SIA-EMFTA
Consultation on Phase 2 Final Report
Table 1. Outcome of
10th Anniversary Euro-Mediterranean
A preliminary consultation draft of the final report on Phase
2 of the SIA-EMFTA was issued at the end of September 2005, to provide
information for the 10th Anniversary Ministerial Summit of the Euro-Mediterranean
Partnership, held in
Many of the actions agreed at the summit address issues which were identified in the SIA report. These actions are reproduced in the table below, along with the corresponding SIA recommendations.
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Text of the |
SIA-EMFTA Phase 2
recommendations |
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Sustainable socio-economic development and reform 7. To work towards creating more job opportunities
for the increasing numbers of young people across the region, reducing
regional poverty rates and closing the prosperity gap and raising GDP growth
rates, Euro-Mediterranean partners will undertake measures to achieve: |
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7. g)
Better socio-economic inclusion, in particular in order to face social
consequences of sectoral restructuring; 7. i)
Increased labour force productivity through greater access to vocational and
technical training and measures to encourage technology transfer from
European partners. An increased role for the private sector in financing and
training within the workplace; 7. j) An
increase in the region’s domestic investment and of its share of global
foreign direct investment, particularly in non-oil sectors, by inter alia
improving its investment climate and supporting efforts to attract foreign
and domestic investment that contribute to the creation of new jobs in the
region; 7. k) An
increase in the percentage of the labour force working in the private sector; Education and Socio-Cultural Exchanges 10. e)
Work to strengthen the quality and relevance to the labour market of primary
and secondary education and training by increasing the effectiveness of the
school system, promoting skills, innovation and active self-learning,
providing continuous education and training for the teaching force, making
appropriate use of educational materials and information technology and
e-learning, and through the monitoring of quality assurance, including
support for participation in international assessments (e.g. TIMSS); 10. f)
Support market based reform of Technical and Vocational Education and
Training, the involvement of commerce and industry, and rationalisation of
qualifications; 10. g)
Enhance the capabilities of universities and higher learning institutions,
including by encouraging networking between them within the Euro-
Mediterranean region, and improve the relevance of their programmes to labour
market demands and the knowledge-based society; |
To counter
urban unemployment and associated impacts resulting from industrial
liberalisation, MPCs may take direct measures to help industrial companies
increase their competitiveness vis a vis European companies. Such measures would be broadly similar to
those taken by Some of
this assistance may be targeted specifically at those manufacturing sectors
which offer the greatest potential for expanding employment opportunities, in
order to counter the loss of employment in rural areas due to accelerated
commercialisation of agriculture. Any
such targeting should take account of the threats to textile industries
arising from the ending of the Multi-Fibre Agreement, and of individual MPCs’
potential comparative advantages and disadvantages in other manufacturing
sectors. |
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7. e)
Strengthened social protection systems to ensure a basic standard of living
for the most vulnerable; |
Many of
the potentially adverse social impacts of the EMFTA can be avoided through
economic measures such as those discussed above. The effectiveness of such measures in
avoiding adverse social impacts should be carefully monitored, such that they
may be revised as necessary. Other
measures which form part of a more general process of social development in
MPCs would contribute to avoiding adverse impacts from the EMFTA. These may for example include measures for
greater participation in decision-making by employers’ organisations, trade
unions, cooperative associations and other social economy institutions,
expanded freedom of association and collective bargaining rights, and the
introduction of stronger minimum wage policies in parallel with regulatory
reforms to increase the flexibility labour markets. |
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7. h) A
significant increase in the percentage of women in employment in all
Euro-Mediterranean partner countries; |
Specific
policy measures to avoid potentially adverse impacts on women may include
stronger labour standards for gender issues, for both agricultural and
industrial employment. |
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7. f)
Developed national capabilities in the field of scientific and technological
research and innovation to establish a knowledge based society through
increased co-operation with and access to relevant European programmes and
