ESC025 ESC 17 EOriginal: English

NATO Parliamentary Assembly

SUMMARY

of the meeting of the Economics and Security Committee

Grand Ballroom 1Hilton Istanbul Bomonti Hotel & Conference Center

Istanbul, Turkey

Saturday 19 November 2016

www.nato-pa.int December 2016

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ATTENDANCE LIST

Chairman Faik OZTRAK (Turkey)

General Rapporteur Jean-Marie BOCKEL (France)

President of the NATO PA Michael R. TURNER (United States)

Secretary General of the NATO PA David HOBBS Member DelegationsBelgium Luk VAN BIESENBulgaria Tchetin KAZAKCanada Joseph A. DAY

Cheryl GALLANTMatt JENEROUXSteven MACKINNONJean RIOUX

Czech Republic Adolf BEZNOSKAFrance Michel BILLOUT

Jean-Luc REITZERGermany Charles M. HUBER

Ralf JÄGERGreece Evangelos BASIAKOS

Konstantinos KATSIKISItaly Andrea MANCIULLILatvia Ivans KLEMENTJEVSLuxembourg Nancy ARENDT KEMPNetherlands Menno KNIPNorway Christian TYBRING-GJEDDEPoland Waldemar ANDZEL

Michal SZCZERBAPortugal Luis Pedro PIMENTELSpain Ramon MORENOTurkey Oktay VURALUnited Kingdom Martin DOCHERTY

Michael GAPESLord HAMILTON of EPSOMBob STEWART

United States James SENSENBRENNER

Associate DelegationsArmenia Mikayel MELKUMYANAustria Hubert FUCHS

Harald TROCHAzerbaidjan Gudrat HASANGULIYEVFinland Eero HEINALUOMAMontenegro Obrad Miso STANISICSweden Kenneth G. FORSLUNDSwitzerland Isidor BAUMANN

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Ukraine Olga BELKOVAYurii BEREZAIryna FRIZMustafa NAYYEM

Regional Partner and Mediterranean Associate Member DelegationsAlgeria Mohamed BENTEBA

Speakers Sanj SRIKANTHANDeputy Executive Director and Vice-president Europe, International Rescue Committee

Mehmet ŞIMŞEKDeputy Prime Minister of the Republic of Turkey

Dr Daniela SCHWARZERDirector of the Research Institute, German Council on Foreign Relations (DGAP)

International Secretariat Paul COOK, DirectorAnne-Laure BLEUSE, Coordinator Loïc BURTON, Research Assistant

Committee Secretary Charlotte LITTLEBOY

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I. Opening remarks by Faik OZTRAK (Turkey), Chairman

1. In his opening remarks, Faik Oztrak (TK) welcomed all members of the Economic and Security Committee to his home country of Turkey. He also thanked his colleagues in the Turkish delegation for all their efforts in preparing the NATO Parliamentary Assembly 2016 Annual Session in Istanbul.

2. Mr Oztrak also noted that several leadership positions in the Committee would be open due to expiring mandates and departures from national parliaments. He went on to list the different open positions and the possible candidates interested in standing for the positions.

3. Mr Oztrak concluded his opening remarks by bringing the delegates' attention to the NATO PA President's newly published report entitled "Deterring to Defend: NATO After the Warsaw Summit". The report included an updated analysis of threats confronting Allies and recommendations on necessary responses.

II. Adoption of the draft Agenda [165 ESC 16 E]

4. The order of the agenda was slightly changed, putting the consideration of the draft Report of the Sub-Committee on Transition and Development The Corruption-Security Nexus ahead of Dr Schwarzer's presentation on An Assessment of the Current Transatlantic Economic Relationship. After this minor modification, the draft Agenda was adopted.

III. Adoption of the Summary of the Meeting of the Economics and Security Committee held in Tirana, Albania, on Saturday 28 May 2016 [123 ESC 16 E]

5. The Summary of the Meeting of the Economics and Security Committee held in Tirana was adopted without comments.

IV. Procedure for amendments to the draft Resolution Allied Defence Spending [190 ESC 16 E] presented by Jean-Marie BOCKEL (France), General Rapporteur

6. Mr Oztrak reminded delegates that the deadline for amendments to the draft Resolution was on Saturday 19 November 2016 at 10:30am and that they were to be handed to Committee Secretary Charlotte Littleboy.

