some countries have already had experience of it. There are several factors which MNMCs should take into account when negotiating or implementing (for those who have already signed) a Euro-Mediterranean Association Agreement. ●

●

●

●

The application of a no-drawback clause may create difficulties in attracting much needed FDI from non-EC firms since their inputs will attract duties when utilized to manufacture products for export to the EC. The full cumulation applicable in the Morocco and Tunisia Agreements should, as far as possible, be maintained and not be substituted by diagonal cumulation. Quite the contrary, it should be expanded to all remaining AMU countries. Moreover, acceptance of the full cumulation principle in the Mediterranean area could be an element in the negotiation of an asymmetry principle taking into account the different levels of industrialization between the CEECs and the MNMCs. If the principle of diagonal cumulation is applied in the context of MNMCs as laid out in the new Czech protocols, some flexibility in the provisions should be adopted as far as the conditions of the establishment of an FTA are conceived. CEFTA was established in 1992. Given the nature of the Mediterranean region at present, and although there are new signs of a revival of inter-regional trade and FTAs, it will still be some time before a full-fledged web of FTAs is created within the Mediterranean region. Attention should also be devoted to the second requirement of the application of diagonal cumulation, i.e. the utilization of identical rules of origin when they are applied among Mediterranean Non-Member Countries. This condition should not be interpreted as meaning that MNMCs should utilize the same EC rules of origin when establishing an FTA among themselves. This assumption may be highly detrimental to them since the difficulties in meeting product-specific requirements for

212 Stefano Inama

rules of origin exist not only when exporting to the EC but also when trading among themselves. These last two points are closely linked and should constitute the pillars of a consistent trade policy organization of the region. Unless the Mediterranean Non-Member Countries undertake a trade liberalization process among themselves, the EC could be at the centre of a web of bilateral FTAs. In such a situation, the EC might become a potential hub for investors that may locate their factories in the EC and benefit from preferential access to all MNMCs and their markets. Unless Mediterranean Non-Member Countries negotiate FTAs among themselves they could be relegated to a ‘spoke’ role since the reverse operation would not be possible and only the comparatively limited home market of the ‘spoke’, in addition to the EC market, would be available to factories located in non-EC countries. In order to avoid such a situation, the Mediterranean Non-Member Countries are expected to undertake negotiations for the establishment of FTAs among themselves to build up the second pillar of the EuroMediterranean Free Trade Area. Such a liberalization of the regional trade initiative has been undertaken by countries belonging to CEFTA almost at the same time as the negotiation of the Europe Agreements. Once FTAs are established among Mediterranean Non-Member Countries, the rules of origin adopted should be, at least initially, more liberal than those adopted in the Europe Agreements. A practical example to illustrate this point is in order. If we take Tunisia and Morocco as examples, then one may envisage the following scenario: 1. In the absence of trade liberalization efforts between Tunisia and Morocco, the diagonal cumulation between these two countries will be frustrated by the tariff protection and the no-drawback clause applied in their trade relations (this being in addition to the ‘hub and spoke’ argument above). This holds particularly true when one considers that, on average, the Tunisian and Moroccan FTAs still retain high tariffs, even after the Uruguay Round. Thus, specialization of production and optimization of resources among Tunisia and Morocco to increase their exports to the EC will be limited or nil since their main target will remain the EC market where they both continue to compete as before. Finally, this situation is exacerbated when higher tariffs are applied to intermediate products in Tunisia and Morocco than in the EC. Effective rates of protection and tariffs may differ between the EC and these latter countries, thus giving rise to a transfer of tariff protection from the EC to these countries. Once again to stress the potential impact of this latter point, it has to be mentioned that the new set of rules to be adopted

Pan-European Rules of Origin 213

under the pan-European rules of origin contains a prohibition on a drawback clause. 2. If an FTA between Tunisia and Morocco is negotiated which has more restrictive rules of origin than the ones applying between Tunisia, Morocco and the EC, the effects of the latter rules of origin may neutralize the expected trade effects of free trade between Tunisia and Morocco and the application of diagonal cumulation contained in their FTAs under the pan-European rules of origin. In fact, under these circumstances, Tunisia and Morocco are as likely to continue to compete in the EC market as they would be in the absence of their FTAs, and both will struggle to comply with the rules of origin requirement contained in their agreements with the EC. In addition, since their trade with and the size of the EC market are usually much greater than the trade with and size of the market of their neighbours, Tunisia and Morocco have little if any incentive to develop joint investments to comply with their bilateral rules of origin that are more restrictive than those applied in their trade with the EC. Ultimately, diversion of efforts will be geared towards the EC market. 3. Thus, only where rules of origin between Tunisia and Morocco are more liberal than those applied between themselves and the EC do producers have an inducement to trade among themselves and redistribute manufacturing activities among themselves in order to utilize more fully the mutual trade preferences and their possibilities for exports to the EC. Two additional cautions about adopting this kind of approach derive from other variables which have to be taken into account: (a) Even in the latter case, the greater the tariff disparities between Tunisia and Morocco, the more the determination of production location may be influenced. The impact of the no-drawback clause may be determinant in this case. (b) The advantages of more liberal rules of origin applying between Tunisia and Morocco may indirectly favour EC exports of intermediate products to Tunisia for further processing according to liberal rules of origin and re-exported to Morocco. This possibility, which may be remote, has in certain circumstances also to be taken into account.

Notes 1. 2.

See on this issue of coexistence, N. Komuro, ‘Pan-European Rules of Origin’, RAE/LEA, 1997, 324–41. As last amended by Commission Regulation 12/97 of 18 December 1996 amending Regulation 2454/93 laying down provisions for the implementation of Council Regulation 2913/92 establishing the Community Customs Code, OJ, L9/1, 13 January 1997. At the time of writing, the GSP list rules are under consideration by the Commission’s Committee on Rules of Origin: the proposal is to align the content of the GSP rules of origin to the ‘Pan-European’ model.

214 Stefano Inama 3. The no-drawback clause has been included in the new protocol on rules of origin attached to the new Euro-Mediterranean Association Agreements with Israel, Tunisia and Morocco. 4. Commission Communication SEC (94)1997 Final; see footnote 132. 5. See EEA Joint Committee Decision 71/96 amending Protocol 4 to the EEA Agreement on Rules of Origin, OJ, L21/12, 23 January 1997. 6. Decision 2/97 (97/483/ECSC, EC, Euratom) of the Association Council, association between the European Communities and their Member States, of the one part, and the Slovak Republic, of the other part of 9 January 1997 amending Protocol 4 to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Slovak Republic, of the other part, OJ, L212/1, 5 August 1997. 7. Decision 1/97 (97/30/ECSC, EC, Euratom) of the Joint Committee, between the European Communities, of the one part, and the Republic of Lithuania, of the other part of 25 February 1997 amending Protocol 3 to the Agreement on free trade and trade-related matters between the European Community, the European Atomic Energy Community and the European Coal and Steel Community, of the one part, and the Republic of Lithuania, of the other part, OJ, L136/1, 27 May 1997. 8. Decision 1/97 (97/593/ECSC, EC, Euratom) of the Association Council, association between the European Communities and their Member States, of the one part, and the Republic of Poland, of the other part of 30 June 1997 amending Protocol 4 to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Poland, of the other part, OJ, L221/1, 11 August 1997. 9. Decision 3/96 (96/230/ECSC, EC, Euratom) of the Association Council, association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part of 28 December 1996 amending Protocol 4 to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part, OJ, L92/1, 7 April 1997. 10. Decision 1/97 (97/127/ECSC, EC, Euratom) of the Association Council, association between the European Communities and their Member States, of the one part, and Romania, of the other part of 31 January 1997 amending Protocol 4 to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and Romania, of the other part, OJ, L54/1, 24 February 1997. 11. Decision 1/97 (97/302/ECSC, EC, Euratom) of the Association Council, association between the European Communities and their Member States, of the one part, and the Republic of Bulgaria, of the other part of 6 May 1997 amending Protocol 4 to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Bulgaria, of the other part, OJ, L134/1, 24 May 1997. 12. Council and Commission Decision, 96/752/Euratom, ECSC, EC, of 25 November 1996 on the conclusion of the Interim Agreement on trade and trade-related matters between the European Community, the European Coal and Steel Community and the European Atomic Energy Community, of the one part, and the Republic of Slovenia, of the other part, OJ, L344/1, 31 December 1996. 13. See Article 2, Title II, of the EEA Joint Committee Decision 71/96: ‘1. A product shall be considered to be originating in the EEA within the meaning of this Agreement if it has been either wholly obtained there within the meaning of

Pan-European Rules of Origin 215 Article 4 or sufficiently worked or processed in the EEA within the meaning of Article 5. For this purpose, the territories of the Contracting Parties to which this Agreement applies, shall be considered as a single territory.’ 14. See Article 11, paragraphs 3 to 7, of the EEA Joint Committee Decision 71/96. The principle of territoriality is also contained in the Euro-Mediterranean Association Agreement with Israel. This difference in respect of the other EuroMediterranean Association Agreements with Tunisia and Morocco and the CEECs is partly explained by the fact that a similar provision was contained in the earlier agreements of the 1970s. 15. The draft text for the negotiation of the free trade area with South Africa is modelled along the pan-European rules. 16. Article 6 of the Czech protocol as amended, OJ, L 343/1, 31 Dec. 1996: 1. For the purposes of Article 2 [origin determination], products which are not wholly obtained are considered to be sufficiently worked or processed when the conditions set out in the list in Annex II [new single list] are fulfilled. The conditions referred to above indicate, for all products covered by this Agreement, the working or processing which must be carried out on non-originating materials used in manufacturing and apply only in relation to such materials. Accordingly, it follows that if a product, which has acquired originating status by fulfilling the conditions set out in the list, is used in the manufacture of another product, the conditions applicable to the product in which it is incorporated do not apply to it, and no account shall be taken of the non-originating materials which may have been used in its manufacture. 2. Notwithstanding paragraph 1, non-originating materials which, according to conditions set out in the list, should not be used in the manufacture of a product may nevertheless be used, provided that: (A) their total value does not exceed 10 per cent of the ex-works price of the product; (B) any of the percentages given in the list for the maximum value of nonoriginating materials are not exceeded through the application of this paragraph. This paragraph shall not apply to products falling within Chapters 50 to 63 of the Harmonized System. 3. Paragraphs 1 and 2 shall apply except as provided in Article 7 (minimal working or processing). 17. Thus, bearing in mind the above-mentioned differences, the Commission’s harmonization process is likely to continue during the negotiations with other MNMCs (Algeria, Egypt, Lebanon and the Syrian Arab Republic), together with the necessary amendments to the already signed Euro-Mediterranean Association Agreements with Israel, Morocco and Tunisia. This latter consideration holds particularly true when it is remembered that the 1995 Cannes European Council considered the extension of diagonal cumulation among CEECs and MNMCs. 18. Full cumulation was also granted to Algeria, Morocco and Tunisia under the former Co-operation Agreements. 19. The non-inclusion of the no-drawback clause will require an additional harmonization effort to bring these agreements into line with the CEECs’ protocols. 20. The relaxation of the principle of territoriality and the no-drawback clause was already contained in the former EC–Israel Agreement.

216 Stefano Inama 21. The examples below refer to the original Protocol on Rules of Origin of the EC–Czech Republic Agreement, OJ, L360/1, 31 December 1994. The new protocol on rules of origin will be discussed in detail below. 22. See A. Tovias, ‘The European Union and Mediterranean countries’, in P. Demaret, J.-F. Bellis and G. Garcia Jimenez (eds), Regionalism and Multilateralism after the Uruguay Round (Brussels: European Interuniversity Press, 1997), 95–113. 23. See COM(97)554 Final, 29 October 1997.

11 The Financial Assistance of the European Union to Its Eastern and Southern Neighbours: a Comparative Analysis Alain Guggenbühl and Margareta Theelen

Introduction When looking at the financial instruments of the European Union’s policy vis-à-vis its direct eastern and southern neighbours,1 it seems as if the EU is applying a proverb which recommends putting one’s eggs into more than just one basket. The financial transfers of the EU are indeed shared between the East and South in order to avoid the risks of exclusively considering the prospect of enlargement. This chapter will look at how baskets have been shared and gives a comparative analysis of the eastern and southern financial transfers with a view to presenting their common features and differences. The first section of the chapter presents PHARE 2 and MEDA 3 as the two main instruments of co-operation with respectively 14 4 Central and Eastern European Countries (CEECs) and 12 Mediterranean Non-Member Countries (MNMCs) engaged in the Euro-Mediterranean Partnership. It appears from this section that even though the projects in the PHARE and MEDA Programmes follow quite similar objectives and priorities, one can note some differences with regard to their budget allocations and also with regard to the recent new targets assigned to PHARE from the perspective of accession to the European Union. For the purpose of illustrating the coexistence of similarities and differences between the projects financed by PHARE and MEDA, the first section will refer to the fact that eggs of the eastern and southern baskets are equal but that some are more equal than others. The second section presents the bottom of the baskets, i.e. the instruments of financial co-operation established by the European Union alongside PHARE and MEDA with their specific objectives, means and budget lines. The last section of this chapter will try to assess how safely the eggs have arrived at their final destination by applying a procedure of evaluation of the transfers. 217

218 Alain Guggenbühl and Margareta Theelen

I. PHARE and MEDA compared Similarities between PHARE and MEDA Both programmes have a foothold in a wide political and economic rapprochement between the European Union and its neighbours from the East and the South. The moves of rapprochement to eastern and southern countries are founded on an identical conception of incremental relations conducted through successive agreements leading to association. Whereas in the case of rapprochement with Central and Eastern Europe, technical assistance was introduced in 1989 in conjunction with the Trade and Economic Co-operation Agreements, which aimed at supporting the successful political and economic reforms of the partners, significant assistance to southern neighbours with comparable objectives only accompanied the Euro-Mediterranean Association Agreements after 1995. Still, the flows of technical assistance to the East and South have in common not only the fact that they were both initialled respectively in 1989 and 1995 by international conferences but also the fact that these conferences were designed to meet comparable objectives and prepare for deeper ties between the two regions. Comparable genesis and scope Bearing in French the names of the first beneficiaries, the Poland and Hungary Assistance for Economic Restructuring Programme (PHARE) was launched in December 1989 by the EEC Council of Ministers directly following an international conference held in Paris among the Group of 24 industrialized countries prepared to commit themselves to supporting the transition of CEECs. Besides describing the beneficiaries and the objective of the Programme, the name PHARE is also synonymous with the French word ‘beacon’ and was therefore quite appropriate to illustrate the philosophy of grants whereby the EU intended to help establish the paths to successful economic, and hence political, transition in the CEECs. In parallel, these countries were invited to conclude with the Community an agreement of commercial and economic co-operation. 5 Initially destined for the two countries which gave their name to the Programme, today PHARE benefits the 14 CEECs6 that are presented in Table 1 of the annex to this chapter together with their date of entry into the Programme. The MEDA Programme for its part is the fruit of the Euro-Mediterranean Conference of Barcelona and was put in place by a Council Regulation of 23 July 1996.7 Contrary to PHARE, the word MEDA is not an acronym based on the elements of the title of the Decision of the Council; instead, it has been chosen to illustrate the geographical scope of the assistance. MEDA is the Union’s new financial instrument in the framework of its Euro-Mediterranean Partnership and is entirely made up of grants. The MEDA resources are destined for activities in all three baskets of the Barcelona Declaration: the political and security dimension, the economic

Financial Assistance of the EU 219

and financial dimension and the cultural and human dimension. The geographical scope of the Programme can be compared to the current scope of PHARE since it applies to the 12 Mediterranean Non-Member Countries listed in Table 9 in the annex to this chapter. Comparable objectives Both programmes have, as overarching initial objectives, institution building and the investment measures necessary to accompany the reform of economic and social structures, and the taking into account of the respect of fundamental democratic and political values. The only apparent differences in the initial objectives relate to certain specific features of the two regions. For example, the objective of improvement of living conditions in urban areas or co-operation in the field of fisheries is not assigned to PHARE, whereas the nuclear safety in PHARE does not appear as an objective in MEDA. For the rest the two programmes share a large number of objectives. The following can be considered to be common to both programmes. To support economic transition. The initial aim is to prepare for the implementation of a market economy and free trade through increasing competitiveness and sustainable economic growth, with an appropriate legal and administrative framework that is stable, reliable for foreign investors and consistent, and also, therefore, the necessary public administration and institutional reform. A project under MEDA has, for example, financed the modernization of municipal administrations of four heavily populated towns in Syria. Concerning PHARE, this objective is the most prominent. Eurostat noted in its 1996 report that with the support of the Programme, 3.4 million companies were active under market economy conditions in the eleven CEECs six years after the fall of the Iron Curtain. To prepare the partners to face the Internal Market. One could consider that for both programmes this objective has succeeded to the initial objective described above, although of course with obvious teleological differences. After the launching of the pre-accession strategy at the 1994 Essen European Council, a larger part of PHARE resources was devoted to efforts aimed at the approximation of CEECs’ legislation with the acquis communautaire. In 1997, the objectives of PHARE in only ten beneficiary countries were further attached to their preparation for membership of the EU. Redesigned to accompany Agenda 2000, PHARE has now been transformed from a ‘demand-driven’ instrument into an ‘accessiondriven’ tool to assist these countries to join the Union as soon as possible. The objectives of PHARE for these countries are closely coupled with the Opinions of the Commission and the necessary adoption of the acquis communautaire as framed in the Accession Partnership Agreement concluded with every candidate country. To help the ten countries meet

220 Alain Guggenbühl and Margareta Theelen

these new requirements and take over the acquis communautaire, 30 per cent of the PHARE allocations will finance institutional building and 70 per cent will finance investments in 1998 and 1999. The ‘old’ PHARE guidelines established in 1994 continue to apply to all other PHARE beneficiary countries not yet associated with the European Union. Although there is no question of approximation as such of the acquis communautaire by the MEDA partners, the programme will very soon deal with the part of the acquis communautaire relating to the internal market. In December 1998, the EU Council indeed reacted favourably to the Commission’s Communication 8 which suggested that efforts of cooperation between the Euro-Mediterranean partners be directed at achieving progress in a number of specific areas of the Single Market achievements in order to accelerate the creation of this area of shared prosperity. More specifically, the Council called upon the partners to establish priorities and a timetable and to undertake actions in specific areas of the internal market to be financed under MEDA. The areas to be focused upon concern customs and taxation, the free movement of goods, public procurement, intellectual property rights, financial services, data protection, accounting and auditing and the competition rules.9 To support structural adjustment. The aim is to contribute to the use and strengthening of production capacity through privatization, business cooperation, support for and creation of SMEs, human resource development and training, rural development and agricultural restructuring, and improving the standards of protection of the environment. MEDA funds have in this respect been allocated, for example, to the adjustment of the Moroccan education and health services. With regard to PHARE assistance, mention can be made of a programme in Albania on the use of pesticides. To strengthen the socio-economic balance. The aim is to alleviate the shortterm costs of economic transition through appropriate measures in the field of social policy, the development of civil society, education, health and training but also emergency aid. MEDA has, for example, financed a ten-year programme of basic education and the social fund for development in Egypt. It should be noted that MEDA has reactivated and taken over programmes launched in 1992 by the Commission to meet the objective presented here. The 1992 MED programmes were indeed aiming at the creation of decentralized networks for the exchange of know-how and experience for universities and higher education institutions (MEDCampus), media professionals (MED-Media) and local government authorities (MED-Urbs). These programmes needed reactivation since they had

Financial Assistance of the EU 221

been suspended in 1996 for failing to offer the required guarantees of security and transparency. As regards PHARE projects of this nature, we can mention the reform of primary health care in Hungary. Co-operation on infrastructures in the fields of energy, transport, water and telecommunications. MEDA has, for example, financed the modernization of the Syrian telecommunications organization, a project of water supplies in the tourist area of Cyprus and the rehabilitation of 11 000 km of rural roads in Morocco. Examples of PHARE projects include the modernization of a motorway in Poland and the rehabilitation of the railways in Romania. To enhance regional co-operation. The aim is to complement the bilateral activities through measures to increase exchanges at the regional level in some of the above-mentioned fields. This objective has led to the creation of multi-country programmes within PHARE, for example to clean up the Danube. We can also mention the ECOS-OUVERTURE Partnership Programme which promotes good governance at local authority level in the CEECs with a view to later decentralization. This objective also fuels projects of cross-border co-operation between EU Member States and PHARE beneficiaries. Comparable rules of procedure Even though not identical, the procedures leading to the financing of projects under the two programmes hold similarities which relate to their programming, financial decision-making, decentralization and conditionality. Each year a PHARE budget is agreed, indicating the funds which the Commission will be entitled to commit through the PHARE Programme in each of the 14 countries. 10 PHARE beneficiary countries decide priority areas for spending the funds within a framework agreed together with the European Union. This joint process results in Indicative Programmes. Country operational programmes are then designed and financing proposals prepared. Once these financing proposals have been given a favourable opinion by the PHARE Management Committee and decided upon by the Commission according to the procedure provided in Article 9 of PHARE Regulation 3906/89, the relevant funds are said to have been ‘committed’. The financing decisions will be followed by a Financing Memorandum signed with each of the countries (or on exchange of letters in the case of multi-beneficiary programmes). PHARE must commit its entire annual budget within the year to which that budget applies. Once funds have been committed, tenders are issued and contractors selected. Decentralization in PHARE then occurs, in particular with the setting up of a Programme Management Unit (PMU) in the partner country, usually by the relevant

222 Alain Guggenbühl and Margareta Theelen

partner institution or ministry, and sometimes even with the assistance of PHARE funding. Contractors work with the PMU. Since 1994, the operations of the PMU have been regulated by the Decentralized Implementation System. A special manual established by the Commission notably regulates the way PMUs must operate. With regard to conditionality, Article 4 of Regulation 622/98 11 allows the Council to take action by qualified majority on a proposal of the Commission to modify the preaccession assistance granted to a candidate in the event of failure to respect the commitments contained in the Europe Agreements or insufficient progress towards fulfilment of the Copenhagen Criteria. Guidelines established by the Council in December 1996 on the operation of MEDA enable the Commission to set up the resources and administrative structures to implement the MEDA Programme. These structures include Framework Financing Conventions concluded with all partners eligible for bilateral co-operation and MEDA-teams to provide technical expertise. The guidelines also impose on the Commission the precise course to be followed when selecting projects in the beneficiary countries. According to Regulation 1488/96, the MEDA programming process does not provide a fixed amount for each partner but, rather, overall financial programme planning. The Council and the Commission have resisted this idea of a national breakdown in MEDA which first appeared in the European Parliament when it debated the proposed regulation on MEDA. The Parliament Committee on Foreign Affairs then adopted the report of MEP Enrique Baron Crespo who called for a breakdown of MEDA by beneficiary country. A written question addressed by an MEP to the Commission in June 1997 asked again for a breakdown of the MEDA funding. However, for the Commission and the Council the objective of this regulation is ‘extra flexibility’ which would encourage efficient implementation and make it possible to adapt to evolving priorities. In concreto, indicative amounts for bilateral and regional co-operation are set every year through a three-year rolling programming exercise. In addition, funds can be switched within the budgetary period, both within and between bilateral and regional co-operation. This is contrary to the former system under the protocols which provided for fixed financial allocations for the whole period through a single programming exercise at the beginning of that period.12 As regards the MEDA beneficiary countries, they are each invited to follow the specific priorities set for their own bilateral programme. Support to Syria should, for example, focus on upgrading the administration with a view to providing a better accompaniment to progressive economic liberalization. Further prioritization is operated, this time without distinguishing between the partners, to support the economic transition with the aim of preparing the Mediterranean partners for a free trade area. 13 All these priorities will need to be translated into an indicative programme by every country, the so-called National Indicative Programmes. The guidelines also deal with the content of the Regional Indicative Programme and roughly

Financial Assistance of the EU 223

assign the same priorities as set in the individual programmes to wider regional programmes involving several beneficiary countries. Around 90 per cent of the MEDA grants are allocated to the partner countries on a bilateral basis. The other 10 per cent are meant for regional projects included in the Regional Indicative Programme. Israel, Malta and Cyprus are not included in the list of countries which need to draw three-year indicative programmes targeting the priorities set. Decentralization in MEDA is restricted to the obligation addressed to the Commission to select projects as close as possible to the people and actors of the beneficiary countries, notably with the assistance of the Delegations of the European Commission to the MNMCs, which it has now opened in all 12 countries. With regard to the issue of conditionality of EU assistance, the guidelines reiterate the goal of the Euro-Mediterranean Partnership to create a free trade area between the partners founded on the conditional principles of respect for democracy, human rights and fundamental freedoms. The guidelines also make obvious that the accompanying instrument MEDA could be suspended if these foundations were flouted. By doing so, they repeat the meaning of Article 3 of Regulation 1488/96 establishing MEDA. It is interesting to note that Regulation 1488/96 did not provide any concrete decision-making procedure whereby the Union could indeed take the necessary measures to retaliate whenever an essential element for the continuation of support measures to a Mediterranean partner is lacking. A larger assistance for the East The most striking observation when looking at the volumes of financial aid to both eastern and Mediterranean partners is its steady increase. Relations, and hence financial co-operation, with the Mediterranean neighbours, however, have a far longer history. Before comparing financial transfers under the PHARE and MEDA programmes, it is therefore necessary to first refer to the period before MEDA in the Euro-Mediterranean relationship. Until the Global Mediterranean Policy in 1972 – when aid as such was first established – relations with Mediterranean partners only involved trade issues. In 1979, the system of financial protocols, consisting of grant aid, was initiated. Indeed, in the early 1970s, the Union concluded Cooperation Agreements with several MNMCs in which a chapter on financial and technical co-operation was included and hence a protocol was foreseen. This instrument contained details about which sectors were to receive grants (in the protocols) or loans from the European Investment Bank (EIB). The protocols were signed for a five-year period and provided that funds which had not been exhausted would remain available. This has, as a practical consequence, meant that protocols are still active. Table 10 in the annex to this chapter shows the amounts of aid and loans under the protocol regime since 1978. After 1978, one can notice a significant increase in financial transfers, both in terms of grants and loans. The amount of financial aid under the fourth protocols was indeed six times higher than

224 Alain Guggenbühl and Margareta Theelen

that provided under the first protocols. The breakdown of financial aid per country under the protocols, provided in Table 11, shows that Egypt has been the largest beneficiary of budgetary aid (661 m euro), with Morocco and Tunisia ranking second and third, with 574 and 324 m euro respectively. As regards the Palestinian Authorities, substantial finances were also transferred to them.14 During this period, the three most highly funded sectors have been respectively agriculture, water supply and industry. The fourth and last protocols expired in 1996 when the system of protocols was absorbed into the MEDA Programme. Financial co-operation under PHARE started almost from the very beginning of the Union’s relations with the CEECs. From 1990 to 1998, the Union allocated around 9000 m euro to the PHARE partners. As shown in Table 2, half of this amount, i.e. 4715 m euro, has been transferred between 1995 and 1998. A comparison with MEDA (Table 12) shows an amount of 2533 m euro transferred for the same period to the Mediterranean partners. Though very substantial, grant aid to the Mediterranean partners is only just over half the amount allocated to the eastern neighbours. Looking in more detail at the volume of PHARE funds, Poland clearly appears to be the largest beneficiary, receiving 20 per cent of the total available funds, with Romania and Hungary ranking second and third, receiving around 10 per cent each. Almost a fourth of the funds goes to multicountry and horizontal operations. A sectoral overview in Table 7 shows that priority was given to infrastructure, restructuring of the private sector and education which have received, between 1990 and 1998, 1895, 1073 and 1009 m euro respectively out of a total of 8053 m euro. This amounts to almost half the funds committed mainly because these sectors have been on several occasions put at the forefront of PHARE objectives. Table 13 shows the breakdown of MEDA commitments and payments between 1996 and 1998. A total amount of 2327 m euro was committed to the partner countries of which 25 per cent was actually paid. Looking back at Table 12, the Commission estimates that the full amount of funds committed for the 1995–98 period will be paid by 2003, assuming an average project duration of four to five years. The same situation occurs within the protocols: Egypt, Morocco and Tunisia are the biggest recipients with 674, 455 and 277 m euro each. Table 14 shows that almost half of the available funds were used to support efforts relating to the objective of socio-economic balance. Almost 10 per cent of the funds are used for regional and transborder co-operation. Tables 15 and 16 compare figures for PHARE and MEDA. Table 16 shows the per capita PHARE and MEDA commitments between 1996 and 1998. Significant differences appear, not only between PHARE and MEDA but also among the beneficiaries of both programmes. For the given period, the average PHARE citizen received 20 euro, with Bosnia and Estonia ranking top with 58 and 45 euro as against 10 euro for Romanians and Slovaks. The average MEDA citizen receives 11 euro from the MEDA Programme,

Financial Assistance of the EU 225

the Lebanese and Tunisians ranking first and second with 32 and 31 euro per capita whereas Syrians and Turks receive only 4 euro. One should take note of the fact that small countries appear to receive higher per capita funds. A different destination for Eastern assistance We will consider in this section that the eastern basket of eggs has been more ‘hatched out’ than the Euro-Mediterranean basket. The reason lies in the fact that the European Union has decided to devote its technical assistance to ten associated countries in order to prepare them for joining the EU and also to increase its financial transfers for that purpose under strict new conditions. The Commission has proposed that the ‘new’ PHARE Programme, aiming to help the ten candidate countries to take over the acquis communautaire, will be supplemented with special new pre-accession instruments. The Commission has more specifically proposed a total of 1092 billion euro for the ten candidates over the period 2000–06. This new financial assistance should be provided within the framework of the Accession Partnership Agreements and broken down in the following two pre-accession instruments. The first proposed supplementary instrument relates to agriculture (SAPARD). A total of 520 m euro a year for the ten countries, i.e. a total of 364 billion euro for the seven year period 2000–06, is earmarked for agricultural pre-accession aid. The instrument’s aim is to help the candidate countries transform and modernize their agricultural sector to match the acquis communautaire in this field. The same principles of co-financing as in PHARE will apply. The countries must submit to the Commission a multi-annual rural development plan. The breakdown of the 520 m euro between recipient countries will be operated by the Commission on the basis of objective criteria such as the agricultural population, the agricultural surface area, gross domestic product in purchasing power parity and the specific territorial situation. The second instrument consists of structural policies for pre-accession (ISPA). A total of 104 billion euro a year for the ten candidates, i.e. a total amount of 7.28 billion euro, will be made available and distributed according to objective criteria such as population, per capita GDP and surface area. This instrument aims to help the candidates align their sectors to the EU standards, in particular in the fields of transport and the environment. As for the transport sector, the EU has invited partners for accession to concentrate on trans-European networks and, in particular, on the need to build in order to fill the missing links between the Union’s territory and that of the CEECs. It should also be noted that the objectives of ISPA are clearly of the same nature as those of the EU Cohesion Fund established by the Maastricht Treaty. At the Berlin Summit of 26 March 1999, the EU Heads of State and Government agreed on the financial dimension of Agenda 2000. On the pre-accession financial instruments, it was decided that 1560 m euro per year will be paid in the framework of PHARE, 520 m euro per year for agricultural aid and 1040 m euro per year for structural aid which is in accordance with the Commission’s proposal.

226 Alain Guggenbühl and Margareta Theelen

Further and more precise conditionality has been coupled to this supplementary assistance. The Accession Partnership Agreements provide that the new financial assistance will only be granted to projects closely matching the priorities set out for the candidate country in the agreement. The following examples of the medium-term priorities imposed show how intimately related they are to the new general objective of PHARE, i.e. preparation for accession and absorption of the acquis communautaire. The Czech Republic should, notably, establish the legal, administrative and budgetary framework for an integrated policy in order to participate in EU structural programmes after membership. Estonia should undertake steps to bring its public standards in line with EU levels. Hungary, like all the others, should develop appropriate market structures and review employment policies, in preparation for participation in EU coordination of employment policies; Poland should develop the capacity to implement and enforce the common fisheries policy; Slovakia should foresee the alignment with and implementation of EU energy legislation; Latvia should find the means to enforce the Internal Market legislation. Further evidence of the linkage between the priorities set out in the Accession Partnership Agreements and the new philosophy of PHARE was made apparent in the so-called ‘Polish case’. This matter is closely related to the issue of sufficient capacity to use funds. In May 1998 Commissioner Van den Broek warned the Polish Deputy Prime Minister that if Poland did not present, before 15 May, the necessary projects to finalize the 1998 PHARE programming, ‘there [would] be a real risk that PHARE funds [would] be lost.’ Only two days before this deadline did the Polish authorities manage to hand in the remaining accession-oriented projects eligible for the remaining 212 m euro.15 However, the quality of this last-minute effort did not completely satisfy the Commission which, two weeks later, decided to grant only 178 m euro for 1998 instead of the 212 m euro available initially. Eleven projects had been refused by the Commission. On 26 May 1998, the Commission observed that indeed some of the Polish projects did not meet the priorities set out in the Accession Partnership Agreements.16 It was not a lack of goodwill on the Polish side but a lack of experience, explained the Polish Foreign Minister Bronislaw Geremek.17 The same ‘accident’, so to speak, occurred with other applicant countries. The broader issues brought to the fore here are the management and absorption capacities of the recipient countries. The question also concerns whether recipient countries have sufficiently developed analyses of their needs to enable them to plan large and concrete projects relating to accession as fast as the objectives of PHARE have evolved towards membership. The problem of absorption capacity of the candidate countries was also raised by the European Parliament in November 1998 when discussing the draft EU budget for 1999. The EP deemed that the objectives should take better account of the administrative, structural and material capacities of the beneficiary countries for using the funds effectively. This is one of the reasons which led the

Financial Assistance of the EU 227

Parliament to cut, by 204 m euro, the amount proposed for PHARE in the last draft budget. On the other hand, candidate countries are becoming more and more successful in giving evidence of their management and absorption capacity of the new PHARE. Indeed on 13 October 1998, the Commission and the Czech Republic signed three financial memoranda of co-operation granting the latter an extra 36.9 m euro for three years.18 If one considers the upcoming accession of a number of CEECs, it is quite obvious that the preferential incubation of the Eastern basket as described above will continue to dominate the financial assistance given by the European Union to its neighbours.

II. The bottom of the baskets: additional instruments of co-operation Although PHARE and MEDA account for the largest part of the European Union’s aid towards its eastern and southern neighbours, they do not constitute the full financial picture. Indeed, both the CEECs and the Mediterranean partners benefit from financial aid under separate budget lines. For example, out of the total sum of 4685 m euro earmarked by the 1995 Cannes European Council for financial co-operation with the Barcelona counterparts of the EU, the MEDA Programme accounted for 3424 m euro. The remainder of the aid falls under different budget lines such as carryovers from the protocols (532 m euro), co-operation with Turkey (322 m euro), the financial protocols for Cyprus and Malta, the democracy programme, support to the Peace Process (254 m euro) and to UNRWA (165 m euro). In addition, both can count on substantial amounts from other financial institutions. Coordination of international assistance The EU has long stressed the importance of complementarity in the funding of projects with interventions of other international financial institutions such as the European Bank of Reconstruction and Development (EBRD) or the World Bank. The Accession Partnership Agreements, for example, explicitly foresee this better coordination to prepare the applicants for membership of the European Union. In March 1998, the European Commission, the European Investment Bank (EIB), the EBRD and the World Bank confirmed their willingness to coordinate by agreeing, in Brussels, to strengthen their efforts to support the accession preparations of the candidate countries. 19 This co-operation will entail, notably, regular meetings of representatives of this ‘club of four’ and their staff ‘on the ground’. Also, the enhanced co-operation should favour joint initiatives by the four. To this end, the Commission, the EBRD and the World Bank have signed a memorandum of understanding which establishes the eligibility and selection criteria for projects to be co-financed. Hence the

228 Alain Guggenbühl and Margareta Theelen

four institutions were in a position to set up a preliminary list of projects for a total amount of 3.5 billion euro immediately. This picture of unanimous commitment to the preparation of applicant countries was slightly overshadowed one month later when, apparently, the United States voiced some reluctance to see the EBRD give priority assistance to CEECs rather than to Russia.20 The memorandum of understanding, originally signed by the four actors in view of preparing candidate countries for membership, was signed in November 1998 by four additional financing institutions, namely the Nordic Environment Finance Corporation, the Nordic Investment Bank, the International Finance Corporation and the Council of Europe’s Social Development Fund. The total contribution brought in by these four new sources of financing could amount to as much as 5.9 m euro.21 Examples of successful co-operation between two or more financial institutions are ample, both for the eastern and the southern partners. In December 1998, the EIB and the EBRD joined the PHARE efforts to finance the development of the Latvian rail infrastructure and railways.22 Under the 1991 Bangkok facility, PHARE provides grant funding through the EBRD both for technical co-operation and for investment co-financing. The facility has played a crucial role in enabling the EBRD and the partner countries to build up and implement a portfolio of successful investments. Up to September 1996, a total of 131 technical co-operation projects had already been financed under that facility. To the benefit of the Mediterranean NonMember Countries the EIB and the World Bank have launched the Mediterranean Environmental Technical Assistance Programme (METAP). This Programme aims at coordinating international support relative to natural resources. Since the creation of such projects in the late 1980s, both institutes have already spent over 1600 m euro. The European Investment Bank The EIB provides financing for projects that need to comply with the Union’s policy priorities which should aim at sustainable development as well as at stability and peace in the regions concerned. The financing can be provided from the Bank’s own resources (loans) or from the Union’s or Member States’ budgetary resources (risk capital and interest subsidies). The major part of the financing comes from the Bank’s own resources. Risk capital only accounts for about 2.7 per cent of the total financing provided to MNMCs between 1993 and 1998; it is not used for the CEECs. It is interesting to note also that the EIB was given a mandate from the Commission to manage certain operations under MEDA which consist of risk capital and interest rate subsidies.23 Tables 17 and 18 show the Bank’s action in CEECs and in the MNMCs between 1993 and 1997 and in 1998. Whereas 7833 m euro benefited the CEECs, 5103 m euro were allocated to southern partners. Poland, the Czech Republic and Romania appear to have been the largest recipients of EIB assistance in the CEECs with respectively 2186, 1745 and 1027 m euro. On

Financial Assistance of the EU 229

the southern flank, the three largest recipients were Egypt, Algeria and Morocco, with respectively 964, 940 and 844 m euro. A comparison by sector shows that priority in the MNMCs was given to energy (almost 25 per cent of total loans), whereas the sector ‘communications’ attracted 60 per cent of the loans to CEECs. In Central and Eastern Europe, the EIB has indeed given particular attention to cross-border infrastructure projects in the fields of road and rail transport as well as in telecommunications. In Hungary, for example, the construction of two roads between Budapest and the Slovak border was co-financed by the EIB, PHARE and the EBRD. The project is also part of a road network linking Trieste, Ljubljana, Budapest, Usgorod and Lvov. In the Mediterranean region, the Bank’s loans have also been directed towards economic infrastructure and production projects, industrial development and regional co-operation schemes. One of the Bank’s special priorities is notably the environment. A Cyprus project for water supplies was, for example, financed with the help of both the EIB and the MEDA Programme. The EIB provided roughly 28 per cent of the 56.6 m euro project. MEDA provided 2.96 m euro in interest subsidies. The remaining financial resources were provided by Cypriot municipal and governmental authorities as well as by the Social Development Fund of the Council of Europe. For the period between 1997 and 2000, the EIB foresees 3520 m euro for the CEECs and 2510 m euro for the MNMCs. In addition the Bank has created a mechanism called ‘EIB pre-accession facility’, allocating another 3500 m euro to the candidate countries. The pre-accession facility will focus on projects aiming at the adoption of the acquis communautaire and the strengthening of the candidates’ integration in the Union. Macro-financial assistance Originally designed for CEECs, the Union’s macro-financial assistance has also been made available to the MNMCs. The aim of these medium- or long-term loans has been to support the political and economic reform of neighbouring countries holding close links with the Union which might endanger the Union’s own economic and political interests. As with PHARE and MEDA, one condition to receiving macro-financial assistance is respect for democratic principles. Moreover, there must be ‘significant and commonly identified residual external financing needs, over and above the resources provided by the IMF and other multilateral institutions and despite the implementation of strong economic stabilization and reform programmes’.24 Situations in which such financing needs may occur cover the transition to a market economy or external shocks. Examples of such assistance are a loan to Israel as part of the aid package for Mediterranean Non-Member Countries affected by the Gulf conflict and two loans to Algeria to help it carry out political and economic reforms. Table 19 shows the macro-financial assistance to non-member countries during the period 1990–96. Clearly, the CEECs had been given priority over any other region.

230 Alain Guggenbühl and Margareta Theelen

It appears from both the 1998 and 1999 budgets that this will continue to be the case. The PHARE and MEDA democracy programmes Two separate budget lines aim at financing programmes on democracy both for PHARE and MEDA. The so-called PHARE Democracy Programme was launched in 1992, upon the initiative of the European Parliament, with the aim of promoting democratic societies by supporting the development of East/West partnership projects between non-governmental organizations (NGOs). The Democracy Programme is directed towards parliamentary practice and organization, transparency of public administration and management, development of NGOs, independent and pluralistic media, awareness building and civic education, and the promotion and monitoring of human rights, minority rights, equal opportunities and non-discrimination. This Programme has, for example, provided medical rehabilitation to victims of Romania’s former regime. It also supports the peace process in the former Yugoslavia. In 1997 the Union allocated 24 m euro to the CEECs under the Democracy Programme. The Programme provided 15 m euro for 1998 and the same amount for 1999. In 1996 the European Parliament initiated a similar Programme destined for the MNMCs. The MEDA Democracy Programme covers the political dimension of the Barcelona Declaration and has a goal similar to that of the PHARE Democracy Programme. It aims, in particular, at the promotion of democracy, political, civil and socio-economic rights, the rule of law, freedom of expression of meeting and of association, and the protection of target groups. It also supports the establishment of inter-parliamentary Euro-Mediterranean relations and actions directed towards women and inter-ethnic dialogue. Respectively, 9 and 8 m euro were allocated in the framework of MEDA Democracy in 1996 and 1997. In 1996 almost 70 per cent of the resources were allocated to the countries directly involved in the Middle East Peace Process, especially the Palestinian Territories. An example of support to women’s actions is a grant of 187 000 euro allocated in 1997 to the Human Forum for Women’s Rights in Jordan for a public education campaign on women’s rights and a family counselling centre. For 1998 and 1999 the budgets provided for an annual amount of 10 m euro for each of the PHARE and MEDA Democracy Programmes.

III. Evaluation of the financial assistance The purpose of this section is not to present a thorough evaluation of the PHARE and MEDA programmes – which would go beyond the scope of this chapter – but to offer a broad picture of the issues at stake. A number of sources are available for evaluating both programmes: reports by the Commission, by UCLAF, by a private auditing company and by the European Court of Auditors referred to below as the Court. This section will

Financial Assistance of the EU 231

regroup criteria for evaluating performance, which have been developed by Roger Levy, to assess the Commission’s programme management25 and will build upon the findings common to the sources mentioned above. It should be mentioned from the outset that a large number of the problems pointed out are common to both PHARE and MEDA Programmes, which is not surprising given their similarity. A first criterion concerns the need for appropriate budget utilization mechanisms. Most observers consider the disbursement rates for PHARE and MEDA Programmes to be insufficient. Figures alone, however, do not always give a clear picture of the complex reality of implementation. Indeed, these rates include transfers of appropriations and payment of advances as well as special operations requiring rapid disbursement, which means that the actual payments for more regular projects is well below the overall figure. For PHARE projects, the Court has shown that up to one year could elapse between the Commission’s financing decision and the disbursement of the first advance. In reply to this criticism the Commission26 has pointed to the long lifespan of the projects concerned (on average five years). Hence, lower disbursement rates in the first years of the Programme should not be a cause for surprise. Looking at the PHARE disbursement rates shown in Tables 2, 3 and 5, the Commission’s reply seems to be justified at least partly. The assessment of MEDA disbursement rates seems premature since the Programme did not start until 1996. Secondly, with regard to insufficient budget utilization the Court also refers to inappropriate budget planning. The existence of a more detailed working document would improve the implementation of the Programmes. In this respect, lack of transparency and information as well as lack of clear objectives are important shortcomings often referred to. The Court has advised the Commission to better concentrate the funds on a limited number of programmes corresponding to clearly defined priorities and objectives.27 The Court has further criticized the Commission for the poor quality of some project specifications which have been drawn up too hastily.28 In its report on PHARE activities for 1996,29 the Commission recognized that a ‘demanddriven’ approach has led to shopping lists often lacking a prior sector analysis and also projects lacking critical mass to induce substantive changes. One way to overcome this weakness was to turn the assistance into an ‘accessiondriven’ instrument. Also, the use by the Commission of a specific methodology called the Logical Framework has, in most cases, improved the formulation of programmes, introduced considerations of the risks involved and the use of indicators of achievement. This is a system for classifying events in a project cycle, from the delivery of inputs up to the realization of the wider objectives. The same problems were mentioned with regard to MEDA in an external evaluation report.30 To improve transparency the Commission ought to draft an overview of all relevant budget lines. It is also suggested that the National Indicative Programmes (NIPs) should contain all possible details on the full content of the co-operation so that it could be used

232 Alain Guggenbühl and Margareta Theelen

as a working instrument by all partners involved. The NIPs should include at least: information on thematic and sector choice, the draft budget, links between grants and loans and between regional and bilateral co-operation, information on budget lines other than MEDA and results from evaluation reports. Moreover, since MEDA works under a performance-based funding system, more explicit criteria and indicators should be set to facilitate measuring this performance. A third problem is the Commission’s administration management and capacity. This includes the organization of the work at the Commission’s headquarters but also deconcentration and decentralization making use of the Commission’s delegations and external agencies. The Commission itself has often pointed to the increasing external assistance budget and demands without matching staff and resources. However, shortage of staff – while an important impediment – is certainly not the only explanation for ineffective management. Indeed, with the division of responsibility for parts of the programmes among four or five Directorates General, the Commission’s human resources are not used in the most efficient way. In addition, management of the programmes is still very centralized. Apart from the fact that such management systems tend to be more formalistic and slow, a more decentralized system would also have the advantage of better responding to local needs and offer dialogue with the partners. Hence, strengthening the role and competence of the decentralized actors, in the first place the delegations of the European Commission but also the Programme Management Units (PMUs) and MEDA teams, should be a priority. The delegations should receive sufficient human resources in order to undertake the management tasks required; in turn, these tasks need to be described precisely in order to put the right persons in the right jobs. As for the PMUs, the quality of their services has varied considerably according to the Court. The Commission should now clarify their role, make sure they take proper advantage of the training offered by the technical assistance, provide them with better advice, allow them to access the lists of consultants – or rather the black list – and make sure they systematically check the work done as compared to that claimed to have been done by the technical assistants. In addition, the Commission should review the operating expenditure of the PMUs and MEDA-teams. This cost-efficiency approach should also be established with regard to external contractors. Finally, the evaluation function should be developed. Little importance has been given so far to achievements, effectiveness and efficiency of assistance. There are insufficient criteria to measure the impact of the programmes. Indeed, the least we can say is that evaluation actions have not exactly been numerous but it is also relevant to point out that they are quite new. The Commission has recognized the absence of a useful monitoring and assessment system to ensure better coverage of effectiveness and impact indicators and to enhance dissemination of monitoring information. Steps have been taken to overcome this lack. The use of the Logical Framework approach has been imposed for auditing purposes as well. Since then, the number of audits

Financial Assistance of the EU 233

has increased. In order to capitalize on this measure, the Commission should consider making available more of the reports delivered to it by companies auditing projects undertaken with PHARE money.31 In the conclusion to this section, it is important to bear in mind the fact that although the criticisms referred to above were mostly directed towards the Commission, this institution is certainly not the only partner involved in the PHARE and MEDA Programmes. At Union level, Member States and other institutions have their role to play. In addition, the Commission is dealing with very different partner countries. Hence, programme implementation is sometimes facing problems which are completely out of the Commission’s range. It should furthermore be stressed that the Commission has tried to adapt to the changing needs of the Programmes and to improve efficiency in its management. One example is the setting up of a common service to run all external relations programmes. Moreover, it needs to be stressed that none of the Commission services and programmes referred to in this section have come under suspicion in the report of the independent group of experts which catalysed the resignation of the Santer Commission.

Conclusion The two baskets of financial transfers from the European Union to its eastern and southern neighbours both contribute to establishing a sense of a Pan-Euro-Mediterranean Area. Indeed, even though the European Union endows one basket with more substantial resources for the purpose of enlargement, both aim to provide the foundations for a common house on the grounds of mutual free trade commitments and supportive technical investments for a safe and efficient legal, administrative and democratic modus operandi around the European Union. In this common European house, rooms with a special view on membership have been arranged for eastern neighbours through technical assistance and successive agreements. Even though relations with southern neighbours have followed a similar path, the same rooms will not be offered.

Notes 1. The geographical scope of this chapter covers 14 countries from Central and Eastern Europe – including Croatia to whom assistance has been suspended – and 12 Mediterranean Non-Member Countries. 2. Council Regulation 3906/89, OJ, L375/11, 23 December 1989. 3. Council Decision of 6 December 1996 concerning the adoption of the guidelines for the indicative programme concerning financial and technical measures to accompany the reform of economic and social structures in the framework of the Euro-Mediterranean Partnership (MEDA), OJ, L325/20, 14 December 1996. 4. Croatia’s right to access PHARE funds has been suspended for the time being. 5. On the philosophy and motives of the Community, see A. Guggenbühl, ‘The political economy of association with Eastern Europe’, in F. Laursen (ed.), The

234 Alain Guggenbühl and Margareta Theelen

6. 7.

8. 9. 10. 11. 12. 13.

14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

31.

Political Economy of European Integration (Maastricht: European Institute of Public Administration, 1995), 211–82. See, however, footnote 4 above. Council Regulation 1488/96, 23 December 1996 on financial and technical measures to accompany (MEDA) the reform of economic and social structures in the framework of the Euro-Mediterranean partnership, OJ, L189/1, 30 July 1996. Communication on the Euro-Mediterranean Partnership and the Single Market, COM(98)538 Final, 23 September 1998. Agence Europe, 8 December 1998. See footnote 4 above. Council Regulation 622/98 of 16 March 1998, OJ, L85/1, 20 March 1998. COM(1998)524 Final, Implementing MEDA 1996–1997 Report, 14 September 1998. The guidelines further set general objectives which have already been presented as part of the common objectives with PHARE. There are notably 12 goals in this field including the creation of an appropriate legal and administrative framework, trade facilitation, harmonization of environmental legislation and standards and business collaboration with EU operators. Another objective assigned to the programme is the strengthening of the socio-economic balance. Efforts in this area should, inter alia, target rural development, the improvement of living conditions in urban areas and the delivery of social services. Last but not least, the development of civil society is the final goal set to all individual programmes of the countries by the Council. See Regulation 1734/94, OJ, L182/4, 16 July 1994 and Regulation 1735/94, OJ, L182/9, 16 July 1994. Uniting Europe, 18 May 1998. Uniting Europe, 1 June 1998. Agence Europe, 2 June 1998. Uniting Europe, 19 October 1998. Uniting Europe, 6 April 1998. Uniting Europe, 7 May 1998. Uniting Europe, 9 November 1998. Uniting Europe, 14 December 1998. COM(1998)524 Final, Implementing MEDA 1996–1997 Report, 14 September 1998. European Commission, Secretariat General, ‘Grants and Loans from the European Union’. Roger P. Levy, ‘Myth and reality in EU programme management’, EIPASCOPE, no. 1, 1999, 14–18. European Court of Auditors, Annual report concerning the financial year 1997, 17 November 1998, 100. European Court of Auditors, Special Report No. 3/97. European Court of Auditors, Special Report No. 11/98. COM(1998)178 Final, 24 March 1998. COWI Consulting Engineers and Planners (Denmark) in association with Netherlands Economic Institute (the Netherlands) and Andante (Sweden), Evaluation of Aspects of EU Development Aid to the MED Region, Final Synthesis Report, November 1998. The number of audits is far higher than the number of reports made available to the public. Among those reports, mention can be made of the evaluation of the restructuring and privatization programmes, the essential aid for BosniaHerzegovina and the Democracy Programmes.

