Can the EU mobilise resources for peace in its neighbourhood?

Thorvaldur Gylfason, Per Magnus Wijkman, 4 November 2012

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Since its formation more than 60 years ago, the EU has played a major role in post-war reconciliation and reconstruction1. Ever-closer economic integration, supported by common institutions, has been the EU’s means to preventing conflicts among democratic European states. It has extended free trade beyond its initial six members, successively enlarging the EU to 27 Member States, and, more recently, it has offered the prospect of membership to the countries of war-torn former Yugoslavia and initiated complex negotiations with Turkey, which itself is involved in several regional conflicts2. The economic focus of such negotiations is primarily free trade. Yet, conflicts in the Balkans, Eastern Europe, the Southern Caucasus and the Middle East cannot be solved by free trade alone. Financial aid equivalent to the Marshall Plan, in real terms, will also be required.

Engaging the Balkans

To reconcile the republics of the former Yugoslavia, in 2001 the EU proposed a free trade area between Balkan countries. This was rejected outright by most of the Balkan states since their primary objective was free trade with the EU, not with each other. Balkan states instead proposed a network of bilateral free trade agreements where they could ‘pick and choose’ their partners. After some consideration, this was accepted by the EU. But the agreement was conditional – any Balkan country that had a free trade agreement with the EU should also have free trade agreements with other Balkan countries that themselves have free trade agreements with the EU.

Incentivising progress in the Balkans

Within six years of this policy, all Balkan countries had signed a regional free trade agreement (known as CEFTA 2006)3. A key milestone was the Thessaloniki Declaration by the European Council which, in Spring 2003, stated that the “future of the countries of the Western Balkans lies in the European Union”. The lesson here is that once the republics of the former Yugoslavia saw accession as a credible prospect, they accepted regional free trade. By doing so, they recognised that the EU would not accept a new member that had unresolved conflicts with its neighbours. The EU provided an accession track comprising tangible milestones: regional free trade (CEFTA 2006); deep free trade agreements with the EU (Stabilisation and Association Agreements, or SAA); accession requests to the EU; and accession negotiations, as shown in Table 1.

As a consequence, slowly but surely, most Balkan countries are moving toward accession. Each western Balkan state has been progressing at a speed largely determined by how well its market economy and democratic institutions are functioning (Gylfason and Wijkman 2012). Croatia is due to accede in 2013, having started accession negotiations in 2005. That said, exceptions include Bosnia and Herzegovina and Kosovo. Neither are WTO members, a precondition for an SAA4. The EU’s agreement to open accession negotiations with Serbia remains dependent on the official Serbian recognition of Kosovo’s sovereign status5. Lack of progress in these countries can be attributed to languishing political legacies of the civil wars, resulting in recurrent political stalemates.

Table 1 Key dates for Balkan states en route to EU membership

Source: Data assembled from www.europa.eu.

Some keys for success

EU policy towards the Balkans suggests that there several key characteristics deemed necessary for success. There needs to be:

  • Active facilitators of compromise. The EU and other countries in the Stability Pact strongly encouraged the war-ravaged ex-Yugoslav republics to ‘normalise’ relations with each other.
  • Conditionality. If two Balkan states each had a free trade agreement with the EU, they were required to have a free trade agreement also with each other.
  • Soft power. Once the prospect of accession to the EU appeared credible to a Balkan state, it was prepared to do what the EU wanted.

The Eastern Partnership

EU policy vis-à-vis the Eastern Partnership countries has significantly differed from its policy towards the Balkans6. The EU offered to negotiate a deep and comprehensive free trade agreement (DCFTA) with each country that qualified for Association Agreements. Negotiating DCTFAs between the Eastern Partnership states was not required. This was perhaps because regional trade was small and already ‘liberalised’ through participation in the Commonwealth of Independent States (CIS). Furthermore, conflict resolution through intra-regional free trade was ineffective because Russia, a key protagonist in these conflicts, was not in the Eastern Partnership7.

