The Barcelona Process and regional integration in the Mediterranean region

As stated in the 2^nd Chapter, first attempts towards a regional integration within the EMP’s political-security basket failed just a few years after the launch of the Barcelona Process. In particular, the Euro-Mediterranean Charter of Peace and Stability represented an ambitious project as it aimed to be the first step towards the creation of a cooperative security system in the Mediterranean; through this system Euro-Med partners would have had the opportunity to face and jointly manage tensions and crises in the region, thanks in part to the establishment of a decision-making mechanism working with the rule of consensus.

It is widely recognised that the main reason behind the failure of this project was the outbreak of the Second Intifada in 2000, which led to a rapid deterioration of the Palestinian-Israeli conflict, and consequently the refusal of the other Arab partners to continue any discussions with Israel.

However, several scholars (Attinà 2002, Aliboni 2004) argue that negotiations failed not only because of the recrudescence of Palestinian–Israeli conflict but due to the strong differences between Arab and European security cultures that emerged over the years.

According to Attinà (2002) the European proposal to create a Euro-Mediterranean Regional Security Partnership²¹⁴ encountered strong resistance within the Arab security culture, “(…) that is currently centred on self-help and national military power. Moreover, the double nature of the partnership security strategy (i.e. the co-operative and comprehensive dimension) is difficult to accept to Arab policy-makers. The Arab elite does not deny the benefits of good relations and economic co-operation with Europe, but the conditional requirements posed by the European Union to socio-economic and political adaptation and to military and strategic transparency cause strong resistance." (Attinà 2002, p. 12)

Aliboni (2004)²¹⁵ affirms that profound disagreements between Arabs and Europeans also exist regarding the key-concepts underlying any political and security cooperation and dialogue, such as democracy, human rights and fundamental freedoms. Such differences caused the failure of the Charter of Peace and Stability. For this reason, according to the author, it is necessary to work on them in order to develop a common language as a pre-requisite for any form of dialogue.²¹⁶

Currently, regional cooperation in the area is mainly about the implementation of partnership-building measures. Nevertheless, in the last few years important initiatives have been implemented, among which there is the approval in 2005 of a Code of Conduct on Countering Terrorism which commits Euro-Med partners to cooperate against terrorism and to adopt methodologies conforming to the rule of law and human rights.

214 "Regional security partnership is the name given to the security arrangement of an international region that originates from the consensus of the states to cooperate on the reduction of violence and enhancement of stability and peace in the region by making use of different types of agreements and mechanisms like formal security treaties, security international organizations, joint action agreements, multilateral dialogue processes, peace and stability pacts including confidence-building and preventive diplomacy measures, and also measure for influencing the domestic structures and processes of the countries at risk of internal violence. A regional security partnership does not exclude any relevant power of the international politics of the region. It includes almost all the countries of a region and also extra-regional powers." (Attinà, 2002, p. 2)

215 Democracy is one of the most discussed and controversial principle in the Barcelona Declaration, and a clear example of the compromises partners reached within the document; as a matter of fact the document states the

importance of the development of law and democracy, but at the same time recognises that “(…) in this framework the right of each of them (the partners) to choose and freely develop its own political, socio-cultural, economic and judicial system”. (Barcelona Declaration, p. 2)

216 “The aim is not to ignore or eliminate differences to 'flatten' values: rather, the ain is to learn what the differences are so as to work out how to promote cohabitation and co-operation" (Aliboni 2004, p. 4)

Furthermore, in 2003 a Euro-Mediterranean Parliamentary Assembly²¹⁷ (EMPA) was established;

although it has a purely consultative role, the purpose of the EMPA is to be an instrument to enhance contact and dialogue between Parliamentarians and citizens in the entire Mediterranean region.

The shift of authority towards the supranational level has not occurred in the political and security fields; for this reason, it is possible to talk of regional cooperation but not of regional integration. In the economic field, however, the integration process seems to be in a more advanced phase, in particular due to the creation of a wide Euro-Mediterranean Free Trade Area. Nonetheless, it is important to underline that this process actually presents both shortcomings and achievements.