institutions; 8. k)
Develop scientific and technological research and innovation and facilitate
the transfer of technology in accordance with national legislation; implement
the recommendations of the 2005 Euromed Dundalk Ministerial Conference on
ICT; invite the competent EU authorities to extend the Eureka Programme to
all Mediterranean partners; |
The development of integrated regional industrial
and agricultural policies would enable greater advantage to be taken of
economies of scale within the region, achieve greater synergy of development
strategies, and enable a concerted approach to be taken to accelerating the
economic and social development of the region. The potentially significant adverse employment
effects of both EU-MPC trade liberalisation and south-south liberalisation
may be considerably eased by regional cooperation to achieve a smooth
transition to greater complementarity in agricultural and industrial
production. In
support of such policies, regional institutions may be created to undertake
research into common issues of economic, social and environmental
development, and contribute to the development of regional and national
policy initiatives. |
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8. With a view to contributing to the above
objectives and based on the Barcelona Declaration, Euro-Mediterranean
partners will: a) Design and implement a road map, the components
of which should be developed in a comprehensive way, in accordance with the
provisions of the Association Agreements, for the creation of a Free Trade
Area by 2010. This road map includes: |
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8. a) (i)
The progressive liberalisation of trade in agriculture, processed
agricultural products and fisheries products, with a possible selected number
of exceptions and timetables for gradual and asymmetrical implementation,
taking into account the differences and individual characteristics of the
agricultural sector in different countries, building on the Euromed Association
Agreements and regional free trade agreements, based on the Rabat roadmap.
Non-tariff aspects of agricultural trade liberalisation should be properly
dealt with, along with other issues such as rural development, agricultural
productivity and quality, as well as sustainable development. Negotiations
will start with partner countries as soon as possible; |
Measures
to facilitate the transition to less labour-intensive but more economically
competitive commercial agriculture need to be fully integrated with parallel
measures to support the livelihoods of subsistence farmers during the period
of transition. Both types of measure
need to be sufficiently flexible to take account of expanding or contracting
employment opportunities in other sectors of MPC economies. Facilitation measures such as land reforms,
skills training and micro-credit schemes for small-scale farmers may be
combined with initiatives to promote the development of rural industries and
accelerate the creation of alternative sources of income in rural areas. Provisions
for food subsidies need to be reviewed and if necessary revised, in such a
way as to buffer the greater vulnerability to world price fluctuations that
is expected to result from agricultural liberalisation. |
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8. c) Take
advantage of the adoption of the Pan-Euro-Mediterranean protocol on
cumulation of origin as a step towards promoting intra and inter-regional
integration; |
Such
institutions [regional institutions to
undertake research into common issues] may for example contribute to
developing a common system of rules of origin, and regional approaches to
dismantling non-tariff barriers and the facilitation of regional trade. |
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8. d)
Approximate standards, technical legislation and conformity assessment, and
provide support and assistance to that end, so as to pave the way for the
negotiations of Acceptance and Cooperation Assessment Agreements on
Industrial Products (ACAAs) and the elimination of technical obstacles to
commerce at the latest by 2010; |
Assistance
for schemes providing wider dissemination of information on EU product
standards and other market access constraints and opportunities. |
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8. i)
Strengthen impact analysis of economic reforms and co-operation in the
region; |
Phase 3 of the SIA-EMFTA will contribute to this |
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8. j)
Promote environmental sustainability and implement the Mediterranean Strategy
for Sustainable Development. To develop as soon as possible a road map for
de-polluting the |
In some
MPCs such as Knowledge
is limited in most MPCs on the state of the environment, current trends and
areas of stress. In order to be able
to identify and respond to actual impacts, better information is needed on
environmental baseline data, and monitoring systems need to be strengthened. In order
to better integrate environmental factors into all policy measures designed
to optimise the impacts of the EMFTA, greater use may be made of
environmental economics techniques.
