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Trade for change: EU trade and investment strategy for the Southern Mediterranean following the Arab spring revolutions

01-03-2012

Rinaldi, N. 2012. Trade for change: EU trade and investment strategy for the Southern Mediterranean following the Arab spring revolutions. GREAT Insights, Volume 1, Issue 2. March-April 2012 . Maastricht: ECDPM

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The Arab Spring to date has been a major challenge for Europe’s foreign policy. The wave of revolutions that have swept across the countries in the MENA (Middle East and North Africa) region has offered Europe the opportunity to match its foreign policy and commercial interests with those values that are at the core of its institutions: the respect for human rights in a free, democratic society. 

Having exclusive competence over local trade and investment policies, Europe can provide an effective response to the turmoil in the area, facilitating the transition of the region towards democracy and economic integration, supported by a fair and free market. 

At present there is a huge expectation among people in the Southern Mediterranean Countries (SMCs) for greater EU support towards democratic reforms and a genuine economic development to the benefit of all concerned. These circumstances provide for a warmly welcomed concept at the basis of Europe’s Neighbourhood Policy (ENP), the so-called “More for More” approach introduced by the European Commission. This slogan is based on a positive conditionality and summarizes a simple idea: if partner countries show more commitment (i.e. by introducing more reforms on the path towards democracy), then the EU will give them more political and financial support.

In other words, the results achieved for democratic reforms and individual freedoms on the one hand, should be mirrored by a similar “liberation” process in the economic landscape on the other, in the attempt to dismantle the oligarchies which have traditionally dominated. 

Notably, the publication of specific criteria for such an approach, on the part of the European External Action Service (EEAS), will determine whether a country is eligible for a Deep and Comprehensive Free Trade Agreement (DCFTA). 

The European consumer market is the biggest in the world, and Arabic countries should only be granted access under three main conditions: 

· bilateral opening of markets should be seriously engaged by partner leaderships; 
· the whole population should be able to enjoy the benefits of the new economy; 
· appropriate political, social and environmental commitments should be fulfilled by them.

As a result, setting clear, detailed guidelines will enable each partner country to know whether adjustments are to be made in order to access such a market.

Europe has often missed the opportunity to reform the policy of its neighbouring countries because its political response was too slow and at times even contrary to the democratic aspirations of the people. Trade has always been the backbone of the ENP, and a change of tactics is now necessary to facilitate a prosperous and stable neighbourhood, which is important to the security and economic progress of Europe. 

In order to achieve these goals, focus should be placed on investment strategies for Small and Medium Enterprises (SMEs) in the MENA region. To begin with, the European Investments Bank (EIB) should not be limited to simply providing more investments. It should also specifically target local enterprises to improve innovation and organization in a manner that would enable them to avail of the advantages of the EU’s Internal Market. The EU, through its financial institutions, should be more active in handing out loans to individuals in the region, and should explore policy options such as the provision of counter-guarantees. 

In trade terms, this would entail a closer coordination amongst the different financial institutions investing in the area (including global entities such as the World Bank). It would also mean a substantial alignment with the EU acquis on behalf of SMCs, through the dismantling of remaining tariff barriers on agricultural products in the hope of creating a Euro-Mediterranean Free Trade Area, where business people will be granted flexible movement. It is vital that issues about giving out visas are therefore agreed upon in coordination with trade negotiations and that their implementation is not overly bureaucratic.

If the MENA region is to engage in serious economic growth, the EU’s commercial strategy should also encourage unregistered businesses to legalize their status, since certain studies put the percentage of informal employment (excluding agriculture) at 70% in some SMCs.

The Commission must also encourage its partners to negotiate on the so-called “Singapore issues” such as services and investment. The latter is especially important since the level of FDI (Foreign direct Investment) in SMCs is too low, limiting economic development. EU Member States should provide more grants for students of economics, business people and future leaders: this is an essential step to establish lasting connections with future partners.

To conclude, Europe has a unique opportunity to display political guidance and serious engagement aimed at trade liberalization, creation of investment opportunities, and new jobs. These are all the ingredients needed to help foster economic growth in SMCs. 

Niccolò Rinaldi is a Member of the European Parliement, and Vice-Chair of the Group of the Alliance of Liberals and Democrats for Europe. He seats in the International Trade committee where he is rapporteur on the “Trade for change: EU trade and investment strategy for the Southern Mediterranean following the Arab spring revolutions” own initiative report. 

This article was published in GREAT Insights, Volume 1, Issue 2

African institutionsEconomic Transformation and TradeTrade Policy and Economic Partnership AgreementsTransitions in AfricaArab SpringEuropean External Action Service (EEAS)European Union (EU)TradeNorth Africa

External authors

Niccolò Rinaldi