Sustainability Impact Assessment of the Euro-Mediterranean Free Trade …trade.ec.europa.eu/doclib/docs/2008/february/tradoc... · 2019-05-07 · Executive Summary . This report presents

The European Union’s Sustainability Impact Assessment (SIA) Study of the Euro-Mediterranean Free Trade Area (EMFTA)

Sustainability Impact Assessment of the Euro-Mediterranean Free Trade Area

Final Report of the SIA-EMFTA Project

Revised November 2007

This project is funded by the European Union

A Project implemented by the SIA-EMFTA Consortium

Personal data in this document have been redacted according to the General Data Protection Regulation 2016/679 and the European Commission Internal Data Protection Regulation 2018/1725

Contents Abbreviations ............................................................................................................................ iv

Foreword .................................................................................................................................... v

Executive Summary .................................................................................................................. vi

1. Introduction ............................................................................................................................ 1

2. Synthesis and review of the SIA study................................................................................... 3 2.1. The SIA methodology ..................................................................................................... 3 2.2. Consultation and dissemination....................................................................................... 7 2.3. Baseline economic, social and environmental situation in the Mediterranean region .... 9 2.4. Scenarios for trade liberalisation ................................................................................... 12 2.5. Review and update of the SIA reports........................................................................... 13

3. Major findings ...................................................................................................................... 15 3.1. Economic impacts.......................................................................................................... 15 3.2. Social impacts................................................................................................................ 17 3.3. Environmental impacts .................................................................................................. 18 3.4. Process impacts.............................................................................................................. 20 3.5. Impacts on the Millennium Development Goals........................................................... 21 3.6. Opportunities for mitigation and enhancement ............................................................. 22 3.7. Institutional strengthening and capacity building.......................................................... 31 3.8. Case studies ................................................................................................................... 32

4. Proposed monitoring mechanism......................................................................................... 38 4.1. Indicators and data requirements................................................................................... 38 4.2. Institutional responsibilities........................................................................................... 39 4.3. Dissemination and capacity building............................................................................. 40 4.4. Integration with policy-making ..................................................................................... 41

5. Proposals for awareness raising ........................................................................................... 42 5.1. SIA-EMFTA website..................................................................................................... 42 5.2. Presentations by the SIA team....................................................................................... 42 5.3. Presentations by the Commission services.................................................................... 42 5.4. Regional workshops ...................................................................................................... 42

6. Overall conclusions and recommendations.......................................................................... 44 6.1. The role of the EMFTA within the Euro-Mediterranean Partnership ........................... 44 6.2. SIA recommendations and Neighbourhood Policy Action Plans.................................. 45 6.3. Specific recommendations for negotiators and policy-makers...................................... 45 6.4. Overall conclusions of the SIA study ............................................................................ 46

References ................................................................................................................................ 47

Annex 1. Principal reports published by the study................................................................... 48

Annex 2. Major consultation activities .................................................................................... 49

Annex 3. Summary of main consultation inputs and responses............................................... 51

Annex 4. Impact summary tables............................................................................................. 80

Annex 5. Indicators for the proposed monitoring mechanism................................................. 85

Annex 6. Detailed recommendations for negotiators and policy-makers ................................ 87

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Abbreviations CAP Common Agricultural Policy CEC Commission for Environmental Cooperation CGE Computable General Equilibrium COMPSUD Circle of Mediterranean Parliamentarians for Sustainable Development EEA European Environment Agency EC European Commission EMC Eastern Mediterranean Countries EMFTA Euro-Mediterranean Free Trade Area EMP Euro-Mediterranean Partnership EMPA Euro-Mediterranean Parliamentary Assembly ESCWA Economic and Social Commission for Western Asia EU European Union FDI Foreign Direct Investment GAFTA Greater Arab Free Trade Area GDP Gross Domestic Product M&E Mitigation and Enhancement MAP Mediterranean Action Plan MEA Multilateral Environmental Agreement MPC Mediterranean Partner Countries MCSD Mediterranean Commission for Sustainable Development MDG Millennium Development Goals MSSD Mediterranean Strategy for Sustainable Development NAFTA North American Free Trade Agreement NGO Non-Governmental Organisation NTB Non-Tariff Barrier PCM Project Cycle Management QIZ Qualified Industrial Zones SIA Sustainability Impact Assessment SME Small and medium-sized enterprises SWOT Strengths, Weaknesses, Opportunities and Threats UNDP United Nations Development Programme UNEP United Nations Environment Programme VAT Value Added Tax WTO World Trade Organisation

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Foreword The recommendations made in this report represent the views of the consultants and should not be interpreted as being endorsed by the European Commission. The practical implications of many of the recommendations will need to be examined in depth by the Commission and by Mediterranean Partner Country governments in order to evaluate the feasibility of developing the necessary institutional structures or incorporating the proposals into existing structures. The recommendations presented in the report are intended to form a basis for discussion among stakeholders of the most appropriate means of incorporating the SIA findings into the future development of the Euro-Mediterranean Free Trade Area and the Euro-Mediterranean Partnership.