Financial Assistance of the EU 235

Annex: List of Tables (all figures in the tables are in m euros) Table 1

Chronological and geographical scope of PHARE

Table 2

Budgets: general overview 1990–98

Table 3 programme Year: Breakdown of commitments, contracts and payments 1990–98 Table 4

Contracts: general overview 1990–98

Table 5

Payments: general overview 1990–98

Table 6

PHARE commitments by country and by year 1990–98

Table 7

PHARE commitments by sector and by year 1990–98

Table 8 Commitments: breakdown by sector and partner country 1990–98. Quarterly Statistics on the Execution of the Phare Programme, January 1999, Common Service for External Relations, European Commission (unpublished) Abbreviations Sectors: AD (administrative and public institutions); AG (agricultural restructuring); DE (civil society and democratization); ED (education, training and research); EN (environment and nuclear safety); FI (financial sector); HA (humanitarian, food and critical aid); IN (infrastructure – energy, transport, telecoms); LE (approximation of legislation); PC (consumer protection); PR (private sector, restructuring privatization and SMEs); RE (integrated regional measures); SO (social development and employment); SP (public health); AA (multidisciplinary). Countries: PL (Poland); HU (Hungary); CZ (Czech Republic); SL (Slovenia); ES (Estonia); SR (Slovak Republic); LI (Lithuania); LE (Latvia); RO (Romania); BG (Bulgaria); CS (Czechoslovakia); AL (Albania); MA (FYROM); BH (Bosnia Herzegovina); RP (multicountry); OP (horizontal). Table 9

Geographical scope of MEDA

Table 10 EU–Mediterranean aid allocations, protocols and MEDA Evaluation of aspects of EU development aid to the MED Region, Final Synthesis report, November 1998, COWI Consulting Engineers and Planners

236 Alain Guggenbühl and Margareta Theelen

(Denmark) in association with Netherlands Economic Institute (the Netherlands) and Andante (Sweden) http://www.europa.eu.int/comm/scr/evaluation/evinfo/med/951405_ev.ht ml Table 11 Commission budget and EIB funds to the Mediterranean during the Protocols Evaluation of Aspects of EU Development aid to the MED Region, Final Synthesis Report, November 1998, COWI Consulting Engineers and Planners (Denmark) in association with Netherlands Economic Institute (the Netherlands) and Andante (Sweden) http://www.europa.eu.int/comm/scr/evaluation/evinfo/med/951405_ev.ht ml Table 12 MEDA commitments and payments 1995–2003 Implementing MEDA, 1996–1997 Report, Commission of the European Communities, COM(1998)524 Final, Brussels, 14 September 1998 Euro-Mediterranean Partnership Information Note No. 28 (revised version), http://www.curomed.net/information-notes/In28e.htm, 13 January 1999 Table 13 Breakdown of MEDA commitments and payments 1996–98, by country http://www.europa.eu.int/en/comm/dg1b/budget/ex01meda.htm1, 27 April 1999 Table 14 Commitments: breakdown by objective and country 1996–98 http://www.europa.eu.int/en/comm/dg 1b/budget/ex01meda.html, 27 April 1999 Table 15 PHARE and MEDA commitments and payments 1995–98 Quarterly Statistics on the Execution of the Phare Programme, January 1999 (unpublished), Common Service for External Relations, European Commission Implementing Meda, 1996–1997 Report, Commission of the European Communities, COM(1998)524 Final, Brussels, 14 September 1998. (Own calculations) Table 16 PHARE and MEDA commitments per capita 1996–98 Quarterly Statistics on the Execution of the Phare Programme, January 1999, (unpublished) Common Service for External Relations, European Commission http://www.europa.eu.int/en/comm/dg1b/budget/ex01meda.html, 27 April 1999.

Financial Assistance of the EU 237

Statistical Yearbook on Candidate and South-East European Countries, Data 1994–1998, Eurostat, Theme 1 General Statistics Office for Official Publications of the European Communities, Luxembourg, 2000 Table 17 EIB financing provided in the CEECs from 1993 to 1997: breakdown by country and sector and for 1998 (total) EIB Annual Report 1997, European Investment Bank, 31 March 1998 Table 18 EIB Financing provided in the MNMCs from 1993 to 1997 (breakdown by country and sector) and for 1998 (total) EIB Annual Report 1997, European Investment Bank, 31 March 1998 Table 19 Commitments of Community macro-financial assistance to nonmember countries 1990–96 http://europa.eu.int/comm/sg/aides/en/p4intro.htm, 8 December 1998

238 Alain Guggenbühl and Margareta Theelen Table 1

Chronological and geographical scope of PHARE

1990 Jan.

1991

1992

1993

1996

1998

Sept.

Bosnia–Herz.2 FYROM Slovenia Slovenia Slovenia Estonia Estonia Estonia Latvia Latvia Latvia Lithuania Lithuania Romania Lithuania Romania Romania DDR3 Albania Romania Albania Albania Yugoslavia Yugoslavia4 Albania Slovakia Slovakia Czechoslov. Czechoslov. Czechoslov.5 Czech Rep. Czech Rep. Bulgaria Bulgaria Bulgaria Bulgaria Bulgaria Hungary Hungary Hungary Hungary Hungary Hungary Poland Poland Poland Poland Poland Poland

Croatia1 Bosnia–Herz. FYROM Slovenia Estonia Latvia Lithuania Romania Albania Slovakia Czech Rep. Bulgaria Hungary Poland

1. Croatia’s inclusion in PHARE had already been discussed and even agreed by the EP in 1995 after having rejected it in 1992. Today, Croatia’s right to access to PHARE funds is suspended. 2. When including Bosnia–Herzegovina in PHARE, the EU Council also recommended that country to focus on projects designed to promote reconciliation between ethnic communities. 3. Assistance to Eastern Germany under PHARE has stopped after reunification. 4. Yugoslavia was then excluded from PHARE. 5. Last year as PHARE beneficiary before the split up.

Table 2

Budgets: general overview 1990–98 Appropriations for payments

Appropriations for commitments Budget year

Initial budget

Final budget1

Commitments2

% execution

Initial budget

Final budget

Payments

1990 1991 1992 1993 1994 1995 1996 1997 1998

300.0 759.9 1000.0 1045.0 985.0 1090.0 1228.0 1356.1 1279.4

500.0 775.0 1015.5 1010.7 974.0 1161.2 1223.0 1150.3 1180.4

4930 766.6 1003.2 999.0 967.3 1153.3 1222.5 1147.7 299.6

98.6 98.9 98.8 98.8 99.3 99.3 100 99.8 25.4

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

350.0 307.0 437.0 521.1 734.0 893.5 1002.4 953. 966.2

171.0 284.1 436.3 521.1 722.7 762.4 829.8 819.1 763.3

48.8 92.5 99.8 100 98.5 85.3 82.8 85.9 79

Total

9043.4

8990.2

8053.3

89.6

0.0

6164.8

5309.7

86.1

% execution

1. Figures corresponding to the final budget may include amounts carried over from previous years. 2. Net of decommitments in following years; 1997 figure does not include an amount of 0.3 mecu managed by DG XI.

239

240 Alain Guggenbühl and Margareta Theelen Table 3 Programme year: breakdown of commitments, contracts and payments 1990–98 Commitments A

Contracts1 B

% (B/A)

Payments2 C

% (C/A)

1990 1991 1992 1993 1994 1995 1996 1997 1998

493.55 790.59 984.50 993.25 967.32 1153.26 1222.52 1147.71 299.58

485.10 770.20 950.78 974.56 942.92 898.54 746.50 395.29 50.78

98.3 97.4 96.6 98.1 97.5 77.9 61.1 34.4 16.9

491.44 763.69 950.43 906.08 836.65 700.55 480.50 180.09 0.30

99.6 96.6 96.5 91.2 86.5 60.7 39.3 15.7 0.1

Total

8052.28

6214.66

77.2

5309.73

65.9

Programme year

1. Contracts concluded by the Commission headquarters and by the partner countries. 2. Payments on Commission headquarters contracts + advance payments to partner countries.

Table 4

Contracts: general overview 1990–98

Year

Commitments

Contracts concluded in 1990

1991

1992

1993

1994

1995

1996

1997

1998

Total

%

–8.0 –0.5 21.2 137.6 229.3 309.6 297.7 148.6 0.0

5.9 –2.7 –21.4 22.0 102.1 176.4 197.6 246.7 50.8

485.10 770.20 950.78 974.56 942.92 898.54 746.50 395.29 50.78

98.3 97.4 96.6 98.1 97.5 77.9 61.1 34.4 16.9

1990 1991 1992 1993 1994 1995 1996 1997 1998

493.55 790.59 984.50 993.25 967.32 1153.26 1222.52 1147.71 299.58

154.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

99.5 197.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0

103.6 179.8 258.8 0.0 0.0 0.0 0.0 0.0 0.0

27.8 115.3 186.0 243.0 0.0 0.0 0.0 0.0 0.0

72.2 102.2 156.9 149.0 184.9 0.0 0.0 0.0 0.0

29.1 171.2 219.3 209.1 268.7 245.3 0.0 0.0 0.0

0.2 7.3 129.9 213.8 157.9 167.1 251.3 0.0 0.0

Total

8052.28

154.7

297.1

542.2

572.1

665.3

1142.9

927.5

1135

777.4

6214

77.2

241

242

Table 5 Payments: general overview 1990–98 Year

Commitments

(1)

Paid on budget year 1990

1991

1992

1993

1994

1995

1996

1997

1998

Total

%

491.44 763.69 950.43 906.08 836.65 700.55 480.50 180.09 0.30

99.6 96.6 96.5 91.2 86.5 60.7 39.3 15.7 0.1

1990 1991 1992 1993 1994 1995 1996 1997 1998

493.55 790.59 984.50 993.25 967.32 1153.26 1222.52 1147.71 299.58

171.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

131.9 152.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0

51.2 169.4 215.7 0.0 0.0 0.0 0.0 0.0 0.0

68.6 148.0 161.4 143.0 0.0 0.0 0.0 0.0 0.0

52.5 160.8 251.8 183.5 74.1 0.0 0.0 0.0 0.0

11.7 83.7 159.2 222.6 221.4 63.7 0.0 0.0 0.0

3.7 24.8 107.7 160.9 218.8 218.4 95.5 0.0 0.0

–16.0 19.4 67.3 137.9 174.2 218.4 176.1 41.9 0.0

16.8 5.5 –12.7 58.2 148.1 199.9 208.9 138.2 0.3

Total

8052.28

171.0

283.9

436.3

521.1

722.7

762.4

829.9

819.2

763.3

5309.7

65.9

Table 6

PHARE commitments by country and by year 1990–98

Country Poland Hungary Czech Republic Slovenia Estonia Slovakia Lithuania Latvia Romania Bulgaria CFSR Albania FYROM Bosnia Multi-country Horizontal Total

1990–92

1993

1994

1995

1996

1997

1998

Total

%

577.8 306.8 0.0 9.0 10.0 0.0 20.0 15.0 301.8 223.3 232.7 120.0 10.0 37.3 276.7 143.8

225.0 99.0 60.3 11.0 12.0 40.0 25.0 18.0 139.9 85.2 0.0 75.0 25.0 0.0 112.0 74.3

206.8 85.0 60.0 24.0 22.5 40.0 39.0 29.5 100.0 85.0 0.0 49.0 25.0 0.0 86.0 119.1

174.0 92.0 110.0 25.0 24.0 46.0 42.0 32.5 66.0 83.0 0.0 88.0 25.0 0.0 104.0 243.2

203.0 101.0 54.0 22.0 61.8 4.5 53.0 37.0 118.4 62.5 0.0 53.0 25.0 140.0 125.5 162.2

148 88 60 25 4.3 43 50 43 100 66 0.0 69 33 73 83 262

75.4 8.4 13.1 4.6 1.8 6.7 1.1 1.1 7.7 4.3 0.0 0.3 0.3 29.8 33.1 110.8

1611 780 357 119 135 179 229 175 832 608 233 451 142 280 782 1103

20.0 9.6 4.4 2.4 1.6 2.2 2.8 2.1 10.3 7.5 2.8 5.6 1.7 3.4 10.1 13.6

999

967

299

8052

2262

1154

1222

1148

100

243

244

Table 7

PHARE commitments by sector and by year 1990–98

Administration – public institutions Agricultural restructuring Civil society – democratization Education, training, research Environment and nuclear safety Financial sector Humanitarian, food and critical aid Infrastructure (transport, energy, telecommunication) Approximation of legislation Consumer protection Private sector, restructuring Integrated regional measures Social development – employment Public health Other multidisciplinary Total

1990–92

1993

1994

1995

61.5 305.0 9.0 266.8 289.8 91.7 292.8 145.1

65.7 78.5 10.0 162.2 34.1 61.0 44.9 114.9

81.9 17.0 16.2 169.9 77.5 56.0 30.0 326.4

26.6 40.6 10.5 147.1 82.0 40.5 25.0 457.3

0.0 0.0 436.0 20.8 86.7 60.0 217.9

0.0 5.0 194.3 10.0 15.0 26.5 179.4

0.0 4.0 93.4 4.0 28.5 13.0 55.1

2284.3

1001.4

972.9

1996

Total 1990–98

%

125.2 27.9 23.7 126.4 55.5 9.6 125.0 424.4

555.42 528.84 88.84 1009.23 614.25 269.18 533.02 1895.09

6.9 6.6 1.1 12.5 7.6 3.3 6.7 23.5

2.0 2.0 139.2 47.0 47.3 2.0 85.6

33.5 0.0 97.5 79.0 17.7 0.0 77.5

83.77 12.97 1072.66 240.15 271.64 113.20 764.02

1 0.2 13.3 3 3.4 1.4 9.5

1154.7

1222.9

8052.28

100

Table 8

Commitments: breakdown by sector and partner country 1990–98

Sector

PL

AD AG DE ED EN FI HA IN LE PC PR RE SO SP AA Total %

HU

CZ

AL

MA

48.2 17.2 84.9 56.0 7.0 2.7 141.2 79.3 48.4 67.1 7.5 15.0 80.3 44.9 147.4 190.5 0.0 4.0 0.0 0.0 147.4 72.3 1.5 0.0 19.0 26.3 25.0 25.5 73.9 7.5

0.0 37.2 0.0 37.7 4.0 0.0 37.7 15.3 35.0 11.5 0.0 105.5 0.0 74.5 21.0 130.8 0.0 0.0 0.0 0.0 70.0 7.0 0.0 8.5 15.0 0.0 0.0 13.0 50.0 10.8

12.6 3.9 0.0 4.0 2.0 3.4 82.4 24.0 0.0 0.0 8.1 0.0 0.0 0.0 2.0

1611.3 780.4 357.1 119.6 135.8 179.7 229.2 175.1 831.7 608.3

232.7 451.3

142.3

112.6 58.5 36.0 202.5 78.5 4.5 0.0 0.0 3.0 240.3 136.4 33.0 114.0 74.5 5.0 65.7 19.0 0.0 0.0 0.0 0.0 525.6 125.8 193.1 0.0 0.0 0.0 5.0 0.0 0.0 217.5 176.9 28.0 28.0 59.0 7.5 34.2 31.0 35.0 20.0 10.0 0.0 46.0 10.7 12.0

20

10

4

SL

ES

SR

LI

LE

17.5 0.0 0.0 19.6 4.0 3.5 0.0 20.3 0.0 0.0 28.7 6.0 6.4 0.0 13.6

25.1 3.0 0.0 17.9 3.5 0.5 0.0 32.4 3.0 0.0 21.1 4.5 2.9 0.0 21.9

10.3 14.6 3.5 33.0 1.0 12.0 0.0 19.8 0.0 0.0 54.2 0.5 10.9 8.0 11.9

24.0 4.5 0.5 27.5 3.5 18.3 0.0 70.3 5.3 0.0 35.6 0.0 7.2 0.0 32.4

10.9 0.8 0.0 18.5 6.6 18.7 0.0 34.7 17.5 0.0 21.0 0.0 11.6 0.0 34.8

1

2

2

3

2

RO

10

BG

8

CS

3

6

2

BH

RP

9.0 94.4 38.0 0.0 2.7 0.0 7.5 122.1 0.0 148.5 0.0 0.0 162.3 51.0 38.0 219.9 0.0 0.0 0.0 0.0 3.0 84.9 0.0 92.7 11.6 0.0 5.7 0.0 2.0 1.7

OP

Total

41.9 555.4 0.0 528.8 65.4 88.8 76.0 1009.2 89.7 614.3 0.0 269.2 37.7 533.0 102.0 1895.1 54.0 83.8 8.0 13.0 97.0 1072.7 32.0 240.2 60.5 271.6 6.0 113.2 432.7 764.0

% 7 7 1 13 8 3 7 24 1 0 13 3 3 1 9

279.8 815.1 1102.9 8052.3 100 3

10

14

100

245

246 Alain Guggenbühl and Margareta Theelen Table 9

Geographical scope of MEDA

The People’s Democratic Republic of Algeria The Republic of Cyprus The Arab Republic of Egypt The State of Israel The Kingdom of Jordan The Lebanese Republic The Republic of Malta The Kingdom of Morocco The Syrian Arab Republic The Republic of Tunisia The Republic of Turkey The Palestinian Territories of Gaza and the West Bank

Table 10

EU–Mediterranean aid allocations, protocols and MEDA

First protocol Second protocol Third protocol Fourth protocol MEDA

Period

Grants and risk capital

EIB loans

1978–81 1982–86 1987–91 1992–95 1995–99

307 415 615 1305 3425.5

332 560 940 3018 3900

Table 11 Commission budget and EIB funds to the Mediterranean during the Protocols Budget Risk capital

EIB loans

157 570 0 116 60 438 116 240 300 205

57 91 0 15 10 136 22 84 – 25

640 802 215 198 152 517 323 418 – 1800

2202

440

4850

Grants Algeria Egypt Israel Jordan Lebanon Morocco Syria Tunisia Global Off-protocol Total

Table 12

MEDA commitments and payments 1995–2003

I Commitments I.1 Available credits I.2 Actual commitments – Structural adjustment – Economic transition – Development – Regional II Actual payments

1995

1996

1997

1998

1999

Total 1995–99

173 173 0 37 37 99 50

403 403 200 13 158 32 155

981 981 150 100 623 108 212

943 (943) (0) (513) (338) (92) (315)

(976)

3476

(350)

(1082)

2000

2001

2002

2003

Total 1995–2003

(425)

(600)

(800)

(569)

(3476)

NB: Figures in brackets are forecasts. Project payment forecasts assume an average project duration of four to five years.

247

248

Table 13

Breakdown of MEDA commitments and payments 1996–98, by country

Country Algeria Cyprus WB/Gaza Egypt Jordan Lebanon Malta Morocco Syria Tunisia Turkey Regional Total (1) Available (2) % (1/2)

Committed in 1996

20 74.9 100 10

12.5 120 33.1 32.5

Paid in 1996

20 60

40 34.6

403

154.6

403

202

100%

76.6%

Committed in 1997 40.8 2.9 41.2 202.7 10 86.1 2.8 235.6 42 138.2 70.3 108.8

Paid in 1997

Committed in 1998

Total committed

Total paid 30 1.4 47.1 89.6 105

108.7 12.0 127.3 591.9

– 0.6 25 1.9 45

95 7 5 396.8 8.2

30 0.8 7.1 87.7

30

0.1 218.9

0.1 40.7

60.7 3.2 45.1

18.7 132.1 58.9

8.0 8.7 47.6

135.8 9.9 66.2 674.4 118.2 96.1 2.9 454.5 54.5 276.9 235.5 200.2

230.7

2325.1

285

2327

981

211.5

941

981

314.7

942

100%

Paid in 1998

67.2%

99.8%

81%

99.9%

0.1 70.7

Table 14

Commitments: breakdown by objective and country 1996–98

Algeria Cyprus West Bank/Gaza Egypt Jordan Lebanon Malta Morocco Syria Tunisia Turkey Regional Total %

Economic transition and free trade area

Structural adjustment

Socio-economic balance

95

30

10.8 9.9 56 395.4 8.2

10.2 279 10 96.1 108.1 34 54 37.9

100

120 100

2.8 226.4 20.5 122.9 197.6

Regional and transborder co-operation

Total

%

200.2

135.8 9.9 66.2 674.4 118.2 96.1 2.9 454.5 54.5 276.9 235.5 200.2

6 0.4 3 29 5 4 0.1 19.5 2 12 10 9

0.1

724.3

350

1050.5

200.3

2325.1

33

15

47

5

100

100

249

250 Alain Guggenbühl and Margareta Theelen Table 15

PHARE and MEDA commitments and payments 1995–98 Commitments (1) PHARE MEDA

1995 1996 1997 1998

1153 1222 1147 (299)

173 403 981 941

Total

(3821)

2498

Payments (2) PHARE MEDA

% (2/1) PHARE

MEDA

700 480 180 (030)

50 155 212 231

607 393 157 (01)

289 385 216 245

(1360.3)

648

(356)

259

NB: Figures in brackets are forecasts or partial.

Table 16

PHARE and MEDA commitments per capita 1996–98

Country Poland Hungary Czech Rep. Slovenia Estonia Slovakia Lithuania Latvia Romania Bulgaria CFSR Albania FYROM Bosnia Multi-country Horizontal Total

PHARE 1996–98 426.4 197.4 127.1 51.6 67.9 54.2 104.1 81.1 226.1 132.8 – 122.3 58.3 242.8 241.6 535 2669

Country population

Euro per capita

38.5 10.3 10.3 2.0 1.5 5.3 3.8 2.5 22.7 8.4 15.6 3.3 2.1 4.2

11 19 12 25 45 10 27 32 10 16 37 28 58

130.5

20

Country

MEDA 1996–98

Country population

Euro per capita

Algeria Cyprus WB/Gaza Egypt Jordan Lebanon Malta Morocco Syria Tunisia Turkey Regional Israel

135.8 9.9 66.2 674.4 118.2 96.1 2.9 454.5 54.5 276.9 235.5 200.2 –

27.9 0.7 2.4 59.2 5.4 3.0 0.4 26.5 14.7 8.9 61.6

5 14 28 11 22 32 7 17 4 31 4

2325.1

216.3

Total

5.6

11

251

252

Table 17

EIB financing provided in the CEECs from 1993 to 1997 (breakdown by country and sector) and for 1998 (total) 1993–97

1998 Resources

Resources

Total

715 375 270 140 34 51 40 10 435 225 22 70 2387

Sector

Total

Energy

Poland Hungary Czech Republic Slovenia Estonia Slovakia Lithuania Latvia Romania Bulgaria Albania FYROM

1471 602 1475 195 88 587 108 51 592 231 46

180 55 355 – 7 185 10 6 145 – 12

Total

5446

955

Communications

Water management and sundry

Industry services

Global loans

715 317 820 195 61 352 88 20 370 201 29

378 – 200 – – – – 15 – – –

– – 100 – – – – – 47 – –

198 230 – – 20 50 10 10 30 30 5

3168

593

147

583

Table 18

EIB financing provided in the MNMCs from 1993 to 1997 (breakdown by country and sector) and for 1998 1993–97

1998 Resources Total

Own

Resources

Budgetary

30 250 182.7 30 32 174.4 84.4 80

Algeria Egypt Morocco Lebanon Turkey Tunisia Jordan Cyprus Israel Gaza/WB Malta Regional

102

966

880

86

Total

Sector

Total

Own

Budget

Energy

Communications

Water

Industry

Global loans

910 714 661 456 435 376 195 148 108 94 31 9

910 692 641 453 435 353 183 146 108 87 28 –

– 22 20 3 – 23 12 2 – 7 3 9

670 55 140 72 134 15 20 – – – – –

130 85 250 155 76 148 75 12 – 23 6 –

60 90 161 226 175 140 48 72 35 30 22 –

50 431 – – – – 5 – – 15 – –

– 53 110 3 50 73 47 64 73 26 3 9

4137

4035

101

1106

960

1059

501

512

253

254 Alain Guggenbühl and Margareta Theelen Table 19 Commitments of Community macro-financial assistance to non-member countries 1990–96 Hungary Czech Republic Estonia Slovakia Lithuania Latvia Romania Bulgaria Albania Israel Algeria Moldova Ukraine Belarus

1050 375 40 130 100 80 580 400 105 187.5 600 60 285 55

Total

4047.5

Part III The Socio-Economic and Human Dimension

This page intentionally left blank

12 EU Pre-Accession Strategy: the Social Dimension Andrei Popescu

Introduction The topic which this paper is addressing is of particular importance and complexity. The World Summit on Social Development, organized under the aegis of the United Nations in Copenhagen in 1995 – the last Summit of the Heads of State or Government at the end of the twentieth century – estimated, not accidentally, that inadequately addressed social problems such as unemployment, poverty and social exclusion may represent a real ‘social bomb’, even more powerful than the atomic bomb. Eight decades after it was proclaimed in the Treaty establishing the International Labour Organization (ILO) that a ‘lasting peace may be grounded only on the social justice’ the point is still of a fundamental importance. The social problems which the Central and Eastern European Countries (CEECs) are confronted with in their accession process to the European Union are challenging ones. Although at a certain time during their history these countries were ‘united’ by the same totalitarian ideology imposed by Soviet tanks, they have nevertheless preserved their historical, cultural, religious and legal traditions and, in reality, they have all lived very different experiences. Now, one decade from the fall of the ‘Iron Curtain’, essential differences remain among them which cannot be neglected while they also bear similarities. The social situation of the CEECs has been a complex one throughout the ten years of transition. Each of them has had to liquidate very rapidly a totalitarian system based on a single party and a centrally planned economy. It is also true that, while undergoing the transition to a market economy and undertaking efforts to align their own systems with western models and practices (and especially with the European Community ones) and while implementing the basic reforms, including the privatization of state-owned enterprises, the CEECs have been confronted with serious economic and social difficulties such as inflation, recession, high unemployment and low living standards. These problems are generated by the 257

258 Andrei Popescu

economic stagnation suffered as a direct result of the communist system and the systematic reforms thereof.1 The complexity is further accentuated by the well-known fact that one cannot draw a clear distinction between the social dimension and the economic, precisely because of the complex connections that exist between them. The strategy and the decision to opt for European integration are closely related to the reform process implemented in the CEECs because, despite the fact that they have succeeded to a large extent in building democratic societies, they continue to face economic difficulties. Therefore, these countries have yet to cover considerable ground before they will be able to implement the principles and mechanisms necessary to bring about an effective system of competition and macro-economic stability. Eventually, taken as a whole, these efforts should bring about the compatibility of the CEECs’ political, economic and social systems with the European Union’s structure, legislation and institutional mechanisms. I shall, in this contribution, briefly examine a number of legal questions raised by this complex process with regard to labour and social security law, in particular the difficulties encountered by the strengthening of the social partners, the development of the social dialogue and the implementation of the principle of tripartite social relations which the International Labour Organization and the European Union have been promoting for decades.

I. Forces at play in the modernization of social and labour law Labour and social security law in the CEECs have undergone significant changes. Although one may claim it to be new law, one ought to look upon it as something which is undergoing further reconstruction. It should be emphasized that the fundamental questions concerning the legislative conception which arose when the transition process started have now mostly been overcome. During that time the labour law principles and rules were themselves under discussion, their utility was subject to dispute and experts endeavouring to revise basic legal concepts considered its classical structures to be inadequate.2 Some claimed that, in the context of the transition from a centrally planned economy to a market economy, a ‘paralysis’ in social forces would be unavoidable. As regards trade unions, up to the momentous changes in the 1990s, the single trade union system (‘the driving belt between the single party and the working class’) was predominant in most of the CEECs. In the beginning of the transformation process, when state-ownership dominated economic life, it seemed that even the concept of employer itself had been compromised, at least in part. A review of the trends in the field of social partnership in the countries concerned reveals that the trade union movement developed rapidly with the result that representative trade unions were able to participate effectively in the collective bargaining procedures

EU Pre-Accession Strategy: Social Dimension 259

while they became credible partners in the social dialogue. The employers, for their part, dependent upon the faster or slower pace of the process of privatization and to the extent to which the private sector had developed in each national economy, were hardly able to find a place of influence. Modern labour law has always been founded on an inalienable relationship between the three social partners: workers (represented through trade unions), employers and the state. Also in the CEECs, the basic content of the labour law has been developed within this tripartite framework.3 If, on the one hand, there have been no doubts raised as to the role of the two social partners – trade unions and employers – on the other, however, serious reservations have arisen as to the role of the state for reasons related to its omnipotence in the former social order. The state remained a factor of influence on the nature of labour law. The role of the latter was indispensable since labour relations had to be regulated anyway. In the meantime, two revolutions took place in the development of labour law. In the first place mention must be made of collective bargaining, a phenomenon which has had multiple and direct consequences on labour law. Labour law has evolved, little by little, from strictly regulated public law while the collective bargaining principle has been put in place in a shift towards encompassing both public law regulations and private law-related contractual relations. Indeed, the fact that labour law is also partly private law in nature had already been recognized. Simultaneously, with the introduction of collective bargaining, another revolution gradually took place, this time in the mentalities of workers. Of course, due to the mind-set of the former ideology citizens were ill prepared for the challenges of the new social dialogue and market economy model. Today, many of the difficulties encountered in the beginning are things of the past. The strengthening of the rule of law, democracy and market economy institutions – such as competition authorities, social dialogue councils, bodies in charge of the tripartite or bipartite management of unemployment and social insurance funds – have significantly contributed to this fact. Furthermore, in countries such as Poland, the former Yugoslavia – in particular Slovenia – and Romania, workers’ self-management (the fact that workers administered the former socialist enterprises) was espoused for decades. Ideologically speaking, in the self-management system, every worker is not only a manufacturer but also an owner of the enterprise. Most of the CEECs have succeeded, to a greater or lesser extent, in putting this into practice (Slovenia, Romania partly). These workers became real ‘shareholders’ as a consequence of the privatization but, under the auspices of the market economy, have been dissatisfied at not being able to act as real owners. The process of modernization of legislation, in pursuit of the elimination of any trace of old ideology, was a very difficult one throughout the CEECs.

260 Andrei Popescu

In Romania, for example, after the adoption of the new Constitution in 1991, more than 3000 regulations drawn up had to be reviewed before their entry into force. At present, more than 2500 have already been repealed. In the case of the former Yugoslavia as well as, for example, in Russia, the situation has been further complicated by the parallel enforcement of federal and national regulations. Certain countries (Slovenia, the Czech Republic, Romania) debated, for example, whether they should proceed with a selective implementation of the regulations enacted during the communist period. In the end they eventually concluded that any explicit and total abrogation should be carried out only if a new regulation were to be enacted in the same field. They could not automatically give up the ‘overall’ application of those regulations because this would amount to creating a legislative vacuum. Social life requires the abrogation of certain regulations while new ones had to be worked out from the new market economy perspective and approximated with European Community rules. The approximation of national legislation with Community legislation is a long and complex process. The automatic implementation of Community texts or of the legal model of any EU Member State would have had adverse effects. For example, in 1995 the well-known Russian academic, Ivanov, said that Russian experts were not yet prepared to simply imitate or implement the experience of an EU Member State, all the previous attempts being characterized by dilettantism, by incapacity to correctly transpose a text in the context of the Russian realities and by a tendency to underestimate or even neglect those realities.4

II. The predominance of labour codes and their evolution in the light of the EC model In all the countries covered by this study, fundamental laws, the so-called labour codes, have been predominant until now. Of course, their texts have already frequently been amended or repealed and new regulations enacted. Sometimes, wrong interpretations and compromises have been made for the sake of the market economy. But market economy principles cannot be invoked to justify the denial or rejection of certain generally accepted and useful labour regulations, irrespective of the ideological system under which they were adopted. 5 If labour law has been dramatically altered by ‘cleaning’ it of outdated rules or of rules which had ‘ideological connotations’ or restricted workers’ rights, fundamental concepts such as the employment contract or workers’ civil liability have not, at least formally speaking, been altered. As already mentioned, in the CEECs, employment relations have traditionally been regulated by the existing labour codes. Except in a few cases, such as in Poland, these codes still govern all fields of labour law. But it is

EU Pre-Accession Strategy: Social Dimension 261

obvious that originally they did not regulate industrial disputes, the right to strike, collective redundancy or social protection of employees in cases of transfer of the undertaking or insolvency of the employer. In this context from 1990 onwards the question was raised as to how the law in this context could be developed. Two solutions were possible. First, the immediate adoption of a new labour code, which necessarily was to be a general basic regulation not designed to resolve all employment related problems or, alternatively, a more all-embracing code in which case a ‘maze’ of contradictions would arise between its provisions and the legislation in force. Second, the abrogation of those provisions in the existing labour codes impeding, under the new situation, the development of employment relations (i.e. by removing those restrictive regulations specific to the centrally planned economy infringing the free movement of workers and other fundamental rights). The solution chosen was to abolish certain special regulations while new ones were worked out or, as already mentioned, the legislature developed or enacted entirely new regulations, unknown up to that point in the concerned country’s legislative practice. Multiple reasons underlie this choice. Thus the future labour code will be worked out only after enactment or amendment, where appropriate, of the Constitution. Certain fundamental workers rights, such as the right to work, the right to collective bargaining, the right to rest periods, the right to social security, etc., have to be formulated in the Constitution as fundamental rights of citizens and only afterwards can they be further implemented through the provisions of the labour code. Furthermore, a labour code has to be implemented for decades; it is founded on the country’s main economic options. Where are we going? What is the relationship between the plan and the market? What about decentralizing the existing structures? What is the level of autonomy of the enterprises? How is the concept of privatization to be designed? These important questions, all to be addressed during the transition to a market economy, have influenced the relevant regulations as well as the design of the future labour code. This approach had the great advantage that the new and innovative regulations could be adjusted where needed. For example, in the case of Romania, Law No. 13/1991 on the collective labour agreement was repealed after five years of its being in force by Law No. 130/1996, also later amended (by Law No. 143/1997) at the request of the social partners. This is the way most of the CEECs have amended the old labour codes. To date, only Hungary and Bulgaria have adopted (in 1992) new labour codes. All the other countries have regulated the serious and pressing problems relating to new labour legislation, approximating with European Community regulations, by amending or updating the labour codes taking into account the transition to a market economy.

262 Andrei Popescu

As the comments of the European Commission in ‘Agenda 2000’ on the labour legislation demonstrates, it is clear that most CEECs are reforming their labour legislation. For example, the Czech Republic, Slovenia and Romania have announced their intention to work out new labour codes. This, however, raises the question of the need for radical restructuring of the political mechanisms while the renewal of the domestic legal order becomes one of the priority issues on the agenda of the legislative and executive bodies of the CEECs. Consequently, a complex process of modernization and democratization of the whole labour legislation began. This process may be divided into two phases: the first phase was characterized by the abrogation of certain non-democratic and restrictive regulations and their replacement by new regulations, worked out on the basis of the principles promoted by the International Labour Organization, Council of Europe and European Union; the second phase has as its main objective the establishment of a new legal order based on a coherent legal system, in conformity with EC regulations, and on democratic and market economy driven principles. In Romania, for example, the peculiarity of the period when such measures were implemented, namely that of dynamic trade union activity, resulted in the enactment of several regulations, some of them not yet in correlation with the provisions of the current labour code, nor even between themselves. Such a situation caused difficulties in the understanding and thus the correct implementation of the aforesaid legislation. As a result of the implementation of given solutions for given occupational categories, the concerned regulations might become the basis for new trade union claims. Besides the incontestable positive outcomes, the implementation of the regulations during the first phase entailed the correlation and, in the second phase, the systematization of the labour legislation. This requirement is also underlined by the legislators’ conception in the second phase when, as an urgent priority, regulations were enacted allowing for the implementation of market economy rules. The other aspects related to the legislative technique have not, for the time being, received the same attention. From a structural point of view, the new regulations have modified the whole labour relations system in that they represent the future framework of the new labour legislation and are approximated to a great extent with the requirements of European Community rules. There is no doubt that these new laws are an important step forward towards the creation of a new legal order in labour law, unknown until now, which will be based on the freedom and equality of social partners within a democratic society. The aforesaid regulations are innovations in the labour law system and their implementation is a difficult process due to the practical obstacles resulting from the inconsistent nature of the labour law and from its inadequate

EU Pre-Accession Strategy: Social Dimension 263

understanding. Nowadays, all the CEECs are confronted with the contradiction between the rapid renewal of the legal system and the slow pace of its understanding and, more especially, the implementation of the new regulations. From the legal point of view, the reform of labour law correlates with the systematization requirements. Thus the renewal process is to be brought about by developing, as already mentioned, new labour codes, drafted in conformity with EC requirements. This without a doubt will involve the abolition of laws enacted under the old ideology and, to a great extent, even laws adopted in the 1990s. Another problem, debated animatedly at the beginning of the important changes, was to decide whether the new labour regulations were to be the result of the social dialogue and collective bargaining, which were themselves undergoing a development process, or, on the contrary, ought to have been adopted by the legislative body on the basis, of course, of the EC legislative model and on the experience of those European countries welladvanced on the path towards a market economy. 6 One may say that in most of the countries concerned the regulations in force have been worked out in both ways. I have already emphasized the fact that social partners put in place their structures relatively slowly and that, during the transitional period, the legislative body had to intervene quickly while also taking into account the new social and economic realities. In this case, it has been obvious that the new regulations could not anticipate all the problems posed by the market economy, thus creating a risk of ‘instability’ in the social legislation adopted by those states. All these countries have abolished the old centralized labour legislation and have adjusted their systems, taking into account the models of certain European countries. But the solutions implemented so far cannot be mere imitations of western models. They are the result of the implementation of Community experiences and standards in national legislation, in relation to the realities of these countries, their legislative traditions and current social and political situation.7 This will be further illustrated by reviewing briefly the social dialogue structures and the pension system. In the last part, some of the basic aspects of the EC social acquis will be highlighted. The creation of social dialogue structures as a means of promoting social peace and facilitating the transition and integration process The creation of the framework for a constructive bi- or tripartite social dialogue has been a requirement throughout the transition of the CEECs to a market economy and their progress towards integration into the European Union. The multiple and complex problems related to economic and social reforms had to be sorted out in a climate of social peace, attained on the basis of a real social dialogue among all three parties: government, trade unions and employers.

264 Andrei Popescu

In Bulgaria, Poland, Hungary, the Czech Republic, Slovakia and Romania, economic and social councils have been set up as social partnership bodies to promote an effective social dialogue. Thus, for example, in Bulgaria, the National Council for Social Partnership was created; in the Czech Republic, the Economic and Social Agreement Council; in Poland, the Tripartite Commission for Social and Economic Affairs; and in Hungary, the National Conciliation Council.8 Most of these bodies were set up on the basis of a ‘gentlemen’s agreement’ (for example, in Bulgaria, the Czech Republic, Slovakia and Hungary), while in Poland it was set up on the basis of a decision of the government. In Romania, the organization and operation of the Economic and Social Council is regulated by Law No. 109/1997. Any assessment of the overall activity of these socio-economic structures must correctly reflect the importance of their role in the preservation of social peace, as well as their incontestable contribution to the development of social legislation. The specific problem of pension systems in the CEECs The pension systems in the CEECs were designed on the basis of the structure and ideology of a centrally planned economy. The influences of the old economic principles are still apparent in the present pension systems, ignoring, in particular, the incentive-related considerations. Furthermore, the allocation objectives were designed on the basis of a framework of centralized wages starting from the idea that all adults were to be employees, thus requiring smaller money transfers for the improvement of income levels and, as a consequence, of the well-being of the individuals and families. Due to the ideological premise of unchanging price levels, it was deemed unnecessary to calculate benefits and implement regular adjustment mechanisms in such a way as to take account of their modification. This is a danger which is still present in most countries undergoing transition, all of them being required to adjust their pension system to new economic realities.9 The objective of the pension system reform is not only to replace an inefficient system by a more efficient one, but also to implement several other objectives. First, one has to review the role that public pensions should play in the future context of a market economy. Second, the reform of the current system or the design of a new pension system must not only be adequate but also conform to European Community requirements and take into consideration the tendency towards an ever ageing population. When reviewing the conclusions of ‘Agenda 2000’ with regard to social security, one may conclude that all CEECs are undergoing a difficult period with serious problems and significant changes despite the fact that most of these countries in their legislation cover the classic social risks. The Czech Republic, Hungary, Poland and Slovenia have social security schemes that are better adjusted to the EC requirements; the other countries have, in the

EU Pre-Accession Strategy: Social Dimension 265

future, to focus their efforts on the development of adequate social protection measures. Meeting the EC social acquis The European Commission’s 1995 White Paper on the preparation of the associated countries from Central and Eastern Europe for integration into the EU Internal Market in conjunction with ‘Agenda 2000’ provides an overview of the indispensable legal requirements of accession in the social field. The associated countries have to adjust their standards in the following main areas: ●

●

●

●

●

Coordination of social security schemes in conformity with Regulation 1408/7110 and Regulation 574/72.11 In the case of these regulations, enlargement is not an ‘immediate concern’ of the Commission. However, after accession, nationals of CEECs will be entitled to exercise their right to freedom of movement and to benefit from the above regulations. Occupational health and safety: the relevant directives are the first framework Directive 80/1107/EEC12 and the four special Directives, as well as the second framework Directive 89/391/EEC 13 and the 13 special directives. Approximation in this area will entail effective implementation and thus the setting up of the required infrastructure, the adequate training of workers and the creation of efficient labour inspectorates. Equal opportunities for men and women: there are five directives on equality (75/117/EEC,14 76/207/EEC,15 79/7/EEC,16 86/378/EEC,17 86/ 613/EEC18) plus the Directive related to the protection at work of pregnant or breastfeeding women (92/85/EEC 19). A special infrastructure, other than the existence of a judicial system, is not required. An administrative body of the national government should have the responsibility for the implementation and supervision of the legislation on equality. Labour legislation and working conditions: EC regulations include Directive 75/129/EEC20 on collective redundancies, Directive 77/187/EEC21 on the transfers of undertakings, Directive 80/987/EEC22 on working time and Directive 94/45/EC23 on information and consultation. The implementation of these directives requires the existence of supervision tools, appeal procedures and workers’ representatives as well as a competent public authority. The Commission assumes that all these elements are currently in place in the CEECs. Tobacco products: the implementation of the two relevant directives depends on the technical capacity of the CEECs to measure the tar content of the cigarettes. The White Paper emphasizes that the implementation of this legislation should be a priority.

266 Andrei Popescu

In 1999, the European Parliament also identified the major social problems related to accession to the European Union. 24 According to the European Parliament: ● ●

●

●

● ● ●

the legislative reforms are not accompanied each and every time by real changes in terms of practice; there is a persistence of macroeconomic problems such as an oversized agricultural sector, an outdated heavy industry, currency problems and a high rate of unemployment; there is also the persistence of administrative and social problems such as inefficiency, insolvency, inadequate social security benefits, low government resources and the payment of ‘tips’ for state-funded services; Community funds need to be reallocated for the purpose of increasing the subsidies available to the CEECs to the detriment of current Member States, a reallocation which may be expected to cause tensions among existing Member States; severe environmental problems continue to affect social policy and the quality of life; organized crime remains a critical problem in the CEECs; migration to western European countries continues as a result of the persistence of economic disparities between associated countries and Member States and the increasing poverty of the CEECs.

The associated countries to the European Union shall be required to approximate their national law with the European Community social policy. The social acquis covers several sectors such as occupational health and safety, consultation and participation of workers, protection of employees, equal opportunities, free movement of workers and vocational training.

Conclusion The review of the pre-accession social commitments in the light of ‘Agenda 2000’ also reveals some other aspects. Thus, in respect of labour legislation, the Czech Republic, Hungary, Lithuania, Poland and Slovenia have, to a great extent, transposed the principles of Community labour law. Without exception, the associated countries have been recommended, on a case-by-case basis, to observe the Community requirements on collective redundancies and social protection in the case of the transfer of an undertaking or insolvency of the employer. Recommendations have been made to Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Slovakia and Romania with a view to developing their legislation on information and consultation of workers within the undertaking. Poland and Slovakia have been advised to develop their system of information and consultation by way of a more democratic and efficient representation of workers in the enterprise.

EU Pre-Accession Strategy: Social Dimension 267

With regard to equal opportunities for men and women, the basic principles of Community legislation are being implemented in all candidate countries and especially in the Czech Republic, Hungary and Slovakia. Slovenia has still to adjust its regulations on parental leave. In Latvia, Lithuania and Poland the non-discrimination principle is not always observed with regard to equal pay for equal work, in some cases the remuneration gap between men and women being a substantial one. In Estonia, the non-discrimination principle can partly be seen in practice, especially in respect of equal pay for equal work and advertising for jobs. In Bulgaria, legislation in favour of women is not always enforced and the situation of women even appears to have deteriorated. There are no industrial tribunals and it is not obvious whether certain discrimination cases may be submitted to regular courts. In Romania, the laws protecting women are not always enforced. As for free movement of workers, associated countries do not seem to be confronted with major obstacles to the implementation of the relevant Community acquis. However, the free movement of workers requires certain adjustments to national legislation, in particular as regards access to employment and non-discrimination based on nationality. As regards social security for migrant workers, accession should not raise major problems for the candidate countries even if certain technical adjustments are required. The candidate countries should all pay special attention to their administrative capacity for implementing coordination rules in their relations with other states. The Czech Republic, Estonia, Hungary, Poland, Slovakia and Slovenia seem to have the administrative structures required for the implementation of these tasks but additional training is still necessary before accession. Romania and Bulgaria must introduce the administrative structures required for their operation within the coordination system. Latvia and Lithuania should also implement the administrative structures required for their integration into the coordination system but they must also make significant efforts in terms of planning and training efforts. On the whole, and notwithstanding the ‘gigantic’ task, the CEECs have made significant progress in the social field in this pre-accession phase. But they are still confronted with serious social problems, the settlement of which may last between two and ten years depending on the state concerned. If these countries make optimum use of it, the assistance provided by the European Commission will speed up the pace of approximation of their national legislation to the Community acquis and bring them closer to becoming members of the European Union.

Notes 1. 2.

M. Pliszkiewicz, ‘The development of Industrial Relations in Central and Eastern Europe’, Polish Labour Law, 1995, 127. W. Szubert, ‘Réflexions sur les modèles de droits du travail’, Droit Polonais Contemporain, 1 (85), 1990, 5.

268 Andrei Popescu 3. Ibid., p. 6. 4. S. A. Ivanov, ‘Le droit du travail: rompre avec l’héritage soviétique’, in Russie: le droit en constitution (Paris: La documentation française, No. 753, 1995), 21. 5. Ibid., p. 21. 6. M. Pliszkiewicz, ‘Vers des nouvelles relations professionelles en Europe de l’Est’, Les relations sociales dans les pays de l’Est. Les jeudis de l’I.N.T.E.F.P. (Paris: Ministère du Travail, de l’Emploi et de la Formation Professionelle, 1994), 23–5. 7. Ibid., 32. 8. O. Predescu, ‘Dialogul tripartit-un imperativ al tranzitiei’ (‘The tripartite dialogue – an imperative of the transition’), Munca si progres social (Work and Social Progress), 1–2, 1996, 8–9. 9. S. Ghimpu, Al. Ticlea and C. Tufan, Dreptul securitatii sociale (Social Security Law), (Bucharest: All Beck Publishing, 1998), 102–3. 10. OJ, L149/2, 5 February 1971, as amended. 11. OJ, L74/1, 27 March 1972, as amended. 12. OJ, L327/8, 3 December 1980, as amended. 13. OJ, L183/1, 29 June 1989, as amended. 14. OJ, L45/19, 19 February 1975, as amended. 15. OJ, L39/40, 14 February 1976, as amended. 16. OJ, L6/24, 10 January 1979, as amended. 17. OJ, L225/40, 12 August 1986, as amended. 18. OJ, L359/56, 19 December 1986, as amended. 19. OJ, L348/9, 28 November 1992. 20. OJ, L48/40, 22 February 1975, as amended. 21. OJ, L67/26, 5 March 1977, as amended. 22. OJ, L283/23, 20 October 1983, as amended. 23. OJ, L254/64, 30 September 1999. 24. European Parliament, Les aspects sociaux de l’´e largissement de l’Union Européenne, Luxembourg, Fiche thémathique No. 39, 1 July 1999, 4.

13 The Economic, Social and Political Impact of the Euro-Mediterranean Partnership Bichara Khader

Introduction: what is the Euro-Mediterranean Partnership? Formal institutional relations between the European Community/European Union and the countries of the southern basin of the Mediterranean region date back to the end of the 1970s, with the adoption of the Global Mediterranean Policy and its improved version called the Renewed Mediterranean Policy which came into effect in 1992. Both were tradebased agreements providing for preferential access, under certain conditions, of southern Mediterranean industrial goods and agricultural products to the European Market. The Euro-Mediterranean Partnership (EMP), as embodied in the Barcelona Declaration (28 November 1995), differs from this traditional approach and is meant to be a more comprehensive region-wide strategy aiming at fostering ‘peace, stability and prosperity’ in the Mediterranean region through the ‘gradual creation of a Euro-Mediterranean free-trade area by the year 2010’. To achieve this goal, three areas for priority action have been singled out: ● ● ●

support for economic transition; support for improved socio-economic equilibrium; support for regional integration.

Two main types of financial instruments have been harnessed: ● ●

budgetary resources (4685 m euro); EIB loans (+/– 5000 m euro).

Since 1995, several bilateral agreements, of this new generation, have been signed with Tunisia (1995), Israel (1995), Morocco (1995), Jordan (1997) and the PLO for the benefit of the Palestinian Authority of the West Bank and the Gaza Strip (1997) and a customs union has been established 269

270 Bichara Khader

with Turkey (1996). Negotiations are under way with Egypt and Lebanon while exploratory talks have been undertaken with Syria and Algeria. The main features of these agreements are: ● ● ●

progressive elimination over 12 years of all tariffs on industrial goods; limited trade liberalization for agricultural products; and adoption of a wide range of regulations on rules of origin, competition policy, intellectual property rights and institutional adjustment.

Clearly, the key focus of the new association agreements is the gradual comprehensive liberalization of southern Mediterranean countries and a restructuring of their economies. Thus the Euro-Mediterranean Partnership is nothing else than another structural adjustment and stabilization programme of the kind imposed by the IMF and the World Bank governed by the liberal capitalist free market ideology. Indeed, the diagnosis of the economic situation of southern Mediterranean countries which is proposed in the Barcelona Declaration does not differ from that of the IMF or the World Bank. And the prescription is almost identical: southern countries should continue to carry out programmes of adjustment and stabilization to reduce aggregate demands. This should be achieved through: ●

●

●

policies related to the public budget (decreasing subsidies of a social nature, raising prices of public and government services, downsizing the intervention of the state, transfer of ownership of assets from public to private management, increasing direct taxation and freezing the salaries, wages and allowances of government and public-sector employees, etc.); policies related to the balance of payments such as the increase in the level of foreign reserves through increasing exports (by directing resources to investment in the export sector) and decreasing imports (by currency devaluation). All this presupposes: – trade liberalization (dismantling custom barriers and quantitative restrictions on imports and cancelling controls on foreign exchange and giving every incentive to private foreign investment, etc.); – price liberalization, in order to provide incentives for increasing production efficiency, the optimum allocation of resources and distribution of income; monetary policy restricting money supply to reduce inflation rates and develop capital markets.