V. Consideration of the Draft Terms of Reference for the Committees and the Mediterranean and Middle East Special Group [217 SC 16 E]

7. The delegates had no comments and the Draft Terms of Reference were adopted as they had been drafted. This document [217 SC 16 E] was later formally adopted during the Standing Committee meeting.

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VI. Presentation by Sanj SRIKANTHAN, Deputy Executive Director, Vice-president Europe, International Rescue Committee, on The Europe Refugee Crisis in the Context of Global Displacement, Conflict and Security Challenges, followed by a discussion period

8. Sanj Srikanthan opened his discussion with a short description of the International Rescue Committee's (IRC) history and mission. He noted that the IRC was founded in 1933, during a period of international upheaval and political instability in Europe. Its initial purpose was to resettle refugees in the United States. As the world has changed, so has the IRC's mission. Ten years ago, there were approximately 35 million displaced people around the world. Today, the figure is around 65 million and continues to increase. The IRC now works in Greece, Serbia and Germany as well as the Middle East, Africa and Asia. It has garnered a first-hand understanding of what drives this vast movement of people.

9. Mr Srikanthan also noted that inter-state conflict - for which NATO was originally designed to deter - was becoming more infrequent and that, conversely, wars within states and against armed opposition groups were on the rise. This trend was related to the increase in asylum seekers, as the top three refugee-producing countries - Syria, Iraq and Afghanistan - were each experiencing varying degrees of internal conflict. However, Mr Srikanthan was quick to note that not all those fleeing these countries were refugees, as opposed to migrants. He added that people smugglers were a symptom of the problem rather than its cause.

10. Mr Srikanthan pointed out that if economic migrants were the only problem with which Europe today must contend, the continent would be facing a much simpler and smaller crisis. Conflict is now displacing huge numbers of people with many fleeing to third countries. Those who remain in countries like Syria are increasingly hard to reach. For example, 2.6 million Syrians currently receive little to no aid. With no sign of peace on the horizon and limited access to work and education - many digitally - connected Syrians see their best chance of survival in Europe.

11. Mr Srikanthan stressed that humanitarian aid is only a short-term response to a long-term crisis. Indeed, aid alone is not sustainable for a multi-year response and more durable development solutions need to be found. Improving livelihoods and access to education and healthcare through partnership such as the one established with McKinsey in Jordan has helped spark job creation.

12. Mr Srikanthan explained that assisting refugees is not only a moral cause, but also an economic one. The current figure of 65 million displaced persons - a share of whom are seeking a better life in Europe and North America - could become 100 million by 2030 if these issues are not addressed. When the crisis began, Europe was not prepared to cope as the common asylum system was incapable of responding to a crisis on that scale. Mr Srikanthan said that it is very important for Europe to distinguish refugees from migrants, improve many refugee related programs and emulate the resettlement system in the United States. It should also improve partnerships with first countries of asylum in Africa and the Middle East in order to create sustainable opportunities for individuals in those countries. He suggested that together, these measures could change the views and calculations of those thinking of attempting the Mediterranean crossing, and improve the livelihood of people.

13. Mr Srikanthan concluded his presentation by looking ahead and asking whether we would see another 1 million refugees arrive in Europe in 2017. Some of the steps taken such as compacts, better aid as well as a more cohesive response within the European Union could help control numbers, he suggested. This would be in the interest of both refugees and European governments. Also, as conflicts within states were running for longer, there was a collective responsibility to respond and prevent them at the earliest opportunity since they lead to displacement—not for months but for years. Lastly, new aid deals were starting to appear, with

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conditional aid tied to greater transparency and efficiency. Solutions were not going to be found in the countries experiencing conflict. Efforts had to be led from countries like the member states represented in the Committee to work together and offer practical, realistic policy solutions.