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Executive Summary This report presents the results of a sustainability impact assessment (SIA) study undertaken for the European Commission to assess the economic, social and environmental impacts of the evolving Euro-Mediterranean Free Trade Area (EMFTA). It synthesises the findings of the previous stages of the study and presents overall conclusions and recommendations. The results are intended to provide information for the trade negotiations and for the development of parallel policy measures to enhance the beneficial impacts of the EMFTA and to avoid or mitigate adverse ones. The principal findings of the study are presented in this Executive Summary, together with recommendations for negotiators and policy-makers in the EU and Mediterranean Partner Countries (MPCs). It should be noted that the recommendations made in this report represent the views of the consultants and should not be interpreted as being endorsed by the European Commission. They are intended to form a basis for discussion among stakeholders of the most appropriate means of incorporating the SIA findings into the future development of the Euro-Mediterranean Free Trade Area and the Euro-Mediterranean Partnership. The SIA analyses the impacts of four components of a postulated EMFTA scenario, in comparison with a without EMFTA baseline scenario. These four components cover removal of tariff and non-tariff barriers for: industrial products; agriculture; services; and south-south trade liberalisation. Liberalisation of industrial products is as defined in the current Association Agreements between the EU and MPCs. For the other three components, the postulated scenario includes all the major issues covered by the ongoing negotiations. For industrial products, some of the impacts will already have occurred in those MPCs that have begun tariff reductions. This is taken into account in the assessment. For all four components of the EMFTA scenario, significant impacts will be specific to the conditions in individual countries, and will vary in particular according to the level of existing tariff and non-tariff barriers and the proportion of EU trade in a country’s total international trade. Impacts are also time dependent, with variations in both magnitude and direction between the short term, medium term and long term. The assessment initially gives worst case indications of potential impacts of the EMFTA itself, assuming that no mitigating or enhancement actions are taken. It then proceeds to assess potential policy measures to mitigate adverse impacts or enhance beneficial ones, including measures to strengthen the Euro-Mediterranean Partnership as a whole. Principal findings Overall The findings of the SIA study indicate that the EMFTA can help to deliver large economic benefits to both the EU and MPCs, but only if carried out as part of a comprehensive development strategy in each of the partner countries, in combination with measures to achieve fuller economic integration across the region as a whole. In the absence of such strategic measures, in individual MPCs and regionally under the co-responsibility of the EU and MPCs, the economic benefits of the EMFTA are small, and may be accompanied by significant adverse social and environmental effects.

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Since the launch of the Euro-Mediterranean Partnership in 1995 significant progress has been made for each of its components, including the EMFTA. The study argues that these achievements now need to be more fully integrated with each other and built upon, in order to deliver the potential contribution of the free trade area to the economic, social and environmental goals of the partnership as a whole. The potential economic benefits of fuller regional integration can in principle help partner countries adapt to globalisation and deliver significant gains to businesses and to all sections of society, without jeopardising the natural environment. The engagement of business and other civil society actors in the development of appropriate national and regional development strategies will be essential to their success. Impacts in the EU The economic impacts for the EU are expected to be beneficial overall for all four components of the EMFTA scenario, but small in terms of direct economic efficiency. Larger economic gains may occur in the longer term for services, and to some extent for industrial products, associated with investment effects. These cannot be forecast with certainty as they will be strongly dependent on individual investment decisions and other aspects of economic and development policy in both the EU and MPCs. For agricultural liberalisation the economic benefits may be accompanied by significant adverse social impacts in local areas of the EU if not remedied by parallel mitigation measures. These impacts are mainly restricted to rural areas of southern European countries, where the types of crops grown are similar to those produced in MPCs. In some areas the affected workers will include temporary migrants from MPCs, with a knock-on effect on social issues in MPCs. Both positive and negative environmental effects in the EU are expected. Impacts on water resources, agricultural pollution and biodiversity are generally beneficial, while those on the agricultural value and amenity value of rural environments may be adverse. Impacts in MPCs In terms of direct effects on consumer welfare the economic impacts in MPCs are generally positive and larger than in the EU, although a small short term negative effect is possible in some countries. For industrial products, welfare is expected to rise by an average of about 0.8% of GDP, ranging from slightly less than zero in some countries up to about 2% of GDP in others. For agriculture and services the additional welfare gain averages about 0.5% for each, with a small additional impact from south-south liberalisation. As in the EU, larger economic gains may occur in the longer term, but these are strongly dependent on domestic reforms and investment decisions. In particular there are large potential economic benefits from fuller regional integration, but to achieve them, other policy measures are needed in addition to south-south trade liberalisation and the EU-MPC trade agreements. The study identifies some social impacts in MPCs that are beneficial in the short term as well as the long term, and others that may be significantly adverse unless effective mitigating action is taken.