Thus the core objectives of the Euro-Mediterranean Partnership are: liberalization, deregulation and privatization. The European Union is convinced that unless southern Mediterranean countries adopt bold and courageous measures to correct the imbalances in their economies and face up to the

Socio-Economic Impact of the EMP 271

challenge of global competition, their future will remain bleak and their economies will eventually collapse. Moreover it highlights closely related benefits of liberalization: ● ●

●

efficiency gains as competitive pressure will trigger a reallocation of resources and raise the efficiency of local enterprises; attracting investments since the opening up of the economies will attract foreign investor interest and offer new incentives for local investors to manage or buy public assets and to engage in joint-ventures; allowing for regionalism, whereby the prospect of a free trade area encompassing an enlarged EU and all the Mediterranean Non-Member Countries (including all Arab countries) generates enough credibility and confidence to attract more investment in the Mediterranean NonMember Countries, thus dissipating the ‘hub and spoke effect’ (which usually diverts investments from the spokes (Mediterranean countries) to the hub (EU) because investing in the hub offers access to all Mediterranean Non-Member Countries).

I. Socio-economic impact of the Euro-Mediterranean Partnership and structural reforms No interdisciplinary and exhaustive research has been conducted to thoroughly assess the total socio-economic impact of structural reform programmes on each southern Mediterranean country. The European position on the socio-economic impact of the reform policies is that it is too early to be assessed empirically and is by and large speculative at this stage. But among Euro-Mediterranean experts, there is a consensus that the socio-economic impact may be negative, at least in the short term, although it may be differentiated with winners and losers. The mediumand long-term impacts, however, are expected, if economic reforms are conducted coherently and accompanied by important flows of foreign capital and the mobilization of local savings, to be beneficial to all groups of society. These elements should be kept in mind if we want to avoid general assumptions which are meaningless for sociological analysis and correctly understand the effects of structural reforms as advocated by the Barcelona Declaration as well as evaluate the long-term sustainability of the whole project of a free trade area in the Mediterranean. Given this precautionary premise, this paper assumes that correcting structural imbalances and exposing southern Mediterranean countries to international competition will entail high costs for the states and for certain sectors and social categories, at least in the first five to seven years of the transitional period.

272 Bichara Khader

Loss of fiscal revenues Unilateral tariff reductions and customs dismantling entail substantial losses of fiscal revenues for southern Mediterranean countries. Admittedly, this loss will vary according to the openness ratios (relationship between exports and imports to GDP). If we take the example of the Maghreb countries, the ratios range from 39 per cent for Morocco to 43 per cent for Algeria and 82 per cent for Tunisia (as against, for example, 22 per cent for Mexico). Thus countries with such a high ratio of openness are more vulnerable to trade liberalization. Dismantling customs barriers will immediately lead to loss of fiscal revenues, decline in economic activity and loss of jobs.1 In the case of Tunisia, to take one example, studies estimate that without special conversion programmes, 60 per cent of industrial production (representing 10 per cent of GDP) is threatened. ‘La mise à niveau’ (conversion programmes) might save one-third of the sector but the costs of transition are estimated at $2.2 billion.2 Algerian and Moroccan experts have reached similar conclusions.3 This negative impact is not offset by the benefits deriving from increased access to European markets, first because southern Mediterranean countries already have free access to the European markets for their industrial products, while the EU is not willing, for the time being, to dismantle its own barriers, notably the Common Agricultural Policy (CAP), to allow free access to Mediterranean agricultural products. The loss of fiscal revenues poses a serious challenge for many countries. It can eventually be counterbalanced by indirect taxation, since the existing potential tax base is low and there is considerable room for improvement in tax systems. But this will take some time. So the question is how to graduate the tariff reduction schedule to provide enough time for the improvement of tax systems. The economic bias of Euro-Mediterranean disadvantages for wage earners

Partnership:

the

Not only is the Euro-Mediterranean Partnership economically biased but most policies, in spite of the injection of aid and concessionary loans and the provision of safety nets, seem designed to redistribute income and wealth in favour of owners of capital to the detriment of wage earners. Rising interest rates, lowered taxes for the wealthy and tax exemptions for private investment on the one hand, with wage freezes, price rises, cancellation of commodity subsidies, increases in the prices of public services, etc., on the other hand, are extremely detrimental to wage earners. The long-term implications of Euro-Mediterranean relationship: ‘satellization’ or real convergence? If the full impact of the removal of customs duties is not experienced during the transition period (first five years), the potential long-term effects

Socio-Economic Impact of the EMP 273

will be more worrying. It should not be forgotten that the originality of EMP is that southern Mediterranean countries should open up their markets to international competition but that they must do so in a context of stagnant economies, protected industries and a relative lack of dynamic, high addedvalue comparative advantages. Hence there is a danger not only of increased trade deficits but also the very ‘satellization’ of southern Mediterranean economies. Not all the countries face the same perils. A country like Israel, with a diversified economy and scientific and technological skills, can face up to the challenges and, admittedly, maximize its gains from its exposure to European competition. This does not mean that some Mediterranean exporters will not benefit from this new partnership. Old and new bourgeoisie who have good connections with the state bureaucracy and the elite regime may well be the main winners of the reform process while others (newly graduated students, the rural population, urban poor, women, etc.) may remain at the losing end. This means that if EMP does not succeed in producing global gains for the weaker social groups in terms of GDP growth and increased rates of employment, frustration will build up, inducing disenchantment and resistance. Here lies the importance of financial assistance and flows of foreign capital in order to achieve a real economic convergence between the two shores of the Mediterranean. But such an ambitious goal will remain beyond reach without substantial flows of foreign and domestic investments (almost an impossible task in the present conditions), 4 and also without massive funding, at least comparable to what has been poured into the Spanish and Portuguese economies since 1986 in order to ensure a higher degree of convergence with stronger EC Member States. It is doubtful whether the 4685 m euro can be of any help without decisive action on the debt issue in terms of debt forgiveness, debt conversion or service-burden easing.

II. The social impact The deterioration of the labour market As a result of high rates of population growth (although declining in the Maghreb, Egypt and Lebanon), inadequate strategies of development and the erosion of various forms of state rents, unemployment has skyrocketed in all southern Mediterranean countries. And every year, due to the age pyramid, groups numbering several million will be leaving the schools to look for a job. Since the primary sector can no longer play any role whatsoever in the creation of new jobs and since the state, the number one employer in certain countries (60 per cent of total employment in Algeria), is no longer a refuge for job seekers, it will be up to industry, public works, education and the services sector to provide new employment opportunities. This implies a growth in employment, excluding agriculture and

274 Bichara Khader

public administration, which should average 3.4 per cent in Tunisia, 4.5 per cent in Morocco, 4.6 per cent in Algeria, 4.5 per cent in Egypt and 4.9 per cent in Jordan, Syria and Lebanon. This is an unachievable objective in the short and medium terms: first, because no Mediterranean country is in a position today to balance the supply and demand of labour due to economic constraints; second because ‘deprotected’ industries will lead to important layoffs which, in their turn, will aggravate the unemployment situation; and third, because the states have less financial resources than in previous decades due to the burden of debt, the erosion of traditional rents (inter-Arab solidarity funds), the decrease of migrants’ remittances and the drop in oil prices. Let us dwell for a moment on the issue of the public sector and youth employment. It is well known that the roots of the problem of youth unemployment can be traced back to the past dominance of the economy by the civil service, whereby the states guaranteed public sector employment thus performing one of the main channels for upward mobility – mainly for educated people. Today no southern Mediterranean state is in a position to secure public sector job opportunities. Let us take the example of Jordan: the share of public sector employment in total employment decreased from 50 per cent in 1987 to 33.7 per cent in 1993. In 1995, out of 40 000 qualified applicants for employment, the public sector employed only 5500 persons.5 The situation has since become worse. With the decline of public sector job opportunities in all southern Mediterranean countries, new university graduates have to undergo a long period of unemployment or underemployment with no particular job in sight since the private sector is not sufficiently consolidated to take over the role of the public sector. Already, the unemployment of young university graduates is increasing at alarming rates in Morocco, Algeria, Jordan and, to a lesser extent, Egypt. Linked to this specific issue of youth unemployment is the delay in contracting into marriage and a further decline in population growth, mainly in the Maghreb countries, and an increasing imbalance between the supply of skills and the demands of changing production structures, i.e. the discrepancy between the output of the educational system and the training requirements of the labour market. The Euro-Mediterranean Partnership does not offer any remedy to this daunting challenge. On the contrary, there are many reasons to believe that unemployment rates will keep soaring, affecting unqualified and educated groups alike. Increase of ‘illegal’ migration Since regular emigration no longer serves as a safety valve as it did in the past, irregular migration appears to be one of the survival strategies in times of public sector downsizing.

Socio-Economic Impact of the EMP 275

Already Italy and Spain, which have been immigrant-sending countries for decades, are becoming new destinations for irregular flows not only from Kosovo or Albania, but also from Maghreb countries. The data compiled by Pietro Iaquinta solely on the basis of residence permits confirm this new trend of North African immigration to Italy with 150 460 permits in 19926 and probably double this figure in 1998, to which we have to add non-regularized residents estimated at around 100 000, thus making a total stock of more than 400 000 (regularized and ‘irregular’). Official statistical data confirm the presence of 52 501 regularized Moroccans in Spain (at the end of 1992), 3113 Algerians but only 222 Tunisians. But North African immigrants were well over 70 000 (including 65 847 Moroccans) in 1993.7 Recent studies suggest that this figure exceeds 150 000 regularized migrants in 1998, to which one has to add at least 200 000 irregular migrants (‘migración indocumentada’) thus representing an estimated total stock of 350 000 to 400 000 North Africans in Spain. These figures clearly indicate that the reform policies and EMP cannot, at least in the short and medium terms (the ten coming years), reverse these trends and ‘illegal’ migration will probably continue in spite of all the maritime surveillance techniques, spurred on by deteriorating employment opportunities in the sending countries and the closing of the official tap of regular migration in the European countries. And as long as there is such a huge disparity between the supply of labour (1 600 000 job-seekers per annum in the eight Arab members of the EMP) and the demand for them (less than 600 000), young people will seek new horizons, sometimes at the risk of their lives.8 The development of the informal sector Another consequence of the deterioration of the labour market is the drop in the share of wage-earners out of the total number of employed which fell in Morocco, to take one example, from 70 per cent in 1982 to 65 per cent in 1997 (60 per cent in 1990). Today, informal wage-earning forms (informal sector, home services, apprentices, etc.) represent more than 30 to 35 per cent of the total workforce. Such expansion of the informal sector might simply be caused by the impoverishment of those who are engaged in the formal sector or of those who cannot cope with the economic recession. But the development of the informal sector cannot only be associated with structural reforms – it preceded such reforms. But there is no doubt that the differentiated impact of these reforms badly affects the urban poor and often leads to the impoverishment even of the former middle class. Increasing poverty A deterioration in the nutrition and health of the low-income groups has been clearly observed in most of the Mediterranean and Arab countries applying stabilization and adjustment programmes. 9 The

276 Bichara Khader

Euro-Mediterranean Partnership will add to their hardships. The rise in prices of public sector services and the lowering of public expenditure on health and education has already led to a noticeable decline in the quality of education and enrolment ratios for compulsory education. Case studies on Maghreb countries reveal that families pulled their children – mainly girls – out of school for lack of subsidies on transportation, thus increasing the rates of child labour. On the other hand, deterioration in rural social services has entailed rural–urban migration, increasingly resulting in the phenomenon of squatter settlements.10 The rural population may well be the main loser of EMP: not only because, in southern Mediterranean countries, it represents between 30 and 45 per cent of the total population but also because it is the group most vulnerable to adjustment policies. Firstly, agricultural products are still barred from free and unfettered access to European markets, and secondly, the reduction of state subsidies and services may cause unbearable hardships. In Egypt, for example, in 1992 subsidized foods made up 17.9 per cent of the expenditure on food by the poorest section of rural households and 50 per cent of their per capita calorie intake. Furthermore, economic reform programmes may encourage an export-oriented strategy concentrating on high value and low nutritional crops aimed at the European markets, to the detriment of domestic food supply for local consumption and also to agricultural productivity.11 The widening gap impoverishment

of

income

distribution

and

middle-class

Where adjustment policies gave better results than expected in terms of decreasing rates of inflation (in almost all Arab Mediterranean countries), diminishing current account deficits and increasing foreign exchange (Algeria in 1996–97), the cost of such improvements has been a widening gap of income distribution. In some countries 10 per cent of the population get some 50 per cent of national wealth. In most Arab Mediterranean countries, the wages of the lowest economic group suffered a 65 per cent decrease over the period 1987–97. In all of them, middle classes became impoverished because of the frequent price increases (Egypt and Morocco), the decrease of real wages, the worsening political situation and frequent closures (West Bank and Gaza Strip), or the postwar reconstruction policies (Lebanon).12 Another worrying trend which may not show up in national statistics but which is intimately linked to increasing impoverishment, is the deterioration of health and nutrition indicators. Life expectancy in Egypt does not exceed 61.6 years (1990–95) while it oscillates around 66.6 (Jordan, Palestinian territories and Syria) and 68.5 (Lebanon). Poor hygiene, sanitation, drinking water supply and other inadequate basic services often

Socio-Economic Impact of the EMP 277

translate into high infant mortality rates in most of the southern Mediterranean countries when compared with EC countries. All these hardships are not directly connected to structural reforms nor to EMP; nevertheless it is true that they derive from inadequate state development policies. It goes without saying that the new trade and price liberalization policies are actually aggravating income disparities: the upper strata of society are becoming richer while the situation of the poor is becoming more precarious. Thus, as a study on Sudan’s economy revealed, ‘not all agents are necessarily losers in such adjustments’.13 In other words, those who usually bear the brunt of reform policies and foot the bill are the poor, urban poor, the rural population, women, and youth. Consequently those who should theoretically benefit from reform policies contradictorily are disadvantaged by it. It is the least needy category of the population which is supposed to gain from the liberalization process. Putting it in a nutshell, one may say, as underlined by V. Perthes,14 that ‘losses of economic reforms and liberalization were socialized while their gains had been privatized’. The number of new millionaires in Egypt and elsewhere and the number of luxury cars in circulation are but a tiny indication of social transformation in the post-‘infitah’ (Arabic word meaning open-door policy) era in Arab Mediterranean countries. No doubt the implementation of economic liberalization reforms in an ad hoc, unsustainable, incomplete and selective fashion did contribute to widening the disparities between the rich and poor because of the simple fact that ‘growth rates alone do not guarantee an equitable distribution of wealth’. Latin American countries provide ample evidence of respectable growth rates with unacceptable and inhuman social imbalances. As E. Kienle puts it: These trends towards unequal development will not be reversed by EMP, at least not in the short term … Nor will the partnership stop the relative impoverishment of the southern Mediterranean countries in relation to the EU. Even if their GDPs double, which is one of the objectives of the EU policies, this will not be sufficient to prevent the prosperity gap between them and the EU from doubling from 10 : 1 today to 20 : 1 by the year 2010.15 The political impact of the Euro-Mediterranean Partnership Although the quest for democratization is mentioned more than once in the Barcelona Declaration, prospects for democratic development seem low because of the historical processes of state formation mainly in Arab countries and the contemporary impact of political economy and reliance of the regimes on military control, political repression or

278 Bichara Khader

rent-distribution. 16 Certainly, we may witness a limited degree of political liberalization (expansion of public space, recognition of civil and political liberties, free political discourse, holding of elections) but real political democratization 17 (real and meaningful collective control over public policy) is not on the agenda. The Euro-Mediterranean Partnership and the liberalization process with which it is associated may produce some paradoxical, even contradictory, effects. On the one hand, it is often argued that authoritarian states might loose their grip on the society because of the erosion of their financial resources which allowed, in the past, massive public employment and social welfare to be sustained and fuelled powerful patronage networks. It is argued also that the expected growth of new economic elites, the slimming down of the role of the state as an entrepreneur and principal employer and the exposure of the societies to non-state information systems may also weaken state control. Austerity measures will provoke riots, especially among urban populations. Graduate students who used to seek jobs in the state apparatus will find themselves thrown on the street. Consequently, radical protest may well develop. Opposition movements may espouse religious radicalism or even regional and ethnic separatism, thus putting into jeopardy the very cohesion of the newly built states. In such a context we may experience a slow erosion of the ‘historic’ legitimacy of various regimes (as state founders), economic legitimacy (as state builders) and social legitimacy (as job providers). But this may happen at a time when no other legitimization is offered since democratic legitimacy still remains no more than wishful thinking or is still confined to an electoral process. Here lies the paradox of the Euro-Mediterranean Partnership since it advocates a cautious withdrawal of the state and an increased role for the private sector. Often when the local bourgeoisie remains in limbo, the private sector is linked with the political elites but lacks the strength, self-assurance and assertiveness to take over the role of leading the liberalization process from the state. And when deep structural transformation of the southern Mediterranean economies comes about, it will probably need the authority of a strong state to impose it. Thus, if we assume that the Euro-Mediterranean Partnership aims at widening the space for civil society, it will certainly not produce real democratization any time soon. Regimes will deploy other substitutes for pluralism as ‘clientelism’, selective co-optation or ‘corporatism’, while holding repression in reserve.18 What remains to be seen is the impact in the long run of liberalization on the political system and vice versa. Obviously, there is no automatic connection between economic performance and regime type, although traditional wisdom tells us that economic globalization and the spread of information will accelerate the process of softening the control of authoritarian regimes and empowering civil societies.

Socio-Economic Impact of the EMP 279

Indeed, it would be risky to predict a total retreat by the states. Rather than a retreat, southern Mediterranean states will probably have to restructure their activities in order to bring about smooth economic transformation without endangering the very survival of their regime, or, at least, without losing hold of the process. This is particularly true in countries which are still reluctant to cooperate with the World Bank or the IMF, like Syria. As V. Perthes puts it: ‘In a case like the Syrian where absolute primacy has been given to national and regime security, the recognition of the particular risks that economic liberalization may entail will corroborate the inclination of the regime to steer such a process according to its own schedule’,19 by introducing reform measures selectively and extending its patronage basis to the private sector – a policy which Syria shares with other southern Mediterranean countries engaged in economic adjustment like Morocco, Tunisia and Egypt. 20 No wonder, therefore, that the local bourgeoisie, sometimes limited to a handful of businessmen and entrepreneurs, is not inclined to seek swift economic or political change which might jeopardize monopolistic control over the economy, in that it is reluctant to engage in active politics since it owes much of its power to state-led adjustment reforms and derives enormous benefits from the patronage of its family links with ministers and heads of ministeries or, as in the Palestinian case, from its connections with the Palestinian Authority and the Israeli market.21 Moreover, country studies in other continents do not support the idea that economic liberalization and democratic liberalization are interconnected. The cases of Chile and the Asian Tigers give ample evidence that interventionist states, under certain circumstances and at least for a certain time, can prove successful economic reformers. This entails a measure of selective co-optation of certain economic and social groups in the political system under a ‘façade’ of pluralism which is often intended to ‘modernize’ power control rather than to really share it. This is what is called ‘democratization from above’. This invalidates the view that privatization usually leads to democratization. Although theoretically there may be some truth in this assertion, all depends, however, on the real space occupied by the private sector (expansion), its connections with the state (patronage or relation independence), its contribution to the accumulation process (participation in GDP growth), the breadth of its impact on the efficiency of the modernization process and its capability to generate new employment opportunities (contribution to the labour market). All this leads to the suggestion that Euro-Mediterranean specialists should embark upon an in-depth study of the political economy of the EuroMediterranean Partnership in order to confront the postulates of the Barcelona Declaration on human rights, democracy, civil society and the role of the states undergoing the social economic changes on the ground.

280 Bichara Khader

This will help us to avoid wishful thinking which may obscure our judgement and lead us to hasty conclusions on the charme discret of EMP as an engine of smooth political change.

Conclusion All southern Mediterranean countries have, to varying degrees, implemented policies of gradual trade and price liberalization and structural adjustment, pushed forward by the IMF and encouraged by the European Union. These policies have often proved deeply unpopular but governments, whether decisively or reluctantly, have accepted the IMF and EU prescriptions while, sometimes, considering them an infringement of their economic sovereignty. Although the socio-economic and political impact still needs further scrutiny, the view which has been advocated in this paper suggests that there is an immediate socio-economic cost of economic transformation which is unequally distributed among the various population groups. Some groups are going to gain from the reform process. Others will be at the losing end in spite of safety nets and support measures. Moreover, there is also a political risk for the authoritarian regimes, at least in the medium and long terms, although in the short run, old and new local bourgeoisie will remain prone to leaving politics to the regime already in place, as long as its secure stable environment continues to allow the bourgeoisie to prosper. These costs and challenges need to be addressed correctly in order to lessen their effects on the weaker strata of the society and, hence, their opposition or resistance to EMP. EMP must be understood as a gradual process, a challenge for the future of the stability of the region and within the countries themselves. But it can also be a promise if European states regard the Mediterranean region not only as a zone of simple trade expansion but as a real potential partner in shared prosperity and security. For the time being, EMP remains for Europe a low-cost gamble, offering considerable advantages with a minimum of financial sacrifice; the 4685 m euro of aid over the first five-year period for the Mediterranean region represent the equivalent of the annual American aid to two countries, namely Israel and Egypt. Even when matched by concessionary loans by the European Investment Bank, all this money, in itself, remains insufficient to help the restructuring of their stagnant economies. And unless the debt question is finally put on the agenda of the Barcelona Follow-up Committee, no significant progress may be anticipated, at least in the short term. But for the southern Mediterranean countries themselves, EMP represents a risky gamble. If they fail to correctly redistribute in social terms the potential gains of EMP, then social disparities will inevitably erupt into

Socio-Economic Impact of the EMP 281

radicalism and violence. Therefore, strong intervention in favour of lowincome groups should not only be a ‘support measure’ but also a ‘core policy’ of southern Mediterranean countries. Thus the theory of the ‘trickle-down effect’ that it is necessary if the poor are to become less poor that the rich become richer in the first place is scarcely debatable. Case studies provide ample proof that without state intervention, the trickledown will not occur22 not only because the whole modern industrial sector might become an ‘enclave economy’ with few inter-sectoral linkages but also because, in the absence of real domestic competition, private monopolies might replace public monopolies, thus minimizing the potential positive spillover effects on the economy at large. Most probably, the main challenge of southern Mediterranean countries in the years ahead will be, as Nazih Ayubi summarizes it,23 how to fulfil the two basic and often naturally contradictory functions of ‘accumulation and legitimization’, the first requiring the creation of conditions for maximizing profit, the second requiring the creation of the conditions of social harmony and political stability.

Notes 1. A. Mahjoub and H. Zaafrane, ‘La zone de libre-échange euro-méditerranéenne; défi économique et impacts sociaux pour les P.S.E.M.’, unpublished paper, 1997. 2. G. Joffé, ‘Views on policy toward the South’, in IEEI-FES Conference, Lisbon, September 1997. 3. R. Abdoun, La conduite des réformes économiques en Algérie, paper presented to EMMA Seminar, 1998; L. Jaïdi and F. Zaïm, La mise à niveau de l’industrie marocaine face aux échéances de la zone de libre-échange, paper presented to EMMA Seminar, 1997; D. Cogneau and G. Tapinos, ‘Libre échange, répartition du revenu et migration au Maroc’, in Revue d’économie du développement, 1, 1995. 4. B. Khader, Le partenariat euro-méditerranéen: après Barcelone (Paris: L’Harmattan, 1997). 5. ESCWA, Selected Social Trends in the ESCWA Region (New York: United Nations, 1997), 79. 6. P. Iaquinta, ‘La presenza maghrebina in Italia tra il censimento del 1981 e quello del 1991’ in Quaderni del dipartimento per lo studio delle società, Università di Bari, 1994, Table 5, 269. 7. Ministerio de Trabajo, Dirección general de las migraciones, Madrid, Annario de migraciones, 1993; see also, B. Lopez Garcia (ed.), Atlas de la immigración magrebi en España (Madrid: U. A. Ediciones, 1996). 8. B. Khader, Demographic trends, job creation and international co-operation in the Mediterranean, paper presented to the Intraparliamentary Union, Monaco, 1997. 9. See Economic and Social Commission for Western Asia, Human Development in the Arab Development, Expert Meeting Group, Cairo, December 1993. 10. B. Khader (ed.), Ajustement structurel au Maghreb, special issue of Alternatives Sud (Paris: L’Harmattan-CETRI, vol. II, 1995). 11. There is an abundance of literature on the question of the EMP and southern Mediterranean agriculture, inter alia: B. Roux, ‘Les agricultures du Maghreb et la construction d’un espace euro-méditerranéen’, in L’Annuaire de la Méditerranée

282 Bichara Khader

12. 13. 14. 15. 16. 17. 18. 19. 20.

21. 22. 23.

(Rabat: GERM-Publisud, 1998), 243–65; L. Ait Amara: ‘Les échanges agricoles Europe-Maghreb à l’épreuve du Gatt’, in Options Méditerranéennes, no. 14, 1995; B. Roux and D. Guerraoui, Les zones défavorisées méditerranéennes (Casablanca and Paris: Toukbal-L’Harmattan, 1997). ESCWA, Poverty in Western Asia: A Social Perspective (New York: United Nations, 1996). R. Brown, Public Debt and Private Wealth (London: Macmillan, 1992), 245. V. Perthes, The Political Economy of Syria under Asad (London: Tauris, 1995). E. Kienle, ‘Destabilization through Partnership’, in Mediterranean Politics, Autumn 1998, 8. B. Khader, ‘Etat, société civile et démocratie dans le monde arabo-musulman’, in Mediterranean Journal of Human Rights, vol. I, no. 3, 1997. R. Brynen, B. Korany and P. Noble (eds), Political Liberalization and Democratization in the Arab World (London: Lynne Rienner, 1995). See J. Schwedler (ed.), Toward Civil Society in the Middle East (London: Lynne Rienner, 1995), 74. V. Perthes, The Political Economy of Syria under Asad (London: Tauris, 1995), 251. B. Khader, ‘La privatisation dans le monde arabe: un remède miracle?’, Communication au colloque de la Chambre de Commerce Belgique– Luxembourg–Pays arabes, Brussels, 6 October 1998. See L. Bucaille, Gaza: la violence de la paix (Paris: Presses des Sciences Po, 1998). G. Amin, Egypt’s Economic Predicament (Leiden: Brill, 1995). N. Ayubi, Over-stating the Arab State (London: Tauris, 1995), 385.

14 Company Law Harmonization and Reform as a Vehicle for Regional Integration Peter G. Xuereb

Introduction The European Commission’s Agenda 2000 document issued in 1997 is subtitled ‘For a Stronger and Wider Union’. As is well known, it charts the future of the Union and its policies in the context of the most ambitious enlargement the Union has ever contemplated since the inception of the Communities in the middle of the twentieth century. Among other salient points are the need to complete and further develop the Internal Market as well as ensure that all new Member States are in a position to operate within this market. The competitiveness of Europe as an economic entity is recognized as depending on dynamic enterprises and the skills and knowledge of its people. This is not to minimize in any way the goals which go beyond the economic and the recognition of the interrelationship of goals is a hallmark of the development of the Union in the closing years of the century. However, it is central to the success of the Union that it be economically strong, and Agenda 2000 declared that the Single Market can play a central role in furthering growth and employment, provided that its potential is fully exploited. It is also declared that, given their proven potential for job-creation, improving the operating conditions for small and medium-sized enterprises in the Single Market remains a high priority; this is to be done, inter alia, by stimulating new forms of co-operation between small and large companies. At the same time, for applicant states, the challenge is to satisfy the political, economic and other criteria as set out at the 1993 Copenhagen European Council, and foremost among these are the existence of a functioning market economy and the capacity to withstand competitive pressure and market forces within the Union. The purpose of this chapter is twofold. Firstly, it will attempt to highlight what EC laws and proposals set out in the way of transnational vehicles for the doing of business across Europe, pointing out some of the opportunities and barriers for undertakings established within the Union and outside the Union, that is to say for ‘third-country undertakings’, and arguing for a 283

284 Peter G. Xuereb

pan-Euro-Mediterranean approach to access to such vehicles for all relevant enterprises. Secondly, it will make the point that the Community company law harmonization programme, having had limited effect in that it has so far failed to achieve consensus on, and therefore harmonization of, some fundamental precepts of company law, can now be seen as poised for a quantum leap forward in this regard. Unhappily, since the 1980s the Commission has appeared to surrender its goal of securing such harmonization. The first theme Any co-operation between companies finds its rationale in economic or strategic considerations. This applies at the national as well as the transnational level. Economies of scale, the evasion of entry barriers to new markets and other factors may provide the impetus. A business enterprise may find that it needs to cooperate with erstwhile competitors in order to stay competitive. These same factors may impel undertakings to merge, and it has been observed that the two phenomena often occur simultaneously. One result could well be numerically fewer players in the market, often comprising most of the previous players but now cooperating more intensively.1 The law plays a secondary but vital role in relation to these industrial, commercial and economic requirements. It has the potential to facilitate co-operation as it has the potential to obstruct it. Competition law is always an issue. However, the role of law in a modern economy facing the challenges of globalization is without doubt that of offering legal instruments or vehicles for the purpose of permitting acceptable and desirable co-operation. The European Economic Interest Grouping, mirroring the Economic Interest Grouping which was already to be found in several national laws, is just one such ‘facilitating device’. The attractiveness of any vehicle or structure will depend on many factors, such as the availability of limited liability, the flexibility of the vehicle in terms of participation and management, the balance of decisionmaking power within the structure, the division of profits and losses, access of the vehicle to financing instruments, taxation and others. Then there are questions relating to the general need to comply with one or more national legal systems, the relevant legislation forming part of which may impact on licensing, permits, social requirements, the transfer of undertakings or part thereof and so on. In general terms, a contractual form of partnership will normally be static in the sense that the alteration of the terms will as a rule require unanimity. By way of contrast, co-operation via a regulated legal entity will usually enable many decisions to be taken by majority, save perhaps for a fundamental reordering of the rights and duties associated with participation. The available principal legal instruments are the contract, the partnership, the economic interest grouping (the EEIG at European level), and companies (at some point in the near future, quite possibly, the European company at the European level). Reciprocal access,

Company Law Harmonization and Reform 285

or pan-area access, to such forms across regional barriers is, it is argued, a powerful force for economic integration. The rules in the EC Treaty on the freedom of establishment for firms and undertakings established in the EU are well known. One major limitation on the scope of the Treaty rules, as established in the Daily Mail case by the European Court of Justice itself, is that the Treaty does not give such a firm the right to transfer its seat (primary establishment) to another Member State at will. Such an attempt stands to be thwarted by the laws of the place of incorporation or registration, and will entail the dissolution of the entity and the creation of a new one, with attendant costs including tax implications. This problem has eluded solution by harmonization of company law and related legislation, and has led to mounting support for the concept of the European company, a transnational entity in conception, able to register and operate in the Member State of its founders’ choice and thereafter opt for a change of its seat without the repercussions referred to above. A draft directive on the transfer of seat will make headway in this regard. However, it will be shown that the Community measures which introduce transnational cooperation vehicles are in their essence EU-centric and it will be argued that a strong case exists for a more integrative approach. The second theme It will also be argued that while the Commission seems to have given up on any grand designs for the harmonization of company law typified by the original proposals for a European company, the fifth directive and the ninth directive on the law of groups of companies, nevertheless developments and reform in the respective national laws and corporate cultures have brought national company laws closer together on a number of fundamental precepts. These include the standard of care owed by directors, limitations on the exercise of power by the majority shareholders in and out of the general meeting, protection of the enterprise and creditors through special rescue procedures, treatment of groups of companies, protection of minority shareholders and reformulation of the position of employee interests in the company law context, among other issues related to corporate management and corporate governance. It will be argued that a major new initiative is required to distil these developments and to fashion around them a model substantive company law code, if only in order to speed up the process of ‘natural harmonization’ which would appear to be occurring very slowly in any event. Developing the acquis is an important part of delivering true pan-Euro-Mediterranean integration.

I. The pattern of EC company law development thus far Proposals for the harmonization of company law, or even the creation of a transnational European company law, are increasingly based on the

286 Peter G. Xuereb

Single Market provisions in the EC Treaty (Articles 7a and 100a in particular, now Articles 14 and 95 Treaty of Amsterdam), but Article 54(3)(g) (now Article 44(2)(g) Treaty of Amsterdam) cannot be dismissed entirely. As was said in the introduction, the ability of companies, and especially medium-sized companies, to adapt, to move, to collaborate, cooperate and even to merge with other European firms is an important component of the Agenda 2000 strategy. Union firms will be doing all of these things in the search for increased market shares within and outside the Union. They will be assisted by measures intended to secure market access to third-country markets. In some cases, they will be seeking to involve third-country firms in their strategy, in other cases not, and indeed third-country firms may be the very competitors against whom such strategies are employed. It is against this background, and with emphasis on the benefits of co-operation, that it is important to juxtapose the Single Market strategy and the association agreement strategy reflected in company law measures and proposals. Sitting alongside this Union perspective as reflected in Agenda 2000, the perspective of those states which have or aspire to have special relations with the Union on the Europe Agreement or Euro-Mediterranean Association Agreement model is one of internal restructuring with the same aim of becoming ever more competitive internationally, in order that their undertakings are able to hold their own in home, regional, Union and Mediterranean markets in a context of increasing globalization and a liberalized Mediterranean, European and even global marketplace. European Union company law measures of relevance to internal company law reform with such competition or collaboration in mind include those relating to mergers, the European Economic Interest Grouping, the Take-over Directive, the European company and the draft proposal on the ‘law of groups’. Several harmonization measures in the company law field are the subject of the screening process for the accession states and many have in large measure been incorporated in the national laws of such states. Suffice to mention Hungary’s significant effort at approximation to the company law acquis in its 1997 legislative programme. These measures include the merger and divisions directives (the third and sixth company law directives); the first company law directive on formation, disclosure and security of transactions; the second company law directive on disclosure and capital requirements; the fourth and seventh directives on company accounts; the eighth directive on auditing; and the twelfth directive on the singlemember limited liability company. Certainly, it can be said that company law ‘approximation is helping to provide the legal infrastructure necessary in order to attract inward investment and business into the CEECs, and for the CEECs this may well be at this stage more important than (as well as a pre-condition to achieving) the goal of freedom of establishment’.2

Company Law Harmonization and Reform 287

However, the fact remains that the EC company law harmonization programme has aimed at reducing differences of the type referred to above in terms of Article 54(3)(g) TEC, with limited success, while putting in place a transnational European (Union) company law framework (comprising transnational vehicles) and more recently enabling Union enterprises to collaborate for the purposes of strengthening the Union’s competitive position in the global marketplace. It is a pertinent question whether the acquis suffices to integrate non-member economies with that of the EC; in other words, how exclusive or EU-centric is the company law harmonization programme and can much be done to revise it for the benefit of EC and third-country enterprise? This is the first theme which will be addressed in this paper. The union-enterprise centricity of EC company law measures It is proposed under this heading briefly to sketch the essential relevant background and then the main provisions of relevance to the theme, in relation first to the European economic interest grouping (EEIG) and then the proposed European company. The European economic interest grouping In legal terms, a partnership is formed by natural or legal persons all of whom are unlimitedly liable, jointly and severally, and normally also directly and principally, for the debts of the partnership. European company law takes an interest in transnational partnerships, constituted by members from different Member States, and the EEIG is the Community’s response to the need to provide just such a transnational partnership vehicle. This obviates the position which would otherwise arise whereby the partnership would need to be regulated entirely by one national law and is intended to offer the same level of certainty to the members and to outsiders as if one national law applied, while offering an appropriate degree of flexibility in formation and freedom of movement. The EEIG has strong features of the national partnership, in particular the unlimited, joint and several liability of the partners, but with features which render it particularly suitable for the purpose of undertaking transnational European joint ventures. Irrespective of what national law may or may not have provided, the EEIG is available in all of the Member States by virtue of the Regulation which brought it into Community law.3 A point of interest for non-EC states which do not possess such a vehicle in their national laws is that several Member States which did not have an equivalent vehicle available for purely domestic use have also introduced national legislation bringing the ‘economic interest grouping’ into national law also as a purely ‘domestic’ vehicle. In this way the same vehicle is available in Member States for partnership and collaboration with domestic partners as well as with European partners. The option of using the ‘contractual’ joint venture

288 Peter G. Xuereb

is unaffected, but the universal nature of the grouping is an asset in doing business transnationally. Non-EC states which do not have an analogous vehicle may well wish to consider its introduction for domestic as well as transnational use. The grouping is of particular utility where the object or primary purpose is not that of generating profits directly for the members (participants). Indeed, the EEIG itself is prohibited by the Regulation from having that purpose. A purely national form will be used in that case. Rather, the EEIG exists to facilitate co-operation in ancillary activities intended to enhance or support the main activities of the members. These can extend from know-how networks (of major importance to small and medium-sized firms), joint research, purchases, sales, production, tendering, management, quality control, data processing and multiple other uses. While the grouping may not have as its object the making of a profit for itself, it is not as such prohibited from operating profitably, of course. The grouping may not undertake the objects or activities of its members. By the same token its activities must be related, as ancillary, to those of its members.4 This means that the EEIG could be set up to coordinate the activities of the members, for example, while respecting the Treaty rules on competition, so that one would need to ensure that EEIG activity did not fall foul of Articles 85 and 86 (now Articles 81 and 82) of the EC Treaty. The benefits of the EEIG are that it is relatively easy to form, that it can enjoy legal personality, that there are no initial capital requirements and that there is great flexibility as regards management structures, voting procedures and profit and loss sharing, as well as the tax transparency, if not perfect neutrality, in that the profits of the EEIG are deemed to be the profits of the members of the EEIG. Its limitations, as a matter of the Regulation, are that the EEIG’s objects must be no more and no less than ancillary to the existing activities or objects of its members, although this can include the actual carrying on of substantial business activity; it may not make profits for itself, so that if any are made they are profits in the hands of the members and taxable as such, an approach which provides for transparency but at the same time raises, on analysis, some difficult issues of international taxation; there must be members from at least two Member States; the partners do not enjoy limited liability; it may not raise capital from the public; and it may not employ more than 500 persons. Of these, the tax issues are the most telling, particularly where the EEIG is set up to conduct major operations in its own right. The Regulation left it to the Member States to put in place a coherent tax regime to back up the ‘company law’ transborder features of the Regulation. While progress has been made, it cannot be said that total tax neutrality has been achieved, which is the least that one should aim for if one is to encourage the use of this form of collaboration; that is to say, the guiding principle should be that it should not be tax disadvantageous to potential partners to operate

Company Law Harmonization and Reform 289

through the EEIG form rather than operating directly and on their own. Proper planning and choice of place of registration should lead to maximized favourable tax treatment. Member States were left free to confer or not to confer legal personality on EEIGs registered in their jurisdiction, without prejudice to the unlimited joint and several liability of the members,5 although the modalities of that liability are a matter for that state (for example, as to recourse between members). Creditors of the grouping must first seek payment from the grouping, so that recourse against a member or members is secondary or subsidiary. It is clear that the use of the EEIG lies particularly in what may be called small-risk activities. If the members were seeking to limit the extent of their potential liability arising from activities to be carried out in common they would be advised to do so via the limited liability company vehicle, whether under a purely national form or, when available, the European company form. By virtue of the Regulation, the EEIG can acquire rights and enter into obligations in its own name, irrespective of whether the law of the place of registration accords it legal personality. Up to 500 employees can be employed.6 The Regulation provides for maximum flexibility of internal arrangements, coupled with a minimum level of protection for third parties dealing with the EEIG. The central point, for the purposes of this paper, relates to the permissible members of the EEIG. These include natural or legal persons who (or which) carry on business activity in the EC. In the case of legal persons, these must have their official address and head office in the EC. A minimum of two members must have their businesses in different Member States; for natural persons this is tested by reference to the place where the business is conducted by that person as his main occupation, while for legal persons the question is where the siège réel (real seat) is situated, irrespective of the place of incorporation. It is clear that participation in an EEIG is only open to participants who or which already have close links with the EU. Those not qualifying under the above rules could not participate, apparently even if the EU partners unanimously wished to include a non-EU partner in their venture for mutually beneficial reasons. It may well be asked whether this is not carrying too far the goal, laudable in itself, of improving the competitiveness of EU undertakings. It would exclude the participation of persons, firms and undertakings from the EU’s closest trading partners, including from applicant countries, but equally from countries with close relations falling short of an immediate prospect for membership of the Union. It raises the question in a real sense as to where co-operation ends and competition begins. Perhaps the European Union can be persuaded to rethink this particular issue in the light of the momentous events since the Regulation was adopted, and in particular since the fall of the Berlin Wall in 1989, the consequent applications for membership of the Union by so many Central and

290 Peter G. Xuereb

East European Countries and the fostering of ever closer trading and other relations with the Mediterranean Non-Member Countries, not least via the Euro-Mediterranean Partnership. As things stand, the direct participation of companies, firms or other legal bodies created under the laws of third countries is prohibited, as is that of natural persons whose economic activities are carried out outside the EU – arguably to the detriment of their potential partners in the EU as well as to themselves. At the time of the adoption of the Regulation, the reason was stated to be political, as well as in order to avoid certain difficulties in the legal, and in particular the taxation, fields.7 The criterion used to establish eligibility for a company, firm or other legal body is elaborate, more so than that set out for natural persons. It is intended to exclude those without an acceptable degree of linkage to the Community. It combines the two different conceptual and practical connecting factors to be found in the traditions of Member States for domestic purposes, namely the place of registration or incorporation and the place of central administration. It does not require that both be in the same Member State, but that for a legal body to participate in an EEIG its place of incorporation and its place of central administration must both be in the Community.8 In the case of natural persons, they must be carrying out an industrial, commercial, craft or agricultural activity or be providing professional or other services in the Community. The Regulation does not lay down, in the case of individuals, the degree of intensity or permanence of the economic activity carried out in the Community. It has been opined 9 that standards used by the taxing authorities for determining whether an entity will be liable to tax in a Member State, for example the existence of a permanent establishment, will not necessarily be conclusive in this context. There is no requirement that natural persons be Community nationals. However, if the grouping is to consist of only two natural persons, then those two persons must carry on their principal activities in the Community. In theory, therefore, a non-EC sole trader has easier access to membership of an EEIG than a non-EC company. Indeed a non-EC company operating principally outside the EC has no direct access to such participation. Even without a full revision of the current wording of the Regulation, it is still possible to envisage indirect participation by non-EC companies in an EEIG and indeed this is not uncommon. Thus, a non-EC company which carried on an economic activity in the Community could form a subsidiary in a Member State and transfer its economic activity to that subsidiary, such subsidiary then becoming a member of an EEIG. Of course, the activities of the grouping would need to be ancillary to the activities of the subsidiary, in accordance with the normal rule. This form of indirect participation nevertheless requires actual conduct of economic activity in the EC and, even where such can be shown, imposes costs on the non-EC firm, so that it must be asked whether these can be avoided. Lobbying or

Company Law Harmonization and Reform 291

negotiation leading to some relaxation of the participation eligibility rules would appear to be called for, on the arguments made above. At the start the European experience with the EEIG reflected the French experience, the EEIG being used predominantly in an agriculture-linked sector, namely in agricultural commodities trading. Quickly, it was to be used in a whole range of collaborative ventures, with application in the fields of consulting, marketing, legal services, joint research and development, audio-visual, real estate, finance, training, transport, import and export, and manufacturing, among others. It has been said that regardless of the type of activity under consideration, the threat of increased competition is the predominant motive driving businesses to establish an EEIG and that this applies to large as well as small and medium-sized undertakings. All types appear to consider the EEIG as a means to provide extensive and more integrated services to customers and to strengthen their competitive position and market shares. The European Company A potentially exciting addition to the ‘transnational element’ of the company law acquis will be the European Company Statute, the latest version of which is in the form of a 1996 text. This text broadly follows that of the 1989 and 1992 texts, but with some substantial changes. Proposals in this area date back to the 1970s, and the latest text is a pale shadow of the comprehensive code for the public company which the original draft represented, even taking into account the effective exclusion of the detailed rules on employee participation which featured strongly in the earlier drafts. The result is a highly flexible and far less prescriptive legal framework. There is significant cross-reference to already adopted directives, for example in relation to the second, fourth, seventh, and eighth company law directives. Furthermore, several provisions have been deleted so that ‘national law’ would deal with many matters previously regulated. The most significant areas now to be left to national law include tax treatment, auditing and accounting requirements, requirements as to the raising and maintenance of capital, requirements for the registration and publication of documents, insolvency and winding up, and directors’ liability. To link up with the second theme of this paper, the lack of adequate harmonization across such areas therefore makes the European company very much a ‘national’ vehicle or ‘type’ rather than the truly ‘European’ vehicle originally contemplated. For example, the Regulation provides for one- or two-tier boards, but would permit a Member State to require that one particular management structure apply to a Societas Europaea (SE) registered in its jurisdiction. As with the EEIG, of central interest for the purposes of the first theme of this paper are the provisions on formation, and particularly the eligibility, or otherwise, of third-country undertakings to participate in the formation

292 Peter G. Xuereb

of an SE. It should also be noted that the SE would be assimilated to a public company. This restricts the use of this vehicle. Even internally within the Community, a case may be made for a private company statute serving a similar purpose to the SE statute. There would seem to be much to commend such an initiative. As things stand, a private company would be able to participate in the formation of an SE on certain conditions. The 1996 draft would relax somewhat the provisions on the formation of an SE, by providing in Article 2(5) that Member States have the option of permitting a company which has its head office outside the Community to participate in the formation of an SE if the company is formed under the law of a (any) Member State, has its registered office in that Member State and a ‘genuine, permanent link with a Member State’s economy’. This last phrase is not defined but is reminiscent of the wording and concept operative in the context of the General Programmes of 1961. The UK Department of Trade and Industry has suggested that the drafting of the last eligibility requirement needs to be revised so that there is a clear and objective test of whether a company meets the requirement. 10 The same sentiment could be expressed on behalf of the potential participating companies involved. Otherwise, this provision indicates the ‘EU-relevance’ of the proposal. Participating companies must have their registered office in a Member State, under the law of which they are formed, in order to be eligible participants. The SE itself would need to have both its registered office and its head office in the same Member State (Article 7). Under the latest recommendations of the so-called Davignon Group of Experts, the formation of an SE by the conversion of a public company into an SE would not be available. The methods of formation would include (a) the formation of a joint holding SE, (b) the formation of a joint subsidiary SE, and (c) the formation of an SE by merger. Private companies would be able to participate in the formation of a joint holding company. Any type of company, firm or legal entity would be able to participate in the formation of a joint subsidiary SE. Only public companies can merge to form an SE. In all cases, as said above, the companies, firms or other entities involved would as a rule have to be registered in and have their head office in the EC, subject to the concession referred to above, at the choice of a Member State. The only possible method of participation for a non-EC enterprise would be indirect, for example that of participation in the formation of a joint subsidiary SE via an EEIG in which the non-EC enterprise was a partner, or via an EC subsidiary controlled by it. It is clear that for a non-EC company the activities of which were not centred in the Community to participate in the formation of an SE as such would be impossible. A new company would need to be formed under the law of a Member State, and evidence supplied of the appropriate link with the economy of a Member State if the head office were not also in the Community. The same technique would need to be employed if the

Company Law Harmonization and Reform 293

proposed SE were to be formed as a joint subsidiary via the participation of an EEIG in which a non-EC-owned company formed under the law of a Member State had an interest. The link between the SE Statute and its legal base in the Treaty is clear. The Regulation is based on Article 100a of the EC Treaty, which is in turn linked to Article 7a on the completion of the Internal Market. The preamble makes it clear that the Regulation is motivated by the fact that the legal framework within which business is carried on ‘in Europe’, based as it is on national laws, no longer corresponds to the economic framework within which it must develop if the objectives set out in Article 7a of the Treaty are to be achieved, since that situation forms a considerable obstacle to the creation of groups of companies from different Member States (fourth recital). Again, it is one purpose of the Regulation to ensure that the economic unit and the legal unit of business ‘in Europe’ coincide (sixth recital). The essence is that participating companies must have been formed under the law of a Member State and have a genuine economic link with the economy of a Member State. The suggestion is that we should begin to think in terms of pan-Euro-Mediterranean vehicles, and in this context take a fresh look at the eligibility criteria relating to participation in transnational vehicles. The as yet unharmonized fundamental precepts of company law The second theme of this paper has already been touched on above. Glaring and painful examples of the difficulties encountered by the Commission in this area are the history of progress, or the lack of it up until now, on the draft Fifth Directive and the proposal for a law of groups. An obvious connection exists between laws setting out the framework for such vehicles as the EEIG and the European company on the one hand and the law of groups of companies on the other. The laws of many European states, including Member States, do not cater specifically for groups of companies. There are, of course, several instances in which the national courts will lift the ‘veil of incorporation’ on a range of legal bases, but not generally so as to permit the economic entity which is the group, and has been formed on the basis of certain understandings, to be able to operate for all intents and purposes as a ‘group legal entity’. The point can best be made by reference to German law which has long had specific rules regulating groups of companies. Furthermore, the German courts have extended those rules by analogy far beyond the public company context, being the context to which the actual legislation applies. The German system is by far the most elaborate attempt yet made in Europe to align the law with commercial reality. It is generally acknowledged that the rigid adherence to the doctrine that a company is a legal entity separate and distinct from its members, to which alone its management (that is, the directors) owe duties of loyalty, skill and care,

294 Peter G. Xuereb

and to which alone its shareholders look for the return on their investment and its creditors look for satisfaction, can render operating through a group structure difficult, if not outright dangerous in terms of legal liability for the managers. Statutory inroads have occurred, as for example with regard to group accounts and even at the European level in the tax field, but these do not amount to anything like a comprehensive solution to the reality divide which exists. As it has been put, the polar elements of legal independence on the one hand and economic association on the other create tension at the level of the interests of the different parties involved, that is the interests of the subsidiary company and its minority shareholders (should there be such – and there will be, or should be, if financing needs so dictate), its creditors and its employees, all set against the interests of the parent representing the group as a whole.11 It should be emphasized that group structures are no longer adopted only by large listed companies. Medium-sized and even small family businesses can be so organized for risk-spreading, family-partitioning and succession reasons. It may well be that different considerations apply according to the reason for the adoption of the group structure, but the group phenomenon is widespread in the ‘non-family’ context, so that this issue merits serious consideration. Indeed, it has been said that groups have become the rule rather than the exception. Most common is the vertical group with a single parent or holding company having participation in a number of subsidiary or otherwise controlled companies. As far as efforts at the European level are concerned, a preliminary draft Ninth Directive on the conduct of groups containing a public limited liability company as a subsidiary was published in 1985, 12 but did not get a warm reception from the Member States. It was closely modelled on German law and the literature, not least the German literature, is replete with criticism of the complicated nature of the rules as extant in Germany. This attempt was followed in 1993 by a comparative study on groups of companies in the EC by Professor Wymeersch. 13 The preliminary draft Ninth Directive was withdrawn in 1990, and any future proposal is likely to be far less complex and impose liabilities which are less severe than originally proposed. The main reason for referring to the law of groups is, however, to point out that Pan-Euro-Mediterranean companies seeking to structure their operations so as to operate in a group structure and regulate their affairs accordingly will find that the unitary system of company law does not facilitate this, and this must have significant implications for mobility and flexibility. A large part of the problem with the achievement of consensus on a harmonized group law is to do with the lack of consensus on the rules relating to the balancing of interests within the company. It is not an easy matter to regulate the group when the core issues of company law are

Company Law Harmonization and Reform 295

‘unsettled’. Yet it is arguable that there has been such significant ‘rapprochement’ of these core issues in recent years that the time is ripe for a reconsideration of the feasibility of speeding up this process.