14. During the discussion, questions were raised about the International Rescue Committee's actual role. Mr Srikanthan explained that the IRC works in 35 countries, focusing on providing services in places characterized by poverty and conflict and where government is weak. Rather than moving vulnerable individuals, the IRC works as close as possible to conflict areas in order to minimize the "pull factor". He added that it was fair to be critical about the IRC and other aid agencies but it is essential to consider the broader framework in which aid is currently delivered. Other members also asked what would be the best policy-making mix when delivering aid. Mr Srikanthan responded that the solution would not be more money allocated to NGOs, because civil society alone was not capable of bridging the current gap. Instead, it was about strengthening donor and host government capacity to respond to crises.

15. Members also posed questions about the distinctions between refugees and migrants and ways to identify the two. Mr Srikanthan replied that the IRC referred to the 1951 UNHCR convention to determine whether an individual is a refugee or a migrant, but that is up to governments to determine whether a candidate for refugee status has a legitimate fear of persecution in his or her home country. The IRC focused solely on refugees, but at the moment, the two are frequently put into the same policy pot without a clear distinction. Others members raised similar concerns about the distinction between refugees and migrants. Mr Srikanthan responded that although the definition was clear, it is the actual determination that posed problems: "How do you interview someone and make a determination that they are a refugee or a migrant?" The resettlement process made this determination easier through verification, since people applied to be resettled from the country where they first sought shelter. Finally, citing the 1951 refugee convention, a member explained that the document guarantees a temporary protection until it was safe to return, which was different than a permanent integration in the host country population. Mr Srikanthan agreed that integration, resettlement, and citizenship were not ensured in the convention. However, a number of conflicts have endured for years and this has blurred some of the finer distinctions made in international law.

16. Looking at the IRC’s work in specific countries, members asked questions about Ukraine and Syria. Mr Srikanthan answered that to deal with the 2 million internally displaced persons in Ukraine due to Russian aggression, a more concerted response and support should be formulated. The IRC was previously working in Ukraine, but was no longer welcomed by authorities in eastern Ukraine. Aid agencies are often denied access to some areas in need of support. With regard to Syria and the establishment of a safe zone to deal with the refugee crisis, Mr Srikanthan explained that, in principle, a safe zone is an attractive notion as they can provide stability and safety for civilians. There were, however, pragmatic challenges to consider such as its location, the ability to provide services in these regions, and most importantly whether there would be a guarantee that the safe zone would indeed be safe.

VII. Summary of the future activities of the Sub-Committee on Transition and Development by Jean-Luc REITZER (France), Vice-Chairman of the Sub-Committee

17. On behalf of Chairman Francis Hillmeyer (FR), Jean-Luc Reitzer (FR) reviewed the activities of the Sub-Committee in 2016. He noted that the ESCTD participated in a seminar in Kyiv, Ukraine in June as well as a visit to Canada and to New England in the United States in September. He noted that both visits were very instructive. Mr Reitzer also presented the proposed Sub-Committee activities for 2017. First, the ESCTD would visit Serbia and the Former

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Yugoslav Republic of Macedonia1. The second visit in 2017 would be to Slovenia, in the format of a Rose-Roth seminar in November.VIII. Summary of the future activities of the Sub-Committee on Transatlantic Economic

Relations, by Menno KNIP (Netherlands), Chairman of the Sub-Committee

18. Menno Knip (NL) reviewed the activities of the Sub-Committee in 2016. The ESCTER first took part in a seminar in Rabat, Morocco in April, and then visited Washington D.C. and Chicago in May. Looking ahead, Mr Knip presented the proposed Sub-Committee report topic and visits for 2017. Although the Sub-Committee's Rapporteur Ossur Skarphedinsson (IS) was no longer serving in the NATO PA, Mr Knip suggested that the Sub-Committee produce a report in 2017 report on Assessing and Mitigating the Cost of Climate Change. The ESCTER would have a joint visit with the Sub-Committee on Transatlantic Defence and Security Cooperation to Svalbard, Norway in May and would likely also visit Canada.

IX. Presentation by Mehmet SIMSEK, Deputy Prime Minister of the Republic of Turkey, on Outlook for the Turkish Economy, followed by a discussion period

19. Mehmet Simsek began his presentation by looking at global growth in the past years. Growth has remained below long-term averages since the global financial crisis, suggesting that the world economy was stuck in a "low growth trap". The driving factors of this phenomenon were rising protectionism—discouraging further globalization and international trade—as well as ageing populations, weak investments leading to a fall in productivity, highly indebted private and public sectors, and the slowing down of structural reforms implementation.

