Euro-Mediterranean Free Trade Area – Is It Time To Be Optimistic about the Future?

22 juny 2021 | Focus | Anglès

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The Barcelona Process and the Euro-Mediterranean free trade area to be formed within the context of the Euro-Mediterranean Partnership receive undeserved criticism about their pace and achievements. Despite the fact that the Barcelona Process is rather slow, it must be recognised that the process of liberalisation and integration is not easy. Even European integration of the EU member states with more or less similar levels of development and traditions has not been very fast in all areas. It is necessary to be realistic about what can be expected from the Euro-Mediterranean Partnership.

While the EU is struggling with its domestic problems due to the recent economic crisis and as long as the prospects for the future look rather gloomy, it may seem at first sight that the EU may not have enough time, energy and funds to commit to further integration with its Mediterranean neighbours and, thus, the Euro-Mediterranean Process may slow down even further. However, the Euro-Mediterranean Process has no elements that would have a negative impact on the present economic crisis. It is just that the EU may not be able to devote sufficient funds to the structural part of the relations, but there is scope for many achievements, which would lead to mutual benefits without requiring much funding.

Looking at the brighter side of the picture, one can observe that there has been considerable progress in the area of conclusion of the FTAs and, to some extent, the implementation of the FTAs in the Euro-Mediterranean case. Progress is slow in the areas of integration between the Euro-Mediterranean partners, which go beyond the simple economics textbook definition of FTAs; in other words, which go beyond tariff dismantlement in industrial goods. As the southern Mediterranean countries start reaping the long-term benefits of the liberalisation in industrial goods, it is very likely that they will be willing to accelerate and expand the integration process to other areas.

Contrary to the earlier FTAs, present day FTAs include liberalisation in other areas besides trade in goods, market regulation, and some type of structural policy to enable the weaker party(ies) to fulfil its (their) obligations within the context of the agreement, and the new generation Euro-Mediterranean FTAs are no exception. Even though the original Euro-Mediterranean FTAs had a narrower scope, they are being and will be extended over time; meanwhile, other bilateral agreements are being signed or will be signed to include other areas. Topics where progress is said to be limited so far is basically in agriculture, services, elimination of technical barriers to trade, sanitary and phytosanitary measures, cumulation of origin, and sub-regional agreements among the southern Mediterranean partners. For the EU, it is desirable to include provisions on competition, intellectual property rights and public procurement in the FTAs.

FTAs are criticised for not including agriculture within their content. However, the EU has been in a process of concluding bilateral agricultural agreements with its Mediterranean partners since 2006, which foresee reciprocal but asymmetric and gradual liberalisation. Earlier experience shows that it is much easier to liberalise in industry than in agriculture. In fact, that is what happened in the case of the GATT/WTO. Within the context of the GATT, it was only the protection on merchandise trade that was removed from 1958 until 1995. It was in 1995 for the first time that an agreement could be reached for some liberalisation in agriculture among the WTO members. Considering that agriculture is a sensitive sector, the achievements among the Euro-Mediterranean partners so far should be appreciated. Further generosity by the EU to the demands of southern Mediterranean countries in agriculture would have a positive effect on accelerating the pace of the process in other areas. It must also be remembered that the elimination of obstacles in agricultural trade will necessitate the adoption of EU regulations on sanitary and phytosanitary measures by the southern Mediterranean countries.

The EU started negotiations with the aim of liberalisation in services, including the right of establishment. However, liberalisation in this area is even more difficult than agriculture, considering that accepting a case for labour mobility is not very easy for the EU. GATT/WTO and EU experience again shows that it is difficult to achieve liberalisation in services. While there has been no development within the GATT with respect to liberalisation in services, it was with the WTO in 1995 that for the first time a consensus on some common principles in services was reached and the corresponding agreement, the GATS, became effective. In the case of the EU, liberalisation in services could only be achieved by the completion of the EU internal market, about two and a half decades after the completion of the customs union; that is, liberalisation in trade in goods. The common commercial policy of the European Union with respect to the third countries also only covers trade in goods, but not in services.

Some phases of regional integration have been more difficult in the case of the European Union and it will be realistic to expect that those phases will be more difficult for the southern Mediterranean partners. Elimination of technical barriers to trade is one of them. Technical barriers remained to a great extent even among the EU member states until the completion of the internal market and it is not logical to expect their removal among the Euro-Mediterranean partners in the short term. In fact, within the context of the Euro-Mediterranean partnership, the southern Mediterranean countries are expected to harmonise their technical regulations with the present EU system, so that they will not meet with technical barriers from the EU. If it is remembered that the EU member states could only achieve harmonisation of essential health and safety standards with each other by the completion of the internal market, it would be realistic to expect that such a harmonisation would take quite some time.

Another major criticism is the lack of sub-regional integration between the southern Mediterranean countries. For the progress of sub-regional integration, it is important for those countries to be certain about the positive impact of integration; in other words, they must be confident that economic integration will serve to maximise their economic interests. If that is achieved, for instance between Tunisia and Morocco, and benefits are to be reaped, other countries would join the process with a domino effect.

Countries conclude bilateral or multilateral trade agreements with the objective of bringing about an improvement in the living standards of their people. The Euro-Mediterranean FTAs are such that they form an economic integration between unequal partners with respect to development levels. Although the overall aim of future prosperity is the same for both sides, in the case of Euro-Mediterranean partners, it is obvious that the parties originally had different intentions.  

After having granted unilateral concessions to its Mediterranean partners for a very long period, the EU wished to change its agreements to a reciprocal form by concluding FTAs. The impact on the EU of such agreements will be one of penetrating further into the southern Mediterranean markets and increasing exports.

The southern Mediterranean countries probably expect the biggest benefit of the FTAs as part of the pan-Euro-Mediterranean diagonal cumulation of origin, which will enable more of their products to benefit from free trade. However, the most important positive impact of FTAs is most likely to be observed through restructuring in the less efficient industries of the southern Mediterranean countries with the aim of reducing costs. This will be the outcome of the increasing competition coming from the EU through the removal of protection. Although this transformation cannot be observed in the short term, it will eventually lead to improvement in efficiency and competitiveness in the southern Mediterranean countries. After this impact becomes apparent in the future, there will probably be greater optimism for further integration between Mediterranean partners, either through the expansion of the context of the FTAs or by other means.

Experience shows that patience and determination is necessary to reap the benefits of any form of regional integration. It is necessary to observe some tangible benefits of the present FTAs in order to proceed with further integration in the Mediterranean. The EU is experienced enough to know that demanding significant concessions from its Mediterranean neighbours, without being generous enough in its concessions to them, will do no good for the progress of the relations. The FTAs will be desirable as long as they create employment and bring prosperity to both parties. There is no doubt that the establishment of a fair dispute settlement mechanism would certainly facilitate and accelerate the integration process between the Euro-Mediterranean partners.