II. Current Commission thinking on EC Company Law In the summary of the open discussion on free movement and mobility of companies on the occasion of the conference on Company Law and the Single Market held in Brussels in December 1997, it was declared that ‘any further harmonization of European Company Laws was generally considered undesirable and impractical’. 14 The present author agrees, however, with the view of Professor Vincke, who declared that while we have perhaps exaggerated the importance of the employee participation issue and allowed it to dominate our thinking, there are, through the diversity of approaches, certain common trends on which much further work could profitably be done, and he sees the appearance in Europe of the corporate governance debate as an opportunity to return to core issues. 15 It may be recalled that the Ernst and Young Report 16 had stated that financial markets seem unable of themselves to ensure efficient ‘control’, yet the internationalization of companies and the development of the financial markets ‘encourage’ the approximation of corporate governance systems so that common management and control principles then emerge and, once identified, could be incorporated in one or more directives, while requiring adaptation to national systems.17 It is here being argued that those national systems are closer than appears at first sight and that there is a duty to do further work in the interests of true pan-Euro-Mediterranean integration. At the same Company Law Conference, Professor Viandier argued that full compliance with the right of establishment, which simply means the right to become established in accordance with the local legal provisions, requires that harmonization should be as complete as possible, and may call for simplification, as too great a divergence between the rules in force contributes to legal uncertainty.18 The call for simplification is a strong one but disagreement as to what is meant by simplification, possibly leading to harmonization, led Professor Viandier to link the desideratum to contractual freedom and to flexibility, while identifying certain areas for future attention. This surely resolves itself into a need to identify, and set out as clearly as possible, the fundamental precepts of modern company law. Professor Viandier suggested that the relevant consultation exercise preceding the conference provided the Commission with three guidelines, namely: (1) take action only if necessary and if certain work has to be started; (2) directives must create freedom, i.e. be geared towards enhancing contractual

296 Peter G. Xuereb

freedom; (3) ensure at the same time that the legitimate interests of shareholders, creditors and employees are safeguarded.19 The Commission once had a vision which perhaps focused too closely on the third guideline. As the first and second guidelines gained ascendancy, ambitions on the third began to wane. The second guideline deserves to be given all due weight, but arguably in the light of a developable model for the third. On what lines, then, should such a ‘developable model’ proceed? One contributor at the conference, Mr Jürgen Hahn, argued that when legislation is being drafted all interests of employees, creditors, members, consumers and others should take a ‘back seat’ to the central corporate interest for ‘it is of decisive importance to the further development of European company law that its inherent addressee, the company, does not grow exclusively into the object of third party interests’, the essential idea being that company continuity should be left unimpaired if all the public interests which depend precisely on the company are not to go by the board. 20 Without pre-empting any developing debate on these lines, and although the writer has expressed views on these issues, it suffices for present purposes to point out that what may be perceived as little more than a further stage in the ‘contractarian’ (or contractualist) versus the ‘institutionalist’ debate refers to the kernel of company law in the shape of a balancing of interests, and this through the identification of common principles relating to directors’ duties and liability, the role of the shareholder and of the general meeting, creditors’ rights and the balancing of the short-term and long-term interests of all involved, as well as the balancing of these with the general public interest. The challenge is the same as it has always been. Arguably, national laws have evolved to a point where a deeper common core can be distilled. Successfully facing up to the challenge of establishing a greater degree of legal certainty in this way would render mobility far more of a reality within the Union and facilitate economic integration, where such is sought, in the pan-Euro-Mediterranean space. This leads to the next part of this paper, centring around the question of whether the Union’s preferential agreements with the states of Central and Eastern Europe and those of the Mediterranean reflect concrete designs and adequate strategies to facilitate transborder pan-Euro-Mediterranean collaboration.

III. The Europe and Euro-Mediterranean Association Agreements The Europe Agreements This section considers the ‘extension’ of the company law acquis to the applicant states of Central and Eastern Europe. The position after enlargement, for those states admitted, is of course that the extant acquis will apply; their companies will be Union companies, fully involved in the

Company Law Harmonization and Reform 297

regimes, and the debate, adverted to in the previous section. Meanwhile, while approximation to the company law acquis as it stands is well in train, the question of the Euro-centricity of certain company law measures is alive even here. The issue of approximation to the company law acquis has mainly resolved itself in the first instance into a choice between ‘national models’, sometimes eased by the revival of old legislative enactments and traditions. A major objective of the Europe Agreements themselves is integration, and adoption of the acquis is seen as part of the pre-accession process. The provisions on establishment reflect the concern with reciprocity and the relevant 1995 White Paper on the Preparation of the Associated Countries of Central and Eastern Europe for Integration into the Internal Market of the Union21 prioritizes protection for investors and creditors. Establishment is defined in terms which reflect Article 52 (now Article 43) EC Treaty, and for companies this includes the setting up and managing of subsidiaries, branches and agencies.22 The definition of ‘company’ is close to that found in Article 58 (now Article 48) EC Treaty, but with a proviso preventing the setting up of a ‘shell’ company in one contracting party with a view to gaining access to the other (the ‘genuine link’ requirement).23 However, the rights of establishment granted by the Europe Agreements appear to be more limited than under the Treaty in so far as the ruling principle is that of equal or national treatment to be applied generally by each Member State, 24 and these rights were to be phased in over varying periods and sector by sector.25 As far as approximation to the company law acquis is concerned, this is expressly mentioned, as one of the areas where approximation is required for economic integration with the Community, in the general provisions in the Europe Agreements on the approximation of laws.26 Indeed, the White Paper linked approximation of company law with the freedom of establishment. However, as Marise Cremona has pointed out, the White Paper largely assumes that the objective of approximation at Community level (namely to ‘ensure an equivalent degree of protection of the interests of shareholders, employees, creditors and third parties throughout the Community’)27 is an adequate basis for approximation within the framework of pre-accession integration. 28 Of course, adoption by the accession states of the likes of the first and second company law directives has stood to modify the legal infrastructure so as to attract inward investment into those states.29 Yet it is here that the questions posed above as to the gaps in the Community’s harmonization process acquire relevance. The White Paper deals expressly only with approximation (and only indirectly with the other aspect of the Europe Agreements, i.e. market access). Indeed, it covers essential Internal Market aspects in a schematic way and priority was meant to be given to measures which provide for integration into the Internal Market. The ‘shortcomings’ of the Internal Market programme

298 Peter G. Xuereb

itself are therefore ‘carried forward’, and the absence thus far in the Internal Market company law programme of a true model of modern substantive company law principle will continue to hamper integration both within and without the Union. If the assumption that Community-level approximation provides an adequate basis for integration is carried over also to the context of the Mediterranean and the Euro-Mediterranean Association Agreements, it would appear to be even more open to debate. This is to put into perspective the careful claim of the White Paper 30 that ‘Community law irons out some of the major differences in national laws about the way in which companies are set up and run.’ This realistic admission sits uncomfortably with the declaration in the White Paper Annex 31 to the effect that the EU’s experience of legislating in the company law sector is that coordination of Member States’ company laws ‘did not in general provoke problems … especially because the national company law systems and theories within the EU were more or less inter-related’. Whatever ‘inter-related’ means, this rather oversimplified statement (followed up by the statement that employee participation was the only major political issue) masks the real, but arguably bridgeable, conceptual and practical differences which still exist and continue to hamper agreement on some key proposals. In short, the measures referred to in the Annex to the White Paper can only be perceived as minimum guarantees of investor and creditor protection and the substantial variations which continue to exist call, in the interests of true integration and mobility, for much further refinement and harmonization before it can be said that all, or even most, of the major differences (such as those relating to minority shareholder protection, the limits on the exercise of majority power in general meeting, directors’ duties and liabilities, rescue procedures, to name some main issues) have been ‘ironed out’. As the White Paper itself was able to record, all the CEECs had, by 1995, put in place a ‘basic form’ of company law as part of their transition to market economies, usually following the model of one or other of the Member States, and therefore broadly in line with Community requirements. Commission opinions on applications for EU membership issued in 1997 on the basis of Agenda 2000 generally expressed satisfaction at the rate of progress in their approximation to the company law acquis, indicating no foreseeable major difficulties on this score for the front-running states, 32 and good prospects in the medium term for several others. Indeed, the Europe Agreements simply call for the approximation, inter alia, of the company law of the CEECs with EC company law. The chapters on establishment frame the matter in terms of national treatment by each Member State, as indicated above. This requires a Member State to grant treatment which is no less favourable than that accorded to its own companies and nationals for the establishment of associated-state companies and nationals. The agreements do

Company Law Harmonization and Reform 299

not therefore in themselves guarantee access for associated-state enterprises to Union transborder vehicles such as the EEIG. Member State companies enjoy such access by virtue of their ‘EU’ status. While the EEIG Regulation is included in the White Paper list of Stage II measures to be ‘implemented’ by the associated states and set out in the White Paper Annex, the European company statute proposal was listed as a ‘non-key measure’. It is true that the Annex is in essence no more than a voluntary ‘organizational’ timetable strategy. On the other hand, viewing the Europe Agreements in the light of the White Paper indicates that the Agreements’ provisions on establishment are not intended to give access to what, therefore, remain Union-centric measures. Indeed, they speak of facilitating the setting up of operations on the territory of associated countries by Community companies or nationals,33 and of the granting by a Member State to associated countries’ companies and nationals of equal treatment with that given to its own companies or nationals. Further, they define ‘establishment’, as regards companies, as the right to take up and pursue economic activities by means of the setting up and management of subsidiaries, branches and agencies. While economic ‘activities’ is widely (and non-exhaustively) defined, ‘subsidiary’ is defined as a company which is ‘effectively controlled by the first company’. This indicates that while a non-EC company benefiting from the rights of establishment under such an Agreement could set up a subsidiary and that subsidiary could then participate in the setting up of an EEIG (or, at some point, a European company) the first company could not directly so participate. The conclusion would therefore appear to be warranted that, firstly, the deficiencies in the Community harmonization process are being geographically extended into the CEECs and, secondly, that the Europe Agreements of themselves do not, except at one step removed, mitigate, vis-à-vis those states, the EU-centricity of certain Community measures on transborder collaboration. The Euro-Mediterranean Association Agreements The Euro-Mediterranean Association Agreement34 for Jordan35 provides for establishment by reference to national or most favoured nation treatment. As Jordan is not a WTO member the wording differs from that of the other Euro-Mediterranean Association Agreements, which simply refer to GATS obligations. Perhaps significantly, Article 30(1)(b) provides that ‘…[T]he Community and its Member States shall grant to subsidiaries of Jordanian companies established in a Member State treatment no less favourable than that accorded to any like Community company, in respect of their operations.’ Most favoured nation treatment is made reciprocally applicable to the establishment of firms by Article 30(1)(a). The Agreements with Tunisia36 and Morocco37 affirm the parties’ reciprocal obligations under the

300 Peter G. Xuereb

GATS regarding the most favoured obligation and commit the parties to widen the scope of the Agreement to cover the right of establishment of one Party’s firms on the territory of the other.38 It was pointed out above, in the section relating to the Europe Agreements, that the Europe Agreements are phrased specifically in terms of an obligation on each individual Member State to extend national treatment to the firms of the relevant non-EC country.39 The relevant articles of the Tunisian Agreement cited above, however, refer to the obligations of ‘the parties’, and the parties are the Communities as well as the Member States themselves and the relevant Mediterranean state. The reader is referred back to the wording of Article 30 of the Jordan Agreement, cited above. Could it be argued, and was it intended, that in so far as the relevant Community ‘transnational vehicle’ measures are related to the Treaty rules on establishment, the Community and the Member States have contemplated access to those vehicles for firms established in a Mediterranean state? As far as the second theme of this paper, that of approximation of laws, is concerned, but linking it to the first, Article 69 of the Jordan Agreement provides tersely that ‘the parties shall use their best endeavours to approximate their respective legislation in order to facilitate the implementation of this Agreement’. Such a provision is weaker than the ‘sister’ provisions in the Europe Agreements. Yet progress in approximation of laws in relevant activities is envisaged as leading to the establishment of an economic integration agreement as defined in Article V of the GATS;40 industrial co-operation is to be promoted or encouraged in particular by, inter alia, industrial co-operation between economic operators, the establishment and promotion of an environment favourable to the development of private enterprise, and co-operation between small and medium-sized enterprises in the Community and Jordan;41 it is provided in Article 43, in the title on establishment and services, that companies which are controlled and exclusively owned by Community companies and Jordanian companies jointly shall also be beneficiaries of the provisions of that title; and, last but not least, economic co-operation is to be fostered by means of joint ventures. 42 The other Euro-Mediterranean Association Agreements follow this broad pattern, but often with looser language and commitments, both in relation to establishment and the approximation of laws.43

Conclusion The Commission certainly has a number of laudable aims for future company law development. Simplification and the reduction of the regulatory burden undoubtedly have their crucial place. The provision of a functioning form for European co-operation for small and medium-sized enterprises can surely be added. The Commission hopes to make progress on a number of outstanding proposals (the European company statute; the

Company Law Harmonization and Reform 301

tenth directive on cross-border mergers; the proposal for a fourteenth directive on the transfer of seat). A priority remains that of encouraging companies to restructure themselves at the level of the Single Market. All these measures will serve to enhance mobility and co-operation, for large and small companies. Yet, it is here suggested that more could be done in the EU context as linked to the pan-Euro- Mediterranean context to further the objectives of integration and co-operation, principally by extending access to vehicles for transnational co-operation and by furthering harmonization on fundamental precepts of company law. The Commission had no plans in 1997 to revive the draft fifth directive, although it ‘saw some scope for action’ in the corporate governance field, and saw the subject as a suitable area for discussion in the proposed permanent forum on company law, which might lead to the drawing up of codes of best practice, if not more concrete measures. It seems to the writer that, while progress along the lines envisaged by the Commission would no doubt benefit integration, a primary role for such a forum would be to address the fundamental principles of modern company law along the lines indicated above. It is my belief that in-depth comparative analysis of company law theory and practice in Europe will show much hidden convergence, and opportunity for further convergence, which can and should be usefully uncovered and refined. The Commission has a vital role to play in formulating generally acceptable substantive norms to be adhered to as the core of company operations and properly ensuring that ‘equivalent safeguards for the protection of members and others’, in the language of Article 54(3)(g), (now Article 44 (2)(g)) EC Treaty, are in place and operative throughout the Pan-Euro-Mediterranean Area.

Notes 1. A. Dorresteijn, I. Kuiper and G. Morse (eds), European Corporate Law (The Hague: Kluwer, 1994), 170. 2. M. Cremona, ‘Movement of persons, establishment and services’, in M. Maresceau (ed.), Enlarging the European Union: Relations between the EU and Central and Eastern Europe (London and New York: Longman, 1997), 195–203. 3. Regulation 2137/85, OJ, L199/1, 31 July 1985. 4. Regulation Article 3. 5. Regulation Article 24(1). 6. Regulation Articles 1, 3. 7. S. Israel, ‘The EEIG – a major step forward for the Community’, The Company Lawyer, 9, 1988, 14. 8. Regulation Article 3. 9. P. Kelly, R. Attree, I. Muir, European Economic Interest Groupings: commercial, legal and tax considerations (Bristol: Jordans, 1990), 37. 10. See Consultative Document of the Department of Trade and Industry, July 1997, URN 97/786, which includes the text of the latest proposal. 11. Dorresteijn, Kuiper and Morse, op. cit., 187.

302 Peter G. Xuereb 12. Doc. No. III/1639/84, amended version of 1984/1985, see F. Wooldridge in R. R. Drury and P. G. Xuereb (eds), EC Company Laws – A Comparative Approach (Aldershot: Dartmouth, 1991), 125–7. 13. E. Wymeersch (ed.), Groups of Companies in the EEC: a Survey Report to the European Commission on the Law relating to Corporate Groups in various Member States (Berlin and New York: Walter de Gruyter, 1993). 14. Acts of the Conference on Company Law and the Single Market, European Commission, 1998, 55. 15. Ibid., 52. 16. See Final Report, The Simplification of the Operating Regulations for Public Limited Companies in the European Union, European Commission, 1996. 17. Ibid., paragraph 503. 18. Acts of the Conference on Company Law and the Single Market, European Commission, 1998, 26. 19. Ibid., 37. 20. Ibid., 41. 21. COM(95)163 Final of 3 May 1995, and Annex, COM(95)163/2 Final, Chapter 15. 22. See Article 44(5)(a)(ii), Hungary Agreement. 23. See Article 48, Hungary Agreement. 24. Article 44(3), Hungary Agreement; Article 44, Poland Agreement, OJ, L348/1, 31 December 1993. 25. See M. Cremona, ‘Movement of Persons, Establishment and Services’, op. cit., 195–203. 26. Article 69, Czech Agreement, OJ, L360/1, 31 December 94; Article 68, Poland Agreement. 27. White Paper Annex mentioned at note 21, 309. 28. See note 25. 29. And Cremona tellingly comments that this may well be more important for the CEECs at this stage than (as well as being a precondition for achieving) the goal of freedom of establishment – see note 25. 30. See note 21, paragraph 2.25. 31. White Paper Annex mentioned at note 21, 309. 32. On Hungary, Bull.-EU, Supplement (6/97), 31; Poland, Bull.-EU, Supplement (7/97), 31; Slovenia, Bull.-EU, Supplement (14/97), 34; Romania, Bull.-EU, Supplement (8/97), 32. 33. Article 44(1) of the Poland Agreement. 34. For a general discussion on these aspects of the Euro-Med Agreements, see M. Cremona, ‘Free movement of persons and services in the wider Europe’, in P. G. Xuereb (ed.), The European Union and the Mediterranean: Closer Relations in the Wider Context (Malta: European Documentation and Research Centre, 1998), 94–120 at 113. 35. COM(97)554 Final, 29 October 1997. 36. See COM(95)235 Final, 31 May 1995, OJ, L97/1 30 March 1998 37. See COM(95)740, 20 December 1995. 38. For example, Articles 31 and 32 of the Tunisia Agreement, COM(95)235 Final, 31 May 1995. 39. See, for example, Article 44(3) of the Hungary Agreement. 40. Article 40, Jordan Agreement. 41. Article 66, Jordan Agreement. 42. Article 61, Jordan Agreement. 43. See, for example, Articles 31 and 52 of the Tunisia Agreement.

15 Towards Pan-Euro-Mediterranean Environmental Co-governance Kirstyn M. Inglis

Introduction The European Union (EU) anticipates the Euro-Mediterranean Free Trade Area by 2010 and is preparing to begin eastwards enlargement in advance of that date. Economic development is renowned for its adverse environmental impacts. On the other hand, the growth in national environmental policies and measures increasingly threatens to handicap trade within the Internal Market in terms of non-tariff barriers. 1 Both the Central and Eastern European Countries (CEECs) and the Mediterranean Non-Member Countries (MNMCs) face alarming environmental hurdles of a complexity which differs from the local to transnational situations. But the EU also, despite a progressing body of environmental legislation, is experiencing, to use the phraseology of the European Environment Agency’s Second Assessment of Europe’s environment, a ‘relentless deterioration of the general state of the environment’.2 Pan-Euro-Mediterranean regional integration will extend to the borders of the New Independent States of the former Soviet Republic (NIS), themselves suffering the devastating environmental heritage of the Communist era. Enlargement to the eastern borders of the ten candidate countries will considerably extend the common land borders which the EU shares with the Russian Federation and will extend its reach to the borders of the CIS states of Belarus, Ukraine and Moldova. These are countries needing to protect vast areas of virgin territory and at the same time suffering acute environmental effects from the irresponsible industrialization of the Communist era, including the environmental horrors of dumping of obsolete nuclear equipment, nuclear testing and nuclear disasters. The accession of Hungary, Bulgaria and Romania will also expand the EU borders shared with Balkan countries. The reconstruction of Kosovo and population migration following the recent crisis there will have to be taken into consideration. The EU already shares its presence around the Mediterranean Sea with Turkey (with which it also shares a land border), Syria, Lebanon, Israel3 and 303

304 Kirstyn M. Inglis

the Palestinian Territories, Egypt, Libya and the Maghreb countries of Morocco, Algeria and Tunisia. Of course, Cyprus, Malta (and Turkey), also candidates, should be mentioned for their presence in the Mediterranean. The Mediterranean is a region with a fragile environment and a complexity of scarce resources such as water which is directly linked to social and economic development, and environmental pressures that threaten conflict and heightened political tension. Accession of Bulgaria and Romania will also bring an entirely new presence around the Black Sea, onto which Turkey also looks, together with a number of CIS states, namely Ukraine, the Russian Federation and Georgia. It looks onto the Adriatic along with the Balkan countries, and the Aegean along with Bulgaria and Turkey. While the European Community (EC) has developed an impressive body of ‘environmental’ laws, increased external activity and economic development of an (enlarged) EU reaching to the countries of immediate proximity will present it with the challenge of an ever greater and more complex environment. Resource jealousy, both in terms of the lack of resources such as water or the ability to meet the environmental needs of a population, can only aggravate tensions throughout the region. Even the EU’s cohesion countries, in terms of wealth, far outstrip the applicant CEECs soon to join them on the list of countries lagging behind, entitled to cohesion funding for infrastructure in the fields of the environment and transport. Next door, the MNMCs face spiralling poverty and an environmental catastrophe, in particular water scarcity which threatens conflict and political stability in the region. An expanded Euro-Mediterranean regional integration necessarily implies deterioration in the state of the environment within an enlarging EU and the countries in proximity to it. It therefore also implies increased transboundary pollution from the EU to neighbouring countries as well as vice versa because environmental degradation transcends national, regional and international borders. Put succinctly, polluting neighbouring countries is a side effect of any inadequate sustainable development policy and in the longer term it will have a ricochet effect on the pollution of one’s own territory. The interdependence of the EU and its proximity countries in environmental terms is thus increasing. Economic development on a Pan-Euro-Mediterranean scale puts the entire Pan-Euro-Mediterranean environment into a state of transition. The EU has been active, both internally and externally, in the promotion of environmental protection and sustainable development in third countries, including of course the CEECs and the MNMCs. Environmental funding instruments exist at international level and include the World Bank, the Global Environment Facility, international financing institutions and bilateral programmes involving EU states, the US or Japan. From an EU perspective, considerable regional funding has been provided to different environmental themes through the European Investment Bank and the

Pan-Euro-Mediterranean Environmental Co-governance 305

European Bank for Reconstruction and Development or through specific regional programmes such as PHARE, TACIS and the Mediterranean budget lines. As a direct result of the Amsterdam Treaty, the Commission has put forward a number of strategies to build environmental considerations into various key sectors of activity which have so far been kept from the reach of EC environmental policy. They relate, for example, to agriculture, energy, the Internal Market, tourism, transport and economic and development policy. As regards the latter strategy, the Commission emphasizes that ‘EC funding to specifically environmental purposes is relatively modest compared to the overall flows of EC aid’ and illustrates the specific percentage of funding provided to environmental themes which is actually allocated to the environment.4 Escalation in environmental degradation throughout the whole PanEuro-Mediterranean Area (PEMA) cannot be prevented under the existing piecemeal environmental policy. Moreover, at EU level, an increase in environmental nationalism is inevitable in the absence of concerted action. The success of such Pan-Euro-Mediterranean co-governance also depends on environmental integration into all other EU strategic policies, proper administration of environmental policy, its implementation, enforcement, monitoring and control and strategic support for third countries to do the same. Concerted action involving all players from consumers and industry through to regulators is needed and, more particularly, political commitment is a pre-condition. Pan-Euro-Mediterranean environmental cogovernance is necessary to reverse the trend of environmental degradation in the EU and, by extension, to prevent neighbouring countries from suffering further environmental degradation as a result of economic development and from becoming increasingly dependent on the Union. This paper considers the approach taken towards environmental protection and sustainable development in the context of the enlargement strategy, the process towards a Pan-Euro-Mediterranean regional integration and relevant aspects of EU environment policy. It begins with the question: is the European Community model for the environment appropriate to the environmental situation of an enlarging Union sharing common land and sea borders with third countries having such a diversity of needs, priorities and environmental situations? The paper goes on to forward some priorities and suggestions for joint action of all countries involved in a Pan-EuroMediterranean regional integration before, finally, making some proposals for specific Community action. Taking the enlargement strategy as a starting point, an analysis of the environmental aspects is made in section I (covering both the CEECs and the CIS). It is followed in section II by an analysis of the environmental dimension of relations with the southern and eastern Mediterranean and, finally, the limitations of EU environmental activities in a Pan-European context are dealt with in section III. Certain examples of the more recent

306 Kirstyn M. Inglis

enlargements of the EU are drawn on, as are the policy gaps in the environmental chapter of the acquis communautaire and the tensions between the Member States and the EC competences. The lack of coherence between internal and external EC action is also relevant.

I. The appropriateness of the environmental strategy to eastwards enlargement Is the European Community model for the environment appropriate to the environmental situation of an enlarging Union sharing common land and sea borders with third countries having such a diversity of needs, priorities and environmental situations? The appropriateness of the strategy for integrating the CEECs must rise to the challenge of preventing further deterioration in the qualitative state of an enlarged EU environment. It will be increasingly difficult to prevent further deterioration of an enlarged EU environment. Indeed, the Executive Director of the European Environment Agency, referred to above, quite rightly raises the question in the Second Assessment: ‘Why is it assumed that Central European countries must follow the western model, may be even making the same mistakes?’ 5 To crudely summarize the Second Assessment, it appears that: economic convergence of the CEECs with the West may even reverse the trend in the West to reduce consumption; environmental integration into agriculture at national level through to Pan-European level is seen as crucial to limiting environmental impacts as a result of growth in both production and consumption and all the more so considering that it is not yet possible to assess the environmental impacts of structural reform, modernization and diversification of agriculture; environmental integration into management processes as in the West is necessary to encourage similar falls in air and water emissions; and, in the case of both the EU and the CEECs, ‘in the transport sector, more than any other, environmental policies are failing to keep up with the pace of growth’. 6 The need for the protection of untouched biodiversity is also stressed there, as is the need for national development policies and financial mechanisms as well as adequate provision against its destruction in the accession agreements. The Europe Agreements are the legal basis for relations between the EU and each CEEC separately. With the advent of the process towards accession, they have been reorientated. In the Europe Agreements, environmental co-operation is envisaged under the heading of ‘economic co-operation’ but it differs from country to country. Thus in the Europe Agreement with Estonia, a Baltic country, specific co-operation measures on the Baltic Sea are envisaged while in the case of the Europe Agreement with Slovenia, the co-operation measures on the environment are entitled ‘Environment and protection against natural disasters’. Environmental protection or sustainable development is also mentioned explicitly under the heading of energy

Pan-Euro-Mediterranean Environmental Co-governance 307

and nuclear safety but not always in the context of co-operation in agriculture, transport, regional development or industrial co-operation. The Europe Agreement with Hungary specifically mentions co-operation in the field of water management. The reorientation of priorities for co-operation began with the prospect of enlargement. The 1997 Agenda 2000 Communication7 of the European Commission launched the enlargement strategy based upon the criteria set down by the 1993 Copenhagen European Council. It reorientated the relations between the EU and the CEECs established under the Europe Agreements, and the PHARE Programme funding is tied to the priorities set out in the strategy. Agenda 2000 insists that the candidates adopt the EU environmental acquis, that they are able to keep up with its evolution once members and that they ensure that all new projects meet the environmental standards set out in the acquis. Accession Partnerships bind the candidate countries for the purposes of obtaining accession funding. 8 Each candidate also has a National Plan for the Adoption of the Acquis (NPAA) to support its work programme for compliance with the Accession Partnerships. Should they wish any transitional arrangements relating to the environmental acquis, they must be built into the national plan and the need for them must be justified to the Union. Financial assistance is conditional upon respect of the commitments under the Europe Agreements and the Accession Partnerships. It is possible that funding be suspended by a qualified majority Decision of the Council9 but there is no express provision requiring that environmental implications be taken into account in all projects or fund allocations. From the point of view of the environment therefore, adoption, implementation and enforcement of the environmental acquis is the main ‘accession carrot’. The 1995 White Paper gave the impression that those environmental measures adopted under the Internal Market legal basis were the priority and while the Commission has attempted to correct this impression since then,10 the CEECs did set about their autonomous adaptation accordingly. The accession strategy does not attempt to ensure against any further deterioration in the overall qualitative state of the environment of an enlarging EU. Eastwards enlargement implies a downward pressure both on the state of the European environment and on the evolution of the environmental acquis. After all, the neighbouring countries neither benefit from sufficient sustainable development and environmental protection measures nor have the political will and economic resources to do so. In their eagerness to enter the EU, the candidate countries, through the adoption and implementation of the environmental acquis, are not prioritizing their own environmental needs – thus the accession strategy seems to endorse this approach. Moreover, one could be forgiven for presupposing that, once members, the CEECs could simply join the list of poor implementers of EU environmental policy and hold back its evolution. Certainly, using the example of

308 Kirstyn M. Inglis

the last enlargement, the transitional arrangements for the higher environmental standards of Austria, Finland and Sweden have simply been extended.11 The downward pressure from more lax Member States has served to prevent Community environmental standards from being raised, as Austria, Finland and Sweden had anticipated at the time of the last enlargement. This downward pressure will act on the pusher role traditionally played by the northern countries in environmental policy even at international level. Consequently, there is a real threat of national environmental standards emerging or retaliatory measures in respect of the CEECs on the basis of environmental or human health grounds, especially where policy gaps exist in the environmental acquis. Retaliatory measures are also possible even where the environmental acquis exists. The example of the packaging waste directive demonstrates the tensions between Member States and the potential anti-competitive effects on the Internal Market.12 Under the integrated pollution prevention and control (IPPC) directive, another example of a key instrument in environment policy, many technical implementing measures remain to be adopted (see below). An internal working document of the Commission of August 199713 followed by a Commission Communication of May 1998 14 dedicated to the environmental aspects of the next enlargement give the CEECs informal guidance. Not only must they adopt the environmental acquis, they must also ensure that all new projects meet the environmental standards provided for in the acquis, have the necessary administrative structures in place and enforce the acquis, and be capable of keeping up with its evolution. Nevertheless, in critical areas such as EC regulatory controls over (existing) combustion plants, transitional arrangements are inevitable despite the fact that it is precisely these activities which demand immediate attention. Policy gaps in the environmental acquis have proved to be stumbling blocks to real improvements in the qualitative state of the EU environment and this is looked at in more detail below in the Community context. It is relevant to highlight policy gaps of fundamental significance in eastwards enlargement. It must be said that Agenda 2000 does make reference to the need for efforts in the field of nuclear safety – and, for example, in the 1999 Regular Report of the Commission on progress towards meeting the Copenhagen criteria, the opening of accession negotiations with Bulgaria has been specifically linked to the decommissioning of Units 1–4 at the Kozloduy nuclear installation, to which the Bulgarian Parliament agreed.15 However, despite the many international agreements in the area of nuclear safety, it remains as ever the responsibility of national governments and there is a remarkable absence of a common nuclear standard or even any legislative framework defining such a standard. 16 The Contzen Report of the High Level Group of Advisors in nuclear safety in the CEECs and CIS

Pan-Euro-Mediterranean Environmental Co-governance 309

did not foresee any great difficulty in the CEECs meeting a comparable level of nuclear safety to the Member States. At the same time, it recognized that a more precise definition of such an EU level or standard would be necessary before a comparison could be made reliably. Certainly, there are a variety of radiological protection issues falling outside the scope of the EURATOM Treaty which could benefit from EU-level harmonization in the interests of environmental protection.17 The Agenda 2000 strategy warns of the long-term effects on the environment with all it entails, including the availability of resources, human health issues and how it will affect their ability to compete. It is a warning without incentive to tackle the real problems. The pre-accession funding and strategy aim to ensure the adoption of the acquis only. Adopting the environmental acquis will not in itself guarantee the CEECs the necessary framework to compete. Where policy gaps exist, the Member States are free to do nothing or to institute their own measures. The appropriateness of the strategy also requires a look at financing and investment in the run-up to enlargement. Agenda 2000 suggests that 120 m euro is needed to align with the environmental acquis alone and that only 10 per cent of that can be met out of EU coffers – thus the role of external investment partners becomes crucial to full compliance and this is considered further below. To continue on pre-accession aid, a variety of funding instruments are specifically designed to accompany the enlargement strategy. It should not be forgotten that 54 per cent of EIB commitments for 1998 targeted the CEECs and that the EBRD lending also concentrates on the CEECs and the CIS. PHARE 18 will provide 1.5 billion euro per year. As of the year 2000, SAPARD,19 the fund designed to support agriculture and rural development, and ISPA, 20 the equivalent of the Community’s Cohesion Fund, will provide additional assistance of 1.5 m euro and 520 m euro respectively. PHARE allocated 570 m euro to environment and energy programmes over the period 1990–98. The percentage of funding for environment and energy in the following environment and energy subsectors funded by PHARE is shown in brackets: pollution reduction (28 per cent), energy supply (21 per cent), energy saving (20 per cent), water services (18 per cent), biodiversity (3 per cent) and certain other projects, such as those having multiple objectives (10 per cent). In view of the pre-accession strategy, the funding focuses on institution building and investment support including structural action for the adoption and implementation of the acquis and the development of the main infrastructure to be able to meet EU standards.21 However, the policy gaps in the environmental acquis also serve to deter inward investment. Legal certainty in environmental standards is, after all, a determining factor in investment.22 Uncertainty as to the party responsible for past environmental damage can deter inward investment and no guidance exists at

310 Kirstyn M. Inglis

Community level at the moment while the proposal for a Community contaminated land strategy has been postponed. From the perspective of the CEECs, policy gaps in Community law – such as the widespread problem of rehabilitating contaminated land in the CEECs – will inevitably affect external investment opportunities. The repercussions of this on their attracting the financing necessary if they are to meet their accession obligations are obvious and, in the longer term of course, it can also be expected to affect their ability to compete once integrated into the EU. Other forms of external funding are also relevant from the point of view of environmental protection and sustainable development: LIFE III 23 and ECOS-OUVERTURE.24 With a total budget of 613 m euro spread over five years (2000–04), LIFE III is the only Community instrument devoted to the environment throughout the entire Union. It is different from other types of research and development measures or structural investment, such as the agri-environmental measures foreseen in the Common Agricultural Policy (CAP), the structural and cohesion funds and external policy instruments. The Commission’s report on the previous LIFE III Regulation25 sums up its aim as being ‘to bridge the gap between such exemplary individual projects and Community policy, to link real examples of innovation with European integration’. The Commission has taken on board a number of the European Parliament’s proposals in its amended proposal26 for the third phase of LIFE. In particular, it will include specific reference to sustainable development as a general objective of the Regulation and will afford priority to projects based on a multilateral approach – in particular those ‘likely to foster cross-border, transnational or regional co-operation’. However, it remains to be seen whether LIFE will reach its full potential – the Commission already receives twice as many eligible and favourably evaluated project proposals than it can actually fund. It is a considerable increase in available funds when compared to LIFE II (450 m euro over four years). However, this cannot be considered in isolation from the fact that the Amsterdam Treaty has elevated the importance of the role of environment policy generally, that eastwards enlargement is imminent and that a PanEuro-Mediterranean free trade area is planned for 2010. Special provision has been made to incorporate LIFE funding into the pre-accession strategy but it is important to note that LIFE funding is not additional funding for the CEECs as it either comes from the particular country’s PHARE allocation or from the country’s own coffers. Under the existing proposal27 for the next phase of LIFE, to begin 1 January 2000, the candidate CEECs are open to participate on the same terms as the Member States under LIFE-Nature and LIFE-Environment, in accordance with the conditions set out in the Europe Agreements concerning participation in Community programmes. Turkey, Cyprus and Malta too are entitled to participate once agreements on their participation are concluded. But the appropriations required cannot yet be estimated with any accuracy because

Pan-Euro-Mediterranean Environmental Co-governance 311

the available appropriations will be decided once agreement has been reached with the candidates. However, the eventual allocation must comply with the conditions set out in Article 3 of the additional protocols to the Europe Agreements. Romania, for example, is the first to confirm its willingness to participate as from 1998 and will be allocating funds from its PHARE budget as well as from its own budget, and it must additionally cover all administrative costs of the European Commission as a result of its participation. ECOS-OUVERTURE is the ‘motor for inter-regional co-operation in response to current economic changes’ and environmental protection with a view to sustainable development as one of the four areas of co-operation selected as a factor in reducing tensions in the European integration process. Like LIFE, it is a very important tool because of the concrete aims and results to be achieved. Funds from the European Regional Development Fund (ERDF) and from PHARE are pooled to finance innovative regional development measures, including external inter-regional co-operation. It directs 40–50 m euro to the ten candidate CEECs and Cyprus plus Albania, Bosnia–Herzegovina and the Former Yugoslav Republic of Macedonia. No more than four non-EU countries can participate in the project and can receive up to 75 per cent of eligible expenditure. The NIS, Moldova and the MNMCs can also participate. At least two EU states eligible under the structural funds28 must participate and half the EU partners must receive 50 per cent of the ERDF funds. The PHARE cross-border Regulation29 (CBC programme) can provide aid, from PHARE funds, in the form of grants to all PHARE eligible countries, including grants in the field of the environment. It can be used to supplement the INTERREG initiative, 30 which finances projects within the EU bordering PHARE countries, or to accompany projects financed under ECOS-OUVERTURE. It is a useful tool in that it encourages a joint EU–PHARE country strategic development plan for the border region as a whole. While there are relatively few examples of projects actually on the border itself, the overriding consideration is the preferential and complementary financing of the socio-economic development of the border region.31 Looking eastwards, an enlarged Union will share extensive borders with the CIS and the dramatic environmental situation there raises concerns of transboundary pollution in both the short and long term. As noted in the introduction, they are countries needing to protect vast areas of virgin territory and at the same time are suffering acute environmental effects from past irresponsible industrialization. The environment also raises issues such as democracy, nation building and regional stability, and decentralized cooperation to encourage political and civil society is an essential part of this. Environmental movements being one of the few civil movements to have been tolerated by the Communist administration, the environment was

312 Kirstyn M. Inglis

among the first common concerns to rally anti-Communist protestors in 1989. The budget for the TACIS programme for know-how assistance to the CIS and Mongolia for economic reform and recovery has risen to 2224 m euro up to the end of 1999.32 The progressive replacement of the Trade and Economic Co-operation Agreement between the EC and the USSR with bilateral Partnership and Co-operation Agreements (PCAs) with the CIS and Mongolia has provided a better framework for the TACIS programme. The PCA with Russia entered into force in December 1997 and that with Mongolia in July 1998. These PCAs reflect the different environmental and other factors relevant to each of the various CIS states and Mongolia. Unfortunately, political and economic developments have frustrated the implementation of the PCAs and technical assistance in the NIS. Today, with the social and economic hardship of ordinary people living the economic transformation, environment is low on the list of priorities of the general public and the administration. The reluctance of beneficiary countries to cooperate33 in the field of nuclear safety and the sheer number of reactors requiring to be upgraded throughout the CIS (not to mention those on their borders in the CEECs) have combined to limit the success of TACIS achievements in the nuclear safety field. The environment only became a priority under Article 3(6) of TACIS in 1996 with the third TACIS Regulation and, in 1997, environmental policy advisers were appointed in all Ministries of the Environment in the TACIS area together with an environmental awareness-raising programme. Priority is given to six indicative areas 34 and, for the purpose of the environment, three further priorities for action are identified: institutional strengthening, legislation and training. The indicative areas cover: human resources development; enterprise restructuring and development; transport and telecommunication infrastructure; energy, including nuclear safety; food production, processing and distribution; and, as noted above, environment. The Indicative Programme for the years 1996–99 sets down the framework for TACIS activities. Under this programme the funds are allocated through actual Action Programmes for each country and include Small Project Programmes, and through Regional Programmes in which several partner countries participate. In the case of the Russian Federation and Ukraine the country Action Programmes are annual while for the remaining CIS they are biennial. The Regional Programmes include nuclear safety, promoting CIS and Mongolia collaboration on environmental consideration and establishing public awareness programmes or programmes to bring immediate relief to regions where human health or natural ecosystems are severely jeopardized. Under the TACIS CBC programme,35 similar to the CBC programme 36 referred to above, environmental projects are supported concerning borders between the EU or the CEECs and the CIS.

Pan-Euro-Mediterranean Environmental Co-governance 313

The urgent need to tackle the problems of nuclear safety is reflected in the TACIS funding allocation. Unfortunately, nuclear safety has had a distorting effect on the TACIS programme as a whole. This has been the case for the environment in particular because the environment and nuclear safety are lumped together for budgetary purposes, with the result that the latter eats up a huge percentage of the total budget heading. 37 Of some 757.03 m euro38 allocated to ‘Nuclear safety and environment’, 573.50 m euro goes to nuclear.39 This section would be incomplete without mention of the Balkans, which have an eastern European and a Mediterranean dimension. The environment has been used in recent times to bring warring countries together as it transcends politics. In the objective of reconciliation in Bosnia and Herzegovina, 40 some of the first issues for co-operation in the implementation of the Dayton Agreements were clean water, air and soil. Indeed, the Regional Environmental Centre for Central and Eastern Europe (REC) advocates that the NATO countries should take much of the responsibility for environmental clean-up and the rebuilding of infrastructure in the large-scale reconstruction of devastated Kosovo. It fears that aid priorities will concentrate on humanitarian and development issues at the expense of the environment. 41 It reasons that proper respect for the environment and sustainable development would give the Yugoslav people concrete improvements in their daily lives which they could directly link to the European Union’s reconstruction policy 42 – thus fostering transition and sustainable development while at the same time reducing their dependence on the EU. The Community has created the European Agency for Reconstruction, to be operational as of 1 October 1999, to implement Community reconstruction programmes for the whole region (the OBNOVA Programme) and the return of refugees. An indicative figure of 1000 m euro worth of grants is envisaged for the reference period up to 2006. The new agency promises improved flexibility in the use of funds and response to the needs of the region. Reconstruction must then be followed up with sustainable policies if they are to be of any long-term use. Reconstruction must be transparent, environmental considerations must be built into it and the encouragement of environmental civil society organizations to foster long-term success is also required. ‘An integrated approach will produce better results through the identification of common values, and the establishment of rules of the game to resolve the environmental, and potentially other, problems of the next century.’43

II. The environmental framework in EU–MNMC relations Generally, a separate framework applies to the EU’s relations with the MNMCs and this analysis deals with its provision for environmental

314 Kirstyn M. Inglis

protection and sustainable development. Among the MNMCs are countries both developed, developing and less developed. The MNMCs face a complexity of environmental pressures, not the least of which include population explosion and unemployment, water and food scarcity, war/conflict zones, urban growth, deforestation and desertification. These pressures have already led to a serious environmental situation, most notably in terms of atmospheric and waste pollution, and, most critical of all, shortages of water resources and contamination from domestic, agricultural and industrial wastes. Population explosion threatens mass migrations. IntraMNMC threats due to Islamist movements and rivalry over contested borders are real. Seen from the perspective of environmental interdependence, the single most critical threat to peace and stability in the region is water resources (see below). In 1975, the Mediterranean Action Plan (MAP) was ratified by 16 Mediterranean countries which in turn gave birth to a number of conventions and protocols, the creation of pollution monitoring and research and a socioeconomic programme designed to reconcile environment and development known as ‘The Blue Plan’.44 Objectives set have failed and even assessment and evaluation have proved difficult because of countries lacking or withholding information. Despite the success of bringing such a variety of countries to the negotiating table and expert credibility that the MAP has brought to the environmental problems of the Mediterranean, environmental progress in the region lives under the threat of inter-MNMC conflict. Previously, the declining political support from the Union for the movement could be seen in the failure of the major European participants to meet their subscriptions for secretariat and research activities under the MAP.45 Unlike the CEECs, the southern and eastern Mediterranean countries have no prospect of becoming members of the European Union. Thus they are under no obligation to take up the environmental acquis as such.46 The scenario of economic convergence actually increasing consumption in the West has been referred to above as regards the CEECs. Applying this scenario to the MNMCs participating in a free trade area is relevant. The EuroMediterranean Free Trade Area addresses the new regionalism and, of course, the fears of a repeat of the loss of trade preferences in the MNMCs as has been experienced since the renewal of links with the CEECs in the post-Soviet era and as was experienced in the last southern enlargement. In the Co-operation Agreements concluded in the 1970s within the framework of the Global Mediterranean Policy with the MNMCs, the environment was mentioned for the purposes of economic co-operation 47 but financial and technical assistance did not begin until 1988. Of course, the confusion of the various old and new relationships throws doubt on the coherence and solidity of the Union’s regional approach. Moreover, economic growth of an enlarged Union and increases in transboundary pollution from the EU through to the Mediterranean will only

Pan-Euro-Mediterranean Environmental Co-governance 315

serve to deepen the dependence of these southern and eastern Mediterranean countries upon the Union. If the EU further outstrips its neighbours in economic terms, without making adequate provision for sustainable development and environmental protection, the Mediterranean environment, its populations and economy will suffer disproportionate (and devastating) effects in relative terms. A disproportionate amount of the bill for the costs of that economic development in the region will fall on countries in proximity to the EU.48 Ultimately, their dependency on the EU will increase. The consequences of inadequate provision for environmentally sustainable development threatens to handicap both trade and aid and demands a genuine model of co-operation based on a fully integrated approach to sustainable development. The EU acts bilaterally and on a regional level with the MNMCs in the context of economic co-operation and concerted action in policy areas giving rise to environmental issues. It must be remembered throughout that significant environmental assistance has been provided to the MNMCs through the Mediterranean Environmental Technical Facility and through loans and interest rate subsidies from the European Investment Bank. The EU continues to contribute directly to individual Mediterranean countries and combined-country environmental projects through the MED-Urbs and the MED-Techno networks. It is, however, institution and capacity building that guides the assistance as do Community standards. The achievement of an ‘environmental equilibrium’49 is very much dependent on implementation through Community assistance for economic transition. Environmental actions are based upon the Barcelona Declaration 50 and its accompanying work programme adopted at the Barcelona Conference, and the MEDA Programme and its accompanying guidelines for the indicative programmes. The second part of the Barcelona Declaration is entitled ‘Economic and financial partnership: creating an area of shared prosperity’. Under the subheading of economic co-operation and concerted action, explicit reference is made to the environment in four sectors: fish stocks, energy, water and environmentally friendly agriculture. The work programme attached to the Declaration takes up these four themes for co-operation and multilateral activities to further sustainable development. Co-operation is also envisaged on harmonizing environmental standards in multi-modal combined sea and air transport and the use of international and European standards. In the first Article of the MEDA (autonomous) Regulation, the Community undertakes to support, inter alia, the efforts of the MNMCs to mitigate social and environmental consequences resulting from economic development for economic and social reform. Express reference is made to the Barcelona Declaration effectively importing the principle thereof. However, Article 2 of MEDA makes clear the goals of the Regulation: ‘the reinforcement of political stability and of democracy, the creation of a

316 Kirstyn M. Inglis

Euro-Mediterranean Free Trade Area, and the development of economic and social co-operation, taking account of the human and cultural dimension.’ It goes on to provide that measures taken under the autonomous Regulation should only ‘take account of the objective of achieving longterm stability and prosperity, in particular in the fields of economic transition, sustainable economic development and regional cross-border co-operation’. The objectives and rules for the implementation of Article 251 certainly relegate environmental considerations to the sidelines: ‘Due regards shall be taken of environmental considerations in the preparation and implementation of activities financed by this regulation.’ While in the Barcelona Declaration the participants emphasize the importance they attach to ‘sustainable and balanced economic development with a view to achieving their objective of creating an area of shared prosperity’, no reference is made to sustainable development in the area listed for co-operation and concerted action. More diluted expressions are used such as ‘reconciling economic development with environmental protection’, ‘integrating environmental concerns into the relevant aspects of economic policy’ and even ‘mitigating negative environmental consequences’. A subsequent Council Decision 52 established the guidelines for the indicative programmes for financial and technical measures accompanying the MEDA Regulation. The guidelines are not binding – any conditions contained in the resulting bilateral or regional programmes remain to be decided by the parties. The binding rules are laid down by the National Indicative Programmes (NIPs) and the Regional Indicative Programme (RIP) and they are binding on both signatories to the Association Agreement in order to ensure that the recipient applies the priorities laid down under the Barcelona Process. But the guidelines are important, as they are followed by the Commission services and therefore also the recipient countries in the preparation and implementation of projects. Thus they indicate the priority afforded environmental protection and sustainable development. Guideline 6 specifically provides that ‘the Commission shall carry out environmental impact assessments on all projects under bilateral and regional programmes according to Community legislation at the stage of identification and design of projects’. The NIPs account for 3424.5 m euro – 90 per cent of the total MEDA envelope. Environmental projects or components of other projects committed between 1990 and 1995 amounted to 90.7 m euro, or 5 per cent of MED budget lines, the greater part of which was allocated to the environment.53 This sum was committed to land resources, marine resources, pollution control, urban environment and technology transfers. In the field of support for economic transition, environmental financial support will put the emphasis on standards approximation and strengthening of the institutions.54 Thus, institution and capacity building and harmonization of standards guide the environmental input into the bilateral programmes.