20. Mr Simsek backed up these claims with figures. From 1960-2008, global trade was growing twice as fast as global growth. It was now growing at less than 50% of global headline growth, indicating that globalization could well have peaked. Global population growth had slowed. In the last 60 years, the population share of individuals aged 65 or more had grown from about 5% to just over 8%, and looked set to increase to 16% over the next 35 years. Working age population, on a 5-year cumulative basis, was declining at a dramatic pace. It had once grown at 12% on a 5-year basis, but was now growing at 6% and set to decrease to less than 3% by 2050. Moreover, since the financial crisis, global investment had been the weakest since the 1970s and, as a result, productivity growth had been declining. The world had accumulated a great deal of debt over this period. Since 2008, USD60 trillion had been added to global debt, pushing debt-to-GDP on a global scale over 200%. The combination of low growth, low inflation and massive amounts of debt was bad news as it made debt servicing much more difficult. Indeed, corporate bankruptcies were at an all-time high in 2016. One would expect reforms to kick in, but instead, the pace of reform implementation in OECD countries had slowed across the board. Global growth could possibly decelerate from the current 3% to possibly 1%.

21. Mr Simsek then shifted to discussing the state of the Turkish economy. Although the country went into a recession following the financial crisis, recovery was swift and strong. Looking at the last 15 years, Turkey's real GDP growth was about 4.7% per year, leading to a genuine convergence with the EU. Its per capita GDP rose from about 1/3 of EU average to just over 53%. However, there had been a slowdown relative to pre-crisis growth of almost 7% due to domestic and external shocks. Mr Simsek presented both the external and internal shocks that explained this economic slowdown. The referendum in 2010, the general election in 2011, four elections in 2014-15 and the failed coup attempt of July 2016 had all triggered the kind of uncertainty that discourages economic activity. Beyond the financial crisis, other external shocks had also affected the country's economy. The Eurozone debt crisis, geopolitical tensions following the Arab Spring, and tensions with Russia over the Russian military plane shot down by the Turkish military

1 Turkey recognises the Republic of Macedonia with its constitutional name.

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had all factored into the economic slowdown. In addition, the rise in terrorist attacks in the last few years had a significant impact. In 2016, the fall in tourism activity in Turkey alone cost the country 1.2 percentage points in GDP growth.

22. Mr Simsek concluded his presentation by discussing the need for structural reforms in Turkey but also in the rest of the world. Following the financial crisis, a significant reform effort helped Turkey move from being a middle-income country to an upper middle-income country. A massive sectoral transformation program aimed at improving competitiveness, reforms of the education, judicial and public administration sectors, and the EU accession process had helped move Turkey into this higher income bracket. Mr Simsek suggested that Turkey and the EU needed each other to strengthen the rule of law, to enhance standards of democracy and improve the quality of institutions. Unfortunately, since the 2005 Dutch referendum, the outlook for EU enlargement had been very unfavourable.

23. During the discussion, concerns about the overdependence on oil and lack of economic diversification by some countries of the Middle East were raised. Mr Simsek suggested that oil prices might slightly rise over the short term. At the same time, a lack of economic diversification, the persistence of authoritarianism and the ongoing demographic boom in the MENA region created large hurdles for the future stability of the Middle East. He believed that the current push to create new ethnic or sectarian-based states was misguided, and that the international community should rather push for more inclusive, tolerant, and democratic societies that tend to be peaceful and prosperous. In sum, Mr Simsek advocated for strengthening territorial integrity of countries and inclusivity of societies in the Middle East, instead of dividing them.

24. Members also asked questions about the Turkish diaspora in Europe and the difficulties of integration, particularly in Germany. They argued that leaders of these communities promoted identification with the culture of origin and failed to encourage educational achievement among youngsters. Mr Simsek replied that this was mostly a German problem rather than a Turkish one. If there were still integration issues with 2nd and 3rd generation Turkish émigrés, Germany and other host countries needed to address the problem. Early immigration from Turkey was mainly from the countryside where low educational levels were the norm. This was a factor in the cultural shock these immigrants confronted and may have been a factor in the creation of ghettos in Germany. In Mr Simsek’s estimation, Germany should have done more to integrate 2nd and 3rd generation Turkish émigrés as unemployment remained much higher and access to higher education much lower within these communities.