Institutional capacity to use these techniques would benefit from
further strengthening in most MPCs. Measures
to reduce or avoid adverse impacts associated with production changes may
include assistance to large and small companies in environmental management
and cleaner production systems, and promotion of environmentally sound
farming practices. Measures
to counter the adverse impacts of increased transport may include the
strengthening of environmental standards for marine transport and commercial
vehicles. The
expected increase in the use of packaging may be partially countered by
recycling schemes, in order to minimise the necessary infrastructural
investment in solid waste management. Support
from the EU through the various initiatives of the ·
Coordination
of all EU support within the Barcelona process towards common sustainable
development objectives, through inter-agency screening of programme proposals
against the priority actions defined in the Mediterranean Strategy for
Sustainable Development (MSSD). ·
The MSSD
should itself be further developed to take account of continuing research
into the economic, social and environmental impacts of greater regional
integration. |
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8. m)
Develop a regional transport infrastructure network and adopt a set of
recommendations at the Marrakech Euromed Transport Ministerial Conference in
December 2005 to boost transport co-operation; |
Measures
to maximise the benefits of regional trade may include cooperative investment
in regional transport and other infrastructure. |
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Fiscal measures – not covered by the Work Programme |
Tax
reforms may be implemented in parallel with trade liberalisation,
sufficiently early to avoid any loss of government revenue. New tax systems need to be such that lower
income groups are not disadvantaged compared with previous mechanisms, based
on the experience of MPCs that have already introduced reforms. |
1 Council of the European Union,
Table 2. Comments from Plan Bleu on Final Report for
Phase II of the SIA-EMFTA project
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Plan Bleu comment |
Contractor’s
response |
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We find
the report interesting and well presented. Tables with signs to indicate
whether impacts of the EMFTA are expected to be adverse, beneficial or nil
are very useful. |
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General
comment: |
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At the end
of the reading, one might conclude that many adverse effects are expected
from the EMFTA, either environmental, social or even economic. In addition,
impacts on MDG are not significantly positive and the EMFTA doesn’t seem to
influence systematically positively the MSSD indicators follow up. At same
time, the study shows a relatively small economic benefit. As a result, the
study and the executive summary draw attention to the fact that negative
impacts of the EMFTA are huge enough to justify the introduction of specific
trade related measures within negotiated agreements, specific measures in
policies at domestic level in the EU and in the MPCs and specific activities
in the euro-mediterranean cooperation. |
The SIA does not compare benefits and costs to evaluate an
aggregate net outcome, since different social groups are affected differently
by each of the social, environmental and economic impacts. A relatively small direct economic gain is identified, along
with potential for considerably larger economic benefits when the EMFTA is
considered in parallel with other measures.
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In the
present case , one would say that,
trade and sustainable development are not “mutually supportive” as requested
by the |
Trade and sustainable development can be mutually
supportive, but the study does show that for this to occur, trade policy and
parallel policies need to be appropriately designed. |
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We also conclude that
foreign trade should play a role in stimulating economies; but to keep
control of the social and environmental situation in the countries and the
region, foreign trade is a tool to be used with cautious to achieve
sustainable development objectives. Therefore, this study clearly stress the
need for the region and for the countries to define/redefine and implement
sustainable development strategies taking into account impacts of the EMFTA.
As a result, it could then be highlighted that regional cooperation should
place sustainable development issues at the hart of the euro-med cooperation,
foreign trade being considered as a tool to help the achievement of
sustainable development objectives. It will allow the region to enhance
positive impact of the EMFTA and to mitigate negative one. |
We agree. |
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Specific comments: |
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issue of
air quality in cities could be more highlighted in the summary: it could be
mentioned in a bullet of the summary, under the environmental impact expected paragraph. As well as the waste
generation, the changes in consumption mode and for example the massive
importation of individual cars will made the situation worse in local air
pollution in cities with direct and costly impact on health. In the summary
the issue of transport doesn’t appear as a key domain to take into account ;
same remark for urban policies and transportation in urban area which are not
mentioned in the summary and which are of high importance for local air
quality. |
We agree that these points are important. They will
be considered for more detailed study in Phase 3. |
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Impacts on
MDG: we don’t find the impact on goal 3 in the summary, probably because as
indicated in the related chapter the impact is not significant. Why not to
mention it ? |
The impact was not mentioned in the executive summary
because it was assessed as being insignificant. |
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The use of
economic (subsidies) and fiscal tools (taxes) to encourage production,
investment and consumption to evolve toward a better compatibility with
sustainable development targets is not mentioned p74 when talking about the
tax reform. It can apply to transport, energy, cities … some example show
good results when those tools are well combined and used. |
We agree that this is an important point, which will be considered for more detailed study
in Phase 3. |
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Agriculture: in the trade related measures of
the summary : we think that to say “… and phased transition to full
liberalization” might be in contradiction with the beginning of the sentence
where it is written: “…continued protection for sensitive products…” . |
Phased transition and continued protection are presented
as alternative options. |
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Agriculture: for MPCs there are opportunities
for an increasing international demand for high quality products, such as
organic products or other products with recognize quality. To this end,
labeling and quality certification policies could be supported by the
euro-mediterranean cooperation. |
Consider for detailed study in Phase 3 |
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Bullet number 3 to 5 in the “Domestic policy in MPCs”
appears more as actions to be decided
at the regional level and should then be integrated in the EU development
assistance paragraph. Same remark for marine transport
and commercial vehicles (last bullet). |
We kept this separate from EU assistance, as MPCs have
common interests as a sub-part of the region.