Pan-Euro-Mediterranean Environmental Co-governance 317

Measures to alleviate the cost of economic transition will accompany these projects and include assistance for particular measures to preserve the environmental equilibrium in the partner countries through supporting capacity building in the field of environmental assessment, management, legislation and enforcement. Interest rate subsidies may be granted on loans of the European Investment Bank to offset the costs of improving the environment for environmental projects. Reinforced co-operation is foreseen for fisheries and sustainable exploitation of marine resources. The Commission Communication on environmental integration into economic and development co-operation 55 is vital to the success of such co-operation. It is designed, inter alia, to enable the Commission and the recipient countries alike to integrate environmental considerations into all aid received and to ensure that environmental impacts are assessed. This strategy, mentioned throughout this chapter, is the direct result of the Amsterdam Treaty, which inserted the provision for integration of environmental protection into the definition and implementation of Community principles and activities with a view to promoting sustainable development (Article 3c EC Treaty) – see below. As regards the specific guidelines for the NIPs, which had to be agreed to by the EU and each MNMC, the MNMCs are divided into the Maghreb and the Mashrek countries and Turkey. No specific reference to environmental activities is made in respect of Morocco, Tunisia, Syria and the Palestinian Authority. For the rest, social and environmental considerations are included. Specific environmental protection measures ‘shall be taken’ in respect of bilateral relations with Algeria, Egypt and Turkey while they ‘may’ be taken by Jordan and ‘should’ be taken by Lebanon. Moreover, Lebanon is singled out for interventions in the water sector. It should be remembered that only the Tunisia EMAA is in force. Where environmental projects are undertaken within NIPs, environmental activities are to concentrate on institution and capacity building and environmental standards harmonization. There are a number of the MNMCs for which no specific environmental issues are even provided for in their NIPs. In a country such as Morocco, for example, where rainfall determines the country’s economic performance, it seems incongruous that protection of already scarce water resources is not built into the development of agriculture. In the remaining MNMCs, environmental concerns are to be tackled in an ad hoc way depending on the sector targeted for development in the NIPs. In both bilateral and regional activities, environmental impact assessment is an administrative prerequisite falling to the European Commission. Taking the Tunisian Association Agreement56 as an example, it is interesting to consider that the guidelines must take account of what is actually

318 Kirstyn M. Inglis

agreed in the Agreement. Recipient countries are bound to the NIPs drawn up according to the Council Guidelines. Under the title on economic cooperation (Article 43(4) establishing the scope of co-operation) the preservation of the environment and the ecological balance is identified as a ‘central component’ of the various fields of co-operation. Article 48 is dedicated to co-operation for environmental preservation and improvement and for sustainable development and Article 45(b) selects the environment for regional co-operation. It is, however, striking that no specific reference is made to environmental protection or improvement in the key sectors of agriculture and fisheries, transport or energy. Moving on to regional actions under MEDA which account for the remaining 10 per cent of its budget, these are designed to complement the bilateral initiatives. The main thrust of regional actions is the Barcelona Declaration and MEDA, 57 ‘to take action at the multilateral level on issues of common concern’ and under the subheading of ‘the development of civil society’ to ‘support the activities in support of decentralised co-operation’. 58 The Med-Urbs and Med-Techno networks are the main regional decentralized co-operation networks concerning the environment but they must compete for funds with a whole array of co-operation tools. The environment is singled out for assistance in the economic and financial field and other sectors of strategic importance from an environmental perspective are also selected for regional attention, including energy, water and fishing. Guidelines also apply to the social and cultural spheres. It is fair to say that the existing piecemeal approach to the environmental policy of the Union is also guiding relations with the MNMCs. Where projects are to be undertaken, environmental impacts are to be a consideration only and there is no compulsory environmental budget allocation of funds required either for the bilateral or the multilateral funds. Other Community financing of the environment in MNMCs does exist. Of the total LIFE III budget of 613 m euro, which will apply in 2000–04, only 6 per cent of the funds are allocated to third countries. It can fund up to 100 per cent of co-operation activities with third countries, defined as countries bordering the Mediterranean and Baltic Seas, other than the CEECs which have signed Association Agreements with the EU. Of course, the number of eligible third countries will drop as a result of the exclusion of the applicant countries (the CEECs, Malta, Cyprus and Turkey) and the approach will be reorientated to encourage transnational, transfrontier and regional projects. Technical assistance requests to create the capacities and administrative structures required in the field of the environment are the most common. Under the present proposal, the financial contribution for assistance for such projects cannot exceed 70 per cent and measures designed to accompany LIFE actions (old and new) are eligible for 100 per cent funding. Priority is given to projects promoting co-operation at

Pan-Euro-Mediterranean Environmental Co-governance 319

transnational, transfrontier or regional level and, inter alia, must have a Community dimension. LIFE third countries has contributed to the MNMCs environmental activities under the Mediterranean Action Plan and through the Mediterranean Environmental Technical Assistance Programme (METAP). However, past experience of LIFE59 shows that since 1992 the MNMCs have benefited from only 25.5 m euro of the total sum of 647 m euro co-financed projects and only 79 per cent of fund appropriations for LIFE third countries have been allocated. To conclude this section, sustainable development and environmental protection is not an objective on the same footing as the EMP. Regional cooperation is being developed in key areas and it has been a considerable achievement to succeed in bringing the spread of Mediterranean countries around the negotiating table for the Barcelona Process. However, being short-term plans, the next round of NIPs provide the opportunity to fully anchor environment concerns into the major part of EC-funded action in line with the Commission’s strategy for environmental integration into economic and co-operation development. The interdependence of the environments in the region is emphasized by the wealth or lack of natural resources. Oil and gas exploitation and transit, apart from raising security issues, raise environmental concerns not least in terms of resource depletion and pollution and thus also in terms of the potential to exacerbate the problems of an already fragile environment. These industries also require regional collusion for the purposes of transit and security of supply for both North and South alike. The case has been made for the Union to act as a catalyst for projects of common interest in energy relations with the region, 60 albeit that it is difficult to envisage in concrete terms just how the existing partnership could undertake such a role. Imperatively, environmental protection and sustainable development components should be built into such projects. Another critical resource, for example, is water and it has already provided a tool for peace, stability and co-operation in the region.61 Water was the single issue to bring the Israelis and Arabs to the negotiating table before any political rapprochement took place. Certainly, the issue of access to water in the Mediterranean area must be resolved before the already fragile supplies are further pressured by a combination of population growth, urbanization and industrialization. Ultimately, water scarcity raises fears that countries will be driven to annex neighbouring territories in search of new sources and force mass migrations of what can only be described as environmental refugees. While water was highlighted for reinforced regional co-operation, rationalized planning and management of existing sources and the creation of new ones,62 no specific financial allocation has been set aside for water. But regional actions within the frame of the Euro-Mediterranean Partnership must be reinforced at the bilateral and even at the local level if they are to be effective and credible.

320 Kirstyn M. Inglis

Certain principles must guide any approach to the development of the entire region. The habitual tendency to assume that environmental concerns oppose development has often been disputed.63 Yet the compatibility of the environment with economic development is not seeping through to political decision-makers generally, as can be seen from the example of the EU itself, considered at more length below. However, rather than being a ‘luxury’ for the richer countries, a serious analysis of the Mediterranean proves that environmental preservation is a necessity for the poorer countries. So far, the Barcelona Process represents a missed opportunity for the North and the South to embark upon an alternative way towards development, which would have avoided further environmental degradation of the Mediterranean area.64 It is therefore logical that this will increase its dependence on the EU. In the case of the Mediterranean, the alarming and critical environmental situation demands that an alternative be found if catastrophic social and environmental costs are to be avoided. The rigours of international competition threaten to wipe out the rural populations dependent on agriculture, pushing further pressure onto the urban environment, already one of the most urgent problems facing the MNMCs. If the justification of international trade is the comparative advantages to all involved, it is alarming that free trade will mean the drain of precious MNMC resources in the form of water and soil as a result of increased exports of fruit, vegetables and flowers. Meeting the environmental standards of the EU in the future free trade area represents a considerable hurdle for the MNMCs. Free trade will cause elevated economic, social and environmental costs for MNMC trading partners65 and therefore should be approached with great care and attention to the economic and environmental risks involved. There is a strong and urgent case for restructuring sectoral growth: restructuring the agricultural sector in favour of more traditional rural production; encouraging sectoral growth in other areas, including (clean) manufacturing industries; and, in particular, developing the role of gas in the energy sector in an attempt to combat the serious environmental threat posed by unsustainable development of transport. The Barcelona Process presented an ideal vehicle for regional environmental improvement in its own right but it seems to have been relegated to a complementary activity. The urgent need to incorporate environmental aspects into all policy areas and to orientate policies and funding towards an integrated approach is being attempted within the Commission Directorate responsible for the SMAP. However, the lack of a specific allocation for the environment within the MEDA programme, something which exists in both PHARE and TACIS and also for the Latin American countries, is a serious stumbling block. It would be a start to ensure that 10 per cent (in line with PHARE, TACIS and the Latin American countries) of all allocations, both regional and national, is dedicated to the environmental dimension of Euro-Mediterranean relations. Compatibility between the

Pan-Euro-Mediterranean Environmental Co-governance 321

environment and development must be sought in the Euro-Mediterranean Free Trade Area and, in particular, in the restructuring of sectoral growth in the MNMCs in an environmentally sustainable manner. Institution building is a necessity but it must be fully integrated into all sectors and policies and scientific and technical research must take account of the human and social needs of the region.

III. The relentless deterioration of the EC environment It is useful to draw some parallels and comparisons from the examples of the more recent enlargements of the EU, from policy gaps in the environmental chapter of the acquis communautaire and from tensions between the Member States and the EC competences (see the next subsection). It is also relevant to consider the lack of coherence between internal and external EC actions, which highlights certain startling incongruities in the EU approach to sustainable development and environmental protection generally (see the following subsection). Policy gaps and tensions in the environmental acquis Certainly, the EU has a progressive and progressing body of environmental legislation but the political will to improve the state of the EU environment, as has been touched upon from time to time above, has not been sufficient to prevent the relentless deterioration in the state of its environment. Tensions between Member States facing different environmental situations and priorities, and therefore also different policies, have been apparent from the beginning of the EC’s environment policy. They can be between the Member States, between the Community and national environmental policies or between environmental protection and sustainable development versus other policies, such as economic and industrial policies or employment and social policies. Indeed, a variety of key policy tools have foundered at the proposal and even pre-proposal stage in the absence of the necessary political will to push them through. Take as an example the proposal for a tax on CO2 emissions and energy efficiency. It is a central policy instrument to reduce CO2 emissions to 1990 levels by the year 2000 and encourage more environmentally friendly energy production, in line with international commitments agreed at the Earth Summit in Rio (1990) and then at the Kyoto Summit (December 1997).66 The proposal as it stands has been watered down to such an extent that it allows Member States to work towards common levels rather than to meet the requirements of a common system of taxation. This has been done to make it more palatable to countries fearing competitive disadvantages to their industries but final adoption is still not in sight.67 Such policy gaps exist across the board of Community environmental legislation: a few pressing examples were mentioned above. 68 The water

322 Kirstyn M. Inglis

regime is only now being revised despite the dissatisfaction of all the Member States with the existing regime. 69 Even in the area of integrated pollution prevention and control (the IPPC Directive 96/61/EC70), a mainstay in the Community policy to tackle industrial pollution and prevent it from being transferred between different environmental mediums, from air to water for example. Distortions in competition will continue to be a real threat in the absence of supporting technical documentation to reinforce the IPPC Directive. The ideal would be to make the Community’s environmental policy a common policy area taking precedence over national competences and delimiting the circumstances in which national measures would be permissible. Renationalization of competences for environmental measures in particular has become a real threat to a Community approach, in particular as a result of the formal introduction of the subsidiarity principle by the Maastricht Treaty.71 To make matters worse, the EU Member States as a whole have poor implementation records in respect of the environmental acquis with 18 per cent not even having been transposed. Rather, the pressure on them to actually improve the qualitative state of the environment is released as a result of the trend away from binding limit values for emissions in the air and water sectors. The accession of the northern Mediterranean countries to the EU required the institution of specific policy tools to address the problem of cohesion within the EU. The accession of Greece, Portugal and Spain required the adoption of specific policy tools, more particularly the Cohesion Fund, to provide the structural adjustment in environment and transport infrastructures needed to boost those countries lagging behind and bring about cohesion between the northern and southern EU Member States.72 The last enlargement taking in Austria, Finland and Sweden brought the dilemma of resolving their generally higher environmental standards with the (generally lower) standards of the other twelve EU Member States. Rather than raise the overall EC environmental standards, their accession resulted in legislative revision to allow them to maintain their higher standards, giving the remaining Member States the time to catch up. These tensions between Member States act as brake on the traditional ‘pusher’ role played by the northern countries in the adoption of international, including EC, environmental measures. Eastwards enlargement implies a further downward pressure on Community environmental standards and increased tensions within EU environmental policy itself, and by natural consequence also threatens the sustainable development and environmental protection efforts of neighbouring countries in the (anticipated) greater Pan-Euro-Mediterranean Free Trade Area. Eastwards enlargement can reasonably be expected to increase these tensions within the Community and therefore to act as a downward pressure or even a brake on the already inadequate environmental

Pan-Euro-Mediterranean Environmental Co-governance 323

standards at Community level. Alternative avenues must be sought for Community action. Looking to the East and the South of an enlarged Union, enlargement implies increased transboundary pollution as a result of the anticipated economic growth. It therefore also implies negative impacts on neighbouring environments and loss of markets for those (poorer) neighbours, inevitably therefore also reinforcing their dependency on the EU for help to tackle the problems. Thus a necessary element of any eastwards enlargement must be to help neighbouring countries avoid the indirect negative environmental impacts of eastwards enlargement. Put bluntly, not enough is being done to reverse the trend of the relentless deterioration in the Community’s environment and neither the Amsterdam Treaty nor Agenda 2000 guarantees the evolution of the environmental acquis. In environmental terms, the advances of the Intergovernmental Conference and the Amsterdam Treaty are modest as they failed to reach the hopes for concerted action at EU level to reverse the trend of deterioration of the Union’s environment. The Amsterdam Treaty introduced co-decision-making for environment-related legislation adopted under the legal basis of Article 109 (ex-Article 130s) and the Council will no longer be able to definitively adopt a proposal which has been sent to conciliation by qualified majority. Also significant is the provision, as a result of the new Article 2 EC Treaty, that part of the Community’s tasks is the promotion of ‘a high level of protection and improvement of the quality of the environment’. The new Article 3c of the EC Treaty provides for the integration of environmental protection into the definition and implementation of the Community principles and activities with a view to promoting sustainable development. Environmental integration is a concrete and positive step towards facilitating the evolution of the environmental acquis and filling the policy gaps existing in the Community environmental actions is the recent move towards integrating the environment into all Community policy areas. 73 The new approach of environmental integration into tourism put forward in this Communication is a welcome step to remedying this incoherence. Another significant advance is the Commission’s Declaration 12 to the Amsterdam Treaty in which the Commission also undertakes to prepare environmental impact studies for all proposals having significant environmental implications. The recent Commission strategy for mainstreaming the environment and sustainable development in economic and development co-operation should also be recalled here, as it aims to continue and strengthen the integration of environmental considerations into the use of all EC aid, into the programming and into the project cycles. On the other hand, certain fundamental problems remain to be clarified – not least the institutional make-up of an enlarged Union and the weighting of country votes. Certain innovations of the Amsterdam Treaty also

324 Kirstyn M. Inglis

raise questions. Take the new Article 11 EC Treaty allowing for a majority of Member States to establish closer co-operation. For example, to what extent might it allow a majority of willing Member States to take joint action using the institutions and procedures of the Community in order to advance together in the environmental sphere, using the legal basis for environmental measures Article 175 EC Treaty (previously Article 130s)? A worrying scenario would be the use of such instruments by the ‘richer’ majority seeking higher environmental standards to pull ahead of the ‘poorer’. The latter would effectively be opting out of improving their environments or even of keeping up with their neighbours in sustainability terms. In general, however, it would surely jeopardize the evolution of the environmental acquis. The need for coherence between internal and external Community environmental actions In addition to the problems internal to the Community, there is an apparent lack of coherence between the internal and the external competence and actions of the EU. The Member States of the EU all participate in international conventions of a reach far beyond EU borders. The conflict between national and Community competences for environmental actions can act as restraints also at the internal level. It is significant that the environmental acquis incorporates numerous international treaties (albeit as mixed agreements) to which CEECs and MNMCs are often also party. International measures do not carry the weight of the supranational authority of Community environmental law which is monitored and controlled at EU level. Multilateral or bilateral co-operation has the advantage of tackling environmental protection and sustainable development considerations according to the particular environmental situation of the countries concerned. The downside of such co-operation is that it seems to be preferred over binding international treaties involving unanimous, and therefore also time-consuming, multilateral negotiations and agreeing fixed commitments. In any case, multilateral activities are not subject to similar levels of monitoring and control. Taking the Barcelona Convention on the protection of the Mediterranean Sea against pollution as an example, most of the pollution comes from the EU or northern Mediterranean countries – with the result that it is the industrialized countries that transfer the costs and impact of that pollution to the less industrialized and poorer MNMCs. Indeed, the failure of the EU partners to meet their financial commitments for secretariat and research activities led to the near failure of the Barcelona Convention’s Mediterranean Action Programme in the early 1990s. Other examples of Community participation at multilateral level include the Helsinki Convention on the Protection of the Baltic and the Conventions on the Rhine, the Danube, the Elbe and the Oder. All of these involve the

Pan-Euro-Mediterranean Environmental Co-governance 325

participation of the CEECs and the Member States and are ratified by the Community but are not independently monitored or controlled at Community level. Coherence between internal and external policies and activities of the Union in environmental matters is also weak. The justification of Community environmental conditionality in its relations with third countries has been contested on grounds of the right of the Community to impose its priorities and preferences over those of third countries. 74 The World Trade Organization’s Committee on Trade and the Environment was established only in 1995 and none of the reports which it has issued to date answer or even discuss in detail the main environmental issues concerning EC environmental law and international trade. 75 In the case of genetically modified organisms (GMOs), the US, previously a staunch supporter of its GMO industry’s technology, has shied away from a trade war with the EU which defended consumer concerns over potential environmental implications. But this was more due to a ‘meltdown in confidence’76 of the scientific, political and global community than to any obligation at WTO level to respect the precautionary principle. Moreover, the Member States both individually and as the Community have been criticized for their actions regarding third countries where they, the Member States, do not respect the environmental standards they apply to their own territories.77 An example would be where Community companies are set up in a third country in order to avoid the environmental costs of establishing in the EU and contribute to environmental pollution there. If we look at the recent Commission Communication proposing an EC strategy to support the development of sustainable tourism in developing countries, it is made clear that to date EC support programmes to such countries have not considered the environmental impact of tourism. Tourism is an industry of greater turnover than the oil and gas industry. Significantly, the majority of tourists received by the MNMCs are EU citizens and the CEECs are also an increasingly popular destination for EU travellers. Only now are environmental considerations beginning to be integrated into this sector.

Conclusion Pan-Euro-Mediterranean regional integration provides an ideal stage for the launch of environmental co-governance to bring about improvements in the state of the environment or at least to prevent its further deterioration. Environmental integration should be secured in all links with proximity countries. But protection of the environment too must not be neglected as an essential component of the Pan-Euro-Mediterranean environment. Precisely because the environment transcends politics, environmental interdependence could provide the springboard for harmonious relations

326 Kirstyn M. Inglis

and bring together countries of traditionally antagonistic pasts. The example of the reconciliation of Bosnia and Herzegovina referred to above has shown how clean water, air and soil facilitated implementation of the Dayton Agreements. The reconstruction of Kosovo presents an immediate opportunity for launching sustainable development and underpinning it by developing the (environmental) civil society and ultimately using this goal as a tool in democratization, nation building and regional stabilization. There is room for coordination where there are clear areas of overlap in the two distinct relationships between the Union and the CEECs on the one hand and the Union and the MNMCs on the other. In October 1998, a European Conference was convened. It brought together the candidates and the Member States and it concentrated on regional co-operation and the environment. In the Presidency Conclusions, the regional initiatives of Pan-Euro-Mediterranean relevance were recognized. 78 The need for cooperation to be strengthened by the participants in this area was noted. Note was equally taken of the need for coherence in policies and for synergies between the enlargement process, wider regional environmental cooperation in Europe and global environmental issues, in particular climate policy and the preparation of international conferences and conventions.79 It is a positive development that the regional co-operation arrangements have been invited to report on their experiences of regional environmental co-operation and to propose solutions, alongside the European Environment Agency and the Commission. On the basis of these reports, the Conference intends to draft a report on the best practices for the various regional integrations for use in their future activities. Only a year earlier, in November 1997, the Euro-Mediterranean Ministerial Conference in Helsinki brought the Member States together with Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia and Turkey and adopted the Short and Medium Term Priority Environmental Action Programme (SMAP) foreseen in the Barcelona Declaration. As with the European Conference, the need for coherence and synergies between national, regional and international programmes was recognized together with activities and common concerns regarding the Baltic and the Black Sea which need urgent attention; the building of civil society is also a goal of both approaches. Of course, environmental integration into all policy areas of co-operation would be central to Pan-Euro-Mediterranean environmental co-governance. But it can only be a component of it. As the Union enlarges, multilateral co-operation offers flexible, nonbinding mechanisms for promoting sustainable development. The downside of this is the lack of binding commitments and, thereafter, the failure of participants to take it seriously. Environmental conditionality in relations with the MNMCs could be used to build sustainability into economic development and avoid future costs of correcting unsustainable

Pan-Euro-Mediterranean Environmental Co-governance 327

development in the Pan-Euro-Mediterranean regional integration.80 It is a question of environmental justice. The comparative environmental advantages and costs must be considered in the framework for trade growth if the predicted social catastrophe in the Mediterranean is to be avoided. The polluter pays principle is central to the Community’s environmental policy and this logic should apply equally to the Union’s contribution to pollution and resource depletion in the region. Past proposals to redirect energy taxes to the MNMCs, for example, have never curried favour at the EU level81 and proposals for public debt relief too have not gained any concrete ground.82 There are no fixed environmental allocations under MEDA. Certain key steps could be taken by the Union to tackle the state of environmental transition which Pan-Euro-Mediterranean regional integration will engender. They relate to reforming existing procedures and institutions, filling gaps in its internal environment policy in preparation for enlargement and reinforcing its environmental participation in the development of the Pan-Euro-Mediterranean regional integration. The success of integrating the environment into all policy areas demands proper implementation, at all levels of administration, of those policy areas. Thus, the various strategies of the Commission to tackle environmental integration in key policy areas and in external aid and funding are exciting. It goes without saying that firm political commitment to environmental integration will be a key factor in their success. This applies in particular to the institutionalization of the environmental integration process in organizational structures throughout all decision-making and legislative/policy implementation, whether at national, EU, OECD or World Bank levels. Certain innovative projects of the European Commission are noteworthy. The Commission is exploring the possibility of securing independent certification and accreditation of the environmental integration process in accordance with an internationally acknowledged, standardized environmental management system such as ISO 14001.83 Also, a new unit is planned which will be attached to the Commission and will work directly under the President of the Commission in order to drive and facilitate the environmental integration process. Moreover, the global revision of the Fifth Environmental Action Programme, which expires at the end of 2000, must look to the South, not only to the East. The Sixth Environmental Action Programme must seek to build upon the integration of environmental considerations into all policy areas and prepare for eastwards enlargement but, simultaneously, look forward to Pan-Euro-Mediterranean integration. Nevertheless, certain vital policy areas such as town and country planning remain excluded from Community action due to unanimous decision-making requirements. Another Intergovernmental Conference will be necessary to pave the way for enlargement and certain fundamental problems remain to be clarified – not least, the institutional make-up of

328 Kirstyn M. Inglis

an enlarged Union and the weighting of country votes. It is also not yet clear to what extent a majority of willing Member States could take joint action using the institutions and procedures of the Community to advance together in the environmental sphere, using the legal basis of the EC Treaty for environmental measures. Certainly, the last IGC did not revolutionize environmental protection in the Union. Innovative proposals put forward then 84 should be put back on the table for the next round. A first step in regional integration on a Pan-Euro-Mediterranean scale must be85 that the mandate of the European Environment Agency (EEAg) be extended to allow it to independently monitor and investigate all areas where any Member State is active, including international commitments or activities. There is a general lack of reliable comprehensive data on monitoring, implementation and control. In any case, the EEAg should not have to depend on the Member States for information. The European Consultative Forum on the Environment and Sustainable Development has suggested that the EEAg even be broadened into a European Sustainability Agency and that the reporting indicators developed by the EEAg be used as a platform for extended sustainability reporting so as to enable assessment of socio-economic response to environmental threats.86 Access to information is fundamental to the environmental civil society in the MNMCs, the CEECs and the CIS but also within the European Union itself and must be improved. Within the Union, environmental information is not as readily accessible under Directive 90/313/EEC 87 as it is in some of the ‘greener’ Member States. 88 For the CEECs, including the Balkans, and the CIS, the Aarhus Convention 89 under the auspices of UNECE should be ratified and best practice models should be disseminated at local and regional levels.90 Above all, an ambitious environmental policy within the EU will be necessary to prevent any escalation in environmental degradation. A considerable onus of responsibility for the preservation of the environment and ensuring sustainable development in relations with proximity countries and beyond falls upon the Commission services and demands considerable experience in the environmental needs of the whole region.91 The incorporation of environmental impact assessments into the administration of all the structural and cohesion funds, and also into the (decentralized) work of the Commission’s External Service as well as the RELEX Common Service, is vital.92 For the purposes of enlargement, the Commission has the opportunity to build in sustainable development through environmental impact assessments applied in its management and control procedures of the preaccession funding.93 Of course, the environmental rights enshrined in the environmental impact assessment Directive 85/337/EEC should also be enforceable against administrative services releasing funds in contravention of this Directive. The European Courts of Justice have refused standing to

Pan-Euro-Mediterranean Environmental Co-governance 329

individuals or environmental groups seeking to hold the Commission to account for the release of funds where a question mark hangs over certain procedural aspects of this Directive.94 The transparency and enforcement of the environmental impact assessment Directive 85/337/EEC 95 cannot be said to proceed smoothly as a considerable case law attaches to it. In the end, the Member States (or the recipient of EU funds) choose the projects and apply the national laws on environmental impact assessments in implementation of Directive 85/337/EEC. And, as examples have shown, ‘even if a project has a very negative impact on the environment, it does not prevent the project from being realised’.96

Notes 1. To quote the Commission Communication on the Single Market and Environment, COM(1999)263, 4, 8 June 1999: ‘The operation of the Single Market can be impeded by uncoordinated technical legislation, and by national measures that are not proportionate to their objectives’ and ‘the number of notified draft technical regulations on environment related issues has been constantly increasing in recent years.’ 2. The European Environment Agency, Europe’s Environment: The Second Assessment (hereinafter referred to as ‘the Second Assessment’), Copenhagen, 1998, 4. 3. Although water is not the primary reason for Israel’s occupation of the West Bank and Gaza Strip, it is indisputable that most of the land that Israel occupies continues to be held for its hydrological significance; see B. Smith, ‘Water: a critical resource’, in R. King (ed.), The Mediterranean Environment and Society (London and New York: Arnold, 1997), 243. 4. Commission Communication Integrating Environment and Sustainable Development into Economic and Development Co-operation Policy, COM(1999)499 Final, 20 October 1999. The percentage allocations referred to are contained in Annex IV. 5. See the Second Assessment, 7. 6. See the Second Assessment, 20. 7. See COM(1997)2000 Final, Communication of the Commission, Agenda 2000, Vol. 1. 8. Council Decision of April 1998 on the principles, priorities, intermediate objectives and conditions in the accession partnerships together with the future financial framework to support the strategy; OJ, L121/1, 23 April 1998. 9. Council Regulation 622/98 on assistance to the applicant states in the framework of the pre-accession strategy and in particular on the establishment of Accession Partnerships. OJ, L85/1, 20 March 1998. 10. Both in the Agenda 2000 and in the Commission Communication on Accession Strategies for Environment: Meeting the Challenge of Enlargement with the Candidate Countries of Central and Eastern Europe (commonly referred to as ‘the Road Map’), COM(1998)294 Final, 20 May 1998 and the Commission Staff Working Paper, Guide to the Approximation of European Union Environmental Legislation, SEC(997)1608, 25 August 97. 11. See COM(1998)745 Final, 11 December 1998, Commission Communication on the Review of Higher Environmental and Health Standards Following the Last Enlargement, and the subsequent Council Resolution of 21 December 1998

330 Kirstyn M. Inglis

12.

13. 14. 15. 16.

17.

18. 19.

20. 21.

22.

23. 24. 25. 26.

27.

28. 29.

extending the Commission’s review period of the relevant EC standards (previously to the end of 1998) to 31 December 2002. Directive 94/62, OJ, L365/10, 31 December 1994, allows Member States to encourage reuse of packaging (Article 5) but provides no fixed target for reuse (although it does so for recovery and recycling). The result has been that Member States have been adopting their own rules and the Commission now has to examine the national reuse systems for their compatibility with the principle of free movement of goods and other Treaty rules. See SEC(1997)1608, above. See COM(1998)294 Final, above. See Uniting Europe, no. 70, 18 October 1999, 1. See the Contzen Report, Point de vue stratégique pour l’avenir des programmes Phare et Tacis de l’Union européenne, August 1998. Note, however, that the Commission published a Recommendation in October 1999 (OJ, L265/37, 13 October 1999) which provides for what are effectively voluntary common classifications for radioactive waste. For example, uranium extraction waste and its final storage and the handling of materials on contaminated natural radionuclides such as waste, mud from oil extraction, slag, etc. Council Regulation 3906/89, as last amended by Regulation 1266/99, OJ, L161/68, 26 June 1999. Council Regulation 1268/99 on Community support for pre-accession measures for agriculture and rural development in the applicant countries of Central and Eastern Europe in the pre-accession period, OJ, L161/87, 26 June 1999. Council Regulation 1267/99 establishing an instrument for structural policies for pre-accession, OJ, L161/73, 26 June 1999. Agenda 2000 denies direct aid in the form of financial price support for agriculture to the CEECs. This will mean they will not be entitled to retain out of their own national budgets the differentiation for eco-friendly farming practices under the Common Agricultural Policy as the present Member States do; see Volume 1, 55: ‘In all events, there would be no need during this period to provide direct income support such as that resulting from the 1992 CAP reform. On the other hand, the applicant countries should be able to receive aid for developing their agricultural and processing structures in order to gradually prepare them for full integration into the common agricultural market.’ See J. Klarer and P. Francis, ‘Regional overview’, in J. Klarer (ed.), The Environmental Challenge for Central European Economics in Transition (Chichester: John Wiley & Sons, 1997), 49. Council Regulation 1973/92, OJ, L206/1, 22 July 1992, as amended. ECOS-OUVERTURE 1998–2001, OJ, C183/26, 13 June 1998. Report under Article 14 of Council Regulation 1404/96, COM(1998)721 Final, 4 December 1998, 14. See Amended Proposal, COM(1999)305 Final, 14 June 1999. A common position was reached on the proposal at the Labour and Social Affairs Council of 22 October 1999. See the explanatory memorandum to the Proposal for a Council Regulation concerning a financial instrument for the environment (LIFE), COM(1998)720 Final, 9 December 1998. See Eligibility Criterion 1, ECOS-OUVERTURE, above. Commission Regulation 1628/94 concerning implementation of a programme for cross-border co-operation between countries in central and eastern Europe

Pan-Euro-Mediterranean Environmental Co-governance 331

30. 31. 32. 33. 34.

35. 36. 37.

38. 39. 40. 41.

42. 43.

44.

45. 46.

47. 48. 49.

50. 51. 52.

and Member States of the Community in the framework of the PHARE programme, OJ, L171/14, 6 July 1994. INTERREG II, OJ, C115/3, 1990, as updated. See, for example, the reply of Mr Van den Broek on behalf of the Commission to the Written Question P-3553/95, OJ, C91/65, 27 March 1996. Regulation 1279/96, OJ, L165/1, 4 July 1996. Using the terminology of the 1998 TACIS annual report, see below, note 38, 55. In Article 3(6) of the 1996 TACIS Regulation (Regulation 1279/96, OJ, L165/1, 4 July 1996). This Regulation was the second to amend the original TACIS Regulation 2157/91, OJ, L201/2, 24 July 1991, the former amending regulation being Regulation 2053/93, OJ, L187/1, 29 July 1993. Commission Regulation 1628/94, OJ, L171/14, 6 July 1994. Known as TACIS Inter-State and Cross-Border Co-operation Programmes. Communication from the Commission on Cross-border Co-operation within the framework of the TACIS programme, see COM(97)239 Final, 27 May 1997. See 33rd Report of the House of Lords, Session 1997–1998, 72, point 225. On the proposal for the new TACIS programme, see COM(1998)753 Final, 8 January 1999. COM(1999)380, 23 July 1999, Report from the Commission. TACIS Annual Report 1998, p. 73. COM(98)134 Final, 31 March 1998, 19, Commission Communication on the actions in the nuclear safety sector for the CEECs and NIS. The OBNOVA Regulation 1628/96, OJ, L204/1, 14 August 1996, introduced aid for the countries of the former Yugoslavia. For the main findings of the environmental impact, see the report of the REC, Environmental Impact of the Yugoslavia Conflict, 3 August 1999 (http:www.rec.org/ REC/Announcements/yugo/exec_sum.html). See the speech of J. Stritih, Executive Director for the REC, ‘The Balkan crisis and environment’, Green Horizon, vol. 2/3, 2 June 1999. See the concept paper of the South Eastern European Development of Environmental Society Initiative (SEEDES), An Initiative on the Development of Civil Society and the Role of the Environment in South Eastern Europe, August 1999 (http:www.rec.org/REC/Announcements/seedes_concept.html). For a brief description, see G. Dardis and B. Smith, ‘Coastal zone management’, in R. King (ed.), The Mediterranean Environment and Society (London and New York: Arnold, 1997), 286–90. Ibid., 296. Although there is provision for harmonization of standards – a proviso no doubt intended to reduce the potential for non-tariff barriers contained in the Work Programme dealt with further below. See the Co-operation Agreements with the Maghreb and Mashrek countries. A. and Y. Benachenou, ‘Environnement et developpement en Méditerranée’, in L’annuaire de la Méditerranée (Paris: Germ-Publisud, 1998), 306–24. See Guideline 6 of the MEDA (autonomous) Regulation, concerning the adoption of the guidelines for the indicative programmes concerning financial and technical measures to accompany the reform of economic and social structures in the framework of the Euro-Mediterranean partnership (MEDA), OJ, L325/20–26, 14 December 1996. Adopted at the Euro-Mediterranean Conference, 27/28 November 1995. Contained in Annex II of the autonomous Regulation. See below.

332 Kirstyn M. Inglis 53. 54. 55. 56. 57. 58. 59. 60. 61.

62.

63. 64. 65. 66. 67. 68.

69. 70. 71.

72. 73.

See COM(1999)499 Final, above, at 14 and 36. See Guideline 15 of the MEDA Regulation, below. See COM(1999)499 Final, above. Decision of the Council and the Commission of 26 January 1998, OJ, L97/1. Guideline 18 of the MEDA Regulation. Guideline 17 of the MEDA Regulation. See COM(1998)721 Final, 4 December 1998, 12. See M. Chatelus, ‘L’énergie en Méditerrané: espace régional ou marché mondial?’, Monde Arabe Maghreb Machrek, hors série, December 1997, 19–30. See B. Smith, ‘Water: a critical resource’, in R. King (ed.), The Mediterranean Environment and Society (London and New York: Arnold, 1997), 249: ‘Because of the supra-national nature of the possible change of sources of water supply, the only route by which future conflicts over water resources can be avoided is by negotiating within and between countries. If treaties ensuring the equitable distribution of freshwater are not negotiated, agricultural and industrial development will be curtailed, individual health and environmental quality will be reduced and politicians will be pressured to secure access to supplies by whatever means available.’ See the Barcelona Declaration Work Plan, November 1995. A specific work plan is being prepared by the Euromed Water Directors on implementing an integrated water management policy with sustainable objectives and identifying quantitative and qualitative aspects. See the Fifth Environmental Action Programme, 23. A. and Y. Benachenou, ‘Environnement et developpement en Méditerranée’, in L’annuaire de la Méditerranée (Paris: Germ-Publisud, 1998), 306–24. See ibid., 315–16. The Kyoto Summit of December 1997 where agreement was reached on the Kyoto Protocol to the UN Framework Convention on Climate Change. On the CO2/energy tax, see COM(95)4 Final, 13 January 1995. Including the lack of land-use planning and programmes; the lack of soil protection policy; the lack of Community criteria to differentiate between waste for recycling and disposal; the lack of provision for the extraction and final storage of uranium waste and common criteria for handling materials contaminated by natural radio nuclides. A. Jordan, ‘European common water policy standards: locked in or watered down?’, CML Rev, vol. 37, no. 1, March 1999, 1. Directive 96/61/EC, OJ, L257/26, 10 October 1996. ‘… and nobody has ever invoked the subsidiarity clause to oppose the degradation of the local or regional environment by measures (under Community) financial assistance measures. Nobody arguing that the Community should not, under subsidiarity auspices, tackle issues such as environmental liability, discusses the startling absence of environmental liability provisions at local, regional or national level in most Member States.’ See L. Kramer, EC Treaty and Environmental Law (London: Sweet & Maxwell, 1998), 202. Regulation 792/93, OJ, L79/94, 1 April 1994 Since the 1998 Cardiff European Council, the Commission has issued communications on environmental integration generally and on Agenda 2000. See for example COM(1998)333 Final of 27 May 1998 on Partnership for Integration, A Strategy for Integrating the Environment into EU Policies and COM(1999)563 Final of 24 November 1999 on the approximation of the laws of the Member States with regard to the transport of goods by vessels on inland waterways.

Pan-Euro-Mediterranean Environmental Co-governance 333 74. See P. Demaret, ‘Environmental Policy and Commercial Policy’, in M. Maresceau (ed.), The European Community’s Commercial Policy after 1992: the Legal Dimension (Dordrecht: Martinus Nijhoff, 1993), 305–86. 75. See WTO press release of 29 October 1998, Press/TE 026. 76. See The Guardian, 9 October 1999. 77. On the lamentable state of implementation of Community environmental laws, see Commission Communication on implementing Community environmental law, COM(96)500, 22 October 1996. See also COM(1999)263, below. 78. Press Release 11605/98, Presidency Conclusions of the first Ministerial Meeting of the European Conference of 6 October 1998. Conclusion 4 lists ‘the regional activities of the Lulea session of the Barents Euro-Arctic Council, Riga Baltic Sea States Summit and the meeting in Nyborg at the level of Foreign Ministers, which adopted Agenda 21, Yalta Summit signing the Charter of the Black Sea Economic Co-operation, Central European Initiative Plan of Action, Short and Medium Term Action Plan adopted by the Euro-Mediterranean Conference in Helsinki’. 79. Conclusion 6 of the Presidency Conclusions of the first Ministerial Meeting of the European Conference of 6 October 1998, above. 80. While the RIPs are not signed by the MNMCs, the Commission does have direct control over the release of funds and it acts upon the decisions of the Member States. 81. Energy taxes have, however, been levied by Member States and redirected to support national environmental actions, as in the case of Greece for example. 82. Although the difficulties that debt creates for the economic development of the region and the need for continued dialogue is acknowledged in the Barcelona Declaration, this topic is not up for discussion under the Barcelona Declaration and is left aside. 83. International Standards Organization Standard 14001 for an environmental management system. The Commission proposes this in COM(1999)499 Final, cited above. 84. See, for example, P. Barnes, The European Union and the 1996 IGC: Crisis or Opportunity, Centre for European Union Studies, University of Hull, United Kingdom, 1995. 85. Indeed, the need for improved information is highlighted by the first focal point for joint action identified by the work programme attached to the Barcelona Convention, ‘the need for an assessment of the problems in the Mediterranean region and to define, where appropriate, the initiatives to be taken’. 86. Preparing the Global Assessment, European Communities, 1999, available at http://europa.eu.int/comm/environment/forum/documentation.htm 87. OJ, L158/56, 23 June 1990. 88. And Sweden in particular. 89. The Aarhus Convention Strengthening Access to Information and Public Participation in Decision-making and Access to Justice in Environmental Matters. 90. Of course, for the MNMCs of such different political and social cultures, and this is probably why access to information is not mentioned in the Barcelona Declaration alongside the development of the civil society. 91. See, for example, proposal for a Council Regulation on measures to promote the full integration of the environmental dimension in the development process of developing countries (which would apply as of 1 January 2000), COM(1999), 28 January 1999, 36. 92. On the External Service and the RELEX Common Service (which deals with the management of Community aid to third countries (SEC(97)1813/5 of

334 Kirstyn M. Inglis

93.

94. 95. 96.

10 October 1997, including OBNOVA, PHARE, TACIS and MEDA), see the Commission Communication on the development of the external service, COM(1999)180 Final. It reports that it is not yet possible to evaluate the work of the RELEX Common Service, operational only as of January 1999. For example, in the case of ISPA, the management and control systems to be established by recipient countries before 1 January 2002 and which will be managed jointly with the Commission in a more decentralized way. For example, see Stichting Greenpeace Council v. European Commission, Case C321/95, ECR, 1998, 1–1651 OJ, L175/40, 5 July 1985, as amended. On this point, see L. Kramer, EC Treaty and Environmental Law (London: Sweet & Maxwell, 1998), cited above, 96.

16 The European Union and Migratory Pressure from the Mediterranean and Central and Eastern Europe Kris Pollet

Introduction The issue of migration is one of the most important challenges facing the European Union. In this regard the Central and Eastern European Countries (CEECs) and the Mediterranean region are of particular importance to the Union as they both, in a number of cases, function as transit countries for immigrants from different parts of the world and as countries of origin. However, apparently, the pressures of migration are perceived differently in relation to the Mediterranean Non-Member Countries (MNMCs) than in relation to the CEECs, although this has not resulted in two different strategies as such. Until now, European immigration policy has always been based upon the implementation of restrictive measures, contributing to the construction of what has been described as ‘Fortress Europe’. This policy has also proven to be complex, combining elements of purely intergovernmental co-operation, third-pillar measures and community instruments. This mixture of various institutional elements results partly from the fact that admission of third-country nationals to the territory of the EU Member States has long been considered as belonging exclusively to the competences of these Member States. It is only since the beginning of the 1980s that intergovernmental co-operation on immigration has begun. Within the European Community, the Schengen Member States started the most important and most successful initiative on the matter. With the signing of the 1985 Schengen Agreement and the 1990 Schengen Implementation Convention, these states abolished internal border controls between them. In the concept of Schengen, the abolition of internal border controls required accompanying measures such as tight external border controls and a common policy on admission of third-country nationals, including a common visa policy. The Schengen Convention approach is exclusively restrictive in that the issue of migration is dealt with in terms of threatening internal security and its links with international crime. As the Schengen co-operation functioned as a model for the 335

336 Kris Pollet

European Union, the initiatives and measures taken within the framework of the Union as regards migration follow the same philosophy. As will become clear, the Schengen co-operation also had an important influence on the general strategy of the Union towards the Central and Eastern European Countries and the Mediterranean partners. In this contribution, an introductory overview will be presented of the state of affairs relating to migration in the relations between the EU and the MNMCs on the one hand, and the EU and the CEECs on the other. In particular the implementation of the visa policy of the European Union as regards both regions and its consequences will be examined. The analysis of the relevant provisions in the various Association Agreements concluded with these countries will be another important element in this study. Migration is obviously also a matter of discussion in the current accession negotiations. In this regard, the influence of Schengen co-operation on the enlargement process cannot be underestimated. Finally, the conclusion of readmission agreements with the countries of both regions seems to be an important policy instrument and will be included in the analysis. As regards the Mediterranean region, the analysis will concentrate mainly on the Maghreb countries, as they remain, together with Turkey, the most important sending countries.

I. The EU policy as regards the Mediterranean Non-Member Countries in the area of migration A general overview Analysing the EU policy towards the Mediterranean Non-Member Countries and in particular the Maghreb countries as regards the migration issue makes a short flashback into the recent past of migration into Europe inevitable. At the beginning of the century, migration between the Maghreb countries and Europe was mainly directed towards France. The reasons were obvious. Algeria had been under the political dominance of Paris since 1830, while French protectorates were established in Tunisia (1881) and Morocco (1912). Until the independence of these French protectorates, migration did not occur in one direction exclusively. Algeria and Tunisia were then also destinations of immigration for European (mainly French) settlers. However, independence turned the three Maghreb countries into important emigration countries.1 Migration, in particular labour migration, was encouraged by certain EC Member States at the beginning of the 1960s. Agreements were concluded in that period with these countries in order to attract as much labour force as possible for, what were at that time, growing European industries. Maghrebi immigrants arrived in high numbers in Member States of the European Community. This created a concentration of immigrants originating in MNMCs in a limited number of

The EU and Migratory Pressure 337

Member States and even certain cities in the EC. This phenomenon can partly be explained by the above-mentioned colonial links between the countries concerned in the postwar period. Most of the Maghrebi emigrants established themselves in France, while Belgium and the Netherlands were also attractive. At first, the EC remained silent to the new challenge, as immigration was considered to be an exclusively national competence. National measures soon led to a complete ban on immigration. The economic recession in EC Member States following the oil crisis of 1974 is often pointed out as the immediate cause for this European-wide halt to immigration. 2 However, the administrative measure was unable to stop the actual immigration into the Member States. Family reunification remains an important source of legal immigration into the Community, while asylum seeking is another means to legally bypass the official immigration ban. In addition, illegal immigration from that moment became a growing phenomenon in the Community as it is the last hope for those excluded from legal immigration to enter the territory of the Member States. According to official Eurostat statistics, 3 the total population in the EU originating from the twelve MNMCs is about five million. This is 1.3 per cent of the total EU population and 8 per cent of the total immigration into the EU. It is most interesting to note that Germany remains the main country of destination for Mediterranean immigrants in the EU: nearly 50 per cent of all Mediterranean immigrants went to Germany in the period 1986–95. The majority of these immigrants in Germany are Turks. Of the one million Turks entering the EU in the same period, 78 per cent chose Germany as their country of destination. France received 310 000 immigrants from the Mediterranean in that period, mostly Moroccans and Algerians. This makes France the second most important EU country of destination for Mediterranean immigrants, followed by the Netherlands that received 183 000 immigrants and is the second EU country of destination for Turks and Moroccans. The percentage of Mediterranean immigrants in EU Member States is nowhere more than 1.5 per cent, except in Germany where the total number reaches about 2.5 per cent of the total population, mostly due to the important number of Turks living in that country. Nevertheless, it can be concluded that the most important immigration pressure towards the EU Member States is still coming from Moroccan and Turkish nationals. In addition, these migratory flows are still mainly directed towards Germany, France and the Netherlands. Interestingly enough, Mediterranean immigration in Italy and Spain is not overwhelmingly high, notwithstanding their geographical proximity. Spain, for instance, has a relatively small African population within its foreign population. Here again, Moroccans are the largest single group of Mediterranean immigrants in the country. However, in the case of Spain, the important phenomenon of illegal immigration should also be taken into account which results in much

338 Kris Pollet

higher numbers. Illegal immigration is, of course, by definition hard to measure accurately but the regularization programme of 1991–92 is, in this regard, an interesting indication. In this programme, 48 240 Moroccans were legalized, increasing the officially resident Moroccan population in Spain to over 65 000 persons in 1993.4 However, according to some estimates, the total number of illegal immigrants in Spain in 1993 reached between 200 000 and 300 000.5 Nowadays, high numbers of Moroccans try to reach the Spanish coast illegally by crossing the narrow Strait of Gibraltar by boat. 6 Spain also introduced a quota system in 1993 and 1994 according to which about 20 000 foreign workers were permitted entry into Spain yearly. In 1995, the quota was lowered to 8000. Mostly Moroccan nationals were able to obtain temporary legal residence in Spain through this quota system. Italy, once a country confronted with a large emigration towards the richer parts of Europe, has now become an important immigration host country within the European Union. The immigrant population in Italy is composed of various nationalities. However, in 1995 the Maghreb countries, in particular Morocco and Tunisia, were still the most important sending countries. Recently, Italy also introduced a regularization programme. The issue of migration in the new EU Mediterranean policy A number of Co-operation Agreements were concluded between the European Community and certain Mediterranean Non-Member Countries in the 1970s, without, however, tackling the issue of migration to the Community. In fact, it is only in the early 1990s that the EC institutions have, in the framework of the Renewed Mediterranean Policy (1992–96), launched programmes in the field of migration. In a Communication to the Council and the European Parliament of 1994, the Commission laid down the general framework for this future Mediterranean policy. The final objective of this policy should be to create peace and stability in the region. 7 Therefore initiatives are necessary to support political reform, respect for human rights and freedom of expression in the region. Improvements in these issues are deemed to help control extremism which is, apparently, seen as the biggest threat. On the other hand, the Union’s policy should at the same time support economic reform. Economic success in the countries concerned should lead to sustained growth and improved living standards, a diminution of violence and an easing of migratory pressures. Here, the Commission subscribes to the view that the main cause for migratory movements lies in poor economic conditions in the country of origin. As a consequence, these economic aspects should be dealt with in the first place in order to control the migratory pressure. It is obvious that the common foreign and security policy of the Union, as introduced by the Maastricht Treaty, will play an important role in

The EU and Migratory Pressure 339

dealing with these challenges. However, in this Communication the Commission did not analyse the migratory flows from the Mediterranean basin towards the European Union. The phenomenon was merely highlighted without further examination. The executive summary simply stated that ‘beyond free trade the Community should be prepared to enter into wide-ranging areas of co-operation with Mediterranean countries, to be defined jointly with them’. Drug trafficking and illegal immigration are mentioned as potential issues to be included in this co-operation. One year later, a second Communication was published by the Commission on the Mediterranean policy of the Union. The ultimate aim is to implement a Euro-Mediterranean Partnership in order to streamline relations between the Mediterranean Non-Member Countries and the EU.8 One of the means to improve those relations should be the establishment of a EuroMediterranean economic area that should go ‘hand in hand with the creation of an area of peace and stability’. The Euro-Mediterranean economic area should not be limited to free trade agreements but also include a number of measures to be implemented by the Community to help the countries of the region modernize their economies in order to support sustainable development. It should be noted that the Commission urged further co-operation in the fields introduced by the Maastricht Treaty, in particular Title VI on justice and home affairs. As a consequence, according to the Commission, the new opportunities offered by the Maastricht Treaty should also be used in relations with third countries. The 1995 Barcelona Declaration, setting out the framework for the reinforced Euro-Mediterranean co-operation, addresses the issue of migration as an element of the partnership in social, cultural and human affairs. In an effort to ‘bring the peoples together’, the participating states stress the importance of dialogue and respect between cultures and religions. Social development is deemed to go hand in hand with economic development. In that context, particular importance is attached to respect for fundamental social rights, including the ‘right to development’. Moreover, the participants acknowledge the importance of the role played by migration in their relationships. The participants apparently perceive migration as a negative element as they agree to strengthen their co-operation to ‘reduce migratory pressures’. Illegal immigration is mentioned separately as an important issue for all participating states. This phenomenon will be dealt with through the conclusion of readmission agreements, as this is already a well-known practice in the states concerned (see below). A work programme has been added to the Barcelona Declaration laying down the general principles to be taken into account for the implementation of the Declaration. Again, the importance of the issue of migration for Euro-Mediterranean relations is emphasized. Improving the living conditions of migrants legally established in the Union is one of the priorities as

340 Kris Pollet

part of the general aim of the integration of migrants. For instance, dialogue between cultures and civilizations is indicated as a very important aspect of the Euro-Mediterranean Partnership in social, cultural and human affairs. It is also expressly stated that the Euro-Mediterranean Partnership must contribute to enhancing educational levels throughout the region. The MED-Urbs Migration Programme was initiated in 1994 in a Pilot Phase as part of the MED-Urbs Programme aimed at urban development in the MNMCs. In November 1995, the MED Migration Programme was identified as being, for its part, one of the implementation instruments of the Barcelona work programme. However, decentralized MED programmes were, at the end of 1995, suspended in order to re-examine and improve the management systems and mechanisms. 9 In addition, the MEDA Democracy Programme, started in 1996, deals with the protection of targeted groups, i.e. women, children, refugees, migrants, victims of torture and detainees. A second Euro-Mediterranean Ministerial Conference was held in Malta on 15 and 16 April 1997. 10 However, the Malta Declaration is merely a confirmation of the general principles and framework laid down in the Barcelona Declaration.11 Sustainable and balanced economic and social development is still regarded as an important tool for creating an area of shared prosperity. Also the importance of the negotiation and ratification of the Euro-Mediterranean Association Agreements, essential elements for the achievement of the Euro-Mediterranean free trade area, is stressed. As regards migration, the participating states confirm their intention to intensify the dialogue and co-operation on a Euro-Mediterranean multilateral level on migration issues and human exchanges and in the field of illegal immigration. In order to achieve this objective, the EuroMediterranean Committee for the Barcelona Process 12 is reaffirmed as ‘a central forum for providing impetus, monitoring and following up actions and initiatives within the framework of the partnership’. 13 However, the Malta Declaration cannot be attributed the same meaning for the EuroMediterranean dialogue as its predecessor, as it merely repeats the objectives set in the Barcelona Declaration. The general principles concerning migration laid down in the Barcelona and Malta Declarations are not very impressive. However, migration, and in particular the problem of illegal immigration, seems to be a matter of concern to the states involved in the Euro-Mediterranean dialogue. The Civil Forums organized during the Barcelona and Malta conferences share this analysis but at the same time insist on attributing greater importance to migration. Indeed, the workshop concerning migration at the Barcelona Civil Forum describes migration as a key factor in Euro-Mediterranean relations today. However, much more emphasis is laid on the aspect of the integration of immigrants in society. Integration of immigrants can be achieved by equality of rights and duties of both immigrants and local