25. Members then asked what kind of policies Europe should implement to integrate these communities. Mr Simsek said that Turkey would be happy to work with German authorities to help educate Turks in a secular fashion, encourage learning the language and obeying the laws of the country in order to better integrate. However, he also warned that Islamophobia was also an aspect of the problem. Mr Simsek called for an improved dialogue between Europe and Turkey about integration. He noted that Germany does not allow dual citizenship and often talks of assimilation in a way that makes the preservation of Turkish identity more difficult.

26. The triangular relationship between Russia, Turkey, and Ukraine and how the Turkish Stream pipeline might factor into the overall regional security outlook was also brought up. After reaffirming Turkey's opposition to the occupation of Crimea, Mr Simsek explained that the Turkish Stream should be understood in the context of Turkey's quickly expanding energy needs. The country was second only to China in terms of growth in demand for energy. Most of this demand is now met with natural gas. Turkey is not only a major energy consumer, it has also become a natural hub for Israeli and Azerbaijani energy exports to Europe.

27. Finally, members asked about the financing of infrastructural renewal in the case of Turkey. Mr Simsek gave details on the private sector's involvement in the country's infrastructure

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development. Ankara was planning to spend USD60+ billion in infrastructure projects through public private partnerships (PPPs) such as Istanbul's 3rd airport costing at least EUR10 billion or Izmir's highway that would cost over USD7 billion. Mr Simsek believed that financing infrastructure projects through PPPs was the way forward for fiscally constrained governments.

X. Consideration of the draft Report of the Sub-Committee on Transatlantic Economic Relations The Economic and Security Consequences of the Migration Crisis [167 ESCTER 16 E] by Ossur SKARPHEDINSSON (Iceland), Rapporteur, and presented by Menno KNIP (Netherlands), Acting Rapporteur

28. Menno Knip presented the report on behalf of Ossur Skarphedinsson. He noted that the report was not substantially different than the one presented in the spring but rather an updated version. The report outlined the implications of mass migration for labour markets and the broader economy, analysed the economic and security consequences for front-lines states and concluded with a discussion of policy options.

29. Mr Knip informed the Committee that, according to the most recent data available, there were almost 5 million registered Syrian refugees living outside Syria in addition to millions of internally displaced persons. Ninety percent of the refugees had remained in the region—in countries like Lebanon, Jordan, Turkey, Egypt, and Iraq. In addition, a growing number of refugees had reached Europe, triggering a highly-polarized discussion about refugees, national identity, the global economy and security.

30. Mr Knip distinguished between short and long-term impacts of mass migration as well as regional differences. Migrants could - as it has been the case in the United States - play a critical role in a country's economic dynamism by meeting labour needs as Western populations age, inducing both short-term and long-term GDP growth. However, he noted that this was contingent on recipient countries' policies and their capacity to quickly integrate refugees into the work force. Indeed, the European asylum system was incapable of coping with the crisis. Several EU states had reintroduced border checks inside the Schengen zone and the precarious situation had stoked populist movements and created conflict between Eastern and Western Europe.

31. Mr Knip discussed the EU-Turkey agreement on migration. It allowed Greece to return migrants to Turkey in exchange for the acceleration of negotiations on visa liberalization for Turkish nationals and increasing the existing financial support for Turkey's refugee population. However, to date few migrants had been sent back - leaving Greece overwhelmed and unable to process refugees without substantial support - while Turkey was threatening to pull out of the deal if visa free travel was not introduced soon.

32. Mr Knip also touched upon the security concerns related to migration. He noted that there was little evidence that refugees had been involved in recent terrorist attacks, most of which are carried out by Europeans. However, uncontrolled borders, inefficient migrant integration policies, inadequate security measures and a lack of intelligence coordination among EU countries did pose security concerns.