The issues are however brought up again under EU assistance. |
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The paragraph “EU
development assistance” integrate proposals to study issues, target actions
and make countries able to implement those actions. I think a word regarding
the financing of actions should be included. From the Plan Bleu studies, it
appears that a better connection of the financing system (EIB, Meda…) with
identified sustainable development actions is needed. And to do so, some
quite important changes in the fund management has to be done. |
The Phase 2 report does
recommend “coordination of all EU support within the |
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Regarding the
coordination with other cooperation bodies, you mention the coordination of
all EU activities within the |
We agree that this point is important. It can be highlighted in Phase 3. |
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The clean development
mechanism of the |
This can be
considered in Phase 3. |
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We
nevertheless wonder why MAP (Mediterranean Action Plan) is cited only for the
MSSD in your report. Let’s remind that the MCSD (Mediterranean Commission for
Sustainable Development) requested Plan Bleu to work about free trade and the
environment in the region and that MAP published all the results of this work
in its Technical Reports Series. This topic was a priority field for the
period 1999-2002 and a synthesis report was produced for the MCSD. All the
related studies are available at: http://www.planbleu.org/publications/libreEchangeUk.html.
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We agree entirely on the importance of all the MAP work in
this area. This was reported in in the
Inception Report for the SIA study, and has been used in the subsequent work. |
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We
are also pleased to inform you that a new report from Plan is published now:
“A sustainable future for the |
This report will prove a valuable resource for Phase 3. |
Table 3. Regional consultation with civil society,
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Civil society
comment |
Contractor’s
response |
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General
Macro-Economic Issues |
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The meagre net economic welfare benefits, compared to
possible high social, economic and environmental costs to MPCs raised a basic
question: was the EMFTA exercise worth the effort, and should alternative
approaches to development of MPCs be considered? |
The economic welfare gains forecast in the SIA should be
seen in the context of uncertainties inherent in this type of study. Potentially large benefits are identified,
which depend on other factors in MPC development policy as well as the EMFTA. The EMFTA as defined in the scenarios is taken as given,
and the purpose of the SIA is to evaluate its impacts and suggest amendments
to the trade agreements and/or enhancing and mitigatory measures to accompany
trade liberalisation. |
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No reference was made to central issues of macro-economic
stability, e.g., future balance of payments crises leading to possible MPC
currency devaluations, nor to demand, supply and price elasticities. |
The report takes account of elasticities in the discussion
of the uncertainties inherent in CGE and other economic analyses. The report also considers the possibility
of a balance of payments crisis and currency devaluation being triggered by
the effects of the EMFTA. In other
respects the interactions with EMFTA were considered not to be significant. |
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In view of market imperfections in MPCs, benefits were
unlikely to pass through to consumers |
The effect of market imperfections on the extent of
pass-through is included in the discussion of uncertainties in the modelling
studies |
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The report stated that long-term economic welfare gains
depended on future policies, but such policies were not identified. |
Possible policies are discussed later in the report, in
relation to mitigation and enhancement measures. |
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The assumption of constant overseas development assistance
(ODA) levels was challenged, since a number of EU Governments preferred to
emphasise trade rather than aid; thus the level of aid to MPCs might decline
in the future. |
The SIA does not assess the impacts of possible changes in
EU assistance to MPCs, up or down, since this is not part of the EMFTA. It does,
however, recommend co-ordination of EU support towards common sustainable
development objectives, irrespective of any change in ODA flows to MPCs. |
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Issues of EMFTA-induced structural economic changes in
MPCs should be addressed, as well as what types of structural changes should
be effected before trade liberalisation occurs. |
Many of the economic impacts that are identified in the
study may be regarded as structural changes.