The EU and Migratory Pressure 341

people and through legalizing their administrative situation. The Civil Forum therefore calls for a harmonization of the policies of the EuroMediterranean countries in such areas as entry conditions, working conditions, right to family reunion and access to citizenship, finally resulting in a Mediterranean charter of immigrant rights. At the same time, the participants to the Civil Forum pleaded for free movement of all immigrants in the MNMCs and in the European Union. The proposals made by the representatives of civil society all stress the importance of creating the best conditions for increasing prosperity and wealth in the countries concerned. For instance, it is stated that European initiatives regarding the Mediterranean region should concentrate more on actions countering the phenomenon of unemployment that is undermining economies in the long term.14 During the Malta Civil Forum, there was no longer a separate working group on migration. However, the report of the working group on multicultural interaction made a recommendation to ‘recognise immigration as an enriching factor both on a human and a cultural level’.15 Where the Barcelona and Malta Declarations lay much emphasis on the control of migration flows in the direction of EU territory, the Civil Forum stresses the potential value of the presence of migrants on the territory of the participating states. Integration of migrants to European society seems to be the key word, while the intergovernmental approach is more concerned with diminishing migratory pressures. However, immigration has played an important role in relations with the Mediterranean NonMember Countries and it will continue to do so in the future. An interesting report of the European Parliament on the joint report by the Presidency of the Council and the Commission on Mediterranean Policy (a follow-up to the Barcelona Conference) contains a proposal similar to the one made by the Barcelona Civil Forum to create a contractual framework for regulated immigration between the two regions where it is also suggested that a charter of immigrants’ rights be created in which a balance should be found between both governmental and human interests. 16 Although the idea may be too progressive to be realistic, it certainly deserves further examination and may be complementary to the current immigration policy which will be dealt with in the following sections. As was expected, the 1999 Euro-Mediterranean Conference of Foreign Ministers held in Stuttgart did not contain revolutionary innovations in the field of migration policy.17 The Stuttgart Conclusions indeed only refer to the results of the Euro-Med experts meeting on ‘migration and human exchanges’, held in The Hague in March 1999. A general conclusion of the experts was to distinguish clearly between different forms of migration and movement of persons. Human exchanges, i.e. contacts between businessmen, tourism and family visits, should be encouraged, while it is deemed necessary that the Euro-Med partners cooperate to oppose illegal immigration. The European Union should continue to provide technical assistance

342 Kris Pollet

to its Mediterranean partners in order to prevent illegal immigration into the Union and close co-operation is needed to readmit and reintegrate into their countries of origin those who have been found to reside illegally in the Union. Anyhow, these conclusions remain rather vague and are characterized by a lack of concrete proposals which was reflected eventually in the Stuttgart conclusions. New association agreements with Mediterranean Non-Member Countries It has already been mentioned that co-operation agreements were concluded with the three Maghreb countries in 1976. However, it soon became clear that these agreements constituted an inappropriate framework for governing the relations between these countries and the EU. In particular the southern EU Member States were demanding expanded co-operation with the Maghreb.18 Eventually, the Commission was given a mandate in December 1993 to negotiate new association agreements with Morocco and Tunisia that would include political dialogue, free trade in industrial products and financial, economic and social co-operation. These so-called ‘Euro-Mediterranean Association Agreements’ have since been concluded with other MNMCs and contain some provisions on the issue of migration. From the point of view of the European Union it is, of course, very important to have privileged relations with the MNMCs, not only as regards trade and trade related aspects but also as regards social matters and related issues such as immigration. In particular, the southern EU Member States, for obvious geographical reasons, are in a vulnerable position in this respect. As the EU, or at least some EU Member States in the framework of the Schengen co-operation, was already from the mid-1980s preparing for the abolition of border controls at the internal borders, implying a common and strengthened border control system at the external frontiers of the Union, it was clear from the beginning that a successful implementation of the external border control system would require special attention for the southern borders of the Union. The fear of massive and uncontrollable immigration from the Mediterranean region is indirectly translated in the association agreements concluded with the MNMCs. These Euro-Mediterranean Association Agreements (EMAAs), like the Europe Agreements concluded with the Central and Eastern European Countries (see below) do not guarantee free movement of persons to nationals of the MNMCs. In the EMAA with Tunisia, for instance, it is stated that only a treatment free from any discrimination based on nationality as regards working conditions, remuneration and dismissal is granted by the Member States to workers of Tunisian nationality. They enjoy the same treatment free from discrimination in the field of social security. Nationals of EC Member States enjoy the same

The EU and Migratory Pressure 343

treatment when employed on the territory of Tunisia. 19 However, the EMAAs also contain provisions on dialogue in social matters and cooperation in the social field. Here, the importance of a combined effort in the field of migration is stressed. It is, for instance, stated that the reduction of migratory pressure is, both for each EU Member State and the associated Mediterranean country concerned, a matter of priority. At the same time, attention will be paid to resettling those repatriated because of their illegal status under the legislation of the state in question. In this respect, the social dialogue must cover living and working conditions of the migrant communities but also migration and illegal migration and the conditions governing the return of individuals who are in breach of the legislation dealing with the right to stay and the right of establishment in their host countries. It is interesting to note that one of the ways to reduce migratory pressure indicated in the EMAA with Tunisia is the ‘creation of jobs and developing training in areas from which emigrants come’. 20 Apparently the idea of a so-called root causes approach in the field of migration policy will also be applied through the implementation of the Euro-Mediterranean Association Agreements.21 In all EMAAs particular concern with the issue of migration can be seen, be it in various degrees. In the Agreement concluded with Jordan, for example, a joint declaration is added concerning co-operation for the prevention and control of illegal immigration. The principle of readmission will be applied between the contracting parties as each party agrees to ‘permit the return of its nationals illegally present on the territory of the other party upon request by the latter and without further formalities’. In line with current EU policy concerning the prevention of illegal immigration, parties are encouraged to conclude ‘bilateral agreements regulating specific obligations concerning co-operation for the prevention and control of illegal immigration, including an obligation for permitting the return of nationals of other countries and stateless persons who have arrived on the territory of the one Party from the other Party’.22 Also the Euro-Mediterranean Agreement with Morocco states in a joint declaration that the Parties agree to adopt bilaterally the appropriate provisions and measures to cover readmission of their nationals. 23 The Agreement concluded with Tunisia does not contain a specific declaration on readmission. In the current negotiations on an EMAA with Egypt, the necessity for a readmission clause has already been stressed by the Dutch delegation.24 However, the conclusion of readmission agreements with certain Mediterranean Non-Member Countries was at that moment already under way among EU Member States. One of the most important bilateral readmission agreements concluded so far is the Agreement between Spain and Morocco in 1992. According to the Agreement, Morocco is obliged to readmit third-country nationals who have entered Spain illegally after

344 Kris Pollet

transiting through Moroccan territory. However, Morocco has until now been unwilling to implement the Agreement in practice. It was only in 1997 that Morocco agreed to readmit a group of 65 immigrants from the sub-Sahara who entered Spain via Morocco. Since the entry into force of the bilateral Agreement, Spain had requested that the Moroccan government take back about 600 illegal immigrants, requests which were refused in most cases.25 It should be noted that the Netherlands concluded a similar agreement with Morocco in 1993, 26 while Belgium, France and Switzerland have also concluded readmission agreements with Morocco.27 Visa policy Still an important element of the migration policy of the EU and the Schengen states towards the MNMCs is the introduction of visa requirements. Until recently, visa policy was a matter exclusively within the competences of the Member States as the European Community had no legal basis in the EC Treaty to take initiatives in this field. However, first within the Schengen co-operation and later at the EU level, the Member States realized that a common approach concerning visas had become necessary because of the principle of free movement of persons within the common area (Schengen/EU) and the abolition of internal borders in this area. Both visa policy at the Schengen level and at the EU level will be briefly discussed here, as well as the impact of the integration of the Schengen acquis into the framework of the European Union. The basis of the visa policy of the Schengen states is laid down in the 1990 Schengen Implementation Convention. Its Article 9 states that a common visa policy will be introduced for third-country nationals and that further harmonization will be pursued. The common visa policy of the Schengen states as defined in the Schengen Implementation Convention requires three elements: the introduction of a common list of those countries whose nationals require a visa to enter the Schengen territory, a common visa format and common rules for the issuing of these visas. Accordingly, the Schengen Executive Committee, responsible for the supervision of the correct implementation of the 1990 Schengen Implementation Convention,28 adopted a common list of third countries whose nationals need visas. This is the so-called negative list which is of a binding nature and can only be modified by unanimity in the Executive Committee. Third countries holding risks for internal security or illegal immigration were included in this list. Besides this list a positive list was adopted containing the third countries whose nationals are exempted from visa requirements by all Schengen states. A third list, the so-called ‘grey list’, contains the third countries for which the Schengen states have differing policies.29 Both the positive list and the grey list are indicative for the competent authorities of the Schengen states but are by no means binding. As a consequence, Schengen states can

The EU and Migratory Pressure 345

unilaterally change their policies concerning the countries on these lists.30 Besides the adoption of visa lists, a uniform Schengen visa sticker was introduced to facilitate the issuing of visas and their control at the border. Moreover, the same model is also used by the Schengen states for their national visa, with an extra national identification. It should be noted that the EU also copied the Schengen model (see below) for its own uniform visa format. Finally, the Schengen states also agreed on common rules for the granting of visas. Indeed, the Common Consular Instruction31 defines the procedure and the criteria according to which visas are granted in order to ensure that all visas issued by the various Schengen states are equivalent in every respect. The latter is a necessity because the main consequence of the common Schengen visa policy is that a third-country national holding a Schengen visa issued by one Schengen state has free access to the territory of the other Schengen states. However, it should be noted that the Schengen visa is only valid for a period not exceeding three months. Visas valid for a longer period remain purely national visas and continue to be governed by national legislation and administrative procedures. Various categories of Schengen visa can be distinguished. A simple uniform Schengen visa is valid for a period not exceeding three months for travel or residence purposes on the Schengen territory. Some third-country nationals also need an airport transit visa in order to enter the international transit zone of certain airports. This transit visa does not imply a right of entry to the territory of the Schengen state concerned. A list of countries whose nationals require such a visa is annexed to the Common Consular Visa Instruction adopted by the Schengen Executive Committee. Nationals of the three Maghreb countries, for instance, require such a visa in the Benelux countries.32 Furthermore, a regular transit visa can be issued in order to allow third-country nationals to travel in the Schengen territory from one third country to another. Third-country nationals who intend to travel several times to one or more Schengen states for business reasons may be granted a short stay visa that is valid for multiple stays not exceeding three months in total. Finally, Schengen states can issue collective visas to groups of between 5 and 50 persons for a period not exceeding 30 days. In addition, the Consular Visa Instruction mentions the possibility of a territorially restricted visa, which is only valid for the territory of one or more Schengen Member States, and a visa issued at the border. It should be noted that the list of countries whose nationals require a visa to enter the territory of the Schengen states has not been officially published so far. It is not only the Schengen states which have established a common visa policy. Also at the EU level, initiatives have been taken in this regard. Nevertheless, the objectives of the EU initiatives were in many respects more modest than the Schengen rules although the basic ideas founding the Schengen visa policy were almost copied. Here too a list of countries whose nationals must be in the possession of visas when crossing the

346 Kris Pollet

external borders of the Member States has been established. Originally, Council Regulation 2317/95 of 25 September 1995 determined this binding list of countries marking it as an important step towards the harmonization of visa policy.33 However, the Court of Justice annulled the Regulation because of insufficient consultation with the European Parliament by the Council.34 Recently, the Council has adopted a new visa Regulation identical to the annulled Regulation, including the same list of third countries, after renewed consultation with the European Parliament. 35 The new Regulation, like the 1995 version, has hardly any harmonizing effect as it remains restricted to the determination of the list of third countries. A national of a third country mentioned on this list can be granted a visa, but that does not necessarily imply a right of entry to the territory of the other EU Member States. In the preamble of the Regulation it is explicitly stated that the principle that a Member State may not require a visa from a person wishing to cross its external borders if that person holds a visa issued by another Member State which meets the harmonized conditions governing the issue of visas and is valid throughout the Community or if that person holds an appropriate permit issued by a Member State is a matter that should be determined within the appropriate framework. Since no initiative has yet been taken concerning this matter, third-country nationals have no right of entry to the territory of Member States other than the one that issued the visa on the basis of this Regulation.36 Besides the determination of the visa list, the Council also adopted a Regulation laying down a uniform format for visas.37 As mentioned before, the EU uniform format was based on the Schengen visa model. The EU visa list, like the Schengen list, was established according to two guiding criteria: risks as regards internal security and illegal immigration. As a consequence, the general policy of the European Union towards the MNMCs is reflected in this list. All MNMCs participating in the Barcelona Process are included in the EU visa list except Israel, Cyprus and Malta.38 The Treaty of Amsterdam has a number of implications for the visa policies analysed above. The protocol integrating the Schengen acquis into the framework of the European Union annexed to the Amsterdam Treaty establishes an authorization for closer co-operation between the Member States concerned. As a consequence of that Protocol, the Schengen acquis must be integrated into either the first or the third pillar. Recently, the Council adopted two Decisions based on the Schengen Protocol to the Amsterdam Treaty. The first Decision defines the Schengen acquis by enumerating the parts of the Schengen acquis for which a legal basis must be determined in the

The EU and Migratory Pressure 347

Treaty.39 The second Decision determines the legal basis for each of the provisions or decisions which constitute the Schengen acquis.40 According to these Decisions, the visa provisions of the Schengen Implementation Convention and the Decisions of the Executive Committee concerned are based now on Article 62(2)(b) EC Treaty but this does not change the content of the common visa policy of the 13 EU Member States mentioned in Article 1 of the Schengen Protocol. It only means that future proposals and initiatives to build upon the Schengen acquis as regards visa policy will have to be made according to the institutional framework established by the new Title IV EC Treaty. This means, inter alia, that the tasks of the Schengen Executive Committee are taken over by the Council and that the Schengen Secretariat is now integrated into the General Secretariat of the Council. Furthermore, both the Commission and the European Parliament can now participate in the decision-making process, while the Court of Justice has limited competences in this field. There is, however, one important consequence of the integration of the Schengen acquis as regards the visa policy developed within the Schengen framework. Apparently, the Council Regulation determining the list of third countries and the Regulation laying down a uniform format for visas replace the corresponding provisions of, or adopted pursuant to, the 1990 Implementation Convention. This can be derived from Article 2 of the Agreement concluded by the Council of the European Union and the Republic of Iceland and the Kingdom of Norway concerning the latter’s association with the implementation, application and development of the Schengen acquis.41 As a consequence, the Schengen uniform visa no longer exists and is replaced by the EU uniform visa format. However, this is not the case for the positive and negative visa list adopted within the Schengen framework. Annex B to the above-mentioned Agreement concluded with Norway and Iceland mentions in a footnote that ‘the determination of third countries whose nationals must be in possession of visa or are dispensed of such obligations, adopted in the framework of the Schengen cooperation, … will continue to be applied upon integration of the Schengen acquis within the framework of the European Union.’ The Amsterdam Treaty has indeed created a very complex situation regarding the visa lists. Apparently, the negative list annexed to Council Regulation 574/1999 of 12 March 1999 based on former Article 100C EC Treaty will continue to be applied as regards the 15 EU Member States. However, the complementary Schengen negative list, containing approximately an additional 40 third countries (the majority being Commonwealth countries), will remain in force for the Schengen Member States. In addition, the positive list adopted by the Schengen states will remain in place for those Schengen states already applying the Schengen Implementation Convention in practice.42 It should be noted that since the entry into force of the Amsterdam Treaty, amendments to the Schengen

348 Kris Pollet

visa lists can only be adopted on a proposal from the Commission and by qualified majority as the Commission has been attributed an exclusive right of initiative in this matter by Article 67(3) EC Treaty. The extreme complexity of the matter requires a new initiative of the Commission to clarify the visa practice of the EU Member States and the Schengen states. However, these visa requirements for the nationals of the MNMCs contradict the aim of the Euro-Mediterranean Partnership to establish a free trade area in 2010. It is indeed an additional and time-consuming obstacle for the establishment and maintenance of business relations between Mediterranean firms and their European counterparts. Trade between the two regions implies various and repeated contacts between the persons holding responsibility over small and medium-sized companies and firms. This means that these persons should be able to travel with as few administrative obligations as possible between the two regions. At the moment, visa requirements imposed upon Mediterranean nationals and the slow issuing of visas by the embassies in EU Member States to these nationals preclude the elaboration of normal trade relations for the Mediterranean Non-Member Countries.

II. The EU policy towards Central and Eastern Europe as regards migration Introduction Migration originating from the Central and Eastern European Countries (CEECs) has undergone various evolutions. The postwar period up to the collapse of the Communist regimes was characterized by a virtually complete lack of migration between the CEECs and the Member States of the European Communities. Refugees fleeing the communist regimes in the CEECs were the only migrants originating in the region and they were at the time warmly welcomed by the governments of the EC Member States as opponents of these regimes. The downfall of the Berlin Wall inaugurated a new era in East–West relations concerning migration. A massive wave of migration towards the Community was generally expected. The regained freedom and the uncertainty of the population of the CEECs regarding the future of their countries combined with the high standard of living in the EC Member States were considered important push factors for emigration. Up to 1989, migration from the CEECs towards the Community was mostly politically motivated. Since that date, migration continues but in most cases is economically motivated. However, mass emigration from the CEECs towards the European Union never really materialized. In 1993, for instance, total population from Central and Eastern Europe residing in the 15 EU Member States reached 1 000 000, with a majority living in Germany.43 The cited number does not,

The EU and Migratory Pressure 349

of course, take account of illegal immigrants and asylum seekers from the CEECs. This official number indicates that in comparison with other regions and in particular the Mediterranean region, direct immigration from the CEECs into the EU is not extremely high. This may be surprising taking into account the less restrictive visa policies of the EU Member States towards most CEECs (see below). On the other hand, as mentioned above, due to their geographical position, some CEECs increasingly function as transit countries for immigration towards the EU Member States. As a result, the EU Member States started, immediately after the events of 1989–90, to coordinate their efforts in immigration policy as regards the CEECs. Their strategy, as in their policy towards the Mediterranean, was twofold. On the one hand they introduced tightened border controls through initiatives such as the Schengen Convention, although only a limited number of EU Member States are contracting parties to this Convention. On the other hand, it was clear from the beginning that in order to achieve an efficient immigration and asylum policy, the EU Member States would have to involve in one way or another the CEECs in this strategy. A clear example of this involvement was established in the framework of the Schengen co-operation. Readmission agreements: an important policy instrument Organizing tight controls at the external borders of the common territory requires at least some co-operation from the neighbouring countries. In particular considering the geographical position of the CEECs vis-à-vis the Schengen territory, an initiative to include in some way or another these countries was needed according to the Schengen countries. It was not very difficult to predict that certain CEECs would soon function as transit countries for immigration towards the Schengen territory. In order to counter this development the Schengen countries concluded, responding to German demand, a readmission agreement with Poland in 1991. The readmission agreement with Poland is unique as so far it is the only agreement concluded between the Schengen contracting parties as one party and a third country as the other. Each contracting party readmits to its territory, at the request of another contracting party, each person who does not fulfil or no longer fulfils the conditions for entry or residence in the requesting state if it can be proved that this person has the nationality of the requested state (Article 1.1). The same obligation of readmission is imposed upon the contracting Party via whose external border a person entered the territory of the requesting state who does not fulfil or no longer fulfils the conditions for entry or residence in the requesting state. The latter is an important provision as it implies that not only nationals of the contracting parties are to be readmitted but also any third-country national who entered the common territory, in which case a contracting party can

350 Kris Pollet

be held responsible for his (illegal) entry or residence. In fact, this provision is placing a high burden on the Polish border authorities. Migratory pressure is directed from the East to the West and not vice versa. Through this readmission agreement, Poland is not only obliged to take back Polish nationals who illegally entered the Schengen territory or who illegally reside there, but also any foreigner in the same situation on the Schengen territory who entered the Schengen territory through the Polish border. Given the fact that Poland is functioning as a transit country for East–West migration, it is not an exaggeration to state that Poland has become the safeguard of the Schengen territory at its eastern border. The initial aim was to extend the readmission agreement with Poland to the other CEECs that are considered to be transit countries for illegal immigration in the Schengen territory. However, that plan never worked out. Instead, a number of bilateral readmission agreements were concluded between certain EU Member States and CEECs that are considered to be functioning as major transit countries for illegal immigration towards the EU Member States or that produce asylum seekers heading for the EU. Eventually, the EU encouraged this policy as the Council adopted a recommendation concerning a specimen bilateral readmission agreement between a Member State and a third country.44 The fact that bilateral readmission agreements continue to be concluded with the CEECs concerned is a logical consequence of the refusal of the EU Member States to harmonize effectively their immigration policies at the European or Schengen level. Although the Amsterdam Treaty holds perspectives for a European policy in the field, it seems not to be very likely that this policy will be put into shape soon. At the same time, readmission agreements also complement existing immigration and asylum policy measures at the European level. These readmission agreements were initially used as instruments to expel illegal immigrants or asylum seekers whose asylum application was rejected in a facilitated way. In respect of the latter category, these agreements are now being used in combination with the safe third-country rule to return asylum seekers even before their asylum applications have been examined. 45 The safe thirdcountry rule, introduced in 1992 by the resolution of the immigration ministers of the then 12 EC Member States, aims to prevent asylum seekers from introducing their claim in one of the EU Member States in case a third country, which is considered to be safe, can be held responsible. It is explicitly stated in the Resolution that the formal identification of a host third country in principle precedes the substantive examination of the application for asylum and its justification. It is obvious that an additional readmission agreement concluded with the third host country (or safe third country) encourages the effective application of the Resolution concerning third host countries by the Member State concerned. As mentioned above, besides the multilateral readmission agreement concluded between the Schengen states and Poland, a significant number

The EU and Migratory Pressure 351

of bilateral readmission agreements now exist between the EU Member States and CEECs.46 It is significant that most CEECs, including the Baltic states, have engaged in concluding such readmission agreements. 47 Some CEECs consider the conclusion of such agreements also to be an integral part of their efforts to obtain membership of the EU. The Hungarian government, for instance, stressed at the time of signing the readmission agreement with France that the agreement constituted a further element in the pre-accession process.48 It is clear that the issue of immigration and asylum is an important element in this process. Concluding readmission agreements seems to be regarded as a sign of goodwill from the applicant countries as it prepares them to introduce at their borders the same border controls as applied by the EU Member States. At this moment, a network of bilateral readmission agreements has been concluded by the EU Member States which has become part of the European strategy to deal with rejected asylum seekers and illegal immigrants. Meanwhile, the heaviest burden is placed upon the CEECs that are bordering the EU territory. As a matter of fact, the conclusion of readmission agreements by the EU Member States caused a chain reaction. Certain CEECs have in their turn concluded readmission agreements with the countries of origin of the asylum seekers. Concluding readmission agreements becomes a way of shifting responsibilities towards neighbouring countries in the eastern direction. In particular, the Federal Republic of Germany has concluded a number of crucial readmission agreements with neighbouring countries in Central and Eastern Europe. In most cases, significant financial aid was offered by the German government to assist the CEECs concerned in the implementation of the readmission agreements that forced them, of course, to apply the same standards as the EU Member States as regards the control of their external borders.49 Europe Agreements and pre-accession strategy The Europe Agreements signed in 1991 and 1993 between the EC, the EC Member States and the CEECs do not deal with the issue of free movement of persons in a profound manner. Only treatment free from any discrimination based on nationality as regards working conditions, remuneration or dismissal as compared to their own nationals is guaranteed to the workers having the nationality of the CEEC concerned who are legally employed in the territory of a Member State.50 This provision is included in all Europe Agreements concluded so far and limits free movement of persons to non-discrimination. The related issue of immigration and asylum is not mentioned as such in the 1991 and 1993 Europe Agreements. Other instruments and fora were deemed appropriate for dealing with the subject in the relations between the EC and the associated States of Central and Eastern Europe. The so-called Budapest Process, for instance, includes the ministers of home affairs of more than thirty countries and concentrates on the fight against illegal immigration. This intergovernmental

352 Kris Pollet

forum for discussion is a continuation of the first Intergovernmental Conference on the Movement of People from Central and Eastern European Countries held in Vienna on 24–25 January 1991.51 However, the Europe Agreements of a later date, in particular those concluded with the three Baltic states and the Europe Agreement concluded with Slovenia, contain references to immigration, in particular irregular or illegal immigration. Title VII of the Europe Agreement concluded with Estonia, for instance, concerns co-operation in the prevention of illegal activities. Article 100 of the Agreement states that the Parties shall cooperate with the aim of preventing a number of illegal activities such as ‘illegal immigration and the illegal presence of their nationals on the other’s territory, while taking account of the principles and the practice of readmission’ and ‘trafficking of human beings and crime related to activity of illegal immigration networks’.52 It is significant that explicit reference is made to the practice of readmission. It certainly points to the high importance attached to this form of immigration policy by the contracting Parties. This is not to say that a comprehensive policy is established by the contracting Parties concerning illegal immigration and the trafficking of human beings. The Parties express their intention to co-operate in these matters but do not engage in a binding obligation or determine clear objectives or time schedules. The approach in Article 100 of the Europe Agreement with Estonia is a negative one. The issue of immigration is only considered in its illegal form and it is included in the title on the prevention of a number of illegal activities. This is not so surprising as the general approach towards immigration in the various intergovernmental fora (Schengen) is mostly part of international crime prevention and the fight against organized crime. Europe Agreements were always considered by the associated countries as a preparation to full membership of the European Union. Indeed, in the preamble of each Europe Agreement concluded with a CEEC it is stated that the ultimate objective of the country concerned is to become a member of the Community and that the association will help that country to achieve that objective. It is therefore surprising that these agreements pay so little attention to the issues of immigration and asylum. Moreover, the provisions mentioning (aspects of) immigration policy, do not contain binding legal obligations but only hold the perspective of intensified cooperation in this field. The pre-accession process and the current accession negotiations that were opened recently with five Central and Eastern European Countries plus Cyprus could, of course, not remain silent on the subject. In Agenda 2000 the Commission had already made clear that the issue of migration and justice and home affairs in general is an important one in the forthcoming enlargement of the European Union. It was stated that ‘the control of external frontiers and respect for international norms in fields such as asylum, visas and immigration brings an added dimension. The

The EU and Migratory Pressure 353

geographical situation of some of the applicants exposes them to risks of importing problems from their neighbours.’ 53 It is obvious that the Commission is particularly concerned here with the problem of organizing tight border controls at the future eastern border of the European Union. The same concern for external border control and the introduction of efficient immigration policies is also expressed in the Accession Partnerships. In all partnerships, emphasis is laid on improving border management and the alignment of the applicant country’s visa policy with that of the Union.54 The adoption of the Schengen acquis is, for all applicant countries, determined to be an objective in the medium term. Given the complexity of this acquis, the CEECs should have more time to adapt their national legislation. It should be noted that monitoring of the situation as regards migration policies in the applicant countries is also taking place within the mechanism for collective evaluation of the enactment, application and effective implementation by the applicant countries of the acquis of the European Union in the field of justice and home affairs as established by the Council Joint Action of 29 June 1998.55 This mechanism includes preparation of up-to-date collective evaluations of the situation in the candidate countries on the enactment and implementation of the justice and home affairs acquis by a group of experts under the supervision of COREPER. These evaluation reports had to be taken into account by the Commission in its proposals for adjustment of the priorities and objectives of the Accession Partnerships. Also within the framework of the PHARE Programme, justice and home affairs, and in particular immigration control, have become important issues. Together with the Essen Summit, which extended the PHARE Programme to justice and home affairs, the Langdon report on the situation of justice and home affairs in the CEECs played an important role. This report sets the priorities for co-operation in these areas and makes proposals for the allocation of PHARE funds. Measures to combat illegal immigration and to enforce border controls are mentioned as a first priority. Secondly, the report calls for institutions and procedures necessary for an efficient asylum system and, finally, the combat of drugs is mentioned as a third priority. Subsequently, the Commission started bilateral discussions to determine the specific needs of each CEEC56 leading, for instance, to the signature of three financial agreements with the Czech Republic totalling 36.9 m euro. Among the projects to be financed with PHARE funds, there is one concerning stricter external border controls.57 Poland also received financial support to improve controls at its eastern border. A total of 6 m euro has been granted to Poland: three for the purchase of vehicles for the Polish border authorities and three for electronic machinery to identify fingerprints to be used in the fight against organized crime, illegal immigration and drug trafficking.58 Besides these bilateral initiatives, the Commission also launched a horizontal PHARE justice and

354 Kris Pollet

home affairs programme with emphasis on interregional co-operation. One of the objectives of this programme is to assist the CEECs to develop appropriate policy, legislative and operational capabilities covering all aspects of immigration, including admission procedures and combating illegal immigration, with special emphasis on border management regimes and in the field of asylum to assist the CEECs to develop the required asylum legislation, policies and procedures.59 The latter programme should complement the bilateral programmes. On the other hand, some programmes started within the framework of the justice and home affairs co-operation contain provisions on co-operation with applicant countries in these areas. In the context of this study, the Odysseus Programme should be mentioned, introducing a programme of training, exchanges and co-operation in the field of asylum, immigration and crossing of external borders.60 Co-operation with the applicant countries in the framework of this programme should be targeted on improving knowledge of the Union acquis in this field and also exchange of information on the legal and administrative institutional systems of the Member States and the applicant states. Another programme, the STOP Programme, establishes an incentive and exchange programme for persons responsible for combating trade in human beings and the sexual exploitation of children and also makes co-operation with the applicant countries possible.61 For some countries included in the pre-accession process, the strong emphasis on enforced external border control has had some consequences as regards their national visa policies. Hungary, for instance, has visa-free arrangements with most Newly Independent States (NIS). In order to comply with the EU acquis regarding visa policy included in the 1995 visa Regulation,62 this situation is, according to the Commission in its November 1998 progress report,63 no longer desirable. In fact, most NIS are mentioned in the list of third countries whose nationals must be in the possession of visas when crossing the external borders of the Member States introduced by the visa Regulation. As a consequence, it seems certain that Hungary will have to adapt its visa policy and reintroduce visa requirements as regards the nationals of NIS that are mentioned on the EU visa list. Although it seems to be a logical demand from the EU, it can be a source of new tensions in the relations between Hungary and these NIS. Seen from that point of view, the enlargement process certainly places a high burden on the Hungarian immigration policy, not to mention the potential political implications of such a measure. Just as Hungary will be obliged to reintroduce visa requirements as regards the nationals of certain countries, the Czech Republic already has reintroduced visa requirements following the conclusion of the readmission agreement with Germany on 3 November 1994 for nationals of the former Yugoslavia, Armenia, Azerbaijan, Georgia and Tajikistan.64 Indeed, the conclusion of readmission agreements with neighbouring CEECs and the reintroduction of visa requirements are in most cases

The EU and Migratory Pressure 355

applied together. To put it more correctly, the latter measure becomes necessary because of the former. However, according to the 1998 Commission Progress Report, there has been a slowing down in the rate of progress required to adjust to the EU acquis. An effort should be made to install more efficient border controls and to adopt new laws on asylum and migration, including adjustment of the visa policy to comply with EU standards.65 The EU visa policy is also a matter of concern to certain CEECs in another way. Bulgaria and Romania, for instance, have been included in the EU list of countries whose nationals must be in possession of visas when crossing the external borders of the Member States. Although their inclusion in the visa list was and is still hard to accept for both countries, until now the list has not been adapted by the Council. The new visa Regulation adopted in March 1999 by the Council did not change this situation. Visa requirements are perceived as serious impediments by the two CEECs as they express a fundamental distrust in the domestic policies of these countries. Bulgaria and Romania function clearly as transit countries for immigration from African and Asian countries and, of course, from the NIS towards the EU Member States. Because there are still problems concerning immigration control and also because there seems to exist an important traffic in drugs and human beings making use of the Balkan route, both countries remain on the EU visa list. It is obvious that this is one of the key issues in the pre-accession strategy towards Bulgaria and Romania. Although Bulgaria and Romania do not belong to the first group of Central and Eastern European Countries included in the enlargement negotiations, the issue lays a heavy burden on the preparation strategy of the EU towards both countries. However, Bulgaria is currently reforming its border management system and it has readmission agreements with Germany, Greece, France, Spain, Poland, Slovakia, Slovenia and Lithuania and is preparing Agreements with Portugal, the Benelux countries, Denmark, the Czech Republic and Romania. A readmission agreement with Turkey is still lacking, which remains certainly an important lacuna from the point of view of EU immigration policy.66 Romania has also taken steps to align with the EU visa policy. It has, for instance, suspended visa-free agreements with 17 countries and adopted the third country list of the EU. Readmission agreements have been concluded with 15 countries and efforts have been made to combat illegal immigration.67 However, progress is still needed as regards border control, according to the 1998 Commission’s Progress Report. More specifically, the country should make an effort to acquire surveillance equipment and information systems. The latter two demands are necessary preconditions for Romania to be taken off the common EU visa list. Bulgaria, on the other hand, seems to be ahead of Romania as regards the border controls and visa system. It is noted by the Commission that most border posts have an

356 Kris Pollet

electronic link to Sofia to help to prevent the entry of undesirable aliens, although the infrastructure of the border posts needs further improvement before Bulgaria can be taken off the EU common visa list. Again the need for the conclusion of readmission agreements with neighbouring countries functioning as transit countries for illegal immigrants seeking entry on the territory of the EU Member States is stressed by the Commission. Shifting borders to the East: creating new border control problems It was mentioned above that the Accession Partnerships concluded with the applicant countries refer to the adoption the Schengen acquis by the applicant countries in the medium or long term. The Schengen Protocol to the Amsterdam Treaty endorses this principle and is very explicit in its wording. In Article 8 of the Protocol it is stated that ‘for the purposes of the negotiations for the admission of new Member States into the European Union, the Schengen acquis and further measures taken by the institutions within its scope shall be regarded as an acquis which must be accepted in full by all States candidates for admission’. 68 As it is formulated here, the adoption of the Schengen acquis is undoubtedly a necessary precondition to the CEECs becoming EU Member States. This is, of course, an important precondition that will be difficult to fulfil. Moreover, it seems at least strange to impose such a condition upon the applicant countries, while at the same time two current Member States, the United Kingdom and Ireland, have always refused to participate in the Schengen Convention. The Schengen Protocol explicitly states that the United Kingdom and Ireland are not bound by the Schengen acquis. However, they may at any time request to take part in some or all of the provisions of this acquis.69 Both the United Kingdom and Ireland recently announced a request for participation in law enforcement and criminal judicial co-operation derived from the Schengen provisions, including the Schengen Information System, while they are also interested in co-operation with the other Member States as regards asylum.70 A special position was also accorded to Denmark with regard to the parts of the Schengen acquis determined as having a legal basis in the new Title IV EC Treaty, as this Member State does not take part in the adoption of measures pursuant to Title IV EC Treaty.71 Given these derogations, the demand for adoption of the Schengen acquis in full by the applicant countries may seem at least unbalanced from a political point of view. Imposing the Schengen criteria and methods for the control of their eastern external borders upon the CEECs obviously creates new problems from the point of view of immigration control and the general security issue in these countries’ relations with their neighbouring countries. As was mentioned before, several CEECs had to reintroduce visa requirements for nationals of their neighbouring countries. Such measures can have farreaching consequences for economic and trade activities between states.

The EU and Migratory Pressure 357

Poland, for example, enacted legislation in 1997 making access for Russians and Belarussian nationals to Polish territory more difficult. This was, according to the Polish government, necessary because both Russia and Belarus refuse to sign a readmission agreement with Poland that would include third-country nationals. However, restricting access to Polish territory by introducing administrative measures and financial demands has already had an impact on the number of border crossings between the countries concerned. In particular the salesmen from Russia and Belarus who frequently cross the border with Poland for business reasons are the first victims of this new policy. 72 This situation was immediately criticized by the Russian authorities and the principle of reciprocity was soon invoked by the Russian government. This kind of problem concerning borders will occur along the eastern border of the enlarged European Union. It seems that this condition for joining the European Union is causing a number of problems and a policy dilemma for the CEECs on the threshold of the Union. It is obvious that complying with the Schengen acquis will reshape the relations between the CEECs and their neighbouring states from the CIS and between the CEECs applying for EU membership themselves. From the point of view of the current EU Member States, it seems unlikely that they will let the CEECs fully participate in the area of freedom, justice and security immediately after their accession to the EU. A transitional period seems necessary for the full implementation of free movement of persons and related matters between the current Member States and the newcomers. In this regard the Schengen countries already have established a so-called ‘Permanent Committee’. Its task is to control and supervise the implementation of the Schengen acquis by the applicant countries. As the Schengen acquis is part of the acquis communautaire following the entry into force of the Amsterdam Treaty, the CEECs will also have to comply with the provisions of the Schengen Conventions concerning free movement of persons and immigration policy. As mentioned above, this condition for accession has also been included in the Accession Partnerships. However, should a transitional period be applied in this matter as regards all or some of the applicant states, the area of freedom, security and justice will become a very complex set of rules, adding another pool of countries not participating in the decision-making of the new Title IV EC Treaty.

Concluding remarks: towards a comprehensive approach? The migration policy of the European Union as examined in this contribution, in terms of admission policies, is in the case of both the CEECs and the MNMCs mainly directed towards efficiently sealing off the external

358 Kris Pollet

borders. Most measures within the immigration strategy of the Union are aimed primarily at preventing immigrants from reaching the territory of the Member States. The conclusion of readmission agreements with actual and potential migrant sending countries is an important tool in achieving this objective as regards both regions. Readmission agreements in fact should inspire the countries concerned to introduce tight border controls and a global immigration policy modelled upon the Union’s strategy. In addition, most EU Member States have introduced national measures that should complement these bilateral agreements and the visa policies established by the Union and the Schengen states. One of the most effective measures in this regard is certainly the introduction of carrier liability for the illegal entry to their territories of thirdcountry nationals. This is also one of the obligations introduced by the Schengen Implementation Convention. Under threat of financial sanctions, transport companies, and in particular air carriers, are obliged to perform external border control duties in the countries of departure to make sure that they do not transport illegal immigrants to the territory of the Member State concerned. One could say that by implementing these measures, the external borders are being transferred to the countries of origin of immigrants and asylum seekers. Indeed, it becomes very difficult even to reach the territory of the EU Member States which can have dramatic consequences for asylum seekers trying to escape persecution. But also other, less subtle measures have been established by some Member States with the aim of securing the EU’s external borders. The examples of the Spanish enclaves on Moroccan territory, Ceuta and Melilla, are well-known. With the financial support of the European Union, the Spanish government built a fence around both cities in order to keep out immigrants and asylum seekers headed for the continent. However, the Maghreb version of the Berlin Wall never was efficient. Recent press reports indicate that it is hardly an obstacle any more. It is nevertheless illustrative of the current European immigration policy that concentrates almost exclusively on restrictive measures. An immigration policy only concerned with excluding as many immigrants as possible is at least one-sided, at worst counter-productive. It is obvious that current measures are not efficient regarding phenomena such as the organized trafficking of human beings that have become lucrative business both in the Central and Eastern European region and in the Mediterranean, although this particular phenomenon is by no means restricted to the regions mentioned. 73 Even worse, introducing more and more stringent controls in a way makes these trafficking organizations indispensable to immigrants trying to reach the Union, making them even more powerful. In this respect the agreement on readmission concluded between Spain and Morocco had a perverse side effect according to some sources: fees for the journey to Spain were

The EU and Migratory Pressure 359

reported to have doubled in 1992 while the number of candidates had not reduced.74 It is obvious that a purely restrictive policy will never be able to control migratory flows to the European Union. Additional measures will be needed in order to deal with the causes of migration. It seems only logical to act upon the reasons why people are willing to leave their homes and families and choose an uncertain future in the European Union. The need for such action has even been recognized by both the Commission and the Council. In the above cited communication to the Council and the European Parliament, the Commission pleaded for a comprehensive approach that would take into account the root causes of migration pressure. These can largely be divided into four main categories. Economic factors are perhaps the most important push factors for migration nowadays. Poverty and lack of future opportunities obviously are preliminary conditions for economically motivated migration. A second important push factor is political and ethnic oppression and internal violence in some countries of origin. Civil war and ethnic conflicts, but also religious persecution, may force people to flee. In some cases, their lives may be threatened. Thirdly, environmental and ecological disasters may cause migration. Although this factor may cause only limited migration within the region, as the Chernobyl disaster has shown, in interaction with economic poverty it may force large populations to migrate. Desertification, for instance, is a long-standing process that, according to some sources, will threaten some 135 million people in the future, mostly in the African Sahel and the Horn of Africa but also in Brazil and Mexico. Obviously such evolutions create increasing population pressure in the region concerned which may eventually lead to internal and external migration. Finally, demographic pressures become more and more important as a push factor for migration. As regards the Mediterranean region, for instance, population growth estimations predict an increase to 374 million in 2025.75 In order to deal efficiently with the mentioned causes of migration the Commission proposes to coordinate action in the field of foreign policy, trade policy, development co-operation and immigration and asylum policy by the European Union and its Member States. This Communication endorses and elaborates an interesting Declaration by the European Council in December 1992. 76 The Declaration concerned the principles governing external aspects of migration policy and determined a number of factors as being important for the reduction of migratory movements into the Member States: the preservation of peace and the termination of armed conflicts, full respect for human rights, the creation of democratic societies and adequate social conditions and a liberal trade policy, which should all improve economic conditions in the countries of emigration.

360 Kris Pollet

As was indicated above, the idea of working on causes for migration has been modestly referred to in the EU policy towards the MNMCs as well as the CEECs. In the working programme to the Barcelona Declaration, for instance, the participating states stress the importance of taking action on the causes for migration by, inter alia, contributing to the enhancement of educational levels in the region. The new Euro-Mediterranean Association Agreements concluded with the Mediterranean Non-Member Countries also contain provisions referring to such a policy.77 Another important initiative in this regard is the creation of a High Level Working Group on Asylum and Migration. This expert group analyses the asylum and immigration issues from a wider perspective, taking into account political, economic, humanitarian and developmental factors. Its task is to establish a common, cross-pillar approach targeted at the main countries of origin and transit of asylum seekers and migrants. The aim is to draw up action plans including an analysis of the causes of the influx, and to make suggestions aimed at strengthening the common strategy for development with the countries concerned. In particular the phenomenon of illegal immigration and illegal residence is a priority. In January 1999 the Council chose five countries or regions for this crosspillar approach, namely Afghanistan and the region, Albania and the region, Morocco, Somalia and Sri Lanka. 78 Action plans were adopted by the JHA Council and endorsed at the special Tampere European Summit on justice and home affairs in October 1999. 79 The European Council also instructed the High Level Working Group to draw up action plans with regard to other countries as well. This initiative could potentially be the start of a renewed and comprehensive approach to migration as the mentioned action plans contain a profound analysis of the situation of the countries concerned in relation to migration and some recommendations on how to deal with migratory pressures from these countries in the future. The latter part of the action plans is not very innovative. Once more, most of the emphasis is laid upon control-orientated measures such as sending more airline liaison officers to the main airports in the countries of origin in order to improve gate-checks, a more effective implementation of existing readmission agreements and enhanced efforts concerning the early detection of false documents. Other measures proposed in the field of foreign policy and development co-operation remain vague and do not hold the perspective of any concrete action on the root causes of migration. Moreover, it should be noted that still more emphasis is laid on restrictive policies and the importance of effective border controls in the agreements concluded with the countries concerned. The EU’s policy towards the CEECs and the MNMCs as regards migration could, perhaps, be best described as ambiguous. Elements of a comprehensive approach can be determined but that does not mean that the Union and its Member States have now drastically changed their strategy. Also the

The EU and Migratory Pressure 361

Amsterdam Treaty does not offer perspectives of deepening the Union migration policy. Although a more consistent immigration and asylum policy, within the concept of an area of freedom, security and justice, is introduced through the new Title IV EC Treaty on ‘Visa, Asylum, Immigration and other policies related to the free movement of persons’, no mention is made of a more comprehensive approach. Only restrictive measures are enumerated in the new title, almost exclusively aiming at developing a policy to manage the arrival of illegal immigrants, refugees and people in need of temporary protection on the territory of the Union’s Member States. The conclusions of the Tampere European Council partly endorse this ambiguity. According to these conclusions the European Union needs a comprehensive approach to migration addressing political, human rights and development issues in countries and regions of origin and transit. It is even explicitly stated that the Union as well as the Member States should contribute to a greater coherence of internal and external policies of the Union. A true partnership with the countries of origin will be a key element for a successful implementation of such a policy. Furthermore, the European Council calls for stronger external action in these matters as ‘Justice and Home Affairs concerns must be integrated in the definition and implementation of other Union policies and activities’. As a consequence, the principles laid down in the Union’s immigration and asylum policies must be taken into account when establishing new initiatives in other areas and policy fields. In other words, there should no longer be a strict dividing line between the external policy of the Union and its immigration and asylum policy as ‘all competences and instruments at the disposal of the Union, and in particular, in external relations must be used in an integrated and consistent way to build the area of freedom, security and justice’. This is, without any doubt, an important step towards a real comprehensive approach. Tampere, in this regard, may have established the framework for developing a migration strategy where both internal and external aspects of migration and asylum issues are being dealt with. At the same time, however, the Tampere Conclusions still contain a number of restrictive principles as regards migration and asylum policy. Strict external border controls remain an important aspect of the common EU asylum and migration policy, in particular in light of the future enlargement of the Union. Closer co-operation and mutual technical assistance between the Member States’ border control services, especially at maritime borders, must be further developed and the applicant countries rapidly included in this co-operation. Moreover, it is explicitly reconfirmed that the ‘candidate countries must accept in full the Schengen acquis and the further measures building upon it’. The message to the latter countries is clear. An efficient border control policy will be a crucial precondition for

362 Kris Pollet

membership of the Union as the European Council stresses the importance of the effective control of the Union’s future external borders by ‘specially trained professionals’. Therefore, the authorities of those countries must be assisted to strengthen their ability to combat effectively trafficking in human beings and to cope with their readmission obligations towards the Union and the Member States. Clearly, the eastern borders of the Union remain an important matter of concern to the current EU Member States. The first Justice and Home Affairs Council after the Tampere Summit underlined once again the role of the candidate countries in relation to the implementation of the Tampere Conclusions.80 Although the aim is to achieve a common EU asylum and migration policy based on, inter alia, an absolute respect for the right to seek asylum and the fair treatment of third-country nationals, with guarantees to those who seek protection in or access to the European Union, it remains to be seen how this principle will be put into practice. The implementation of the Tampere Conclusions will be the real challenge for the Union in the near future, as these Conclusions are only indicative. It will be interesting to see how both the ‘aim of an open and secure European Union’ and ‘the need for a consistent control of external borders’ will be combined in one common EU asylum and migration policy.

Notes 1.

2.

3. 4. 5. 6.

See European Commission, Comparative Research on International Migration and International Migration Policy. Migration from the Maghreb and Turkey to the European Union, and from Mexico, Guatemala and El Salvador to the United States, European Communities, Luxembourg, 1998, 6–10. The economic recession and the oil crisis cannot give a comprehensive explanation for that drastic decision. It could also be stated that the changing industrial organization and the economic restructuring in the European labour market made foreign labour less important for European employers. See an overview of literature concerning the history of immigration in the EC in A. Findlay, ‘ExtraUnion Migration: the South–North perspective’, in P. Rees, J. Stillwell, A. Convey and M. Kupiszewski (eds), Population Migration in the European Union (Chichester: John Wiley & Sons, 1996), 39–43. See Eurostat, Statistics in Focus. Population and social conditions. Migration between the Mediterranean Basin and the EU in 1995, 1998 No. 3. Recently, Italy also introduced a regularization programme. See European Commission, op. cit., European Communities, Luxembourg, 1998, 24–8. In many cases these attempts end tragically. Boats seem to be of poor quality and some smugglers force their passengers to swim the last part. As a result, a number of drownings have been reported, see European Commission, op. cit., 25. See also Statewatch, September–October 1998, 5 and H. Driessen, ‘The new “immigration” and the transformation of the European–African frontier’, in

The EU and Migratory Pressure 363

7. 8. 9.

10. 11. 12.

13. 14. 15. 16. 17. 18. 19. 20. 21.

22. 23. 24. 25. 26. 27.

28. 29. 30.

T. M. Wilson and H. Donner (eds), Border Identities. Nation and State at International Frontiers (Cambridge: Cambridge University Press, 1998), 96–116. COM(94)427 Final, 5, 19 October 1994. COM(95)72 Final, 8 March 1995. The relaunching of the decentralized co-operation, which was decided in 1998 on the initiative of Vice-President Marín, involves, in a first stage, only three programmes: MED-Urbs, MED-Campus and MED-Media, see Euro-Mediterranean Partnership Information Note, Relaunch of Decentralized Co-operation Programmes in the Mediterranean, European Commission, DG1/A/4, April 1999 For text, see Bull.-EU, June 1997, point 2.3.1. For an overview of the progress made since the Barcelona Declaration and some perspectives for the Malta conference, see COM(97)68 Final, 19 February 1997. The Committee consists of representatives of the EU Troika and of the 12 nonEU partners. Its task is to prepare the next meeting of the Ministers of Foreign Affairs, and to evaluate the follow-up to the Barcelona Process: see COM(97)371 Final, 18 July 1997, 3. See the already cited Conclusions of the Malta Conference, under its heading ‘General aspects’. Fòrum Civil Euromed, Barcelona, 1995, Vers un nouveau scénario de partenariat euro-méditerranéen (Barcelona: Generalitat de Catalunya, 1996), 231–2. Civil Forum Euromed, Malta, 1997, Intercultural Dialogue in the Mediterranean (Malta: Foundation for International Studies, University of Malta, 1997), 125. European Parliament, 29 January 1997, A4–0027/97. Council of the European Union, Press Release 7395/99 (Press 109), Stuttgart, 16 April 1999. See S. Collinson, Shore to Shore. The Politics of Migration in Euro-Maghreb Relations (London: Royal Institute of International Affairs, 1996), 63–67. See the Euro-Mediterranean Association Agreement with Tunisia, Article 64, OJ, L97/1, 30 March 1998. See the Euro-Mediterranean Association Agreement with Tunisia, Article 71. The root causes approach was supported by the Commission in its communication on immigration and asylum policies: see COM(94)23 Final, 23 February 1994. See the Euro-Mediterranean Association Agreement with Jordan, COM(97)554 Final, 29 October 1997. For text, see COM(95)740 Final, 20 November 1995. See Press Release 6545/99 (Press 70) on the Justice and Home Affairs Council meeting of 12 March 1999, 13. See Migration News Sheet, January 1997, 6–7. See C.-V. Marie, ‘L’Union européenne face aux déplacements de populations. Logiques d’Etat face aux droits des personnes’, REMI, 12(2), 1996, 186–7. A list of readmission agreements concluded by selected industrial countries is published in B. Ghosh, Huddled Masses and Uncertain Shores. Insights into Irregular Immigration (The Hague: Martinus Nijhoff, 1998), 140–1. See Article 131, Schengen Implementation Convention. Each contracting Party has one representative in the Executive Committee. Meanwhile, the Schengen Executive Committee nearly reached agreement to abolish the grey list: see Agence Europe, 1 August 1998, 4. See, inter alia, K.-P. Nanz, ‘The Schengen Agreement: preparing the free movement of persons in the European Union’, in R. Bieber and J. Monar (eds), Justice

364 Kris Pollet

31. 32. 33. 34.

35.

36.

37. 38.

39. 40. 41.

42. 43.

44.