33. In closing Mr. Knip suggested different policy solutions to mitigate the crisis. He noted that a ceasefire and a political solution were necessary in Iraq and Syria in order to return displaced citizens to their homes. Increased international support for front-lines states is also needed. He pointed out that the West should demonstrate solidarity by accepting more refugees in the future, ensuring that they were given opportunities to integrate and work—turning them into assets for host countries, rather than a burden.

34. During the discussion period, members noted that Greece has become the gateway to Europe for over 856,000 refugees in 2015, according to the UNHCR, surpassing the country's capacity to deal with the flows and thus requiring a coordinated support effort by the entire

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international community, NATO, the UN and the EU. Mr. Knip thanked members for their comments and replied that the message of the report was consistent with the remarks. Members also asked questions about how to quickly give jobs to refugees to help them integrate. Mr Knip suggested that countries receiving refugees could change national regulations in order to speed up the process. He emphasized that work is an essential tool for integration.

35. In addition, members demanded some minor corrections to the report. Indeed, Mr Knip agreed to alter the name of Macedonia for Former Yugoslav Republic of Macedonia in paragraph 72 of the report. It was also agreed to reformulate paragraph 50 so that it reflected that visa liberalization for Turks travelling to Europe was an integral part of the agreement struck with the European Union. The correct version, sent by the Turkish delegation, was later included in the report. In addition, figures in paragraph 53 were updated to USD12 billion spent by the Turkish government caring for migrants and USD512 million received in international support. Finally, in paragraph 69 of the report, Saudi Arabia, Qatar, Kuwait, and the United Arab Emirates (UAE) were asked to take in more refugees and economic migrants. After suggestions from members, the Rapporteur accepted to include figures that Saudi Arabia claimed to have taken in over 2.5 million Syrian refugees, including 100,000 children attending schools. In addition, the UAE claimed to be hosting 100,000 Syrians, of which 17,000 children attending school and Kuwait claimed to be hosting 120,000 Syrians. Although unconfirmed figures, Mr Knip agreed to work these notions into the final version of the report.

36. The draft Report [167 ESCTER 16 E], as amended, was adopted unanimously.

XI. Consideration of the draft report of the sub-committee on Transition and Development The Corruption-Security Nexus [168 ESCTD 16 E] by Richard BENYON (United Kingdom), Rapporteur, and presented by Michal SZCZERBA (Poland), Vice-Chairman of the Sub-Committee

37. Michal Szczerba (PL) presented the report on behalf of Richard Benyon (UK). The report broadly explored the links between corruption and security. Mr Szczerba explained that corruption had a corrosive impact on governance quality, undermining government legitimacy and destabilizing entire regions.

38. Mr Szczerba described how state level corruption diminished public trust in institutions, eventually driving some individuals into the arms of extremists as occurred in Afghanistan and Iraq. Corruption also created social brittleness that engendered social clashes and hampered post-conflict development.

39. Mr Szczerba offered some figures that illustrated the heavy economic price that corruption could impose by distorting market competition, discouraging foreign and domestic investment, increasing the cost of public services, and reducing the profitability of infrastructure projects. Some estimates put total global cost of corruption at USD1 trillion per year, with private sector corruption in developing countries alone amounting to USD500 billion.

40. Mr Szczerba then looked at specific corruption issues in Russia, Ukraine, and the broader MENA region. In Russia, the Kremlin used corruption to subvert the authority and legitimacy of rivals. It politicized energy sales for foreign policy ends, funded separatist movements, and underwrote the election of political figures sympathetic to Russia's ambitions and opposed to NATO and the European Union. In Ukraine, corruption was a main catalyst for public unrest in 2004 and 2014. After the Euromaidan, Russia had taken advantage of Kyiv's fragility to encourage corruption in the Ukrainian energy sector, driving the country away from more transparent Western practices and hindering the reform efforts. Mr Szczerba also noted that the connection between corruption and instability was clear in the MENA region. Public anger at state

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corruption—one of the main reasons for the slow economic growth of these countries in past decades—led to the mass demonstrations of the Arab Spring in 2010.

41. Mr Szczerba concluded with a series of recommendations to tackle corruption. Starting with an acknowledgement of the link between corruption and security, Western governments should place the former higher in their foreign policy priorities. Greater transparency in global financial markets and whistleblowing should be encouraged to expose systematic corruption—as the Panama papers case demonstrated. Mr Szczerba also urged Western countries to offer assistance to tackle corruption in the developing world, reduce bureaucratic tape and consumer subsidies, which provided opportunities for bribery and exploitation.

