The Euro-Mediterranean agreement between the European Union and Algeria
The EU-Algeria Association Agreement was initialled on 19 December in Brussels by the two negotiators, Algerian Ambassador to the EU Halim Benattalah, and Robert van der Meulen, Acting Director for the Middle East and South Mediterranean within the European Commission's External Relations Directorate General. Relations between Algeria and the EU have developed in the framework of a Co-operation Agreement since 1976. Algerian authorities stated their wish to begin negotiations for an Association Agreement in 1995 and negotiations officially started in 1997, to be actively pursued from April 2000 and concluded in December, 2001.
The Agreement now has to be signed by both sides and then ratified by the Algerian Parliament, the European Parliament, and national Parliaments of the 15 EU Member States.
With a population of 30.6 million Algeria is one of the larger Mediterranean Partners. GDP per person was $1767 in 2000, very close to the regional average of $1680. Economic growth was 3.3% in the period 1995 -2000 (but only 2.4 % in 2000). The EU is Algeria's main trading partner. Imports from the EU are 56% of the total and exports to the EU are 64% of all exports.
Under MEDA I Program during 1996-2000, ALgeria received grant commitments totalling $ 194 million. Indicative funding for grants under MEDA II amounts to $ 150 million for the period 2002-2004.
Robert van der Meulen was the European Commission's Chief Negotiator for negotiations with Algeria. Euromed Special Feature asked him what benefits the new Agreement would bring Algeria and what influence it would have on co-operation within the Mediterranean region at large.
Euromed Special Feature: Ratification procedures usually take three to four years. Has anything been envisaged to bring forward the implementation of the Agreement?
Robert van der Meulen: Signature procedures take three months and ratification takes two years at the very least and of course we have discussions with our Algerian friends to make things happen, to make the dynamics of this Agreement already tangible as soon as possible. But on a more general level I would like to say that in my opinion this Agreement proves that a country that has been in a very bad economical, political, and social situation, first of all for the population, can open up to the world. When I think of the horrors that have taken place, I must say that I admire the courage of this Algerian administration to throw open their country's society and to conclude this Association Agreement with Europe. This makes clear that no country, no continent can live on its own in an introverted way. And Algeria is clearly acting accordingly in an intense dialogue with Europe and with the Western world in general. The country is opening up its economy and coming back to the world, so to speak. It is extremely gratifying that the Association Agreement will make all this possible. That is the political importance of this Agreement. It is a signal of the Algerian administration. Algeria in no way can do it alone, we need each other and they are opening up to make it happen. It is one of the reasons why I am very satisfied with this negotiation.
More specifically, do you expect the Agreement to give a decisive boost to economic reforms in the country?
The Algerian government has embarked on economic reforms like privatisation, market reform, introducing a more liberal legislation and you must not forget that they made tariff dismantlement enter into force even before they had to under the Agreement. We did not have to convince them of the necessity of economic reform, it is the Algerian side who decided to do it.
The initialling of the Agreement nearly coincides with the preparation of a new economic co-operation programme. What kind of assistance will be provided to Algeria by the EU in this context?
We first had MEDA I. That was a period of co-operation which, for all kinds of reasons, worked rather belatedly. We now have MEDA II, which makes it possible for us to have a very important co-operation with the Algerians. The new National Indicative Programme provides for privatisation as well as social programmes with the rehabilitation of houses, and the repair of damages inflicted by the internal conflict and terrorist activities. The programme involves the Ministry of Justice, the Ministry of Industry, you name it. The emphasis now is on how we can implement the Association Agreement as quickly as possible. That makes a necessity for us to have all kinds of programmes of economic reform. And secondly we have to ensure that the social component works.
May the Association Agreement be expected to play a part in the necessary diversification of the Algerian economy?
That is one of the objectives of this Agreement. The Algerian side is very much aware of that element and in the negotiations we have taken this into consideration as the specificity of the Algerian economy. Therefore our financial programme also provides for assisting Small and Medium-sized Enterprises (SMEs) to stimulate all kinds of new economic activities. In addition, training activities are important to make sure that qualification levels of workers and of management match the Algerian economy's and the Algerian society's need to diversify. So the Agreement will definitely play a part in that process.
Do you think the Association Agreement will lead Algeria to become a member of the Arab-Mediterranean Free-Trade Area launched in Agadir in May and of the WTO?
Of course free trade does not stop with the Association Agreement. Our ambition is also to have a Euro-Mediterranean Free-Trade Area in the framework of the Barcelona Process. And this Association Agreement goes towards getting the conditions right for Algeria to become a member of the Arab-Mediterranean Free Trade Area, and to be in a good position to do the negotiations in the framework of the WTO. Many of the experts in the Algerian negotiating team for the Agreement are going to be the same who will present the Algerian case at the WTO. And of course there is the wider thinking that Algeria will be ready to step into the framework of our Euro-Mediterranean Free Trade Area. As we have always been saying, it is not our objective with the Euro-Mediterranean Free Trade Area to only have liberalisation of trade and intensification of relations between North and South, but also we very much believe that South-South integration is to the benefit of us all. It is important that the South-South dimension be opened up. It is important for those countries, for their economies, for their investment and surely it is important for us as well that this growing free-trade area, also with Eastern Europe, be creating growth and wealth.
The proportion of MEDA payments relative to commitments in Algeria has been rather low so far, compared to the performance of other Mediterranean Partners. Can we expect the situation to improve with the implementation of the Association Agreement?