45. 46. 47.

and Home Affairs in the European Union. The Development of the Third Pillar (Brussels: European Interuniversity Press, 1995), 36–8. See Trb., No. 39, 1994. The Common Consular Visa Instruction has been published in Dutch in Trb. (1994), No. 39. See OJ, L234/1, 3 October 1995. See ECJ, European Parliament v. Council of the European Union, 10 June 1997, ECR, 1997, I-3213. However, the Court also decided that the effects of the annulled Regulation were to be maintained until the Council had adopted new legislation in the matter in order to avoid any discontinuity in the harmonization of national rules on visas. See Council Regulation 574/1999, 12 March 1999, determining the third countries whose nationals must be in the possession of visas when crossing the external borders of the Member States, OJ, L72/2, 18 March 1999. See on this matter, inter alia, J.-Y. Carlier, ‘La libre circulation des personnes dans l’Union européenne’, JTDE, 1997, 197, and S. Peers, ‘The Visa Regulation: free movement blocked indefinitely’, ELRev, no. 21, 1996, 150–5. See Council Regulation 1683/95, 29 May, 1995, OJ, L164/1, 14 July 1995. In addition to the Visa Regulation, the Council also adopted a Joint Action on air transit arrangements establishing a list of third countries whose nationals require such visas in international areas of airports in the EU Member States. Ten third countries are included in the list: Afghanistan, Ethiopia, Eritrea, Ghana, Iraq, Iran, Nigeria, Somalia, Sri Lanka and Zaire (see OJ, L63/8, 13 March 1996). However, a new draft joint action on airport transit arrangements intends to repeal the Joint Action of 4 March 1996, adding Bangladesh and Pakistan and replacing Zaire with the Democratic Republic of the Congo. See Council Decision of 20 May 1999, OJ, L176/1, 10 July 1999. See Council Decision of 20 May 1999, OJ, L176/17, 10 July 1999. See Council Decision of 17 May 1999, OJ, L176/35, 10 July 1999. Iceland and Norway concluded a co-operation agreement with the Schengen Member States on 19 December 1996. For a French version of the Agreement, see Trb., 1997, No. 133. The latter agreement was needed to allow Finland and Sweden to become Schengen Member States. Finland, Sweden, Norway and Iceland are contracting Parties of the Nordic Passport Union. The 13 Schengen states mentioned in Article 1 of the Schengen Protocol minus Sweden, Finland and Denmark. See Eurostat, Statistics in Focus. Population and Social Conditions, 1996, No. 2. Central and Eastern Europe include: Bulgaria, the former Czechoslovakia, Hungary, Poland, Romania and the former USSR. Council Recommendation of 30 November 1994 concerning a specimen bilateral readmission agreement between a Member State and a third country: see OJ, C274/20, 19 June 1996. See S. Lavanex, ‘Asylum, immigration, and Central and Eastern Europe: challenges to EU enlargement’, EFA Rev., no. 3, 1998, 280. A list has been published by the European Council on Refugees and Exiles (ECRE), Safe Third Countries – Myths and Realities, February 1995, Appendix D. Recently the Schengen Executive Committee decided to abolish visa requirements for the Baltic states from 1 March 1999. This decision is accompanied by the signing of readmission agreements with the Baltic states (see Agence Europe, 28 and 29 December 1998, 7).

The EU and Migratory Pressure 365 48. See Migration News Sheet, January 1997, 5. 49. In the period 1992–96, the Federal Republic of Germany concluded readmission agreements with, inter alia, Romania (1992), Bulgaria (1994), the Czech Republic (1994), Croatia (1994) and Yugoslavia (1996); see M. Schieffer, ‘The readmission of third-country nationals within bilateral and multilateral frameworks’, in M. den Boer (ed.), The Implementation of Schengen: First the Widening, Now the Deepening (Maastricht: European Institute of Public Administration, 1997), 102–5. 50. See, for example, Article 37 of the Europe Agreement concluded with Hungary. OJ, L347/9, 31 December 1993. 51. See Lavanex, op. cit., 283. 52. See COM(95)207 Final, 2 June 1995. 53. See Bull.-EU, Supplement (5/97), 50. 54. The Council decisions on the principles, priorities, intermediate objectives and conditions contained in the accession partnerships with the applicant countries are published in OJ, L121, 23 April 1998. 55. OJ, L191/8, 7 July 1998. 56. See Lavenex, op. cit., 288–9. 57. According to these agreements, the project concerning the external border controls is attributed 4.8 m euros. See Agence Europe, 17 October 1998, 7. 58. According to Polish sources. See Agence Europe, 2 October 1998, 6. 59. See G. Eisl, ‘Relations with the Central and Eastern European Countries in justice and home affairs: deficits and options’, RAE/LEA, no. 2, 1997, 357. 60. See Joint Action of 19 March 1998, OJ, L99/2, 31 March 1998. 61. See Joint Action of 29 November 1996, OJ, L322/7, 12 December 1996. 62. See Council Regulation 2317/95 of 25 September 1995, OJ, L234/1, 3 October 1995. 63. See European Commission, Enlarging the EU. Regular Report from the Commission on Progress towards Accession: Hungary, 4 November 1998. 64. See Marie, op. cit., 188. 65. See European Commission, Enlarging the EU. Regular Report from the Commission on Progress towards Accession: the Czech Republic, 4 November 1998. 66. See Bull.-EU, Supplement (13/97), 72–73. 67. According to its own estimations, Romania had about 20 000 illegal immigrants from Africa and Asia on its territory in 1997; see Bull-EU, Supplement (8/97), 66. 68. For an analysis of the integration of the Schengen acquis, see L. Corrado, ‘L’Intégration de Schengen dans l’Union européenne: problèmes et perspectives’, RMCUE, May 1999, 342–9 and K. Pollet, ‘L’intégration de l’acquis de Schengen dans le cadre de l’Union européenne: impact et perspectives’, in M. Dony (ed.), L’Union Européenne et le Monde après Amsterdam (Bruxelles: Université Libre de Bruxelles, 1999), 143–1. 69. Article 4 of the Schengen Protocol. 70. Council of the European Union, Press Release 6545/99 (Press 70), Justice and Home Affairs, Brussels, 12 March 1999, 11–12. 71. Article 1 of the Protocol on the position of Denmark. 72. G. Lepesant, Géopolitique des frontières orientales de l’Allemagne. Les implications de l’élargissement de l’Union européenne (Paris: L’Harmattan, 1998), 226–7. 73. For more details concerning trafficking of human beings, see B. Ghosh, Huddled Masses and Uncertain Shores. Insights into Irregular Migration (The Hague: Martinus Nijhoff, 1998), 21–33.

366 Kris Pollet 74. Ibid., 31. 75. See R. King, ‘Population growth: an avoidable crisis?’, in R. King, L. Proudfoot and B. Smith, The Mediterranean. Environment and Society (London: Arnold, 1997). 76. Bull.-EC, December 1992, I.31. 77. See above. 78. See Council of the European Union, Interim reports of the High Level Working Group on asylum and migration. On Albania and the neighbouring region: 11429/99 limité, JAI 78-AG-33, plan d’Action concernant le Sri Lanka: 11428/99, limité, JAI 77-AG-32; Action plan for Somalia: 11427/99, limité, JAI 76-AG-31; Action plan for Morocco: 11426/99, limité, JAI 75-AG-30; plan d’Action pour l’Irak, 11425/99, limité, JAI73-AG-28 and Action plan for Afghanistan; Brussels 30 September 1999. 79. Council of the European Union, Press Release 8654/99 (Press 168), Justice and Home Affairs, Brussels, 27 May 1999. 80. Presidency Conclusions, Tampere European Council, special meeting, 15 and 16 October 1999, SN 200/99.

General Conclusion: Towards a Pan-Euro-Mediterranean Regional Integration – Motivation and Objectives Péter Balázs

I. Two strategic dimensions for Europe In parallel with its fundamental and strategic political decisions to embark upon eastern enlargement, the European Union has taken decisive steps to reinforce its relations with the Mediterranean. At the 1994 Essen Summit, the EU sent a message to the so-called transition countries of Central and Eastern Europe about the possibility of their accession to the European Union. The internal compromise of the EU concerning the selection of the potential applicant countries was not at all easy because of the diverging preferences of the Member States. Consequently, the message of the Essen Summit took the form of a ‘political puzzle’. As a first step, the Union confirmed its willingness to accept as new members all those Central and Eastern European Countries (CEECs) ‘which [had] concluded an association agreement with the EU’.1 The same text expressed the wish of the EU Member States to conclude such agreements also with the three Baltic states and with Slovenia.2 However, the document in question did not give a complete list of countries having a Europe Agreement, and only one of the Annexes mentioned ‘the four associated countries … and Romania and Bulgaria’.3 Adding four more CEECs to the – then – six associated CEECs has brought the applicants to ten in all. 4 Since then, the number has not changed and in March 1998 the accession process began with all ten. From the outset – and this must not be forgotten – this enlargement process has always had a touch of the Mediterranean. Malta and Cyprus preceded the CEECs in the EU’s enlargement policy and to them the promise had been extended that enlargement negotiations would be opened ‘six months after the conclusion of the 1996 Intergovernmental Conference’. The suspension by Malta of its candidature – as a result of its national elections in 1996 – reduced temporarily the Mediterranean dimension of enlargement: ‘10 + 1’ countries remained (i.e. the ten CEECs and Cyprus). As regards the Euro-Mediterranean region as a whole, with the 1995 Cannes Summit, the idea of a balanced East–South approach took shape, notably as regards financial input, giving way to the Barcelona 367

368 Péter Balázs

Process aiming, inter alia, to establish a free trade zone between the EU and the Mediterranean by 2010.5 As a consequence, the enlargement policy and the Barcelona Conference opened the way to a Euro-Mediterranean economic area. This marked the beginning of the interconnection of these two strategic neighbouring areas of Europe, which, after all, share common features but nevertheless remain very different from one another: Central and Eastern Europe on the one hand and the Mediterranean on the other. Let us look more closely at the more predominant of their common features. First, they are both at the periphery of Europe with a dominant market share of the EU and drawing the major part of their investment and technology from it.6 Second, according to the specificity of each particular country of course, both regions are characterized by political and socioeconomic instability. While southern Mediterranean countries were modernized by force as former colonies of West European states, the CEECs fell victim to Soviet expansion after the Second World War and thus also to forced Communist modernization. More recently, both regions have given regressive nationalist and/or fundamentalist religious responses to far too rapid modernization of their respective societies, depriving their people of their traditional identities. Third, both of these regions border upon crisis areas. The Central and Eastern European candidates for EU membership are directly exposed to disintegrating and destabilizing effects of the postYugoslav and post-Soviet crisis inducing illegal migratory flows, organized crime, etc. The Mediterranean partners of the EU border upon, on the one hand, the black African states undergoing political and ethnic conflicts and, on the other, radical Islamist states threatening the Middle East Peace Process. As regards the differences of the two regions, first, apart from obvious geopolitical, economic and cultural characteristics, the relations of the two areas with important international organizations are diverging. 7 For example, all CEECs belong to various international agencies as part of the family of European states and are members of the OSCE. Three CEECs – Hungary, Poland and the Czech Republic – have already joined the OECD, membership of which gives them the quality of a ‘developed market economy’. Second, as regards the Mediterranean area, EU accession possibilities are limited to three South European countries, namely Cyprus, Malta and Turkey. Thus, when Morocco applied for EC membership, this was refused on the grounds that Morocco was not considered a European state. Even Turkey continually faces reluctance on the part of the EU, which points to criticisms of the quality of its democratic system, treatment of the Kurdish minority and its human rights record. Looking to the East, the EU promised membership to the group of ten countries of very different economic and social development. Thus associated, they constitute a zone of strategic importance ranging from one geographical extrem-

General Conclusion 369

ity of the Union to the other, i.e. from Finland to Greece, closing off its eastern flank by means of a cordon sanitaire. Third and last, but not least, a ‘Mediterranean Dialogue’ was launched by NATO in 1994 with six MNMCs.8 However, NATO is expanding exclusively towards the East of Europe, in reality in the direction of Russia. The real or potential adherence to the defence community of the West increases the chances of the stable economic integration of the whole area: the first three new members – Poland, Hungary and the Czech Republic – joined the organization on 12 March 1999.

II. Geopolitical considerations The Barcelona Declaration set as an objective the creation of a EuroMediterranean free trade zone by 2010 which would, as a consequence, create ‘the World’s biggest integrated area’. There is no doubt that the potential economic integration of the whole Euro-Mediterranean area would establish a large extended trade and investment zone around the industrial heart of Europe. The interconnection of the EU with the participants of the Barcelona Process, on the one hand, and with the associated CEECs, on the other, would result in an area stretching to nearly forty countries: at the time of the Barcelona Declaration, the EU consisted of 15 Member States; its Mediterranean partners sharing the idea of one big integrated zone number 12 and the number of CEECs having concluded a Europe Agreement with the EC and its Member States is 10.9 However, a certain number of states of the same macro-region is obviously missing from the map of a supposed future Pan-Euro-Mediterranean Area (PEMA). For the time being, the following countries belong neither to the Mediterranean nor to the Central and Eastern European associated partners of the EU. First of all, the concept of a large integrated EuroMediterranean area did not involve, at least at the Barcelona Conference and its follow-up meetings, the EFTA Member States. The four EFTA countries – Switzerland, Liechtenstein, Norway and Iceland – are located in the developed centre of Europe, in terms of economic integration in all ways but also partly in terms of military integration. Three of them – that is the above-mentioned EFTA countries without Switzerland – constitute together with the EU, the European Economic Area which is the deepest integration structure in Europe apart from the EU. As for the Mediterranean dimension, one southern Mediterranean country and at least half of the Balkan countries are also missing from the concept of PEMA integration. Libya and four post-Yugoslav states (Croatia, Yugoslavia, Bosnia and Herzegovina and Macedonia) as well as Albania are not taking part, for the time being, in the preparatory steps leading to the anticipated creation of a Euro-Mediterranean integrated economic area.10

370 Péter Balázs

Finally, the place and the future status of one particular country, namely Turkey, is rather uncertain in a larger pan-European integration. During the Cold War, this country was already a member of important western structures such as NATO and the OECD. In spite of the fact that Turkey was integrated into the western and more particularly in the West European military, political and economic system, its request in 1987 to the EEC for full membership was rejected. The well-known argumentation of this rejection was based not on geographical criteria but on internal political and human rights considerations. However, at the 1999 Helsinki Summit the EU welcomed recent positive developments in Turkey and declared that ‘Turkey is a candidate State destined to join the Union on the basis of the same criteria as applied to the other candidate States.’11 Not to mention the EFTA countries in the context of any future panEuropean trade and economic integration project is politically and economically inappropriate. At the same time, the failure to focus on sensitive areas in South Eastern Europe, thus threatening the security and peace of the entire continent, would similarly be a political mistake. A EuroMediterranean macro-zone of political and economic co-operation should involve, in the long run, some fifty states altogether. It is particularly important to stress here that conflicts in the southern and south-eastern peripheries of Europe have a clear cultural and/or religious character, between peoples of Orthodox Christian culture on the one side, and of Islamic tradition on the other. Current concrete cases of such conflicts are numerous, for example the recent wars between Serbs and Bosnians, between Serbs and Kosovar Albanians, between Armenians and Azeris, between Russians and Chechens. It should be added that the long-lasting conflict between Greeks and Turks, like the massacre of Armenians by Turks early in the last century, reflects the same kind of ‘clash of cultures’. No other ethnic or religious unrest in the transition countries could be compared to the gravity of this ‘Orthodox versus Islam’ tension.

III. Foreign policy motivations of the EU What motivated the establishment of an equilibrium on behalf of the EU in the handling of its two neighbouring regions, the Mediterranean basin and Central and Eastern Europe? As has been pointed out above, both common and different characteristics can be identified when comparing the Mediterranean and Central and Eastern European ‘neighbourhood’ of the Union. However, some obvious similarities are not sufficient to serve as a basis for establishing a large-scale project in the framework of the external relations of the EU. Neither could some differences (including the mutual jealousies of the two regions in question concerning the friendly feeling and the money of the EU) induce any serious action on the part of the Union. The real motivations are to be found inside the European Union itself. As a matter of fact, the Mediterranean region viewed in the framework of the

General Conclusion 371

Barcelona Process is an extension of the southern flank of the EU dominated traditionally by France and the United Kingdom. At the same time, the coming eastern enlargement will attach to the Union countries that belong, predominantly, to the traditional German sphere of interest.12 The ‘geographical coherence of the external action of the EU’13 means, in reality, an internal geopolitical rebalancing between the Member States with regard in particular to the obvious ‘overweight’ of reunified Germany. External challenges can mainly be identified beyond the EuroMediterranean macro-zone. However, such challenges are not independent of certain problematic features of the two neighbouring regions on our agenda. One obvious external motivation is to keep the EU away from the influence and the consequences of Islamic fundamentalism. The centres of this aggressive tendency are to be found outside the Mediterranean, namely in the Middle East. Another danger is rooted in the deep political, economic and societal transformations in Central and Eastern Europe. The EU would like to distance itself from various consequences of systemic changes such as illegal migration, organized crime and so on. The veritable challenge in this respect is the slow and difficult transformation process in the post-Soviet states and, in the first place, Russia. An extended pan-European and Mediterranean dimension to the EU would not only enlarge its sphere of welfare and stability but would also serve as a protective zone against more dangerous ‘second neighbours’ of Europe. Security considerations, both internal and external, constitute the real background of expanding the area of trade and economic welfare around the EU. The rapprochement to the centre of the relatively poorer southern and eastern peripheries of the continent would be the best prevention of dangerous external influences coming from the regions contiguous to the integrated centre of Europe. At the same time, in spite of the high political ambitions concerning the deepening of integration in the fields of foreign policy and defence, to date the EU has no security doctrine. The real content of the Common Foreign and Security Policy (CFSP) can only be detected in a number of common declarations of the Member States. If the ‘economic giant’ is a ‘political dwarf’, its security dimension is – for the moment – only a funny little insect. A unique and appropriate common foreign policy for Europe should have three main axes of action. The first is coping with other ‘global players’, which is a threefold task in itself: competing with economic and military powers like China, Japan and above all the USA; coexisting and cooperating with major international and transnational companies; and, finally, protecting the Internal Market against various forms of fraud and organized crime. The second is helping the Third World and promoting the economic expansion of Europe, which is in fact one of the main traditional domains of the EU’s external relations. Third, the most specific

372 Péter Balázs

immediate task is developing relations with the eastern and southern direct neighbours of the EU.

IV. The next enlargement of the EU Various aspects of the next eastern and southern enlargement are on the agenda of regular meetings of the Union. However, the eastern enlargement is seemingly the ‘hostage’ of internal compromise. The first proof is the ‘slow motion’ reactions of the EU to the requests and needs of the candidate countries together with the uncertainty of the outcome of such reactions.14 In addition, the EU has also taken ‘voluntarist’ steps, such as the selection of would-be members that had not presented their candidature in the appropriate form.15 The dominant role of autonomous actions instead of bilateral agreements can also be observed, 16 as well as the fact that the EU tends to be a negotiating partner and a ‘judge’ at the same time. Moreover, there is a terminological labyrinth which reflects confused organizational structures, for example the overlapping or double use of some structures, and competing bilateral and multilateral ties pointing to clashes between the Commission and the Council (i.e. the Member States) contesting each other’s competences. One might have the impression that the EU and NATO have changed their roles: NATO has opted for a ‘small enlargement’ based on high standards whereas the EU tends towards ‘big enlargement’ embracing a whole security zone consisting of countries at rather different stages of political and economic transformation. It is important to emphasize that in the very complex process of enlargement, the EU cannot be considered as a simple ‘negotiating partner’. With special regard to the unique background of systemic transformation in Central and Eastern Europe, the following three components should be distinguished in the context of the coming eastwards enlargement. First, as far as financial transfers are concerned, the EU is the ‘donor’ and the new Member States are the ‘beneficiaries’. The range of such transfers goes from the rather limited scope of the PHARE Programme to full participation in the renewed Structural Fund and eventually net Common Agricultural Policy (CAP) payments as new members of the EU. Consequently, the ‘beneficiaries’ should be grateful for the help coming through the channels of the EU and supporting their rapprochement. The second main element is the Internal Market. In this case, negotiations on EU accession represent an adaptation process to the already existing and successful rules and institutions of the industrial heart of Europe. From the point of view of the Internal Market, the EU can be considered a ‘club’ and ‘newcomers’ are expected to adapt themselves to the law. Common policies represent a third important field of entry negotiations. They are basically different from the ‘club rules’ of the Internal Market. In this respect, all the

General Conclusion 373

participants are supposed to share the same common values and objectives. Common policies should take into consideration the goals and limits of each EU country in accordance with their real weight in the given sector. Consequently, such policies should, in principle, be redrafted with each new enlargement and adapted to the goals of the widening circle of all the Member States. The above three main components of the enlargement process indicate rather different negotiating contexts. In reality, none of them can be defined as a classical negotiating situation where the main challenge is to reach a well-balanced agreement based on rights and obligations of the partners. In spite of this obvious complexity in the eastern enlargement process, the EU is stressing above all the ‘adaptation’ scenario. In doing so, it makes two political mistakes. On the one hand, it is minimizing the importance of the financial transfers, i.e. its ‘donor’ role. On the other, it holds the candidate countries at a distance from internal EU reforms (such as the institutional reform regarding Structural Funds) and common policies (for example the CAP) whereas these policies are currently being seriously reconsidered independently from the ongoing process. The eastern enlargement of the EU will certainly not take place in the form of a ‘big bang’ but is to be composed of several steps and accompanied by a number of various transitional periods and measures safeguarding the specific interests of both parties. The above three main components of the enlargement negotiations have some inherent logic that suggests the following sequencing in time during the ongoing negotiation phase. The experience of the ‘screening’ proves that full and rapid adaptation of the acquis communautaire is hardly feasible even for the avant-garde of the candidate countries. For this reason, most CEECs could and should not start, from the outset, by comparing their legal and institutional capacities with the highly sophisticated legal acquis of full EU membership. This means that they should not be forced to jump quickly over the pre-negotiation preparatory steps involving larger financial transfers. Bearing in mind the level of economic development and the degree of political and institutional transformation, the pre-accession phase should be completed, even enriched, for the majority of the candidate countries in parallel with or immediately after a first ‘small’ enlargement of the EU. As to negotiations for renewing certain common policies of the EU – first of all, a new, future CAP – due consideration should be given to the fact that such policies are not yet part of the actual acquis communautaire. Therefore, no entry negotiations could take place for the time being. A political choice between two alternatives could resolve this contradiction. The actual solution is to be found in the negotiating strategy of the EU itself: the ‘screening’ of the acquis is based on the current state of the CAP. By doing so, the EU tends towards postponing the negotiations about the essential open issues of a future enlarged agricultural strategy for Europe.

374 Péter Balázs

A more prospective approach would be to involve the candidate countries in the preparations of the CAP reform in the form of expert talks, joint reflection groups or other similar fora. Such preparatory actions would certainly ease the subsequent negotiations.

V. Renewal of the external relations with the neighbours The creation of a Euro-Mediterranean zone of economic welfare and security similarly presupposes some important changes in the external relations of the European Union. First of all, the double use or in some cases even the multitude of bilateral and multilateral structures connecting the EU with its southern and eastern neighbours17 should be simplified and, in this way, made more efficient. The most appropriate framework of bilateral relations between the EU and its regional neighbours is offered, without a doubt, by the Association Agreement. Its legal basis is highly flexible and can be adapted to various degrees of economic and political co-operation. The economic content of association to the Community is similarly rich. It usually involves industrial free trade, financial assistance and measures promoting the gradual adaptation of the associated partner country to EU legislation. It is only the political value of such an association that seems unsatisfactory: it offers a form of ‘external’ relations, even if it is the closest when compared to the whole set of ties between the EU and the outside world and, as such, is located outside the scope of ‘European’ identity and solidarity. This is the main reason why association has been ‘banalized’, in other words politically devalued. In fact, no European or Mediterranean neighbour of the EU is fully satisfied with having an association agreement. Despite all the economic advantages and legal flexibility of association, most Central, Eastern and Southern European associated partners of the EU would like to reach full membership as soon as possible. As to the pre-accession strategy or Accession Partnerships, these structures do not have an adequate legal basis and their use is also limited as they are only meant for candidate countries selected by the European Council. A new intermediary form of close co-operation in the system of the external relations of the EU should offer a next step following association and preceding full membership. Various multilateral frameworks were also invented and introduced with the aim of completing and enriching bilateral structures between the EU and candidate countries. The Structured Dialogue that has worked with greater or lesser results since 1994 has faded out in parallel with the beginning of the enlargement process. The European Conference turned out to be an unsuccessful diplomatic experience as the very country which should have enjoyed it as a substitute for EU membership, namely Turkey, did not appear at its first meeting.

General Conclusion 375

The most reasonable multilateral framework for economic co-operation between and among numerous European and Mediterranean Non-Member Countries seems to be a large free trade area (FTA) proposed by the Barcelona Conference. However, this FTA is already in the making. Its hard core exists in the form of the European Economic Area established between the EC and EFTA countries in 1992. An extended FTA structure should have a bilateral element, i.e. measures foreseeing the abolition of customs duties and quotas between the participating customs entities. 18 Its multilateral (horizontal) content would consist, basically, of three main chapters: common rules of origin (with the possibility of horizontal cumulation of origin inside the whole area), common rules of competition and uniform safeguard clauses. The precondition of joining this FTA should be twofold: WTO membership as a guarantee for observing rules and procedures of international trade, on the one hand, and preferential relations (Association Agreement involving industrial free trade) with the centre of the area – the EU – on the other. Free trade between and among individual states also presupposes mutual trust and friendly relations. Hence, security, both internal and external, is a general precondition to the establishment of a large EuroMediterranean economic area. No form of a PEMA would be a realistic plan if there were conflicts between participating states and if ethnic or religious unrest, as well as organized crime, were not to be marginalized.

VI. Towards a larger Community Europe, together with its peripheries, expects its integrated centre, the EU, to ‘export’ welfare, security and its recognized experience of harmonizing national interests. The biggest achievement of the EU, for the sake of the future of the continent, would be the extension of European identity and solidarity. This would be more important than insisting on the complete implementation of its partly outdated integration methods. A larger European ‘community’ can only be based on common values and objectives as well as on common rules and institutions. It is not merely a technical problem but a fundamental political question to ask whether the sophisticated, half-century-old building of West European integration can be further enlarged after the forthcoming renovation or whether it should be completely redrafted for a larger circle of European states. Anyhow, as a first step, the EU should define its new and ‘extensible’ identity including the largest possible sphere of European values and culture. This action needs the strong political will of all participating states. At the same time, an appropriate pre-accession programme should be inserted into the overall structure of the external relations of the EU. The content of pre-accession could consist of two main elements: bilateral

376 Péter Balázs

‘tailor-made’ aid programmes for the individual countries on the one hand, and highly efficient multilateral co-operation in matters like internal security, environmental protection, development of infrastructure, adaptation to the Internal Market, etc. on the other. The next stage of integration could be a larger economic area composed of the above elements and interconnecting the eastern and southern flanks of the centre of continental Europe through the establishment of a PEMA. The implementation of the necessary political decisions would be unthinkable without solving a series of technical challenges. The most important of them seems to be the following: ● ●

●

● ●

a new and more appropriate model of EU association adapted to the political and economic realities of the twenty-first century; free trade techniques (efficient safeguards, cumulative rules of origin, etc.) applied to the concrete case of a Euro-Mediterranean economic area; a more helpful and efficient pre-accession programme for the less developed eastern and south-eastern European ‘transition countries’ preceding negotiations for full EU membership; a quicker internal adaptation of the EU to the challenges of the next enlargement; the creation of the vitally important security basis for any further economic and institutional integration in Europe.

There are, of course, many other conditions and important building blocks of a PEMA (for example, subregional integration structures like CEFTA) going largely beyond the scope of the given subject. Generally speaking, one may conclude that only a real ‘community’ based on common identity and a defence dimension expressing deep mutual solidarity is able to create appropriate institutions. It was not the institutions that created the European Community but the European Community that created its institutions. The building of a Pan-Euro-Mediterranean macrozone of trade and investment based on the peaceful co-operation of some fifty states should start with reaching agreement on its basic values and objectives. Admittedly, the EU would be more prepared to share its identity and funds with those countries ready to share its democratic norms and the rules and regulations of a transparent market economy. The 1999 Helsinki Summit gave a new and large political perspective to the enlargement process, which now comprises 13 candidates within a single framework. In view of the fact that the candidate countries, including Turkey and the two other Southern European candidates, are participating in the accession process on an equal footing, there is even more evidence for interconnecting the eastern and the southern peripheries of the integrated heart of western Europe. In Helsinki the EU Member States

General Conclusion 377

reconfirmed the principle that all would-be members must share the values and objectives of the European Union as set out in the Treaties. The Millennium Declaration annexed to the Presidency Conclusions of the Helsinki Summit could serve as a basis – together with the almost forgotten original Preamble of the Treaty of Rome – for the drafting of a new fundamental document about the objectives of a large ‘Community’ of States including the EU as its centre and its southern and eastern neighbours.

Notes 1. Presidency Conclusions, External Relations of the European Union, introductory part, Bull.-EU, December 1994, 7. 2. Presidency Conclusions, External Relations of the European Union, 1, Relations to the States of Central and Eastern Europe, paragraph 4. 3. Presidency Conclusions, Annex IV, Cumulation of rules of origin. 4. The 10 candidate countries having a Europe Agreement are the following: Hungary, Poland, Slovakia, the Czech Republic, Romania, Bulgaria, Slovenia, Estonia, Latvia and Lithuania. 5. The 12 Mediterranean partners are the following: Algeria, Morocco, Tunisia, Egypt, Jordan, Lebanon, Syria, Israel, the Palestinian Territories, Turkey, Cyprus and Malta. 6. In spite of the dominant market share of the EU, US investments play an important role in the economies of Israel, Egypt and Turkey. 7. However, Turkey, with its OECD, NATO and Council of Europe memberships has more in common with Europe than with the MNMCs. 8. The partner countries in the Mediterranean Dialogue of NATO are Egypt, Israel, Jordan, Morocco, Tunisia and Mauritania. 9. This number does not involve those micro European states which, in political and legal terms, participate in the OSCE and at the same time are, de jure or de facto, integrated with the economy of the EU: Monaco, Andorra, the Vatican City and San Marino. 10. The Kosovo conflict, and in particular the bombing of the region by NATO from 24 March 1999 onwards, has increased the geopolitical importance of two states, Albania and the FYROM. At the NATO Washington Summit of 23–25 April 1999 they were mentioned as eligible for future NATO membership. As a next step, they could also be included in the circle of countries having a Europe Agreement with the EU. 11. Presidency Conclusions, I. Preparing for Enlargement, point 12. 12. It is important to remark that Turkey has close traditional ties with Germany. In spite of this, the political objective of Germany had been, before the elections of 1998, not to help the EU accession of this country but, rather, the opposite. One fundamental difference, when compared to southern Mediterranean countries, is that in principle Turkey is eligible for EU membership including, among others, the free movement of labour, while the French and British sphere of interest in the Mediterranean region could be kept at the level of association without time limit. 13. According to the wording of the Barcelona Declaration. 14. A time gap of at least two to four years could be observed during the 1990s between the requests of the CEECs and answers from the EU, for example

378 Péter Balázs

15.

16.

17.

18.

concerning the prospect of full membership, the introduction of a pre-accession programme, etc. Before the 1994 Essen Summit expressing the will of the EU to take in ten CEECs as new members, only two states had submitted their official applications for membership, namely Hungary on 1 April 1994 and Poland on 8 April the same year. The other eight ‘candidates’ took the same step between June 1995 and June 1996. For example, the following actions of the EU took a unilateral legal form: the PHARE Programme, the declaration of the possibility and conditions of EU membership at the Copenhagen Summit (June 1993), the introduction of the Structured Dialogue by the Essen Summit (December 1994), the publication of the White Paper at the Cannes Summit (June 1995) containing part of the legal harmonization tasks of the candidate countries, the introduction of the Accession Partnerships by Council Regulation 622/98 of 16 March 1998. Most of these steps could have been taken in a bilateral legal form, in the most appropriate way attached to the Association Agreements. There is evidence of overlapping for the Central and Eastern European EU candidates between the bilateral Association Councils and Accession Partnerships as well as between the multilateral frameworks of the Structured Dialogue and the European Conference. A customs entity is either a state or a customs union. However, the EU is the only customs union in Europe which speaks with ‘one voice’ and therefore negotiates as an entity. Other customs unions like the Czech–Slovak Customs Union or the Baltic Customs Union do not insist on being treated as a unique customs territory in their relations with the EU because some of their members – for example the Czech Republic or Estonia – seem to give priority to their earlier individual accession to the EU rather than to the integrity of the given customs union.

Appendix: the Network of Bilateral Agreements in the Pan-Euro-Mediterranean Area (1 January 2000) For the key to types of agreement and sources see p. 383.

European Free Trade Association (EFTA) countries Country (type of agreement)

Signature (S); Entry into force (EF)

Publication of Council Decision

Iceland (EEA)

2 May 1992 (S) 1

January 1994 (EF)

OJ, L1/1, 3 January 1994

Liechtenstein (EEA)

2 May 1992 (S) 1

January 1994 (EF)

OJ, L1/1, 3 January 1994

Norway (EEA)

2 May 1992 (S) 1

January 1994 (EF)

OJ, L1/1, 3 January 1994

22 July 1972 (S) 1

January 1993 (EF)

OJ, L300/188, 31 December 1972

Switzerland (FTA)

Central and Eastern European countries (including the Baltic countries): Europe Agreements, candidate countries Country (type of agreement)

Signature (S); Entry into force (EF)

Publication of Council Decision

Bulgaria (EA)

8 March 1993 (S) 1 February 1995 (EF)

OJ, L358/1, 31 December 1994

Czech Republic (EA)

4 October 1993 (S) 1 February 1995 (EF)

OJ, L360/1, 31 December 1994

Estonia (EA)

12 June 1995 (S) 1 February 1998 (EF)

379

OJ, L68/1, 9 March 1998

380 Appendix

Central and Eastern European countries (including the Baltic countries): Europe Agreements, candidate countries (continued) Country (type of agreement)

Signature (S); Entry into force (EF)

Publication of Council Decision

Hungary (EA)

16 December 1991 (S) 1 February 1994 (EF)

OJ, L347/1, 31 December 1993

Latvia (EA)

12 June 1995 (S) 1 February 1998 (EF)

OJ, L26/1, 2 February 1998

Lithuania (EA)

12 June 1995 (S) 1 February 1998 (EF)

OJ, L51/241, 20 February 1998

Poland (EA)

16 December 1991 (S) 1 February 1994 (EF)

OJ, L348/1, 31 December 1993

Romania (EA)

1 February 1993 (S) 1 February 1995 (EF)

OJ, L357/1, 31 December 1994

Slovakia (EA)

4 October 1993 (S) 1 February 1995 (EF)

OJ, L359/1, 31 December 1994

Slovenia (EA)

10 June 1996 (S) 1 February 1999 (EF)

OJ, L51/214, 26 February 1999

Former USSR/CIS: Partnership and Co-operation Agreements Country (type of agreement)

Initialling (I); Signature (S); Entry into force (EF)

Publication of Council Decision

Armenia (PCA)

22 April 1996 (S) 1 July 1999 (EF)

OJ, L239/1, 9 September 1999

Azerbaijan (PCA)

22 April 1996 (S) 1 July 1999 (EF)

OJ, L264/1, 17 September 1999

Belarus (PCA) (IA)

6 March 1995 (S) 25 March 1996 (S)

COM (95)44, 22 February 1995 COM(95)245, 28 February 1996

Georgia (PCA)

22 April 1996 (S) 1 July 1999 (EF)

OJ, L205/1, 4 August 1999

Kazakhstan (PCA)

23 January 1995 (S) 1 July 1999 (EF)

OJ, L196/1, 28 July 1999

Kyrgystan (PCA)

9 February 1995 (S) 1 January 1999 (EF)

OJ, L196/46, 28 July 1999

Appendix 381

Former USSR/CIS: Partnership and Co-operation Agreements (continued) Country (type of agreement)

Initialling (I); Signature (S); Entry into force (EF)

Publication of Council Decision

Moldova (PCA)

28 November 1994 (S) 1 July 1998 (EF)

OJ, L181/1, 24 June 1998

Russian Federation (PCA)

24 June 1994 (S) 1 December 1997 (EF)

OJ, L327/1, 28 November 1997

25 May 1998 (S)

COM (97)693, 6 February 1998

Tajikistan (–) Turkmenistan (PCA) (IA)

24 February 1998 (I)

Ukraine (PCA)

14 June 1994 (S) 1 March 1998 (EF)

OJ, L49/1, 19 February 1998

Uzbekistan (PCA)

21 June 1996 (S) 1 July 1999 (EF)

OJ, L229/1, 31 August 1999

South-Eastern Europe Country (type of agreement)

Signature (S); Entry into force (EF)

Publication of Council Decision

Albania (CA)

11 May 1992 (S) 11 December 1992 (EF)

OJ, L343/1, 25 November 1992

Former Yugoslav Republics Country (type of agreement) Bosnia and Herzegovina (–) Croatia (–) Federal Republic of Yugoslavia (–) FYROM (CA)

Signature (S); Entry into force (EF)

Publication of Council Decision

29 April 1997 (S) 1 January 1998 (EF)

OJ, L348/169, 18 December 1997

382 Appendix

Mediterranean Non-Member Countries (MNMCs) ‘Northern Mediterranean’ or ‘European Mediterranean’ countries: Association Agreements establishing customs unions, candidate countries Country (type of agreement)

Signature (S); Entry into force (EF)

Publication of Council Decision

Cyprus (AA)

19 December 1972 (S) 1 June 1973 (EF)

OJ, L133/1, 21 May 1973

Malta (AA)

5 December 1970 (S) 1 April 1971 (EF)

Turkey (AA)

12 September 1963 (S) 1 December 1964 (EF)

OJ, L61/1, 14 March 1971 OJ, L217/3685, 29 December 1964

Southern (and Eastern) Mediterranean Countries: Maghreb, Mashrek, Israel – Euro-Mediterranean Association Agreements establishing free trade zones, countries not eligible for EU membership Country (type of agreement)

State of negotiations (N); Signature (S); Entry into force (EF)

Reference to Council Decision

Tunisia (EMAA)

17 July 1995 (S) 1 March 1998 (EF)

OJ, L97/1, 30 March 1998

Israel (EMAA)

20 November 1995 (S)

SEC (95) 1719, 13 November 1995 OJ, L71/1, 20 March 1996

Morocco (EMAA)

26 February 1996 (S)

COM(95)740, 20 December 1995

PLO for the benefit of the Palestinian Authority (IA)

24 February 1997 (S) 1 July 1997 (EF)

OJ, L187/1, 16 July 1997

Jordan (EMAA)

24 November 1997 (S)

COM (97)554, 29 October 1997

Egypt (EMAA)

Negotiations in progress (N)

–

Lebanon (EMAA)

Negotiations in progress (N)

–

Interim Agreement

Appendix 383

Southern (and Eastern) Mediterranean Countries: Maghreb, Mashrek, Israel – Euro-Mediterranean Association Agreements establishing free trade zones, countries not eligible for EU membership continued Country (type of agreement)

Initialling (I); Signature (S); Entry into force (EF)

Reference to Council Decision

Algeria (EMAA)

Negotiations in progress (N)

–

Syria (EMAA)

Exploratory talks in progress (N)

–

Micro-states (except Liechtenstein) Country (type of agreement)

Signature (S); Entry into force (EF)

Publication of Council Decision

Andorra (CU–CA)

28 June 1990 (S) 1 January 1991 (EF)

OJ, L374/13, 31 December 1990

16 December 1991 (S)

OJ, C302/10, 22 November 1991 OJ, L359/13, 9 December 1992

Monaco (–) San Marino (CU–CA) (IA)

27 November 1992 (S)

Vatican (–)

Key AA CA CU EA EEA EMAA IA PCA

Association Agreement Co-operation Agreement Customs Union Europe Agreement European Economic Area Euro-Mediterranean Association Agreement Interim Agreement Partnership and Co-operation Agreement

Sources EU databases (CELEX, RAPID), ‘Analyse synthétique des accords qui lient la Communauté Européenne à des pays tiers’, European Commission, 1 November 1999.

Index Aarhus Convention, 328, 333 n89 Accession, see enlargement Accession Partnerships, vii, 4, 7–8, 13, 46, 51, 67, 111–12, 114, 219, 225–6, 307, 353, 356–7, 365 n54, 374, 378 n16–17 acquis communautaire, viii, 4, 7–8, 10, 38, 44, 54, 100, 114–17, 157, 185, 187, 199, 219–20, 225–6, 229, 263, 265–7, 285–7, 296–7, 306–9, 316, 321, 354–5, 357, 373 National Plans for the Adoption of the, 7, 114, 307 Adriatic Sea, 304 Aegean Sea, 40 n2, 304 Afghanistan, 360, 364 n38, 366 n78 Africa, 337, 355, 365 n67, 368 East, 45 Horn of, 359 North 34–6, 141–2, 161, 165, 275 South, 45 West, 45 see also Maghreb, MENA African, Caribbean and Pacific States (ACP), 45, 63 Agenda 2000, vii, xx, 4–5, 14, 22, 109–10, 113, 114–17, 141–51, 219, 262, 264, 283, 286, 307, 309, 323, 330 n21, 332 n73, 352 budget proposals, 142–3, 225 agreements, see association, co-operation agreements, Euro-Mediterranean Association Agreements, Europe Agreements, free trade agreements, Interim Agreements, mixed agreements, Partnership and Co-operation Agreements, Trade and Economic Co-operation Agreements agriculture, xix, 20, 75, 82, 115, 142–3, 158, 193–8, 220, 224–5, 244, 270, 276, 305–7, 309, 315, 317–18, 320 cereals, 143, 194, 196 dairy products, 143

expenditure, 197 exports, 82, 86, 163 flowers, 94 n105, 320 fruits, 195, 320 guideline, 143 olive oil, 94 n102, 94 n105, 198 prices, 143–44, 193–4, 196 products, 65, 75, 79, 82–3, 154–6, 163, 269, 276 tomatoes, 94 n104, 195 vegetables, 320 see also Common Agricultural Policy aid, see financial assistance, MEDA, OBNOVA, PHARE, TACIS Albania, 20, 32, 37, 60 n8, 71, 104, 108, 113, 220, 275, 311, 360, 366 n78, 369, 381 Algeria, 30, 33–6, 38, 40 n3, 40 n5–7, 78, 128, 162, 207, 209, 229, 270, 272–5, 276, 304, 317, 336–7, 377 n5, 383 civil war, 162 Amsterdam Treaty, vii, 15, 20, 28 n74, 41 n13, 43, 53–6, 58–9, 66, 83, 97–8, 128, 131–2, 187, 286, 305, 310, 317, 323, 346–7, 356–7, 361 Andorra, 63, 89 n2, 377 n9, 383 anti-western international, 34 approximation of laws, 65, 115, 157, 177, 185, 244 see also White Paper on Approximation Arab Arab–Arab relations, 30, 161–2, 274 Arab–Israeli relations, 30, 31, 34, 37, 161, 279–80, 319 Arab–Israel conflict, 36, 39, 162 boycott, 155, 161 elites, 32, 273 states, 32, 161, 271, 275–7 world, 31, 161 Arab League, 30, 91 n47 Arab Maghreb Union (AMU), 30, 40 n3, 41 n7, 91 n47, 211, 383 384

Index 385 Arms proliferation, 36, 48 see also weapons of mass destruction, security Armenia, xviii, 180, 188 n11, 354, 370, 380 Army, 13, 23 Asia, 107, 365 n67 Central Asia, 58, 60 n2, South-East Asia, 46 see also Association of South-East Asian Nations Asian Tigers, 279 association, xvii–xviii, 21, 26 n28, 42–62, 63–89, 103, 178–80, 184, 270, 286, 316, 336, 352, 374–6, 378 n16, 382 and admission, 49 banalization, 44–6, 60 n4 concept, 50 interregional, 45 obsolescence, 44, 46 of proximity, xvii, 42–62 of the EU, 55 practice, 44 specific, 44–9 see also Association Council, Euro-Mediterranean Association Agreements, Europe Agreements, Partnership, Stabilization and Association Agreements Association Council, 25 n13, 66, 104–5, 120, 176–7, 179, 185, 191 n81, 210, 378 n17 Association of South-East Asian Nations (ASEAN), 202 asylum, 31, 33, 35–7, 337, 349–56, 358–62 asylum seekers, 31, 35–6, 337, 349–52, 354, 358, 360 see also migration, refugees, visa policy Atlantic Alliance, 49, 53 see also NATO audiovisual policy, 10–11 Australia, 157 Austria, 10, 24 n1, 29, 67, 142, 148, 154, 308, 322 autonomous, agreement, 63 instrument, 65, 68, 83, 88 measure, 75, 86, 124

policy, 63 regulation, 100, 124–7 trade preferences, 108 Azerbaijan, 180, 188 n11, 354, 370, 380 balance of payments, 270 Balkanization, 42 Balkans, 9, 20, 29, 35, 38, 42, 328, 303–4, 313, 355, 369 Plan for Stabilization and Association, 20 Baltic Clause, 104–5 see also conditionality Baltic Customs Union, 378 n18 Baltic Sea, 42, 72, 306, 318, 324, 326, 333 n78 Helsinki Convention, 324 Baltic States, 17–19, 50, 57, 104, 205, 209, 324, 333 n78, 351–2, 364 n47, 367, 379–80 see also Estonia, Latvia, Lithuania Bangkok Facility, 228 Bangladesh, 364 n38 Barak, Ehud, 31 Barents Euro-Arctic Council, 333 n78 Barcelona, acquis, 78, 117 Conference, vii, 20, 30, 153, 210, 218, 315, 368 Declaration, viii, 38, 41 n7, 42, 48, 61 n16, 74–5, 77, 117–18, 125, 195, 218, 230, 269, 271, 277, 279, 315–16, 318, 326, 333 n82, 333 n90, 338, 340–1, 360, 363 n11, 369, 377 n13 Follow-up Committee, 280, 340, 363 n12 Process, 37–8, 40, 68, 79, 81, 85, 102, 118, 128, 280, 316, 319–20, 346, 363 n12, 368–70 work programme, 74, 195 see also Euro-Mediterranean conferences, Mediterranean Policy, security Barcelona Convention on the Protection of the Mediterranean Sea, 324, 326 Belarus, 46, 52, 65, 72, 180, 303, 357, 380 Belgium, 337, 344, 355

386 Index Benelux, 345, 355 see also Belgium, Luxembourg, Netherlands Berlin European Council, 145, 147, 197, 225 Berlin Wall, 289, 348, 358 bilateralism, 76, 83 Bill of Rights, 98, 129 biodiversity, see environment Black Sea, xviii, 42, 58, 72, 304, 326, 333 n78 Black Sea States, 50 economic co-operation, 333 n78 Blair Government, 6 bon voisinage, see good neighbourly relations borders, 23–4, 49–50, 57, 69, 161 Bosnia and Herzegovina, 20, 32, 37, 63, 108–10, 146, 224, 311, 313, 326, 369–70, 381 Brazil, 359 Budapest Process, see migration budget (EU), 10, 54, 66, 67, 131, 141–52, 196 accounting, 148–9 balances, 148 data, 151 expenditures, 149 rebates, 145, 149–50 resources, 141–2 transfers, 141, 144, 146–9 see also Agenda 2000, cohesion fund, European Regional Fund, net contributors and recipients, structural funds Bulgaria, vii, xviii, 4, 9, 11, 15, 16, 26 n24, 99, 104, 188 n11, 189 n33, 203, 205, 261, 264, 267, 303–4, 308, 355–6, 364 n43, 365 n49, 367, 377 n4, 379 Bulgarian Clause, 104–5, 112, 120 see also conditionality Burma, see Myanmar Canada, 156 candidate country, xvii, xviii, xix, 12–14, 43, 67–8, 70, 112–13, 219, 226–9, 370, 379–80, 382 Cannes European Council, vii, xxi, 84, 158–9, 164, 199, 210, 368, 378 n16 CAP, see Common Agricultural Policy

capital and payments (free movement of), 170–1 Cardiff European Council, 26 n28, 332 n73 case-law ECJ, see Court of Justice (EC) Caucasus, 52, 57, 60 n2 CEECs, vii, xvii-xviii, 3–10, 14–16, 21, 25 n15, 42, 44, 46–7, 51, 65, 67–72, 102, 109–17, 132, 150, 158, 169, 176–8, 184–6, 187 n1, 203, 205, 211, 217, 221, 224, 227–30, 257–68, 286, 289–90, 296–9, 303–14, 318, 324–6, 328, 330 n21, 335–6, 342, 348–58, 360, 364 n43, 367–74, 377 n14, 378 n15, 378 n17, 379–80 CEFTA, 164, 211–12, 376 CEN, 165 CENELEC, 165 Central Asia, see Asia Central and Eastern European Countries, see CEECs Central Europe, 141–51 see also CEECs Central European Free Trade Association, see CEFTA centrally-planned economy, see non-market economy Centre for Economic and Policy Research (CEPR), 152 n16, 190 n58 Centre for European Policy Studies (CEPS), 166 n6 Centre de Recherches et d’Information Socio-Politiques (CRISP), 198 n12 certification, 159, 327 Ceuta, 358 CFSP, 10, 13, 22, 39, 41 n13, 50, 52–5, 58, 80, 93 n87, 97–8, 338, 371 see also common action, common position, common strategy Charter of Paris, 103, 108, 121 Chechnya, 22–3, 58, 129, 370 chemicals, 164 Chernobyl, 359 child, 340, 354 care, 9 labour, 107, 276 Chile, 45–6, 89 n6, 279 China, 53, 58–9, 371 CIS, 22, 44, 46, 50–1, 57, 69–70, 72, 110, 141–2, 151, 303–5, 308–9, 311–12, 328, 354–5, 380–1

Index 387 citizenship, 17–19, 341 see also non-citizens, nationality conditions civil society, viii, 33, 35, 37, 120–1, 125–6, 220, 244, 278–9, 311, 313, 318, 326, 328, 333 n90, 340–1 civil war, 359 see also Algeria climate change, see environment coherence, 43, 49–52, 53, 66, 89, 108, 129 cohesion fund, 144–5, 225, 304, 309–11, 322 Cold War, 31, 33, 56, 72, 97, 162, 370 Cologne European Council, 9, 12, 22–3, 39, 41 n13, 102 colonial links, 32, 44, 75, 81, 118, 337 COMECON, 20–1, 157 commercial policy, see trade policy Commission (European), xvii, 6, 8–9, 12–20, 22, 24 n1, 43, 51–2, 55, 73, 79, 80–4, 103, 105–7, 111, 114, 116, 130–1, 148, 185, 196, 219–28, 231–3, 285, 293, 296, 300–1, 305, 307–11, 316–17, 320, 326–9, 333 n92, 334 n93, 338–9, 347–8, 352–3, 355–6, 359, 372 delegations, 223, 232 Commission Opinion, see enlargement common action, 60, 66, 80 Common Agricultural Policy, xix, 10, 142, 144, 150, 193–8, 272, 310, 330 n21, 372–4 reform, 143, 145, 196–7 Common Customs Tariff (CCT), 21 Common Foreign and Security Policy, see CFSP common position, 60, 80 common strategy, 38, 41 n13, 60, 66, 129 Commonwealth, 347 Commonwealth of Independent States, see CIS communautarisation, 50 communism, 141 Community model, 101, 103, 116, 118, 130, 132 companies (free movement of), 283–302 see also company law company law, 10, 283–302 and Europe Agreements, 296–9

and Euro-Mediterranean Association Agreements, 299–300 see also European Company, European Economic Interest Grouping competition policy, 10–11, 66, 116–17, 220, 258, 270–1, 283–4, 375 see also mergers conditionality, 61 n12, 71, 97–138, 221–3, 226, 307, 326 concept, 50, 97–101 conditions, 99–100, 109, 111–12 conditions (new), 9–10, 99–100 economic, 97–100, 102, 105, 107–8, 118–19, 121–3, 125–9 environmental, 100–2, 115–17, 120, 126, 131 facing MNMCs, 117–29 financing, 110–13, 123–9 incentives, 100–2, 108, 112, 123 internal, 97, 101 political, 97–8, 100, 103, 120–1, 124–5 positive approach, 98–9, 107, 113–14 preconditions, 99–100, 109, 111–12 regional, 99, 102, 109, 113, 120, 123 social, 101, 120, 123, 126 and South-eastern Europe, 107–9, 113 see also Baltic and Bulgarian clause, Copenhagen criteria, essential element clauses, human rights (protection of), interpretative declarations, proportionality principle, sanctions, suspension/non-execution mechanism conditions, see conditionality Conference on Security and Co-operation in Europe, see CSCE confidence-building, 37 conflict prevention, 48 constructive abstention, 52, 56 consumer protection, 10, 325 Contact Group, 57–8, 61 n23 contaminated land strategy, see environment Convention determining the State responsible for examining applications for asylum, see Dublin Convention Conventions on Rhine, Danube, Elbe and Oder, 324 convergence criteria, 143