Difficulties with Ukraine

The EU started negotiations on a DCTA with Ukraine in 2008, following the enthusiasm generated by 2004‘s Orange Revolution. The negotiations were completed four years later (see Table 2). These negotiations were certainly difficult for a former centrally planned economy in slow transition to a market system, and these difficulties were compounded by the fact that democratic procedures in Ukraine seriously deteriorated during the period. In fact, entry into the Agreement was postponed following the conviction and imprisonment of former Prime Minister Tymoschenko. These problems led the EU to formulate ‘key recommendations’ that an Eastern Partner must fulfil in order to start negotiations. The European Commission now must conduct a feasibility study of the country and thereafter send a fact-finding mission. After this initial stage, the Commission suggests key recommendations for the Partner to fulfil before negotiations can begin. Furthermore, these key recommendations must be approved by the EU Member States.

Screening Georgia, Armenia and Moldova

This screening procedure was applied to Georgia when it requested a DCTA in August 2008, following conflict with Russia. It took close to four years before the EU considered Georgia’s key recommendations fulfilled. Subsequent DCTA negotiations started in early 2012. The screening procedures also took around four years for Armenia. Moldova had a speedier experience because, crucially, it had participated in the CEFTA 2006 negotiation and was therefore better prepared.

Table 2 Progress of the Eastern Partnership states

The difficulties encountered by the Eastern Partnership also suggest several lessons. The EU and would-be EU countries must:

  • Tackle the easy tasks first. The EU has previously set too high a level of ambition for Eastern Partnership countries, given their poorly functioning market economies8.
  • Support comprehensive institution building. Poor and formerly centrally planned economies need significant financial and technical assistance to train staff and build institutions that are appropriate for market economies.
  • Provide an explicit accession perspective. The Eastern Partnership states were reluctant to take over and implement significant parts of the acquis without the prospect of actual membership. Ambiguity as to whether or not a partner fulfils the geographic condition for membership is no longer productive9.

The Union for the Mediterranean

Neighbouring states on the southern coast of the Mediterranean are unique in that their trade with each other is small10. The Barcelona Process set its sights on achieving free trade between both the countries in the Middle East and North Africa and with the EU by 2010. This target was more or less met, yet most of the trade agreements are more ‘shallow’ than ‘deep’, and no Arab country has yet signed a free trade agreement with Israel11. An encouraging exception in the first respect is the Agadir Treaty whereby Morocco, Tunisia, Egypt, and Jordan concluded relatively deep free trade agreements with each other in 2004. These agreements increased the levels of their once paltry intra-trade (Gylfason et al. 2012). The EU will need to provide stronger leadership alongside greater implementation capacity building by the Union for the Mediterranean if Arab-Israeli free trade is to be achieved12.

Conflict resolution

The EU could encourage Egypt and Jordan, which have peace treaties with Israel, to negotiate DCTAs. The EU could also encourage the implementation of the EU’s proposed Neighbourhood Economic Community (NEC). Free trade between these large and contiguous economies is likely to have significant economic benefits across the region (Gylfason et al. 2012). Importantly, the institutional framework of the Neighbourhood Economic Community would also help ‘normalise’ relations between former belligerents by providing forums to discuss common problems and settle trade disputes.

More trade between the Mediterranean Partner countries

The EU is also well-placed to provide an incentive to other Middle Eastern and North African countries to deepen their agreements with each other: joining the Agadir Treaty; benefitting from an equivalent deep and comprehensive free trade agreement with the EU and from participation in the NEC; and the fact that deep and comprehensive free trade agreements with the EU should include free trade in most agricultural and fishery products, as the EU proposed in 2012 with Morocco.

The popular uprisings in several Arab states in 2011 have provided a rare window of opportunity for introducing democracy and functioning market economies in the Middle East and North Africa. In May 2011, The European Commission and the High Representative of the EU for Foreign Affairs and Security Policy proposed to intensify the Union for the Mediterranean by supporting inter alia:

  • Deep democracy, including human rights.
  • Deep and comprehensive free trade agreements.
  • Greater emphasis on conflict resolution.
  • Greater conditionality and stronger incentives.

Conclusions

This new approach is a welcome response but desperately requires leadership and resources. The Coal and Steel Union was able to develop into what we now know as the EU because it was supported by the US leadership and the Marshall Plan. The EU will have to play a similar role if it is to resolve its conflicts in the European Neighbourhood. Are the Member States of the EU willing and able to provide resources at least equivalent to the Marshall Plan and a common security policy for the neighbourhood before the window of opportunity closes?

