Doc. 10706

4 October 2005

The Council of Europe and the European Neighbourhood Policy of the European Union


Committee on Economic Affairs and Development

Rapporteur: Mrs Liudmila Pirozhnikova, Russia, European Democratic Group

1.       Introduction and background

The Political Affairs Committee of the Council of Europe’s Parliamentary Assembly (Rapporteur: Mr Van den Brande) has prepared a draft report on the subject “The Council of Europe and the European Neighbourhood Policy of the European Union”. The Committee on Economic Affairs and Development has been asked by the Bureau of the Assembly to prepare an opinion on this subject.

This draft opinion is intended for discussion by the Economic Committee at its meeting in the October 2005 part-session of the Assembly. (The Assembly debate is foreseen for the latter half of the Session.) Its purpose is to examine the possible impact and consequences of the European Neighbourhood Policy (ENP) from an economic and developmental point of view and also to see how the Council of Europe and its Parliamentary Assembly, with their pan-European membership, may be able to contribute most usefully to this project.

The European Neighbourhood Policy was launched by the European Union in 2004 with 15 partners. In eastern Europe the countries concerned are Belarus, Ukraine and Moldova; in the southern Caucasus - Armenia, Azerbaijan and Georgia; on the southern and eastern shores of the Mediterranean - Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco and Syria, to which should be added the Palestinian Authority. The total population of all the above countries is approximately 400 million. The European Commission is proposing a total commitment from the EU amounting to more than € 14 billion over the 2007-2013 period, to sort under a financial arrangement called the “European Neighbourhood and Partnership Instrument” (ENPI).

2.        The ENP and the European Economic Area: a comparison

As we limit our discussion to those areas of the ENP which concern economic aspects more directly, it is worth noting that many people draw a parallel between the ENP and the European Economic Area launched in the early 1990s by the European Community in regard to the countries then belonging to the European Free Trade Association, or EFTA. They were Austria, Finland, Iceland, Liechtenstein, Norway, Sweden and Switzerland. Three of these countries - Austria, Finland and Sweden - joined the European Union in 1995, making EEA membership a very brief chapter indeed. However, the EEA still exists between the present European Union and three of the four countries remaining in EFTA, that is, Iceland, Liechtenstein and Norway. Switzerland does not belong to the EEA but has found suitable accommodation with the European Union via the so-called Bilateral I and II agreements.

However, there are important differences between the EEA and the European Neighbourhood Policy. Firstly, in joining the EEA, the EFTA countries concerned became fully part of the European Union’s Internal Market. That is, the famous “four freedoms” – i.e. freedom of movement of goods, capital, people and services - applied as much to them as to, at the time, twelve (and subsequently fifteen) EU members. This is not, however, foreseen for the ENP countries as regards any of the “four freedoms”.

A second difference is that the EEA countries in fact contributed to EU finances as the “price” for being able to form part of the Internal Market. This is not the case with the ENP, where it is the EU which is supporting the ENP countries, to the tune of the aforementioned € 14 billion over the 2007-2013 period.

A third difference is that, even if the EEA was conceived by the EU to at least in part slow down any further EU enlargement from the then Twelve (in order to let the institution digest its earlier enlargements), such enlargement indeed happened already in 1995 when Austria, Finland and Sweden joined. This was much sooner than most people had anticipated. With the ENP, by contrast, nothing of this kind is foreseen. Some would even argue that the ENP has been prepared at least in part to postpone enlargement to include the countries concerned for a long time, if not for good. It must be asked, however, whether this will truly meet the intentions and wishes of, say, a country like Ukraine, which has made accession to the EU a formal part of its policy.

3.        Avoiding new European dividing lines

Your Rapporteur certainly agrees with what is perhaps the main argument in the report prepared by Mr Van den Brande on behalf of the Political Affairs Committee, namely that one major purpose of the ENP is to avoid any new dividing lines in Europe. However, the question remains whether the ENP’s focus on financial assistance and policy advice will be sufficient to achieve this goal.

Our Economic Committee has repeatedly argued that, although international assistance is often needed, there is also much truth in the adage that “trade is better than aid” - whether it be relations between the different parts of Europe or between the Council of Europe area and other parts of the world. However, given the fact that the ENP does not foresee many trade openings for the countries concerned as regards the EU’s Internal Market, such dividing lines could yet come about.

If we relate this to the efforts of the World Trade Organisation to create more open world trade, we see that all EU countries are members of that institution, as are most of the ENP countries. One of the central tenets of the WTO is the so-called Most Favoured Nation clause, foreseeing that any trade liberalisation accorded by one country to another must also be given to all other WTO members. The Assembly, in adopting draft reports from its Economic Committee has always come out in favour of as free a European and international trade as possible, since this is seen as a paramount factor behind peace, prosperity and integration.

