The Euro-Mediterranean Partnership is one of the most ambitious socio-economic programs the Mediterranean region has ever witnessed. It promises to rekindle the close economic and cultural ties that historically flourished between the northern and southern shores of the Mediterranean Sea. Yet the term “Euro-Mediterranean Partnership” is scarcely known outside of the offices of the governmental bureaucrats responsible for overseeing the initiative’s implementation. While the Euro-Med Partnership, as it is known, is likely to fall short of its lofty goals of establishing “a common area of peace… and shared prosperity,” [1] it is likely to have a profound impact on Mediterranean societies and environment. One unintended repercussion is the potential sell-off of the region’s natural resources.

Building a “Partnership”

The Euro-Mediterranean Partnership is a joint policy initiative to increase the political, economic and cultural ties between member countries on both sides of the Mediterranean Sea. These include all 15 member states of the European Union as well as the 12 southern and eastern Mediterranean partners — Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, the Palestinian Authority, Syria, Tunisia and Turkey. [2] The Barcelona Declaration, the document signed by the foreign ministers of each partner country officially initiating the Partnership in 1995, outlines the Partnership’s main goals:
1. [Promoting] a common area of peace and stability through [reinforcing] political dialogue and security;
2. [Engendering] a rapprochement between peoples through social, cultural and human partnerships;
3. [Constructing] a zone of “shared prosperity” and gradually establishing the region as a free trade zone, to be fully functional by the year 2010.

Since the end of European colonial rule in North Africa in the 1960s, the importance of southern and eastern Mediterranean nations to European foreign policy has diminished significantly. Within the framework of the Euro-Med Partnership, however, European nations have expressed their intention to upgrade these trans-Mediterranean ties. Although the three goals of the Partnership are expressed as equal “pillars,” the ultimate establishment of a Mediterranean Free Trade Zone (MFTZ) is the most concrete and well-defined of the Partnership’s objectives and was the single-most important factor leading to its formation. In the wake of the North American Free Trade Agreement (NAFTA) and the initiation of negotiations on the Asia Pacific Economic Cooperation (ACPEC) in the early-to-mid 1990s, the EU undoubtedly felt pressured to establish its own regional trade agreements and private spheres of political and economic influence to keep pace with global economic trends.

The MFTZ is slated to eliminate tariff and non-tariff barriers to trade in manufactured products gradually, with complete reduction attained by the 2010 deadline. [3] The formation of the MFTZ essentially means an opening up of Mediterranean markets to European manufactured goods and investment. It will also entail structural adjustment programs, including the liberalization of tax and investment policies in Mediterranean countries. The benefits to Europeans are now clear: cheap labor and production costs and access to new markets. Most of the Mediterranean partners, however, already benefit from preferred access to EU markets for manufactured goods under the EU’s Generalized System of Preferences and thus stands to gain little in this area from the MFTZ. The major attraction for these countries is the promise of coveted foreign investment and increased financial aid. The cost of pursuing these goals, however, may include states’ loss of control over domestic policy as well as diminishing natural resources and environmental quality.

MFTZ and Sustainable Development

With current high-profile international trade disputes over such items as hormone-treated beef and genetically modified organisms, the relationship between trade and environmental concerns is becoming increasingly pronounced. Neoliberalists, including representatives of the trade ministries of most Western governments, are keen to point out what they term the “win-win” aspects of trade liberalization, i.e., those allowing for both increased trade and environmental protection, for instance, by reducing wasteful subsidies, increasing access to environmental technologies and enhancing market potential for environmentally friendly goods such as organic agriculture.

Unfortunately, while such win-win situations do exist, they are greatly outnumbered by the more common win-lose scenarios, in which the environment takes a backseat to trade interests. The goal of any free trade zone, the MFTZ included, is to promote trade, especially trade in goods. Yet the ceaseless production and consumption of material goods in a world of limited natural resources is inherently unsustainable. Moreover, rules stipulating how and by whom trade-environment disputes are to be resolved often raise troubling questions regarding the public’s rights and the limits of democracy.

Other free trade zones’ experiences do not inspire confidence, particularly those zones that link countries with differing levels of economic development, as is the cause in the Mediterranean region. NAFTA, for instance, has resulted in increased pollution, especially along the US-Mexican border, and a precipitous increase in trans-boundary transports of hazardous wastes. [4] Such environmental pressures seem to be overwhelming governments’ capacities to deal with them, especially in the case of cash-strapped Mexico. In addition, NAFTA has led to drastic changes in land use and life-styles in Mexico, characterized by rural-to-urban migration and the abandonment of traditional subsistence agricultural in favor of cash crops. The MFTZ can expect similar outcomes.

Though in close geographical proximity to one another, the ratio of average GDP for EU and non-European Mediterranean countries stands at 12:1. The contrast is even sharper when one considers the gaps between individual countries. The difference in per capita GDP of the most populous European and Mediterranean countries, Germany and Egypt respectively is an astounding 34:1! [5] Comparisons of other development indices are even less flattering to Mediterranean countries. [6]

Predictably, such disparities may lead to a relocation of industries from the EU to the southern Mediterranean countries, in order to take advantage of cheap labor and operating costs. This, indeed, is the hope of those advocating MFTZ. Unfortunately, most of the southern Mediterranean countries lack the capacity to monitor and regulate anticipated increases in industrial production. This, combined with the region’s critical shortages of key natural resources, such as fresh water, means that any marginal increases in economic activity can quickly overwhelm the region’s ecological carrying capacity. Perhaps most at risk is the ecological health of the Mediterranean Sea itself, which is certain to suffer the effects of increased shipping and coastal industries.