References

Emerson, M., et al. (2006), “The Prospect of Deep Free Trade between the European Union and Ukraine”, CEPS, Feasibility study commissioned by the European Commission.

European Commission (2012), “Communication from the Commission to the European Parliament and the Council, Enlargement Strategy and Main Challenges 2012-2013”. COM 600 final.

DeLong, J. Bradford, and B. Eichengreen (1992), “The Marshall Plan: History's Most Successful Structural Adjustment Program”, CEPR Discussion Paper, 634.

Gylfason, T., and P. M. Wijkman (2012), “Which Conflicts can the European Neighbourhood Policy help Resolve?”, Cesifo Working Paper, 3861, June.

Gylfason, T., I. Martínez-Zarzoso, and P. M. Wijkman (2012), “How Free Trade Can Help Convert the ‘Arab Spring’ into Permanent Peace and Democracy,” Cesifo Working Paper No. 3882, July.

Sekarev, A., (2011), “Medium-term trade flows between EU27 and EaP6: what trends are visible?” Eastern Partnership Review, 10.

Made, V. (2011), “From Prague to Warsaw: A Study of Eastern Partnership’s Rhetorics in the Context of EU Membership Perspective from 2009-2011”, Eastern Partnership Review 7.

Wijkman, P.M. (2011), “Fostering Deep and Comprehensive Free Trade Agreements for the Eastern Partners”, Eastern Partnership Review, 8.

Wijkman, P.M. (2009), “Frihandel för Fred: Exemplet Balkan”, SNS.


1 The Berlin Blockade and the Prague coup in 1948 signalled the start of the Cold War, resulting in the Marshall Plan, the OEEC and economic integration in Western Europe. The fall of the Berlin Wall in 1989 signalled the end of the Cold War, dissolving the Soviet Union and returning democracy and market economy to the countries of East and Central Europe. In 1953, the Nobel Peace Prize Committee recognized the role played by the Marshall Plan and, in 2012, the historic role of the EU.

2 Cyprus, Armenia, Kurdish groups in bordering countries.

3 When Bulgaria and Romania acceded to the EU on 1 January 2007, Croatia would have been the sole member of CEFTA. It convinced its Balkan partners in 2006 to join CEFTA and revise significantly the agreement (hence the name CEFTA 2006).

4 In addition, BiH must revise its constitution and replace the Office of the High Representative. The sovereignty of Kosovo must be generally recognized.

5 This recognition was questioned by the new government following elections in Spring 2012

6 The EU established the Eastern Partnership during the Czech Presidency in Spring 2009. It consists of Belarus, Moldova, Ukraine in Eastern Europe and Armenia, Azerbaijan, Georgia in the Southern Caucasus.

7 The conflicts over Transnistria (between Moldova and Ukraine), over Nagorno Karabakh (between Armenia and Azerbaijan), and over South Ossetia and Abkhazia between Georgia and Russia all involve Russia.

8 Wijkman (2011) describes some of the initial difficulties.

9 Article 49 of the Treaty of Rome. Made (2011) offers a perceptive take on the accession perspective debate.

10 The Barcelona Process initiated during the Spanish Presidency in Spring 1995 was transformed into the Union for the Mediterranean during the French Presidency in Autumn 2008.

11 Limited regional free trade was achieved through the Arab League’s Pan-Arab Free Trade Area (PAFTA) established in 1997.

12 The Stability Pact had a small but efficient Secretariat. The Eastern Partnership rejected the idea of a secretariat. The Union for the Mediterranean has a large secretariat largely staffed by seconded experts from governments and with six Deputy Secretaries General. It has a reputation for bureaucracy.

 

Topics: Development, EU policies, Europe's nations and regions, Politics and economics
Tags: Balkans, Conflict, EU, MENA, Middle East, North Africa, trade

Thorvaldur Gylfason
Professor of Economics, University of Iceland and CEPR Research Fellow
Former Director of Economic Affairs at EFTA and adjunct professor of international economic policy at University of Göteborg