Furthermore, it is important to ensure that the ENP, to the extent that it helps us avoid any new dividing lines between the EU-25 and the ENP partners, does not create such lines with countries beyond, such as the Rapporteur’s own country Russia. True, the EU has separate agreements with Russia building on a Partnership and Cooperation Agreement of 1997. It is supposed to operate in consistency with, but separately from, the ENP - even as financial assistance to Russia will be made through the same instrument as that used for the ENP, namely the European Neighbourhood and Partnership Instrument (ENPI). It is important, nevertheless, that the two projects function smoothly together so as to avoid any new divisions.

4.        Economy-related areas for Council of Europe support to the ENP

Turning now to how the Council of Europe, and its Parliamentary Assembly, could be of assistance to the aims of the ENP, it is worth noting from the economic point of view that the Assembly’s Committee on Economic Affairs and Development for a long time has worked in favour of a number of objectives. Firstly, that everything must be done to permit as rapid an economic integration as possible between the different parts of Europe, a priority being to raise the prosperity level in the poorer countries of the continent. Secondly, to avoid any dividing lines of the kinds mentioned. And, thirdly, the Committee’s and the Assembly’s numerous calls for stronger cooperation with developing countries, especially Africa and more particularly North Africa, not least through the Council of Europe’s North-South Centre.

Our Committee has done this through its role as the parliamentary forum of the OECD and - of particular relevance here - the European Bank for Reconstruction and Development (EBRD). The emphasis has been placed on financial and other assistance, coupled with the development of democracy, human rights and the rule of law. A second point has been that economic development can only take place on a lasting basis in countries that are permeated by the rule of law; which resolutely fight corruption and economic crime; which are equipped with good constitutions and where transparency reigns in public and economic life.

Your Rapporteur is therefore happy both that the ENP lays such clear emphasis on these areas and that the Council of Europe has the right instruments to assist in this endeavour. She believes, for instance, that the “Venice Commission” - officially called the European Commission for Democracy through Law - is an important instrument for shaping good constitutions and that the Council of Europe’s Directorate General for Legal Affairs is eminently well-equipped to play a leading role in Europe’s fight against corruption and economic crime – an area where the Parliamentary Assembly has also made a major contribution. Many Council of Europe activities in these fields in fact benefit from EU funding and it is the Rapporteur’s hope that they may receive funding also from the ENPI, so as to supplement the EU’s own actions.

Furthermore, it is important that the Economic Committee in its close cooperation with international institutions such as the EBRD, the OECD, the World Trade Organisation, the World Bank and the International Monetary Fund encourage them to assist in seeing the ENP project through.

5.        Concluding remarks

One final thought: 14 billion euros is a big sum of money. We must ensure that this money is wisely spent, that it is used in well thought-out projects, that there is no duplication of effort, waste or improper use. Few if any problems are solved by simply having money thrown at them. The Rapporteur would have wished for the ENP to bear greater resemblance to the European Economic Area mentioned at the outset, by including a fuller participation in the EU’s Internal Market. It can now only be hoped that the assistance provided through the ENP will help to raise prosperity and standards in the countries concerned, so much so that full participation in the Internal Market will in due course appear as a natural next step.

In conclusion, the following amendments to the draft Recommendation appearing in Doc. 10696 are suggested:

In the draft Recommendation, at the end of paragraph 3, add the following new paragraph:

"It is important to remember that eastern Europe is not an economic and institutional desert or void. The countries in the region maintain stable economic and commercial relations, sometimes in the framework of intergovernmental agreements and institutions, such as the Common Economic Space and the Euro-Asian Economic Union. A balanced strategy under the ENP should be based on constructive co-operation with these institutions, not on attempts to sow discord between them or to face the former Soviet countries with the dilemma of either belonging to independent structures or moving closer to the EU."

In the draft Recommendation, at the end of the text or where deemed appropriate, to add the following paragraphs:

“The Assembly insists that the ENP should not be allowed to create new political and economic dividing lines in Europe, but should rather foster more open trade and investment in the EU’s relations both with its ENP partners and with Council of Europe member states outside the EU-ENP area, especially in central, south-eastern and eastern Europe. The ENP should be made increasingly to resemble the EU’s current European Economic Area agreement with a number of west European countries, and thereby permit ENP partners to share more fully in the EU’s Internal Market.

The Assembly resolves to work closely with institutions for which it serves as a parliamentary forum – such as the Organisation for Economic Cooperation and Development (OECD), the European Bank for Reconstruction and Development (EBRD), the World Trade Organisation (WTO), the World Bank and the International Monetary Fund (IMF) – in order to ensure maximum effect of the ENP and an optimal use of the considerable funds to be dispersed”

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Reporting committee: Political Affairs Committee

Committee seized for opinion: Committee on Economic Affairs and Development

Reference to committee: Doc. 10535; Ref. No. 3136 of 1.9.2005

Draft opinion approved by the Committee on Economic Affairs and Development on 4 October 2005

1 See Doc. 10696 tabled by the Political Affairs Committee.