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Al-Ahram Weekly 6 - 12 May 1999 Issue No. 428 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 6 - 12 May 1999 Issue No. 428
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Features Special Focus Travel Living Sports People Time Out Chronicles Cartoons Letters Right time for Euro-Med pact
by Niveen WahishOn 9 May the European Union (EU) celebrates its 49th anniversary. The world's most successful example of regional integration, the EU's most recent achievement was the formation of a monetary union and the introduction of a single currency. The monetary union has established a frontier-free integrated market of 370 million citizens inside Europe.
Ambassador Christian Falkowski, head of the delegation of the European Commission in Cairo, attributes the success of European unity to the fact that it was built on economic foundations. "It was realised that political differences between European countries are such that to start with political unification would be no start," said Falkowski, adding that economic issues have, in a sense, taken the upper hand in international relations.
Nevertheless, the success of the EU in strengthening and widening its economic union has also triggered speculation that it will become a self-sufficient economy with no room for cooperation with long-standing partners, such as Egypt and the Arab countries.
Ambassador Falkowski does not believe this will be the case. He said that as the EU enters the 21st century, it realises that the relationship with the Arab world "is one of the essential long-term foreign policy elements". For that reason, the EU has devised the Euro-Mediterranean partnership, part of the Barcelona process, which aims at creating a new form of economic, political and social cooperation between Europe and its neighbours on the southern shores of the Mediterranean.
The Euro-Mediterranean partnership is an integral part of the EU's plan to create a free trade area covering 15 EU member states and 12 Mediterranean countries, as well as prospective EU member states of Central and Eastern Europe. It will be based on a series of bilateral economic association agreements, and promises to allow for the free exchange of manufactured goods and services by the year 2010. This date, however, has been set only as a guideline. According to Falkowski, it does not mean that whoever has not joined by then will be left out. The date was inspired by the fact that the countries which have already signed association agreements with the EU, such as Tunisia and Morocco, have been granted a 10 to 12 year transition period allowing them to adjust their manufacturing sector before having to lift their tariffs.
It is within this same context that the Egypt-EU partnership agreement is currently being negotiated. And although discussions over the agreement have been in progress for over four years, nothing has been concluded yet. This did not seem to worry Falkowski who commented that the current situation gives an indication of what the negotiations are all about. "It is not just a matter of signing, but there is a lot of substance involved in the talks. This entails a considerable learning process on both sides," Falkowski said, referring to the effort needed to convince Mediterranean partners who will be affected by the free trade agreement.
"This is the first real free trade agreement Egypt will have with outside countries, which is why it requires considerable discussions in Egypt about what it means and what is behind it," he said. Europe in the meantime has been negotiating various forms of partnership agreements with a large number of countries, he added.
Despite the long drawn out negotiations, Falkowski believes "they are taking place at the right point in time". He said that the partnership agreement needs to evolve in a liberalised environment which is what the Egyptian economy is currently moving into. He added that the fact that Egyptian and EU representatives are meeting this month for more discussions on the partnership agreement "is an indication that we are really trying to find solutions for whatever [problems] are left".
In Egypt the partnership has been a controversial issue because some believe that Egyptian local industry will not be able to compete with European goods enjoying free entry into the Egyptian market in future. However, Falkowski pointed out that European goods are already here and are not waiting for the partnership to invade the market. Therefore, in his opinion, it is Egyptian products that will benefit most from the agreement because they will be allowed tariff-free entry into the EU and its huge market and because "Europe is in the process of further enlargement", meaning its need for imports will increase. Egypt will be granted a 12-year transitional period during which tariffs on EU products will be gradually phased out in order to give Egyptian industry time to get ready for tougher competition.
In fact, the European Commission (EC) has pledged some LE1 billion to the Industry Modernisation Programme (IMP) designed to help Egypt compete effectively worldwide by modernising enterprises, reforming the business environment and strengthening institutions that serve business. The EU contribution to the IMP is part of some 660 million euros (LE2.2 billion) pledged to Egypt in the past two years, making Egypt the recipient of the largest EC funding programme in the developing world. Moreover, according to Falkowski, what Egypt has received in the past two years from the EC equals what it received in the previous 20 years under the former protocol for cooperation.
Another issue considered of importance to the Euro-Med partnership, which was underscored during the third Euro-Mediterranean conference held last month in Stuttgart, is the need for joint efforts to create a positive climate for investment to increase the attractiveness of the region to European companies. Falkowski believes this will only be possible once the various association agreements between the EU and the Mediterranean countries are implemented. He believes the agreements provide investors with an improved framework in which to operate. Knowing that their Intellectual Property Rights (IPRs) are protected, for example, might encourage investors to approach the market. Moreover, the tariff cuts, which will be made as a result of implementing free trade area agreements between the EU and Mediterranean countries, will put the latter on an equal footing with their counterparts in the EU.
The ambassador added that further deregulation is needed in various sectors of the Egyptian economy such as communications and transportation. "In the framework of a free trade agreement, expectations will grow, and there will be an increased need for better services and lower prices."
As the EU grows and more northern countries become members, it will need less immigrant labour from the south. Admitting this, Falkowski said that the economic growth in individual countries such as Egypt and, consequently, the jobs that will be created by increased investments will make up for the loss of jobs in the EU, and so keep the workers at home.
While drawing up association agreements with the different Mediterranean countries, the EU is also supporting regional cooperation and integration efforts. Cooperation among Arab Mediterranean countries could be boosted by the Euro-Mediterranean partnership. However, "We are not providing a ready-made recipe on how to do things," said Falkowski. "Each country and region has to find its own way. But one essential element is finding a minimum of common interest and a common perception on how to develop the area," he said, adding that cultural identity is not necessarily a sufficient basis on which to proceed with political or economic partnership.
While the EU is moving internationally to boost the Euro-Med partnership, it is also doing some spring cleaning itself. It is finally getting down to revising its common agricultural policy, which has put it into trouble with almost everyone -- starting with the World Trade Organisation (WTO) and the various countries with which it is negotiating association agreements. In fact, the Egypt-EU partnership has long been stalled because the EU would not agree to allow tariff and quota-free entry of Egyptian agricultural exports -- as it does with manufactured goods.
The EU needs to cut its Common Agricultural Policy (CAP) budget, which is estimated at 20.5 billion euros, in order to direct more funds to its programme of enlargement involving Eastern Europe, dubbed as Agenda 2000. Cutting farm subsidies would certainly reduce the number of future disputes over agricultural issues, especially in subsequent WTO rounds, Falkowski said.