The section on mitigation and enhancement recommends changes that
should be made before liberalisation or in parallel with it. |
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The impacts of the EMFTA in terms of net financial flows
should be positive, i.e., inflows from the EU should exceed loss of customs
revenues of MPCs. Prospects for
negotiating a package of external debt relief should be examined, as a way of
freeing MPC budgetary resources. |
The effect on MPC national income is neutral, since the loss
of customs revenue is balanced by lower prices to MPC consumers. The SIA does however identify potential distibutional
effects within the country, if the lost revenue is not replaced by other
taxes on the same consumers. |
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The SIA did not address the possible impact of the
European Neighbourhood Policy in MPCs. |
Except in so far as EMFTA is part of the Neighbourhood
Policy, this is correct. The SIA is
for the EMFTA. |
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Descriptions relating to Tunisian economic progress since
entry into force of the Association Agreement were too optimistic |
The discussion covers economic progress before and since
the Association Agreement, and notes the importance of other policy measures. |
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Trade
liberalisation: general issues |
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Positive impacts of liberalisation of trade in industrial
goods evoked in the SIA were not supported by subsequent analysis. |
The study identifies both positive and negative effects. |
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The most likely scenario could be that liberalisation
would occur without any mitigation measures in the South. The resulting
situation under this scenario should be forecasted and analysed as part of
the SIA. |
The main sections of the SIA, including the tables, assess
impacts in the absence of mitigation. |
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The SIA did not consider present and possible future
impacts, at the national and regional levels, of free trade area agreements
concluded by the United States with certain MPCs, viz Jordan and Morocco. |
These trade agreements were discussed in the Baseline
Report for the SIA. |
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The SIA did not address issues relating to international
property rights (TRIPS). |
Questions relating to international property rights going
beyond the present TRIPS agreement are not included in the SIA as the EC have
advised that the issue would not be pressed within the EMFTA. Should this
change, examination of related aspects should
be considered for study in Phase 3. |
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The relationship between the EMFTA and Article XXIV of GATT
should be clarified. |
The SIA is intended to study the impacts of the SIA, not
its GATT compatibility. |
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The assessment should take into consideration the
impacts not directly linked to trade
liberalization, such as the removal of agricultural subsidies and
privatization. |
The parallel effects of CAP reforms are discussed in the
section on agriculture. The
interactions between liberalisation and privatisation are discussed in the
section on services. |
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Industry |
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The negative impacts of on-going trade liberalisation in
industrial goods would start to be felt in the last four years of the
transitional period under the different Association Agreements. |
The timing of impacts may be considered for more detailed study in Phase 3. |
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The informal economy in MPCs should be studied. |
Consider for detailed study in Phase 3 |
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Agriculture |
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The report did not address issues relating to the rural
non-farming sector or assess the overall impact of EMFTA on the agricultural
sector, in particular on subsistence farming. |
The SIA recommends facilitation measures such as land
reforms, skills training and micro-credit schemes for small-scale farmers in
MPCs, combined with initiatives to promote the development of rural
industries and accelerate the creation of alternative sources of income in
rural areas. It also recommends more research into alternative lifestyle
options available in rural areas of |
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The experience of the North American Free Trade Area and
its impacts on |
This experience contributed to the Phase 2 findings, and
may be considered for more detailed study
in Phase 3. |
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The potential and prospects for organic agriculture in
MPCs should be examined, particularly in terms of the potential it may
present for generating employment opportunities. |
Consider for detailed study in Phase 3 |
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According to a suggestion made in the European Parliament,
MPCs should be permitted to impose import levies for certain protected
products: revenue thus raised would be allocated to social and environmental
programmes. |
Consider for detailed study in Phase 3 |
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Protection of agricultural sectors should be set in the
framework of the ‘food sovereignty’ concept. |
Alternative approaches to food security need to take
account of a wide range of issues. |
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The development of agri-business-type large-scale export
agriculture in MPCs could involve subsistence farmers losing ownership of
assets such as land and water resources, with corresponding welfare
implications. |
This is discussed in the Phase 2 report, and may be considered for more detailed study in
Phase 3. |
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Disastrous impacts on agriculture had been observed in |
Consider for detailed study in Phase 3 |
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Social issues |
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The critically important issue of migratory flows in the |
This is discussed fairly fully in Section 4.2.1.