42. During the discussion period, members suggested some minor modifications. In paragraph 67, the original wording gave the impression that the fight against corruption was a higher priority than the fight against terrorism. Mr Szczerba agreed to rewrite the sentence. In addition, in paragraph 74, the word "can" was added to the sentence "deregulation accordingly represents a highly effective weapon against corruption" in order to soften the assertion as it was not always the case.

43. The draft Report [168 ESCTD 16 E], as amended, was adopted unanimously.

XII. Presentation by Dr. Daniela SCHWARZER, Director, Think Tank of the German Council on Foreign Relations (DGAP), on An Assessment of the Current Transatlantic Economic Relationship, followed by a discussion period.

44. Dr Schwarzer began her presentation by noticing the timeliness of her presentation after the election of Donald Trump and how his policy choices could affect the transatlantic relationship. The presentation outlined the transatlantic economic ties, then casted light on the economic situation in the EU and in the United States and discussed the prospects for the relationship going forward.

45. Dr Schwarzer explained that the transatlantic trading relationship was the world’s most important, dwarfing exchanges with emerging economies. Indeed, the United States was the second largest importer and the largest exporter, making it the largest overall trading partner for the EU. Conversely, the EU was the second largest importer and exporter and the United States' largest overall trading partner. In addition, the United States and the EU continued to account for over 50% of world GDP.

46. Dr Schwarzer noted that the increasing degree of global uncertainty made the case for higher investment in the transatlantic relationship both politically and economically. Looking at the EU, Dr Schwarzer said growth forecasts were hovering around 1.7% and had been influenced by geopolitical factors including Brexit. Because of political uncertainty, she argued economies were underperforming. The Eurozone crisis, the sovereign-debt crisis and banking problems have contributed to the malaise. Moving on to the United States, Dr Schwarzer believed that if President Trump maintained his campaign promises, one would expect a push for deregulation and increased defence and infrastructure spending. In the short term, this fiscal expansion could create an improvement to domestic growth and more Foreign Direct Investment inflows. The question arose to what extent President Trump would be able to implement these policies, given likely resistance to greater spending in Congress. If implemented, expansionary policies would likely benefit EU exporters.

47. Dr Schwarzer then looked to the future of the transatlantic trade relationship. Since the launch of TTIP talks in 2013, the political situation had changed dramatically on both sides of the Atlantic. Scepticism toward globalization and trade agreements was now on the rise. The

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United States, the United Kingdom, and Germany—traditional supporters of free trade—were now experiencing a backlash against it.

48. During the discussion period, members mentioned the upcoming referendum in Italy and the presidential elections in France and Germany as posing additional risks to the transatlantic relationship. Dr Schwarzer agreed that the European political calendar was very busy and setbacks were possible. Changes in leadership and the possible rise of another populist government would seriously hamper the ability of the EU to act in a unified way. Members also mentioned that TTIP had virtually no support in the US Congress with little to no chance of being approved. Dr Schwarzer agreed with that view, and noted that both Hillary Clinton and Donald Trump had argued against ratifying the agreement during the presidential campaign. She added the United States had also been looking at TTIP with a degree of doubt due to EU economic weakness and general reservations about free trade.

XIII. Consideration of the draft General Report The Budgetary Implications of New Challenges to Transatlantic Security [166 ESC 16 E] by Jean-Marie BOCKEL (France), General Rapporteur

49. Jean-Marie Bockel (FR) presented the ESC general report, noting its timeliness in light of the result of the US presidential elections. He reminded members of the decision taken during the 2014 Wales summit to reverse the observed trend of declining defence expenditures and aim at spending 2% of GDP on defense, of which 20% would be dedicated to major equipment investment, and research and development in order to adapt to the changing security environment. Mr Bockel observed that, although there were some encouraging signs, those objectives had yet to be achieved with few countries reaching the 2% of GDP guideline.