388 Index co-operation, see Co-operation Agreements, Trade and Economic Co-operation Agreements, Partnership and Co-operation Agreements, Framework Co-operation Agreement; see also, Co-operation Council, Interregional co-operation, multilateral co-operation, multi-sectoral co-operation, sub-regional co-operation, judicial co-operation, scientific and technical co-operation Co-operation Agreements (Mediterranean), 44, 65, 70, 75, 122, 125, 223, 314, 338 Co-operation Council, 70 Copenhagen criteria, xvii–xviii, 8–9, 13, 15–20, 67, 99, 111, 114–15, 141, 222, 283, 308 Copenhagen European Council, 14, 67, 109–10, 141, 200, 307, 378 n16 Corfu European Council, 99 corporate governance, 295 corruption, 8, 56 Council (of Ministers), 9, 16, 52, 55–6, 71, 77–8, 82–3, 88, 97, 103, 108, 114, 122, 127, 174, 196, 218, 220, 222, 338, 341, 346–7, 350, 355, 359–60, 364 n38, 372 Council for Mutual Economic Assistance, see COMECON Council of Europe, 17, 130, 262, 377 n7 membership, 99 Social Development Fund, 229 Country Operational Programme (COP), 221 Court of Auditors, 131, 230, 231–2 Court of Justice (EC), 55, 65–6, 115, 130, 132, 172–3, 183, 186, 191 n86, 329, 346–7 cases Adoui and Cornuaille, 183; Casis de Dijon, 185; Daily Mail, 285; Keck, 172; Polydor v. Harlequin, 182; Rush Portugesa, 175, 190 n39 Opinion 1/94, 55 Cremona, Marise, 297 crime (organized), 6, 55, 72, 148, 266, 352, 375 Croatia, 11, 20, 63, 108–9, 113, 117, 233 n4, 365 n49, 369, 371, 381

Cross-Border Co-operation (CBC), 72–3, 91 n40, 92 n60, 113, 125, 221, 229, 311–12 Cross-Border Programme, 72–3 CSCE, 103 see also OSCE cultural rights, vii, 16 culture, 11, 116, 318, 375 customs union, 5, 10, 12, 43, 65, 68, 121, 155–6, 269, 378 n18, 382–3 Cyprus, vii, xviii, 3–8, 10, 14, 25 n7, 25 n11, 25 n15, 29, 41 n7, 44, 51, 65, 68, 117, 141, 154–7, 188 n11, 221, 223, 229, 304, 310–1, 318, 326, 346, 352, 367–8, 377 n5, 382 Czech Republic, xviii, 4, 10, 18, 146–7, 156, 171, 188 n11, 189 n33, 203, 207–11, 226–8, 260, 262, 264, 266–7, 353–5, 365 n49, 368–9, 377 n4, 378 n18, 379 Czech-Slovak Customs Union, 378 n18 Czechoslovakia, 364 n43 Danube, 324 Davignon Group of Experts, 292 Dayton Agreements, 313, 326 decentralized co-operation, 120–1, 128, 220–2, 223, 232 see also Med-programmes decision-making process, 66, 84, 129, 154, 157, 160, 221, 223 see also European Parliament declarations, 80 common, 45, 106, 123 interpretative, 105–6, 108, 112, 122 joint, 45, 105, 108, 210 of principles, 118–19 defence policy, 29–40, 57–60, 98 see also CFSP, security Delors, Jacques Delors I, 151 n2 Delors II, 151 n2 democracy, 8, 15, 17, 22, 35, 58–9, 101, 118–19, 124–5, 127, 129, 141, 223, 230, 279, 315, 376 democratic principles, 15, 43, 51, 78, 83, 88, 97, 103, 105, 108–10, 121, 219, 229, 338, 368 democratization, 52, 68, 109, 278–9, 325

Index 389 democracy, continued Democracy Programme(s), 48 see also PHARE, MEDA democratic deficit, 132 demography, 31, 50, 147, 359 Denmark, 142, 355 deforestation, 314 deportation, 32 deregulation, 270 desertification, 314, 359 detainees, 340 development policy, 50, 84, 97, 359 developing countries, 68, 130, 325 see also GSP, Lomé Conventions dialogue, bilateral, 48, 114 economic, 76, 128 inter-ethnic, 230 multilateral, 48, 114 political, 40 n6, 45–6, 48, 51, 54–5, 65, 67–8, 70, 78, 85–6, 103, 122, 342 social, 123–4, 259, 263–4, 343 differentiation, xvii–xviii, 9, 14, 21, 63–89, 103, 108, 110, 113 between associated and non-associated countries, 64–74 chronological, 77–9 definition, 63, 89 n1 as an incentive, 77–81 possible forms, 74–81 national identities, 75–7 strategy, 64, 74–81 diplomas and qualifications, see mutual recognition direct effect (EC law), 16 displaced persons, 33 drugs (trafficking), 85, 130, 339, 353, 355 East Germany, see GDR earthquake, 12 earth Summit, see Rio Summit East-South relations, 368 Ecevit, Bülent, 13 ECHR, 100, 124 Economic and Monetary Union, see EMU economic and social development, 44, 339 economic transition, 67, 70, 77, 79, 116, 126, 219–20, 257, 269, 280, 316–17

ECOS-OUVERTURE, 72, 221, 310–11 education, 10–11, 17, 220, 224, 230, 244, 273–4, 340 EEA, 63, 65–8, 90 n22, 154, 159–60, 178, 186–7, 191 n86, 203–7, 369 Egypt, 30–2, 34, 37, 40 n5–6, 41 n7, 41 n10, 52, 82, 128, 154, 159, 161, 163, 165, 188 n11, 207, 220, 223–4, 229, 270, 273–4, 276–7, 279, 304, 317, 326, 343, 377 n5–6, 377 n8, 382 EIB, see European Investment Bank Elbe, 324 elections, 15, 19, 278 Algeria, 78 Israel, 31 Malta, 24 n3, 367 Romania, 16 Slovakia, 9 employment, 35, 120, 202, 260–1, 267, 273–5, 278–9, 283, 321 see also unemployment, youth employment EMU, vii, 10, 29,143–4, 150, 154 see also euro, convergence criteria, financial convergence energy, 10, 20, 81, 115, 120, 221, 226, 244, 305–6, 309, 315, 318–19, 327, 333 n81 crisis, 155 flows, 33–4 enlargement, xvii–xx, 3–28, 142–3 Accession Process, xix, 4, 6, 7–11, 12, 14, 24 n3, 109–17, 113, 257, 297, 351–2, 354, 367, 376 administrative capacity candidates, 8, 15 Commission: Opinion, viii, 3–6, 14–18, 24 n3, 25 n3, 26 n7, 27 n38, 298 role, 3, 10 Composite Papers, 7, 19 cost, xxii, 3, 141–52 economic aspects, 3 enhanced pre-accession strategy, 4, 7, 12, 67, 109–17 funding, 7, 141–52, 217–54, 309 Helsinki Group, 8–9, 11, 15 institutional aspects, 11, 373, 376 judicial capacity, 8, 15–16 legal aspects, 4, 9–28, 109–17

390 Index enlargement, continued Luxembourg Group, 8–11, 15, 18 Member States role, 3 negotiations, vii, 3–12, 14, 16–18, 24 n3, 43, 67–8, 99, 114–15, 308, 336, 343, 352–3, 356, 367, 372–4, 376 political aspects, 3–4, 9–28, 373–6 pre-accession strategy, xviii, 3–28, 46, 61n9, 67, 69, 99–100, 109–17, 219, 257–68, 297, 309–10, 351–6, 373–6, 377 n14 questionnaire, 24 n2 Regular Reports, 4, 8, 12, 15, 18–19, 24 n3, 116, 355 road map, 11, 114 target dates, 11, 114 terminology, 4 social aspects, xxii, 257–67 Structured Dialogue, 115, 374, 378 n17 see also Accession Partnerships, acquis communautaire, Agenda 2000, CEECs, candidate countries, conditionality, Copenhagen criteria, screening process, transitional period, White Paper environment, xix, 10, 72, 133 n17, 220, 225, 244, 303–34 acquis, 115, 117, 303–4, 307–9, 314, 316, 322–4 Action Programme (fifth), 327 Action Programme (sixth), 327 air emissions, 306, 313–14, 321–2, 326 climate change, 326 biodiversity, 306, 309, 312 co-governance, 303–34 contaminated land, 117, 310 disaster, 359 equilibrium, 315, 317 external competence, 306, 308, 321–2, 324–5, 327 funding, 304–5, 309–10, 316, 318, 327, 329 Global Environmental Facility, 304 impact assessment, 306, 316–18, 328, 329 integration, 306, 313, 317–21, 323, 325–7, 333 n77 policy, 115–17, 305 protection, 101, 115, 376

standards, 101, 116, 120, 196, 220 waste, 314, 330 n12, 330 n16; packaging waste, 330 n12 see also conditionality, polluter pays principle, pollution, precautionary principle, water equal opportunities for men and women, 265, 267 equality of treatment, 45 Ernst and Young Report, 295 Essen European Council, 14, 18, 79–80, 99, 113, 200, 205, 219, 353, 367, 378 n15–16 essential elements clause, 51, 78, 83–4, 100, 102–4, 108, 111–12, 115, 121–2, 126–7, see also conditionality establishment, see right of establishment Estonia, xviii, 4, 10, 17–19, 154, 188 n11, 189 n33, 189 n35, 224, 226, 266–7, 306, 352, 377 n4, 378 n18, 379 see also Baltic States Ethiopia, 364 n38 ethnic conflict, 32, 59, 359, 368, 375 euro, 158 see also EMU EUROMARFOR, 32 Euro-Mediterranean Association Agreements (EMAAs), viii, 64, 68, 74–9, 81, 85, 99, 106, 121–3, 169–73, 178–81, 183–4, 186, 189 n29, 195, 205, 207, 209, 211, 218, 286, 298–301, 340, 342–4, 360, 382, 383 Euro-Mediterranean Charter for Peace and Security (EMCPS), 38, 119 Euro-Mediterranean Civil Forum, 121, 340–1 Euro-Mediterranean Conferences, Helsinki, 326 Malta, 81, 340, 363 n11, 363 n13 Stuttgart, 38, 41 n7, 81, 84, 92 n61–2, 102, 117–19, 341–2 The Hague, 341 Valencia, 128 see also Barcelona Conference Euro-Mediterranean Economic Area, 186–7, 187 n1, 339, 368, 370, 374–6,

Index 391 see also Mediterranean Free Trade Area Euro-Mediterranean Partnership (EMP), vii, 12, 30–1, 37–40, 40 n7, 41 n7, 69, 74, 77, 81, 83, 117–21, 124–5, 127, 153–4, 158–9, 162, 164, 218, 223, 269–82, 290, 319, 339–40, 348, 363 n9 socio-economic impact, xx, 269–282 Euro-Mediterranean policy, see Mediterranean policy Euro-Mediterranean Study Commission (EuroMeSCo), 37 Europe Agreements, xvii, 8, 17, 21, 46, 64, 66–8, 70–1, 99, 105–6, 109–12, 115, 121, 132 n7, 146, 169–73, 175–8, 181–5, 187 n5, 189 n29, 189 n33, 190 n39, 196, 204–5, 212, 222, 286, 296–9, 306–7, 310–11, 342, 350–1, 367, 369, 377, 377 n10, 379–80 European Agency for Reconstruction, 313 European Atomic Energy Community (EURATOM), 114, 309 European Bank for Reconstruction and Development (EBRD), 110, 227–9, 305, 309 European Central Bank, 150 European Committee for Electrotechnical Standardization, see CENELEC European Committee for Standardization, see CEN European Community Investment Partners (ECIP), 94 n109 European Company, 284–5, 291–3, 299 European Conference, 4, 6–7, 12, 25 n16–17, 326, 374–5, 378 n17 Ministerial Meeting Luxembourg, 326 European Consultative Forum on the Environment and Sustainable Development, 328 European Convention for the Protection of Human Rights and Fundamental Freedoms, see ECHR European Council, xvii, 3, 7, 13, 55, 359–62 see Cannes, Cardiff, Cologne, Copenhagen, Corfu, Dublin, Essen, Feira, Fontainebleau, Helsinki, Luxembourg, Madrid, Nice, Tampere, Vienna

European Council on Refugees and Exiles (ECRE), 364 n46 European Economic Area, see EEA European Economic Interest Grouping (EEIG), 284, 286–91, 299 European Environment Agency, 303, 306, 326, 328 European Free Trade Association (EFTA), 65, 67, 69, 155–6, 159–60, 203–5, 369–70, 375, 379 European Investment Bank (EIB), 110, 114, 223, 227–9, 252–3, 269, 304, 309, 315, 317 European Parliament, 12, 19, 27 n57, 55, 61 n19, 80–1, 84–5, 87–9, 99, 106, 124, 130, 132, 222, 226, 229, 230, 266, 310, 338, 341, 346–7, 359 assent, 87–8, 99 legislative powers, 87–9 opinion, 87–8 co-decision, 89, 323 veto, 88, 97, 99, 124 European Regional Development Fund (ERDF), 143–4, 311 European Sustainability Agency, 328 extreme right, 31, 35 Federal Republic of Yugoslavia (FRY), see Yugoslavia Feira European Council, 41 n13 financial assistance, xx, 12, 54, 68, 81–2, 107–8, 123, 217–254, 273, 305, 309, 313, 323, 327, 374 absorption capacity, 226–7 macro-financial assistance, 229–30, 254 see also MEDA, PHARE, OBNOVA, TACIS financial convergence, 144 financial co-operation, see financial assistance financial framework, 142, 143–5, 147, 150 Financing Framework Convention, 85, 128, 222 Financial Instrument for the Environment (LIFE), 310–11, 318–20 financial protocols, 12, 54, 79, 87–8, 93 n76, 95 n128, 123–4, 222, 223–4, 246

392 Index financial services, 176, 181, 184, 189 n23 Finland, 24 n1, 24 n65, 29, 67, 72, 142, 154, 308, 322, 364 n41–2, 369 fiscal policy, 141, 143, 272 see also taxation fisheries, 10, 81, 83, 120, 219, 226, 315–18 sardines, 83 flexibility, 81–3, 89, 99–100, 103, 105, 108, 110, 112, 124, 129, 131, 197–8, 211, 222 Fontainebleau European Council, 144 foreign direct investment (FDI), 146, 150, 162, 211, 271 Foreign and Security Policy, see CFSP forestry, 196 Former Yugoslav Republic of Macedonia (FYROM), 60 n8, 71, 107–8, 110 Fortress Europe, 335 Framework Co-operation Agreement, 45 France, 34, 36, 40 n6–7, 144–5, 196, 336–7, 351, 355, 371, 377 n12 fraud, 371 free movement of capital, see capital free movement of goods, see goods, free trade area, trade free movement of persons, see persons free movement of services, see services free trade area (agreements), xix, 30, 46, 65, 67–8, 80, 120–1, 154–5, 157–9, 162–4, 180, 210–12, 269, 271, 303, 314, 339, 374–6, 382, 383 Front National, 35 Frontiers, see borders Fundamentalism, see Islamism, religious fundamentalism, radicalism, FYROM, 20, 311, 369, 377 n10, 381 G8, 57 Gamal, Soltan, 30 gas, 34, 40 n12, 78, 319–20 GATT, 122, 154, 156, 175 see also GATS, Marrakesh Agreement, Uruguay Round, WTO GATS, 169–92, 299–300 Gaza Strip, see West Bank and Gaza Strip GDP, 142–6, 150, 225, 272–3, 277, 279 GDR, 29, 154 General Agreement on Tariffs and Trade, see GATT

General Agreement on Trade in Services, see GATS General System of Preferences, see GSP genetically modified organism (GMO), 102, 325 geopolitics, 21, 371 geopolitical situation and context, 66, 98 geopolitical coherence, xxi geopolitical limit, 44 geostrategic, 52, 146 Georgia, xviii, 108, 180, 188 n11, 304, 354, 380 Germany, 10, 34, 144–5, 148–9, 337, 348–9, 351, 354–5, 365 n49, 371, 377 n11 Ghana, 364 n38 Gibraltar, 338 glasnost, 20 globalization, viii, 278, 284, 286 good governance, 51, 125, 137 n98, 221 good neighbourly relations, 18, 57, 99, 113, 124 goods (free movement of), 10 see also free trade area, trade Gorbachev, Mikhail 20, 57 Greece, 12, 25 n16, 29, 40 n2, 40 n6, 43, 44, 54–6, 69, 142, 146, 150, 154, 322, 333 n81, 355, 368, 370 Gross Domestic Product, see GDP GSP, 45, 101, 107, 130, 133 n16, 202, 213 n2 Gulf (Persian), 33–6, 39 Gulf War, 32, 229 Hahn, Jürgen, 296 Haiti, 104 Harmonization, see approximation of laws Hassan II, 32 health and safety, 265–6 Helsinki Convention (Baltic), 324, 333 n78 Helsinki European Council, vii, xviii–xix, 7, 9, 13–14, 20, 23–4, 24 n3, 43, 51, 54, 68, 100, 113, 129, 370, 376–7 Helsinki Final Act, 103, 108, 121 Helsinki Group, see enlargement Herzegovina, see Bosnia and Herzegovina holy shrines, 32

Index 393 hubs and spokes, 69, 153–68, 212, 271 human beings trafficking, 352, 354–5, 362 human factor, 119, 129 human rights (protection of ), viii, 8, 13, 15–17, 32, 43, 51, 58–9, 71, 78, 88, 97, 99, 101, 103, 105, 106–9, 118–19, 121, 124–5, 129, 132, 223, 230, 278–9, 338, 359, 361, 368, 370 see also conditionality, ECHR, minorities humanitarian principles, 32 Hungary, xviii, 4, 10–11, 16, 18, 115, 146–7, 156, 177, 188 n11, 189 n29, 189 n33, 189 n35, 190 n37, 196, 203, 207, 209, 218, 221, 224, 226, 229, 261, 264, 266–7, 286, 307, 351, 354, 364 n43, 365 n50, 368–9, 377 n4, 377 n15, 379 hygiene, 102, 276 Iaquinta, Pedro, 275 Iceland, 64, 66, 72, 156, 205, 209, 347, 364 n41, 369, 379 ICJ, see International Court of Justice identity, European, 66, 132, 375 European Union, 50, 77 IGC, 327, 335 1991, xxi 1996, 81, 328, 367 2000, 11 IMEMO, 57 IMF, 57, 78, 229, 270, 279–80 Immigration, see migration Implementation Force (IFOR), 37 Indian sub-continent, 46 industrial policy, 10, 273 infant industry protection, 176 inflation, 56, 257, 276 Instrument for Structural Policies for Pre-Accession (ISPA), 114, 225, 309, 334 n93 Integrated Pollution Prevention and Control (IPPC), 308, 322 intellectual property rights, 85, 220, 270 Intergovernmental Conference, see IGC intergovernmental co-operation, see IGC Interim Agreements, 80, 85–6, 121, 123

Internal Market, 14, 24 n3, 29, 66–7, 114–16, 146, 149, 154, 160, 171, 185, 187, 219–20, 226, 283, 286, 293, 297, 301, 303, 305, 307–8, 329 n1, 371–3, 376 see also White Paper international assistance (co-ordination of), 227–8 International Court of Justice, 13 International Labour Organization (ILO), 101, 107, 257–8, 262 international law, 103–5, 108, 118, 124 see also United Nations International Monetary Fund, see IMF International Standards Organization, 327 INTERREG, 72, 311 Interregional co-operation, see regional co-operation investment, 45, 170, 187 n5, 188 n8, 189 n22, 270–2, 309, 368–9, 376, 377 n6 Iran, xviii, 36, 53, 364 n38 Iraq, xviii, 31–2, 36, 53, 364 n38, 366 n78 Ireland, 142, 144, 150, 356 Iron Curtain, 162, 219, 257 ISO, see International Standards Organization Islam, 31, 58, 370 Islamism, 31–5, 41 n9, 53, 314, 368, 371 Armed Islamic Groups, 34 Al-Gama’at al-Islamiyya , 41 n10 Muslim Brotherhood, 32 Israel, 30–2, 34, 36–9, 40 n5, 48, 52, 68–9, 74–5, 77, 79–81, 84–6, 99, 106, 121–3, 153–68, 178, 180, 188 n11, 195, 204, 207, 223, 229, 269, 273, 279, 303, 326, 329 n3, 346, 377 n5–6, 377 n8, 382, 383 special status, 79 sectoral agreements, 79–80 trade policy, 154–7 trading partners, 155–6 see also Arab-Israel conflict, Arab-Israel relations, Middle East Peace Process, Oslo process Italy, 30, 34, 37, 40 n6, 40 n12, 144, 275, 337–8 Japan, 157, 304, 371 joint committee, 122

394 Index joint venture, 271, 287, 300 Jordan, 37, 40 n5, 41 n7, 77, 81–2, 86, 94 n104, 121–3, 154, 156, 159, 161, 165, 178–80, 188 n11, 189 n29, 190 n37, 210, 230, 269, 274, 276, 299–300, 317, 326, 343, 363 n22, 377 n5, 377 n8, 382 judicial co-operation, 43, 50, 53, 55, 66 Justice and Home Affairs, 10, 98, 335, 346, 352–4, 360–2 Kaliningrad, 21, 28 n65 Kazakhstan, 53, 57, 180, 188 n11, 380 Kosovo, 22, 32, 36–7, 39, 275, 303, 313, 326, 370 Kosovo Force (KFOR), 37 Kosovo crisis, 32, 36, 39, 57, 65, 70, 73, 98, 146, 370, 377 n10 Kurdish question, 35–6, 43, 119, 368 Kuwait, 32 Kyoto Protocol, 130 Kyoto Summit, 321 see also climate change Kyrgystan, 180, 188 n11, 380 labour, 257–68 market, 10, 273–4 standards, 101 labour law, 257–68 collective bargaining, 258–9, 263 collective labour agreements, 261 dismissal, 342, 351 employer insolvency, 261, 266 parental leave, 267 remuneration, 342, 351 workers’ self-management, 259 see also equal opportunities for men and women, pension, social dialogue, social justice, social policy, social security, workers (free movement of), workers rights, working conditions language policy, 17–19 Latin America, 60 n 4, 89 n6, 107, 320 Latin American countries, 45, 51, 87, 320 Latvia, xviii, 4, 8–9, 11, 15, 17–19, 177, 188 n11, 189 n29, 189 n33, 189 n35, 190 n37, 226, 228, 266–7, 377 n4, 379 see also Baltic States

lawyers, 18 least developed countries, 45 Lebanon, 36–8, 41 n7, 128, 161, 188 n11, 207, 225, 270, 273–4, 276, 303, 317, 326, 377 n5, 382 legal approximation, see approximation of laws, White Paper on Approximation legal harmonization, see approximation of laws legal personality, 288 European Community, 63 European Union, 56 Lemaître, Philippe, 27 n45 Libya, 30, 34, 39, 41 n7, 63, 91 n47, 117–18, 304, 369 Liechtenstein, 64, 66, 156, 369, 379, 383 life expectancy, 276 LIFE III, 310, 318 Lithuania, xviii, 4, 8–9, 11, 15, 17, 21, 26 n24, 188 n11, 189 n33, 189 n35, 266–7, 355, 377 n4, 379 see also Baltic States living standards, 257, 338–9, 348 Lomé Convention(s), 45 Lomé IV/Mauritius Convention, 45, 60 n3, 106–7 Luxembourg, 355 Luxembourg European Council, xviii, 6, 8, 12, 24, 24 n3, 25 n15, 26 n28, 67, 103 Luxembourg Group, see enlargement Luxor, 34, 41 n10 Maastricht Treaty, 88, 97, 132, 225, 339 Macedonia, see FYROM Madrid European Council, 3 Maghreb, 30, 33, 35, 39–40, 48, 76, 78, 123, 162, 194, 206–7, 209, 272–6, 304, 317, 331 n47 336–8, 342, 348, 382 see also Africa (North) Malta, vii, xviii, 3–4, 9, 11, 24 n3, 25 n7, 25 n8, 29, 40 n1, 40 n6, 41 n7, 44, 51, 65, 68, 117, 141, 157, 188 n11, 223, 304, 310, 318, 326, 340, 346, 367–8, 377 n5, 382 marginalization, 64, 70, 72, 78 Marin, Manuel, 51, 84–5, 363 n9 market access, 102, 155, 158, 163, 166, 171–84, 212

Index 395 market economy, 8–9, 17, 47, 71, 108, 110, 141, 146, 171–84, 219, 262–3 functioning market economy, 8–9, 13, 283 principles of, 103, 119, 121–3 transition to market economy, 298 see also non-market economy Mashrek, 48, 161–3, 194, 317, 331 n47, 382, 383 Mauritania, 40 n3, 40 n5, 41 n7, 91 n47, 377 n8 McSharry Reforms, 144 MED-programmes Campus, 220, 363 n9 Media, 220, 363 n9 Migration, 340 Techno, 315, 318 Urbs, 220, 315, 318, 340, 363 n9 MEDA, xx, 68, 74–6, 79, 81, 83–4, 86, 88, 94 n113, 107, 112, 123–9, 217–54, 246–50, 315–16, 318, 320, 327, 334 n92, 340 MEDA II, 84–5, 88, 128–9 beneficiaries, 78–9, 222–4, 246 commitments, 224, 247–51 democracy, 101, 230 evaluation reports, 78–9, 84, 230–2 genesis, 218 grants, 218, 223, 232 objectives, 219–21 payments, 224, 247–8, 250 regulation, 78, 84, 89 scope, 218–19 teams, 222, 232 and PHARE, 217–23, 227, 230, 250–1 see also National Indicative Programmes, Regional Indicative Programme media, 220, 229 Mediterranean Action Plan (MAP), 314, 319 Basin, 45 Environmental Technical Assistance Programme (METAP) 228, 319 Forum, 30, 40 n6 Free Trade Area, 74, 76, 81, 86, 126, 164, 198, 210–12, 222–3, 339–40, 348 Sea, 161, 303–4, 318, 320, 324 security dimension, 29–41

zone, 50, 64, 68, 79, 186, 368, 349, 359, 370–1 see also Barcelona, EMAAs, Euro-Mediterranean, med-programmes, Mediterranean Policy MNMCs, NATO, security Mediterranean Environmental Technical Facility, 315 Mediterranean Non-Member Countries, see MNMCs Mediterranean policy, 37–40, 74–81, 87–8, 117–29, 148, 158, 269–82, 303, 314, 316, 321–2, 338–48, 368–9 Global Mediterranean policy, 154, 194, 223, 269, 314 Renewed Mediterranean policy, 195, 269, 338 Melilla, 358 membership EU, see enlargement men and women, see equal opportunities MERCOSUR, 45–6, 89 n6, 154, 156 mergers, 286 Mexico, 156, 272, 359 MFN, 155, 173, 175, 178, 181, 299–300 Middle East, xviii, 30, 33, 36, 39–40, 48, 51–3, 141–2, 160, 371 Middle East North Africa (MENA), 159–60 Middle East Peace Process, 30–1, 53, 81, 85, 154, 160, 319, 368 support to, 80, 123, 230 migration, xix, 33–4, 98, 148, 184, 266–7, 274–76, 303–4, 319, 335–66 Budapest Process, 351 family reunification, 337, 341 illegal, 33, 274–5, 337–43, 346, 349–54, 356, 358, 360–1, 365 n67, 368, 371 passports, 17, 27 n43, 364 n41 pressure, xxi, 31, 48, 55, 275, 319, 335–66 readmission (agreements), 336, 339, 342–4, 349–52, 354–8, 360, 363 n27, 364 n47, 364 n49 transit countries, 335, 349, 356 and CEECs, 10–11, 348–57 and MNMCs, 274–6, 336–48

396 Index migration, continued see also asylum, persons (movement of), refugees, Schengen, visa policy military co-operation, 31, 37 Milosevic, Slobodan, 32, 57–8, 146 Millenium Declaration, 377 Millennium Round, xx, 184 minorities (protection of), 8, 13, 15–19, 27 n53, 27 n57, 28 n58, 43, 59, 71, 99, 107, 109, 119, 230 see also Kurdish minority, Russian minorities, Turkish minorities missiles, 34 mixed agreements, 50, 54, 81, 85–7, 99, 101, 123 MNMCs, vii, xvii–xviii, 20, 42, 48, 51, 54, 65, 80–1, 83, 102, 117–18, 132, 141, 153–4, 157–66, 182, 185–6, 206, 210–11, 217, 219, 229, 271, 290, 335–8, 303–4, 311, 313–15, 317–21, 324–8, 333 n90, 341–2, 344, 346, 348, 357, 360, 369, 375, 377 n7, 382 northern Mediterranean countries, 67, 382 southern and eastern Mediterranean countries, 64, 68, 74–89, 117–29, 148, 269–82, 382–3 Moldova, 6, 46, 65, 70, 180, 303, 311, 381 Monaco, 377 n9, 383 monetary policy, 270 Monetary Union, see EMU Mongolia, 110, 188 n11, 312 monopolies and oligopolies, 155, 281 Morocco, 30, 32, 34–7, 40 n3, 40 n5–6, 41 n7, 52, 74, 77–8, 82–3, 86, 88, 99, 121–3, 128, 162, 177, 180, 188 n11, 189 n29, 194, 207–9, 211–13, 220–1, 224, 229, 269, 272, 274–6, 279, 299, 304, 317, 326, 337–8, 342–4, 358, 360, 366 n78, 368, 377 n5, 377 n8, 382 Most-Favoured Nation treatment, see MFN movement of capital, see capital movement of goods, see goods movement of persons, see persons movement of workers, see workers Multifiber Agreement (MFA), 155, 158

multilateral co-operation, 50, 101–2 multi-sectoral co-operation, 45, 48, 70 mutual recognition agreements (MRAs), 154, 158–60 mutual recognition, 185 diplomas and qualifications, 173, 179, 181 Myanmar, 101 NAFTA, 154 National Plan for the Adoption of the Acquis (NPAA), see acquis communautaire nationalism, 58, 368 nationality conditions, 17–18 Latvian Nationality Act, 17 see also citizenship nationality discrimination, 119, 267, 342–3, 351 National Indicative Programmes (NIPs), 76, 84–5, 124, 127–8, 137 n100, 222, 231–2, 316–19 national treatment, 173–5,178–9, 181–3, 188 n13, 297–300 NATO, 18, 22, 29–30, 33–40, 40 n2, 53, 57–60, 98, 130, 146, 313, 369–70, 372, 377 n7–8, 377 n10 Mediterranean Dialogue, 36–7 membership, 146–7 strategic concept, 33 natural disaster, 306 naturalization, 17–18 net-contributors, 143–5, 148–9 net-recipients, 143, 147 Netherlands, 144, 183, 337, 343–4, 355 New Independent States of the former Soviet Union (NIS), see CIS newly emerging industry, see infant industry Nice European Council, 11 Nigeria, 364 n38 NIS, see CIS no-drawback rule, see rules of origin non-citizens, 17–19, 27 n43, 27 n53, 27 n57 non-discrimination (principle of), 106, 172, 174–5, 182–3, 351 non-interference (principle of), 129 non-market economy, 258 non-tariff barriers (NTBs), 21, 154, 158, 161, 303, 331 n46

Index 397 Nordic Investment Bank, 228 Nordic Passport Union, 364 n41 norms and standards, 21, 307–9, 315–16, 322–3 North Africa, see Africa North-American Free Trade Agreement, see NAFTA North Atlantic Treaty Organization, see NATO North-South relations, 30–1, 36, 320 Norway, 64, 66, 72, 154, 156, 205, 209, 347, 364 n41–42, 369, 379 NPPA, see acquis communautaire nuclear, 10, 57, 303 Kozloduy nuclear power station, 9, 308 materials, 303, 307–9, 312–13, 330 n17, 332 n68 non-poliferation, 119 safety, 9, 72, 114, 219, 308 OBNOVA, 112, 313, 334 n92 Oder, 324 Odysseus Programme, 354 OECD, 35, 107, 154, 156, 327, 368, 370, 377 n7 oil, 34, 53, 319, 337, 362 Operation Allied Harbour, 38 Organization for Economic Co-operation and Development, see OECD OSCE, 17, 30, 57, 103, 122, 130, 368, 377 n9 see also CSCE Oslo Process 30, 120 Organization for Security and Cooperation in Europe, see OSCE Pacific, 45 Pakistan, 53, 364 n38 Palestine, 36, 60 n1, 80, 279 Palestine Liberation Organization (PLO), xvii, 48, 74, 80–1, 86, 121–3, 178, 269, 382 Palestinian: Authority, xvii, 41 n7, 48, 74, 80, 121–3, 156, 161, 224, 269, 279, 317, 382; People, 32, 80–1, 119; products, 80; self-determination, 119; State, 80; territories, 80, 128, 188 n11, 230, 276, 304, 377 n5; see also Arab–Israel conflict, Arab–Israel

relations, Middle East Peace Process, Oslo Process, West Bank and Gaza Strip Pan-Euro-Mediterranean Area (PEMA), vii-viii, xviii–xix, 63–7, 69–70, 72–3, 89, 101, 130, 132, 169–92, 233, 296, 301, 303–34, 326, 369, 375–6, 379–82 Association of Proximity, 42–62 companies, 294 Integration, viii, xix–xx, 169, 184, 303–5, 325, 327–8, 367–78 policy, xix-xxii, 42, 52–3, 102, 284 Pan-European rules of origin, see rules of origin partnership, 47, 61 n17, 75, 91 n56, 125 association, 42–4, 46, 53, 73 co-operation, 45 of proximity, 50 spirit of, 42–3, 48–9, 51, 75, 117–18 see also Euro-Mediterranean Partnership, Partnership and Co-operation Agreements Partnership and Co-operation Agreements (PCA), 21, 22–3, 28 n77, 42, 44, 45–8, 57, 65, 70, 73, 91 n33, 108, 169–73, 180–1, 183–4, 186, 187 n5, 312, 380, 381 Partnership for Peace (PfP), 36 Passports, see migration Patten, Chris, 51 PCA, see Partnership and Co-operation agreements peace, viii, xviii, 47–8, 50, 57–8, 60, 269, 319, 338–9, 359 PEMA, see Pan-Euro-Mediterranean Area pension, 144, 264, 266 perestroika, 20 periphery, vii-viii, xvii, xviii–xx, 33, 147, 153–4, 157, 163, 169, 186, 368, 370–1, 375, 377 persons (movement of), 10–11, 29, 67,184, 267, 341–2, 351, 357 see also Europe Agreements, migration pesticides, 220 PfP, see Partnership for Peace PHARE, xx, 18, 67, 72, 109, 110–13, 147, 217–54, 238–45, 305, 307, 309–11, 312, 320, 334 n12, 353, 372, 378 n16 beneficiaries, 110, 220–1, 224

398 Index PHARE, continued commitments, 221, 224, 240, 242–5, 250 democracy, 101, 113, 230 genesis, 218, 223 guidelines, 220, 234 n13 management committee, 221 objectives, 219–21 payments, 240–50 scope, 218, 238 and MEDA, 217–23, 227, 230, 250–51 pipeline, 34, 41 n12 Poland, xviii, 4, 10–11, 16, 18, 21, 72, 146, 156, 183, 188 n11, 189 n33, 196, 203, 207, 209, 218, 221, 224, 226, 228, 259–60, 264, 266–7, 349–50, 353, 355–6, 364 n43, 368–9, 377 n4, 379 Poland-Hungary Aid for Economic Restructuring, see PHARE police co-operation, 50, 53, 55 Polisario Front, 36 Polluter Pays Principle, 327 pollution, 130 transboundary pollution, 304, 311, 314, 318–20, 323–5 Portugal, 34, 40 n6, 44, 83, 142, 146–7, 150, 154, 176, 273, 322, 355 poverty, 118, 257, 275–6 pre-accession strategy, see enlargement precautionary principle, 102, 325 preferential policy and relations, viii, xvii-xx, 65, 199, 269 Presidency, 3, 6, 341 British, 6 Finish, 13, 377 French, viii, 7, 119 German, 12, 41 n7 Spanish, 40 n7 pricing policy, 270, 276–7, 280 primacy (EC law), 16 Primakov, Yevgeny, 57, 58 private sector, 146, 224, 244, 259, 274, 278–9 privatization, 220, 257, 259, 261, 270, 279 Prodi, Romano, 9, 12, 51, 73 Programme for Technical Assistance to the Commonwealth of Independant States, see TACIS

Programme Management Unit (PMU), 221–2, 232 Progress Reports, see enlargement, Regular Reports proportionality principle, 103, 129 prostitution, 183 protection of minorities, see minorities protectionism, 185 proximity, 43, 46, 48–9, 52, 63, 65–6, 69–74, 304, 325, 328 policy, 43, 60 n2 public contracts, 189 n29 deficit, 56 enterprise, 270 health, 10, 176, 221, 244, 308, 311 opinion, 32–3, 56 policy, 176 procurement, 189 n29–30, 220 sector, 274, 276 security, 176 service, 270, 273 works, 273 Putin, Vladimir, 58 quality of life, 266 quantitative restrictions (QRs), see trade Rabin, Yitzhak, 30–1 racism, 119 radicalism, 281 see also Islamism, religion railways, 221, 228–9 Rambouillet negotiations, 57, 59 Rapid Deployment Euroforce (EUROFOR), 32 readmission (agreements), see migration recession, 257, 362 reciprocity, 45, 75, 87, 91 n56, 132, 155 refugees, 33, 35–7, 113, 313, 319, 340, 348, 361 see also asylum, migration, visa Regional Environmental Centre for Central and Eastern Europe (REC), 313 regional co-operation, 6, 45, 72–3, 75–6, 86, 92 n59, 102, 119, 123, 125, 221–2, 224, 232, 244, 307 groupings, 45, 63, 72, 76

Index 399 regional co-operation, continued integration, 72, 76, 80, 92 n59, 123, 161–3, 283–302 union, 45 see also cross-border co-operation and programmes Regional Indicative Programme (RIP), 125, 127–8, 222–3, 316, 333 n80 Regional Integration Agreements (RIAs), 153 regional policy, 10 regionalism-multilateralism, 154, 216 n22, 271 Regular Reports, see enlargement reinforced co-operation, 43, 49, 54–55, 61 n22, 85 Relex Common Service, 131, 328, 334 n92 religion, 119–20, 370 Orthodox religion, 56, 370 religious fundamentalism, 368 religious unrest, 375 religious persecution, 359 see also Islam, Islamism rendez-vous clause, 70 research, 10–11, 79, 116, 244, 321 resource scarcity, 304, 327, 332 n61 restructuring industries, 176 retaliatory measures, 153 Rhine, 324 Riga Baltic Sea States Summit, 333 n78 right of establishment, 169–92, 285, 297–8, 300, 343 Rio Declaration, 102 Rio Summit, 321, 333 n78 risk capital, 228 Roma, 16 Romania, xviii, 4, 9, 11, 15–16, 99, 104, 156, 180, 188 n11, 189 n33, 203, 205, 209, 221, 224, 228, 230, 259–60, 262, 264, 267, 304, 311, 355, 364 n43, 365 n49, 365 n67, 367, 377 n4, 379 rule of law, 8, 15, 17, 51, 58–9, 71, 97, 118, 120–1, 230 rules of origin, xix, 158, 161, 163, 199–216, 270 alternative percentage rules, 203 change in tariff heading, 200–1, 206

full, diagonal and bilateral cumulation, 69, 120, 123, 159, 164–5, 201–2, 205–6, 210–11, 213 no-drawback rule, 204, 211, 213, 214 n3 pan-European, 164, 202–6, 210–11, 213 protocol on, 200–2, 211 in CEECs Agreements, 205 in EEA Agreement, 205–6 in EMAAs, 123, 206–13 rural, areas, 197, 276 development, 125, 143, 197, 220, 276 Russia, vii, xviii–xix, 4, 7, 17–18, 20–4, 27 n43, 28 n65–6, 28 n77, 38, 41 n13, 42–9, 52, 56–60, 61 n10, 65, 70, 72, 74, 129, 180–2, 187 n5, 188 n11, 189 n29, 190 n37, 228, 260, 303–4, 357, 368, 370–1, 381 Action Plan, 47–8 Common Strategy Paper, 22–3, 41 n13 Russian minority, 17–19, 57 Russian nationalism, 56–7 see also Partnership and Co-operation Agreement, Soviet Union, USSR Russian Federation, see Russia Sahara Western Sahara, 30, 35–6, 162 Sub-Saharian Africa, 359 see also Polisario Front San Marino, 63, 89 n3, 377 n9, 383 sanctions, 23, 41 n7, 88, 98, 100–11, 118, 126–7, 129–32, 196, 358 see also conditionality Sarajevo Summit, 109 Saudi Arabia, 32 Schengen acquis, 344–50, 352–3, 356–7, 361, 365 n68 Agreement, 11, 21, 335, 342, 344–6, 349, 352, 356–7 Implementation Convention, 335, 344, 347, 357, 363 n28 Executive Committee, 344–5, 347, 363 n28 Information System, 356 Protocol (Amsterdam Treaty), 346–7, 356

400 Index Schengen continued territory, 344–5, 349, 350 see also visa policy science and technology, 10–11, 368 scientific and technical co-operation, 40 n6, 65, 79, 86, 134 n41, 321 see also technical assistance screening process, 4, 7–8, 116, 286, 373 Security Council (UN), see United Nations security, 29–41 European 6, 18, 22, 29–31, 47, 98, 102, 146, 148, 335, 344, 346, 356, 372 institutions, 29–31 perceptions, 31–3 Mediterranean, viii, xviii, 29–41, 148, 279–80, 319, 374–5 see also CFSP, conflict prevention, confidence building measures, defence Serbia, 56–7, 146, 370 services, 149, 158, 160, 162, 169–92, 220, 276 free movement of, xx, 5, 10–11, 169–92 liberalization of trade, 85, 278 supply of, 70 see also, financial services, GATS, transport Short and Medium Term Priority Environmental Action Programme (SMAP), 326 Single European Act (SEA), 87, 97 Single Market, see Internal Market Slovak Republic, xviii, 4, 9, 11, 15, 26 n24, 135 n45, 156, 188 n11, 189 n33, 203, 207–9, 224, 226, 266–7, 355, 377 n4, 378 n18, 379 Slovenia, xviii, 4, 10–11, 16, 29, 113, 156, 188 n11, 188 n33, 188 n35, 205, 259–60, 262, 264, 266–7, 306, 352, 355, 367, 377 n4, 379 small and medium-sized enterprises (SMEs), 10–11, 286, 288, 294, 300–1, 348 Social Development Fund, 228 social exclusion, 257 social policy, 220, 257–68, 269–82 social rights, viii, 98, 101, 108, 120

social security, 258, 265, 267, 342 see also labour law Societas Europaea (SE), see European Company soil, 313, 320, 326, 332 n68 Solana, Javier, 16, 22 solidarity, 375 Somalia, 360, 364 n38, 366 n78 South America, see Latin America South-East Asia, see Asia South-eastern Europe, 20, 41 n13, 70–1, 73, 102, 107–9, 113, 118, 148, 370 South-Eastern Development of Environmental Society (SEEDES), 331 n43 Southern Common Market, see MERCOSUR South–North relations, 31, 36 South–South relations, 33, 36–7, 39 Soviet Union, 17, 20–1, 56, 70, 97, 146, 169, 180, 312, 364 n43, 368, 380–1 post-Soviet Union, 46, 50–1, 314, 368, 371 Soviet threat, 31 Spain, 34, 40 n6–7, 44, 69, 83, 142, 144–7, 154, 176, 273, 275, 322, 337–8, 343–4, 355, 358 Special Accession Programme for Agriculture and Rural Development (SAPARD), 114, 225, 309 Sri Lanka, 360, 364 n38, 366 n78 stability, viii, xviii, 22, 24, 29, 269, 281, 311, 315, 326, 338–9, 371 Stability Pact, 66 Stability Pact for South Eastern Europe, 73, 109 Stabilization and Association Agreements, 73, 109 Stabilization Force (SFOR), 37 Standardization, see norms and standards stateless persons, 17, 343 state-owned companies, 19, 257, 258 state-trading country, see non-market economy statistics, 10, 276 STOP programme, 354 Strategy Paper, see Russia, Ukraine structural adjustment, 122, 220, 271–3, 277, 280

Index 401 structural funds, 114, 142–50, 311, 373 structured dialogue, see enlargement Stuttgart Declaration, see Euro-Mediterranean Conferences subsidiarity, 322, 332 n71 subsidies, 144, 197, 270, 276 Sudan, 277 Summit, see European Council see also, Sarajevo, Washington suspension clause, see suspension/ non-execution mechanism suspension/non-execution mechanism, 103–7, 126–7 sustainable development, 77, 98, 115, 118–19, 123, 125, 304–7, 310–11, 313–23, 325–6, 328, 339–40 Sweden, 24 n1, 29, 67, 142, 154, 308, 322, 364 n41–42 Swiss Trade Initiative for the Middle East and North Africa (STIMENA), 168 Switzerland, 6, 25 n17, 34, 63, 156, 159, 166 n2, 205, 209, 344, 369, 379 Syria, xviii, 36–8, 41 n7, 99, 128, 161, 166, 188 n11, 219, 221–2, 270, 274, 276, 279, 303, 317, 326, 377 n5, 383 TACIS, 21, 23, 48, 70, 72, 101, 107, 110, 112, 129, 305, 312–13, 320, 331 n34, 334 n92 Tajikistan, 188 n11, 354, 381 TAIEX, 116 Take-over Directive, 286 taxation, 10, 149, 220, 270, 272, 284–5, 290–1, 321, 327, 333 n81 technical assistance, 8, 185, 314, 318–19, 341, 361 see also scientific and technical co-operation Technical Assistance Information Exchange, see TAIEX telecommunications, 10, 114, 181, 184, 189 n23, 221, 229, 244 Tampere European Council, 98, 360–2 terrorism, xix, 31, 33–4, 40 n12, 98, 148 textiles and clothing, 20, 162–4, 167 n12, 205 tobacco, 265 torture, 340 tourism, 34, 221, 305, 323, 325, 341

town and country planning, 327 training, 10–11, 220, 244, 274 trade, viii, 5, 153–68, 320, 325 diversion, 21, 156–7, 159, 162, 165 liberalization, 169, 270, 277, 279, 342 policy, xxii, 54–5, 359 preferential access, 269 quantitative restrictions, 155, 270, 375 reciprocal, 45 tariff protection, 82 technical barriers, 186 see also trading blocks Trade and Economic Co-operation Agreements, 65, 70, 104, 107, 218 Trade Related Aspects of Intellectual Property, see TRIPS Trade Related Investment Measures (TRIMS), see TRIMS trade unions, 125, 258 trading blocks, 153, 155, 157, 165 transatlantic relations, 39–40, 150 trans-European networks (TENs), 22, 114, 225 transitional period, 10–11, 75, 142, 176, 196, 271–2, 308, 357, 373 transparency, 108, 131, 231 transport, 10, 115–16, 146, 176, 179, 181, 189 n23, 221, 225, 244, 305, 307, 315, 318, 320, 358 treatment, see equality of treatment TRIMS, 170 TRIPS, 158 Troika, 363 Tunisia, 34–5, 40 n3, 40 n5–6, 41 n7, 74, 77–9, 81, 86, 88, 106, 121–3, 128, 178, 180, 188 n11, 194–5, 207–9, 211, 212–13, 224–5, 269, 272, 274–5, 279, 299–300, 304, 317, 326, 336, 338, 342–3, 363 n19–20, 377 n5, 377 n8, 382 Turkey, vii, xviii, 3–8, 12–14, 20, 23, 25 n7, 25 n11, 25 n13, 25 n15–16, 26 n28, 26 n30–1, 29, 31, 35–6, 40 n2, 40 n6, 41 n7, 43–4, 50–2, 53–6, 65, 69, 73, 117, 128, 141, 156, 159–60, 161, 178–80, 184–5, 188 n11, 192 n86, 225, 270, 303–4, 310, 317–18, 326, 336–7, 355, 368, 370, 373, 377 n5–7, 377 n12, 382 Decision 1/95, 12, 66, 68

402 Index Turkish minorities, 16 Turkmenistan, 181, 188 n11, 381 United Kingdom, 6, 44, 61 n20, 142, 144–5, 149, 356, 371, 377 n12 Ukraine, xviii, 6, 11, 22, 38, 40 n13, 46, 52, 57, 65, 72–3, 104, 180, 188 n11, 303–4, 312, 381 Common Strategy Paper, 41 n13 United Nations, 13, 41 n7, 58–60, 98, 130, 155 Charter, 58–60, 118, 121 Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), 227 Security Council (UN), 42, 57–9, 62 n25–8 Security Council Resolutions, 31, 59, 60 n25–7, 118, 130 World Summit on Social Development, 257 United States, 29–33, 38–40, 86–7, 131, 146, 153–8, 186, 194, 280, 304, 325, 371 universality, 129 university curriculum, 16 unemployment, 31, 143–4, 226, 257, 259, 266, 273–4, 314, 340–1 see also employment Unit on Coordination of Fraud Prevention (UCLAF), 230 Universal Declaration of Human Rights, 108, 118 Urban environment, 314, 316, 319–20 Uruguay Round, 153, 155, 174, 177, 184, 187 n4, 193, 212 USA, see United States USSR, see Soviet Union Uzbekistan, 180, 188 n11, 381 Van den Broek, Hans 51, 226 Vatican City, 377 n9, 383 VCLT, see Vienna Convention on the Law of Treaties Venice Summit, 80 VERs, see voluntary export restraints Verheugen, Günter, 13 Viandier, Alain, 295 Vienna Convention on the Law of the Sea, 183

Vienna Convention on the Law of Treaties, 103–4, 134 n27 Vienna European Council, 9, 22, 25 n17, 38, 41 n13, 144–5 violence, 35–6, 338, 359 visa policy, 11, 344–8, 352, 354–8, 361 airport transit visa, 345 collective visas, 345 entry conditions, 341 simple uniform Schengen visa, 345 see also migration, Schengen Visegrád Countries, 69, 203 voluntary export restraints (VERs), 159 Washington Summit, 33 waste, see environment water, 120, 166 n11, 221, 224, 229, 276, 304, 306, 309, 313–14, 317, 319–22, 327 n3, 332 n61–62 Weapons of Mass Destruction, see WMD welfare, 162, 371, 375 West Bank and Gaza Strip, 80, 269, 276, 329 n3 West European Union, see WEU WEU, 30, 53, 98 Mediterranean Dialogue, 30, 40 n5 White Paper on Approximation, 14, 67, 109, 115–16, 185, 260–7, 297–9, 307, 378 n16 see also approximation of laws, Internal Market White Russia, see Belarus WMD, 33, 119 women, 120, 126, 230 see also equal opportunities working conditions, 265, 341–3, 351 workers (free movement of), 10, 175–6, 377 n12 World Bank, 114, 227–8, 270, 279, 304, 327 World War II, 368 WTO, 101–2, 107, 131, 153, 156, 161, 163, 170–1, 173–4, 178, 180–1, 183–4, 186, 188 n13, 189 n30, 299, 325, 375 Appelate Body, 183 conformity with, 45–6, 61 n11, 87, 121–3, 130, 195 Marrakesh Agreement, 102, 122, 194

Index 403 WTO, continued trade dispute settlement, 102, 132 Seattle Conference, 143, 184 Wymeersch, Eddy, 294 xenophobia, 119

youth employment, 274 Yugoslavia, 11, 20, 59, 63, 108–9, 365 n49, 369, 381 Yugoslav crisis, 48, 59, 104, 368 Former, 107, 113, 230, 259–60, 331 n40, 354, 381

Yeltsin, Boris, 23

Zaire, 364 n38