Adding Salt to the Wounds

Reduction of tariffs — the central component of the free trade zone — will entail a sharp drop in government revenues, as customs duties represent a relatively significant share of total revenue sources for many Mediterranean countries. With fewer funds to go around in times of economic belt-tightening, it is traditionally the budgets of social and environmental programs that suffer most. Moreover, eliminating customs can result in a country’s loss of control over the kind and degree of development it undergoes. A recent reduction of tariffs on automobiles in Jordan, implemented partly in anticipation of the eventual establishment of the MFTZ, will likely lead to a sharp increase in private vehicle ownership. But Jordan lacks a national transportation plan, and has insufficient funds for public transportation or basic road maintenance. The probable outcome will be additional traffic jams, air pollution and traffic accidents.

In addition to the obvious necessity of removing tariffs under a free trade zone, establishing the MFTZ also requires more thorough structural reforms. For instance, the Lebanese government is implementing a series of economic reforms including introduction of a value-added taxation (VAT) system intended to replace its customs structure, which is being gradually reduced under the encouragement of the EU and the IMF. Unfortunately, these economic reforms led to budgetary constraints, which in turn led the Lebanese government to slash the Ministry of the Environment’s 1999 budget to a meager US$ 1.5 million, representing a 53 percent reduction from the previous year’s budget. Similarly, the Ministry of Social Affairs’ budget was cut by 27.5 percent. [7] Sacrificing social and environmental standards in favor of budgetary “streamlining” is common under structural adjustment plans. Tragically, the revenue loss comes exactly at a time when environmental and social pressures are mounting due to increased economic activity sought by governments.

What is to be Done?

Since the 1970s, environmental issues have received considerable attention in the EU at the Community level, making them one of the few non-trade issues to be dealt with at this level. Implementing relatively strict EU environmental directives was a standard precondition for nations wishing to join the EU, according to the rationale that a common strategy is crucial for adequately addressing serious and common cross-boundary concerns.

Incorporating environmental concerns into trade zones seems to have been forgotten in constructing the MFTZ, however. Despite sharing a common eco-system — the Mediterranean Sea — and despite member nations’ commitments to incorporating environmental concerns into other policy spheres, including trade policy, [8] no corresponding recognition of environmental concerns is included in the MFTZ. The environment is not mentioned at all in most of the bilateral association agreements (i.e., trade agreements) being drafted between the EU and the Mediterranean partner countries as the basis for the eventual MFTZ.

While the official documentation of the Euro-Med Partnership mentions the goal of sustainable development, few practical steps have been taken to realize this objective. In 1997, a Euro-Med environmental summit failed to attract 11 of the 27 Environment Ministers invited. Although a Euro-Med environmental program has been developed, [9] it is restricted in scope — and funding — to a limited number of issues, none of which are directly related to the expected repercussions on the environment of the Partnership’s mandated economic liberalization.

After four years of pressure by environmental organizations, the European Commission, the primary funder and promoter of the Euro-Med process, has finally agreed to fund an environmental sustainability assessment. The nature and scope of the assessment, however, has yet to be determined. Meanwhile, the Euro-Med’s economic liberalization process is running at full steam, far outpacing the efforts and capacities of member nations to deal with its multifaceted environmental and social implications.

For more information see http://www.foeme.oeg/mftz.

Endnotes

[1]“The Barcelona Declaration,” 1995.

[2] Other Mediterranean countries, such as Libya and the Balkan countries of Albania and the former Yugoslavia, were left out of the Partnership for political reasons, but may join in the future, should political dynamics change.

[3]Despite the term “free trade,” trade liberalization for agricultural goods, which play a significant role in the economics of most Mediterranean countries, is to be negotiated separately in individual agreements between member countries. This allows the EU to protect its highly subsidized agricultural industries from competition from Mediterranean countries.

[4] One study showed a 30 percent increase in hazardous waste transport between the US and Mexico during the first two years of NAFTA’s implementation. Joe Schultes, EPA official, cited in Public Citizen, NAFTA’s Broken Promises: The Border Betrayed (Washington, DC: Public Citizen’s Global Trade Watch, 1996).

[5] Based on figured in UNDP, Human Development Report 1998 (New York: Oxford University Press, 1998). For comparison’s sake, the difference in per capita GDP between the US and Mexico for the same period was 8:1.

[6] Ibid. According to the United Nations Development Programme’s Human Development Index, which evaluates nations based on a series of development criteria, the average EU country ranked 15 out of 174 nations surveyed, while the average Mediterranean partner ranked 71.

[7] Adib F. Farha, “Pros and cons of the 1999 budget proposal,” The Beirut Daily Star, April 13, 1999; Najib Saab, “Environment Ministry Needs to be Saved and Given First-Class Power to Make a Difference,” The Beirut Daily Star, May 18, 1999.

[8] Such commitments were made clearly in the 1992 Rio Declaration on Environment and Development, as well as in other international for a, including in the EU’s Amsterdam Treaty.

[9] The “SMAP” or Short and Medium-term Priority Environmental Action Programme, was established in 1997 in order to address some of the most pressing environmental issues facing the Mediterranean region. Two years after the program’s inception, and four years after the initiation of the Euro-Med Partnership, however, SMAP had yet to distribute any funds or undertake any activities.

How to cite this article:

David Katz "The Mediterranean Free Trade Zone," Middle East Report 213 (Winter 1999).
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