50. Mr Bockel addressed the perennial issue of burden sharing within the Alliance—with the United States still accounting for 70% of NATO military expenditures—and the necessity to bridge the gap in NATO’s capabilities. As the security situation in Europe became dangerously unstable, higher defence spending was essential to develop the capabilities needed to cope with this serious challenge.

51. Mr Bockel also urged Allies to cooperate more in terms of defence spending and not fall prey to defending short-term national interests at the expense of long-term security. Thinking more broadly would allow NATO member countries to better share the burden of meeting NATO’s collective defence commitments. Mr Bockel indicated that next year’s report would provide an analysis of the Allied defence sector—excluding nuclear-related industries and including research and development activities.

52. During the discussion period, members noted that, although president-elect Trump had reassured NATO Secretary General Stoltenberg of the United States’ future commitment to the Alliance, he would insist on all Allies achieving the 2% of GDP on defence expenditures guideline. Indeed, this would be perceived as an article of good faith by the Trump administration and the US Congress. Members also discussed other aspects of Allied defence spending such as the different military ambitions of NATO member countries linked to their distinct geographical situations and histories, both of which factor into the size of their defence budgets. Mr Bockel agreed with the remarks but also noted that Allies’ military commitments outside the NATO core collective defence mission also shaped defence spending. He cited the examples of the French involvement in the Sahel or Estonia in Central Africa.

53. Some corrections to the report were also suggested. With regard to paragraph 71, members proposed reformulating the sentence “Failure to do so [invest at least 20% of overall defence expenditure] will mean that we are preparing our armies to fight the last war and not the next

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one”. Mr Bockel agreed to the changes with the revised version reading “Failure to invest in new equipment and research and development will mean that our armed forces might not have the right state of technology to fight future wars”.

54. The draft General Report [166 ESC 16 E], as amended, was adopted unanimously.XIV. Consideration of the amendments and vote on the draft Resolution Allied Defence

Spending [190 ESC 16 E] by Jean-Marie BOCKEL (France), General Rapporteur

55. Mr Oztrak invited the Committee to consider the amendments to the draft Resolution on Allied Defence Spending.

56. An oral amendment was made on Paragraph 3 now reading: “Acknowledging that the security environment has become far less benign, as evidenced in the eastern and southern flanks where Russia has deployed significant A2/AD (anti-access/area-denial) capabilities” with 10 votes in favor and 4 against.

57. Paragraph 4 was unanimously amended so that it would read: “Underlining that Article 3 of the North Atlantic Treaty calls upon Allies to separately and jointly, by means of continuous and effective self-help and mutual aid, to maintain and develop their individual and collective capacity to resist armed attack and recognising the unaltered relevance of an adequate level of defence capabilities in an increasingly challenging environment”.58. An amendment to Paragraph 10.a. was rejected with 7 votes in favor and 9 votes against. An amendment to Paragraph 10.f. was withdrawn.59. Mr Oztrak asked the Committee to adopt the entire Resolution as amended. The draft Resolution Allied Defence Spending [190 ESC 16 E] was adopted unanimously.

XV. Election of Committee and Sub-Committee Officers

60. Mr Oztrak called for the elections of the Committee and Sub-Committee Officers.61. The following new officers were elected:

Economics and Security Committee (ESC)Vice-Chairperson Ivans Klementjevs (Latvia)

Sub-Committee on Transition and Development (ESCTD)Chairperson Menno Knip (Netherlands)Vice-Chairperson Oktay Vural (Turkey)

Sub-Committee on Economic Transatlantic Relations (ESCTER)Chairperson Francis Hillmeyer (France)Vice-Chairperson Jean-Luc Reitzer (France)Rapporteur Steven MacKinnon (Canada)

Ukraine-NATO Inter-Parliamentary Council (UNIC)Member Jean-Marie Bockel (France)

62. All other Committee and Sub-Committee eligible officers were re-elected by acclamation.

XVI. Any other business

63. No other business was raised.

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XVII. Date and place of the next meeting

64. Mr Oztrak reminded delegates that the Committee would gather in Brussels and the OECD in Paris in February 2017.

XVIII.Closing remarks

65. Mr Oztrak thanked all members of the Committee, the Turkish delegation, the guest speakers, and the NATO PA International Secretariat. He then closed the meeting of the Economics and Security Committee.

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