The main shortcomings relate, first of all, to the fact that the EMP, with the respective Association Agreements, has not yet produced the expected ‘leap forward’ in Euro-Med economic relations and, secondly, that the Euro-Mediterranean Free Trade Area has been developing as a ‘hub and spokes’

system.

Chapter 3 analysed the evolution of relations between EU and Maghreb countries in the context of the Partnership. Available data demonstrate that there have not been particular changes in terms of trade and FDI. Relations between the two sides continue to be characterised by a strong asymmetry in favour of the Community, while neither Algeria, Morocco, nor Tunisia have achieved considerable improvements in terms of share in total EU imports or export. Similarly, no significant progress had been observed in terms of EU FDI flows towards Maghreb countries. Rather, in last recent years these countries have consolidated a marginal position compared to other countries preferred by European investors.

Further, FDIs appear to be linked more to individual large investment operations (i.e. the privatization of public assets) rather than to a stable trend following the consolidation of macro-economic indicators.

The 3^rd Chapter stressed that Maghreb countries are still characterised by important structural deficiencies such as, for instance, a manufacturing production mainly based on no-dynamic and low value-added products which is increasingly subjected to a strong international competition. At the same time, some sectors within the Partnership framework where it should be necessary to intervene in order to improve performances both in terms of trade and FDI have been identified. In particular, it would be necessary to move towards a ‘deeper integration’ - which goes beyond the

217 Established in 2003 by the Naples Euro-Med Ministerial Conference , the Euro-Mediterranean Parliamentary Assembly has a consultative role; in particular it expresses its views on all issues relating to the Partnership, including the implementation of the association agreements and adopts resolutions or recommendations, which are not legally binding, addressed to the Euro-Mediterranean Conference.

Source: http://www.europarl.europa.eu/intcoop/empa/assembly/default_en.htm

process of tariff dismantling by also involving the liberalisation of the agricultural sector and of trade in services - as well as striving for convergence in the field of technical requirements and industrial standards. In this regard there is still much to do.

Secondly, the Euro-Mediterranean Free Trade Area (EMFTA) has been developing as a ‘hub and spokes’ system. Within the EMP framework, the process of trade liberalisation is in fact occurring through several bilateral agreements: the Euro-Mediterranean Association Agreements. The main consequence is that currently the EMFTA is more the sum of several bilateral FTAs rather than a single preferential trade agreement in which all contracting parties agree with each other on the mutual reduction and/or removal of tariffs barriers.

Furthermore, since the European Union is the main partner in each bilateral agreement, the Euro-Med FTAs constitute a ‘hub and spokes’ structure where the hub’s role is played by EU while Mediterranean partner countries are the spokes.

This process has created a system where potentially two MPCs have both abolished their trade barriers towards the European manufactured products, but still maintain a high tariff protection between themselves. As a matter of fact, such a system may constitute an important obstacle to the economic development of the ‘spokes’. As already seen in the 3^rd Chapter, an increased South-South intra-regional integration is expected to produce positive effects due to economies of scale and increased competition effects. Furthermore, it is expected to promote FDI.

Given the reduced dimension of the individual Mediterranean local markets coupled with the relevant amount of tariffs and non-tariff barriers in force among them, a potential investor or supplier would find it more convenient to establish their firm in the EU territory (the hub) and from there to have economic relations with each of the Med countries (the spokes) by enjoying all the trade facilities, fiscal incentives and more favourable conditions available within the EMP bilateral dimension. Vice-versa, “(t)he creation of a Euro-Mediterranean area with common rules and procedures would allow both an increased flow of FDI from Europe as a result of “allocation”

choices oriented to the penetration of new markets and to achieve higher levels of efficiency. On the other hand, greater integration would be a incentive to the strengthening of interregional FDI flows and the implementation of investment strategies on a regional basis, which can promote the consolidation of specific areas of product specialization and the emergence of competitive local firms on the international level.” (Primavera 2004, p. 13)

Nonetheless, there are other elements which support the idea that in the Mediterranean Basin, among the countries of the northern and southern shores, a process of economic regional integration is currently taking place. These include the recent Agadir Agreement and the establishment of the Pan-Euro-Mediterranean system of cumulation of rules of origin.