It could improve but here the Agreement is only partly of relevance. Surely the fact that the Agreement is in place, surely the fact that we are getting programmes into operation is of relevance for the effective implementation of the Agreement. That makes reform possible. That will generate much more demand for this kind of programme in Algeria. It takes two to tango. The Algerian administration is now more interested in what we are offering. But in all fairness the fact that there has not been such a good performance in Algeria as in other Mediterranean Partners has to do with the security situation that existed in Algeria and it was very difficult, nearly impossible for us to bring the assistance out. But these things are turning to the better. Clearly the security situation has improved considerably. Secondly, there is now this Association Agreement which is the tool with which we are going to work. We have to implement all the relevant programmes. So these elements put together make me very confident that we are going to move faster and faster.
To what extent can the Agreement contribute to restoring peace and stability? How relevant is political dialogue in particular in this respect?
My conviction is that what the Agreement will bring about (economic reform, modernisation of the economy, growth) will help with the democratic system. The Agreement opens markets, ends monopolies, and ends privileged positions. There is no denying it. We have seen it in the past with accessions to the European Union. That will bring about growth which will be divided in a more equal way among new operators on the markets in Algeria. It will generate growth and exports will increase. Next to this you must not forget that we will have social programmes which will take care of training, so people will have a better chance of finding a job. Unemployment is extremely high in Algeria. With reform and growth many more people will be brought into the labour market than there are now. Therefore I think that the Association Agreement, and the interest we take in Algeria will be to the benefit of all. The Agreement is to the benefit of European industry, but first and foremost in my view, it will make possible for the Algerian industry after an adaptation period to be in a position to export to European markets and to other markets. Therefore in Algeria's relations with us and with the rest of the world there will no longer be a situation of dependence on oil or on financial assistance. There will be growth generated by economic performance, by exports. That is more generally the way we want to develop our relations with our neighbours in the Mediterranean.
How can the initialling of the Agreement influence investment and in what kind of time frame?
Increasing investment is of course an exercise which depends on many factors. Attracting investment is an extremely competitive business. Algeria finds itself in competition with other parts of the world, but this Agreement is a signal towards the markets, towards investors. Algeria means business with its liberalisation. Growth will be generated, so the Algerian market will be more interesting than before. The whole exercise of South-South co-operation we have mentioned before is extremely important. European or other investors are interested in the Algerian market of course, but would very much like to have a bigger market. That is why we are coming to the Arab-Mediterranean Free-Trade Area, we are coming to the free-trade area of Barcelona, because in one go investors in Algeria will cover a bigger market. And there is proof of what I am saying. When I was working with our Delegation in Tunisia, after the Agreement with that country was signed and then ratified, we held an investment fair and we invited investors. We expected 200 of them but we had 800. So the present Association Agreement is a signal of liberalisation. Of course it has to be followed up by measures on the Algerian side falling outside the scope of the Agreement itself on matters that investors have to be sure of when they invest. They want a clear legal system for instance and there the Ministry of Justice has a role to play. Then there are other measures to be taken by the Algerian government. They are taking these because they are anxious to see the flow of investment increase in vast proportions. This investment flow is necessary because the financial assistance of the European Union, of EU Member States, and of the World Bank will not be sufficient for the upgrading of the Algerian industry. The need for investment is crucial. But the elements of response are put in place by both the Association Agreement and the Algerian authorities.
On the social side, some problems can be expected in the aftermath of the Euro-Mediterranean free trade area, one of the goals of the Association Agreement. But on the other hand the implementation of the Agreement can improve the social situation through EU assistance. Can you elaborate on this?
Economic reform has downsides as well as positive sides. When we in the European Union started with our Customs Union and our Single Market, restructuring in certain parts of industry was inevitable. But in the end, be it within the European Union or with our Partners, the net benefits are far higher. If you look at the figures, unemployment in Algeria is very high. Therefore we talk about boosting SMEs: those are the generators of employment. It is also crucial to have a social policy in that country. The schemes that we put in place are for vocational training and retraining. We have made this National Indicative Programme together with the Algerians and we believe that it is a balanced programme which takes care of the aims of economic reform and always puts the emphasis on new economic activities. And we have a social component in the wider sense, we take care of the people who need retraining.
The Justice and Home Affairs chapter of the Agreement was apparently the most difficult to conclude. In what way do provisions agreed in this area take on board both sides' causes for concern (for instance the fight against terrorism and migration problems)?
Strangely enough, it was not the most difficult part of our negotiations with Algeria. In general I can't say that there were any really difficult parts to those negotiations. We shared the analysis, we shared the objectives. Once you have that in a negotiation the rest follows very easily. If we look at Justice and Home Affairs matters, our analyses are the same. After the attacks on September 11, things accelerated. On the subject of terrorism we very quickly shared the objectives: the fight against terrorism of course, and the exchange of information. We also covered money laundering, corruption, bank secrecy, drug trafficking, etc. These issues these days are pretty much related. That is why we found a quick agreement. It was just that it was a new subject for the Union to deal with, but once the novelty effect had been overcome, we were really running together in the same direction. It was really going very very fast in the last stages. Of course we had to find the wording. We found on the Algerian side no problems to accept the clause on human rights and democracy. We have an article in the Agreement which is a standard clause on human rights, it was not even put to discussion. On the subject of human rights, on fighting terrorism and all these different subjects we will use the political dialogue which is provided for in the Agreement, as we do within all other Association Agreements which are ratified and in force. These issues are also raised in the context of Troika meetings. That was done even in those meetings with Algeria which have taken place before the initialling of the Agreement.