Unemployment and Migration. It may be considered for more detailed study in
Phase 3. |
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Impacts of EMFTA should be disaggregated by social groups,
with special focus on women, farmers, and organised labour. |
Some disaggregation has been done in the Phase 2
report. Consider for more detailed study in Phase 3. |
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Consumer gains from cheaper prices of EU imports in MPCs
would be offset by local producer losses. |
Consider for detailed study in Phase 3 |
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Changes in consumer habits and preferences generated by
trade liberalisation should also be considered. |
Effects on consumer cultures are discussed in Section
3.2.7. Consider for more detailed study in Phase 3. |
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Could loss of social capital be replaced by more formal
institutions? |
The enhancement of social economy and other institutions
is discussed in the section on mitigation and enhancement. Consider for more detailed study in Phase 3. |
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There are no mechanisms within the Euro-Mediterranean
Partnership (EMP) for co-responsibility: MPCs would be left alone to deal
with social impacts of the EMFTA. |
The |
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Environmental issues |
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Would MPCs be able and willing to adopt environmental
standards and legislation equivalent to those in the EU? How this would
affect flows of foreign direct investment in new industrial capacity there? |
The economic issues are complex. Consider for more detailed study in Phase 3. |
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Possible positive environmental impacts were exaggerated,
while the consequences of destruction of irreplaceable environmental services
were not adequately addressed. An overall assessment of environmental impact
did not emerge from the SIA so far. |
The report indicates an overall adverse impact on climate
change and global biodiversity, with specific effects in both
directions. It should be noted that
positive effects do not cancel out negative ones. |
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A World Bank study showed that the cost of environmental
degradation in MPCs was equivalent to 6% of GDP a year. |
Some
degree of economic valuation of environmental impacts may be valuable. Consider
for more detailed study in Phase 3. |
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The impacts of global climate change on environmental
services, resources and agriculture within MPCs, as well as the constraints
of preparing and adapting agriculture to these impacts needed to be more
clearly indicated and distinguished from the climate-related impacts expected
from EMFTA |
Other studies may be needed on this. The SIA addresses the EMFTA. |
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Hazardous waste issues were not addressed in the SIA. |
The general literature indicates that cross-border
movements of hazardous waste will not be significantly affected by the EMFTA
trade agreements. |
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Governance |
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The report should focus more on governance issues, and the
institutional capacity in MPCs to implement parallel reforms. |
Section 9 makes recommendations for capacity
strengthening. |
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Issues of corporate social responsibility should be
addressed, as well as public participation, such as mechanisms laid out in
the Aarhus Convention. |
The potential influence of CSR is included in the
discussion of environmental impacts.
Stronger mechanisms for public participation would be included in
environmental capacity strengthening. |
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The SIA was not advocating governance and democratic
reforms, which would be more likely to produce benefits than continuation of
present trends. |
The Phase 3
studies might be able to examine democracy issues in so far as they relate to
realising benefits from the EMFTA. |
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General Comments |
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It was necessary to include a caveat noting that the
findings were based on the availability and accuracy of existing data, as
well as a mix of quantitative and qualitative assessments. |
This is discussed in the report. |
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The tables tabulating positive and negative impacts could
be misleading: clarification was needed about whether under each subject area
negative impacts listed could be cancelled out by positive ones. |