The Barcelona Declaration underlines several times the importance of South-South regional integration within the Euro-Mediterranean Partnership. For this reason the Agadir Agreement, which entered into force in July 2006, assumes a particular importance because, by going beyond the bilateral dimension of Turkey-led free trade areas²¹⁸, it is the first regional attempt at South-South integration among MPCs entirely developed within the framework of the Euro-Mediterranean Partnership, and represents an important step towards the achievement of a wider regional Free Trade Area.

Among Maghreb countries, only Morocco and Tunisia take part in the Agadir Agreement; the other two partners are Egypt and Jordan.

Even if it is too early to evaluate the first results of such agreement, this represents an important step forward in order to increase trade among Med countries; the 3^rd Chapter has shown that MPCs have a higher average in terms of tariffs protection compared to other emerging economic regions in the world, around 17%; in addition Maghreb countries are all above this average. For this reason, even if in its first phase the Agadir Agreement will deal mainly with the liberalisation of trade in goods, this is expected to have considerable effects in terms of intra-regional trade.

Furthermore, it is important to underline that the agreement is open to the participation of other members as “(e)ach Arab country that is a member in the Arab League and the Great Free Trade Area, which are connected with the European Union by a partnership agreement or a free trade agreement may request to accede to this Agreement.” (Agadir Declaration, art. 30)²¹⁹

The Agadir Agreement is supposed to increase intra-regional trade and to promote regional integration not only by reducing tariff barriers among members, but also by allowing them to enter completely into the Pan-Euro-Mediterranean system of cumulation of origin.

As seen in the previous chapter, the Pan-Euro-Mediterranean cumulation system (PEMCS) is a diagonal system of cumulation based on a ‘variable geometry’ rule which means that “(…) countries of the Pan-Euro-Med zone can only cumulate originating status of the goods if the free trade agreements including a Pan-Euro-Med origin protocol are applicable between them.

Consequently, a country of the zone which is not linked by free trade agreements with the others is practically outside cumulation’s benefit”²²⁰.

This means that if country A (European Union) has a trade agreement, including the Pan-Euro-Mediterranean protocols on rules of origin, with country B (Tunisia) and with country C (Morocco),

218 In October 2005 the negotiations for Turkey Accession to European Union started. Since then Turkey has had to adjust its commercial policy to the European Union one; for these reasons Ankara has signed since 2005 FTAs with Tunisia (2005), Morocco (2006), Syria (2007) and Egypt (2007). An Israeli-Turkey FTA was already in force since 1997

219 The Agadir Declaration is available on the web-site http://www.agadiragreement.org/index.html

220 From http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_783_en.htm

but countries B and C do not have trade agreement including the same protocols with each other, then country A will be encouraged to trade with countries B and C and vice-versa, but countries B and C will not have incentives to trade between each other, since their combined finished products will not enjoy the originating status and will not get the benefits of the preferential trade agreements. In this regard, by deciding to adopt the Pan-Euro-Mediterranean protocols on rules of origin within the Agadir Agreement, the Agadir members have entered completely into the PEMCS.

Beyond the expected advantages in term of intra-regional trade, this decision also has important symbolic value. This is well shown by the fact that during the negotiations, as Wippel (2005) underlines, not all the Agadir members agreed to harmonise the Agadir Agreement rules of origin with the PEMCS. In particular “(t)he main problem was the compatibility of Euro-Med and Pan-Arab cumulation regimes. Tunisia, Jordan and Egypt favoured the Pan-European system, while Morocco preferred the rules applied in other Arab trade agreements, fearing that otherwise export options would be considerably limited.” (p. 11)²²¹

For this reason the final decision to adopt the same protocols on rules of origin shows a precise willingness to proceed toward economic integration with the EU; even if this does not solve the existing problem of compatibility and overlapping in the same MPCs of different protocols of rules of origin in relation to different preferential trade agreements these countries participate in.