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Al-Ahram Weekly 19 - 25 August 1999 Issue No. 443 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 19 - 25 August 1999 Issue No. 443
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Profile Travel Living Sports Time Out Chronicles Cartoons Letters Winners and losers
By Dominic Coldwell
in Euro-Med clubIsraeli Prime Minister Ehud Barak's pledge to revive the comatose Middle East peace process has raised hopes that after four years of dithering, Euro-Mediterranean integration could finally become a tangible reality.
Aims of intensifying political, economic, and social ties between the EU and the countries of North Africa and the Eastern Mediterranean were first etched into the Barcelona Declaration of 1995. But since then, former Israeli Prime Minister Binyamin Netanyahu has sniped at the idea of co-operation. Plans to adopt a Covenant for Peace and Security at the 1997 meeting of Euro-Mediterranean leaders in Malta disintegrated when Israel refused to tolerate official criticism of its settlement expansion in the Occupied Territories. The final communiqué of April's third Euro-Med summit in Stuttgart even hinted at Netanyahu's departure, declaring that a security "charter will be approved formally by ministers as soon as political circumstances allow".
But Barak's accession as Israeli prime minister also coincides with more favourable economic conditions. Before the planned creation of a free trade area (FTA) between the EU and its southern neighbours by the year 2010, inflation has dropped dramatically in most Mediterranean countries. Budget deficits have also contracted. Hopes that this could attract more inward investment are also buoyed by the expected recovery of Europe's new single currency, with analysts predicting higher levels of growth for France and Germany by the end of this year. A possible decision by Mediterranean countries to peg their currencies to the Euro might ensure long-term financial stability.
But in the end, this could all be pie in the sky. Although the EU has entered a customs union with Turkey and concluded bilateral Association Agreements with Israel, Jordan, Morocco and the Palestinian Authority in anticipation of the Euro-Med FTA in 2010, European investments in the south have only been flowing at half the projected levels. Economists at the World Bank and the International Monetary Fund (IMF) predicted as much in 1996, referring to the so-called "hub-spoke" effect, which was expected to result from the maintenance of high intra-regional trade barriers between southern Mediterranean countries in tandem with the creation of bilateral FTAs with the EU.
Investors, who might otherwise have pumped money into a Mediterranean country in the hope of entering domestic markets, were instead encouraged to invest in the "hub" (the EU), which offers access to consumers in the Mediterranean "spokes". But not even the IMF can help concluding that the alternative of complete liberalisation would have led to staggering unemployment figures and a depression of consumer spending.
But even talk of creating FTAs is somewhat misleading. Although Mediterranean agricultural exports to the EU have a comparative advantage vis-à-vis European produce, they are excluded from tariff exemptions. Because most Mediterranean countries have enjoyed preferential access to European markets for manufactured goods since the 1970s, the creation of a Euro-Med FTA is unlikely to boost profits from the sale of such goods dramatically. Nor have Mediterranean products proven to be very competitive on the European market.
Small wonder, then, that the Barcelona Declaration has been criticised for its ambiguity. While the document makes a big song and dance about freeing markets, it paradoxically also curbs labour mobility. Thus "the need for a differentiated approach that takes into account the diversity of the situation in each country" is a blank cheque for drafting bilateral agreements to shunt asylum seekers from North Africa back home.
If neo-liberal economics capitulates before xenophobia, this is partly because the Barcelona Process was initially motivated by European fears of political Islam. As early as 1992, the European Council of Lisbon had expressed its unease at the "advance of extremist forces... in various North African countries". Two years later, the European Council of Essen elevated the Mediterranean to a "priority zone of strategic importance to Europe". At the behest of France, Italy and Spain, NATO began lobbying the EU early in 1995 to concoct a new policy towards "Islam". So rabid was 'Islamophobia', that the EU did not even protest when authorities in Algeria allegedly rigged the 1997 municipal ballot, which, ironically, had been financed by Euro-Med "democracy" funds.
But what also underlies European fears of the South is the threat that foreign nationals might cause unnecessarily 'disruptive' competition in European labour markets. In 1995, a conference of the Western European Union in Lisbon established a 12,000 man-strong Eurofor unit, aided by a newly created naval battalion, to help France, Italy and Spain fight -- not so much 'Islamism' -- but unwanted immigration. Italy and Spain have also been developing the joint satellite project Helios to monitor migration flows since the late 1980s.
Owing to labour immobility and the maintenance of agricultural protectionism, critics claim that the Euro-Med project is less about free trade than about Europe creaming off dividends once the mare nostrum is liberalised. Yet even if the EU puts profit before philanthropy, some believe that the Mediterranean basin could benefit from the Barcelona Process. The convergence of macroeconomic policies and the harmonisation of manufacture according to European standards could propel intra-regional trade, which currently constitutes only five per cent of Arab exchanges. On the other hand, the planned economic liberalisation will not happen without a massive shedding of labour as cheap European products are expected to swamp the Mediterranean capital goods market. Of course, the conclusion of the Uruguay Round on Trade already forces Mediterranean countries to liberalise markets. The Barcelona Process at least sugars the pill of increased unemployment with funds for structural adjustment.
But this does not make Europe's exploitation of economic weakness any less reprehensible. Nor does it explain why the EU has chosen to abstain from offering aid for genuine development. While it has devoted some money to modernising outdated industries, the EU has poured precious little into educational projects or scientific research, which might raise employment levels. In the words of Bichara Khader of the Université Louvain-la-Neuve, "Arab countries have been slow to discover that foreign investment is no longer attracted by cheap labour, but also by trained labour."
Even so, funds for industrial modernisation have been anorexic. Tunisia's export of manufactured products is expected to drop by 40 per cent after trade liberalisation. A study conducted by the Royal Institute of International Affairs in London last year also found that 60 per cent of Morocco's industrial sector will disappear unless the EU sets aside $5.4 billion of transition costs. But EU funding does not even begin to match such demands. In fact, annual assistance to the Mediterranean was cut by 35 per cent at the Stuttgart summit in April.
As it is, the pressure for competitive agriculture favours the extension of monocultures, the marginalisation of small farmers and increased urbanisation. With the planned elimination of customs tariffs, experts also predict a rise in sales taxes which will hurt the poor. Even worse, the question of debt has been excluded from the Barcelona Process, although the EU accounts for 50 per cent of Mediterranean arrears. Each year, Mediterranean countries cough up $17 to 19 billion in debt servicing, while they receive only $2 billion worth of EU grants and loans.
Thus, in the long term, the Barcelona Process is likely to heighten existing disparities between North and South. Its very success might yet be worse than its current failures.