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In the absence of appropriate preventive and mitigating measures, the potential impacts of greatest concern are:

• a significant short term rise in unemployment, which could continue into the long term if not successfully mitigated, particularly for liberalisation of EU-MPC trade in industrial products and agriculture, and to a lesser extent for services and south-south liberalisation;

• a fall in wage rates associated with increased unemployment; • a significant loss in government revenues in some countries, with potential for

consequent social impacts through reduced expenditure on health, education and social support programmes;

• greater vulnerability of poor households to fluctuations in world market prices for basic foods;

• adverse effects on the status, living standards and health of rural women, associated with accelerated conversion from traditional to commercial agriculture.

Similarly, both positive and negative environmental impacts are expected in MPCs. In the absence of preventive and mitigating measures, the main potential adverse impacts that have been identified are:

• significant local impacts on water resources, soil fertility and biodiversity in areas of high existing stress;

• higher environmental stress in cities, resulting from declining rural employment and accelerated rural-urban migration;

• higher air pollution and coastal water pollution from greater international transport; • higher waste generation from greater use of packaging materials.

Many of these potential impacts would occur primarily in the short or medium term, although this may be as long as ten to fifteen years over the full period of adjustment. Unless effective action is taken in the short term, some impacts may continue into the long term. The European Commission and MPC governments have for many years devoted significant resources to actions to address existing environmental degradation in the region. The potential impacts of the EMFTA would add incrementally to existing problems, and therefore require additional mitigating action. Global environmental effects The assessment indicates an overall adverse impact on climate change and global biodiversity, arising primarily through the influence on greenhouse gas emissions of increased transport and changed consumption patterns in MPCs, and pressures for increased agricultural production in biologically sensitive areas in MPCs. These scale effects, which arise from increased trade and increased production and consumption, can in principle be countered by technology or regulatory effects. In itself, the EMFTA scenario that has been assessed does not include measures which will strengthen these positive effects sufficiently to counter the adverse ones. The study does however indicate an overall economic gain, part of which could be directed towards parallel actions to mitigate the expected impacts.

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Impacts on the Millennium Development Goals The SIA has implicitly evaluated the impacts of the postulated EMFTA scenario on the Millennium Development Goals (MDGs), through the core indicators that frame the SIA methodology. It shows that unless effective mitigating action is taken, there will be a small but significant adverse effect on Goals 1 (poverty), 2 (education) and 4 and 5 (health). Both positive and negative effects occur for Goal 7 (environment), while the impact on Goal 8 (global partnership) is positive. The potential adverse impacts arise primarily from a short term rise in unemployment and loss in tariff revenues, occurring mainly for liberalisation of industrial products, but with additional effects from the agricultural, services and south-south components of the EMFTA scenario. Without effective mitigation, some of the short term effects may continue into the long term. Recommendations for negotiators and policy-makers The SIA study is not intended to make specific recommendations for the negotiating positions of the EU or MPCs. However, negotiators in all countries are urged to take account of the impacts discussed above, in developing their positions and throughout the ongoing negotiation process. In particular, they should note the potentially adverse effects on Millennium Development Goal 1 (extreme poverty and hunger), and the mixed effects on Millennium Development Goal 7 (environmental sustainability). Specific policy measures have been identified for actions which may be taken by the EC and MPC governments to mitigate adverse impacts and enhance beneficial ones. These are presented in an Annex to the report in six categories:

A. Trade-related measures B. Domestic policy in the EU C. Domestic policy in MPCs D. EU development assistance E. EU support for stronger global governance F. Joint action to monitor the future evolution of EMFTA

Negotiators and policy makers are urged to satisfy themselves that measures such as these are being taken within the negotiations and alongside them, in sufficient degree to maximise benefits and counter potentially adverse effects. Overall conclusions of the SIA study Six broad conclusions are drawn:

1. In parallel with other strategic measures at the national and regional level the Euro-Mediterranean Free Trade Area is capable of making a major contribution to achieving the objectives of the Euro-Mediterranean Partnership and hence to the sustainable development of the region.

2. Implementation of the EMFTA on its own will make only a small contribution to the economic objectives of the EMP, and needs to be accompanied by appropriate parallel measures if significant adverse social an environmental impacts are to be avoided at the local, regional and global level.

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3. The parallel measures that are necessary to enhance the beneficial effects of the EMFTA and to avoid significant adverse impacts include actions both at the regional level and nationally in each of the partner countries.

4. In order for the EMFTA to make its full potential contribution to the sustainable development of the region, the Euro-Mediterranean Partnership itself needs to be re-invigorated and re-directed towards clearly defined economic, social and environmental goals for each of the partner countries and for the region as a whole. This reinforces a similar regional need arising from the challenges of addressing climate change, economic globalisation, regional migration and the Millennium Development Goals.

5. The monitoring mechanism proposed for the EMFTA may be used as a framework for addressing all of these challenges.

6. Any such re-invigoration of the Euro-Mediterranean Partnership should be based on a strategic review of its objectives and of the interactions between the EMFTA and the other components of the Barcelona Process in contributing to those objectives.

Further consultation The results of the SIA will contribute to refining the EU’s position in the ongoing negotiations and in the design of its development assistance programmes. They are also expected to be taken into account by policy-makers in the Mediterranean Partner Countries. Comments and suggestions on all aspects of this consultation draft of the SIA report will be greatly appreciated. They should be sent to the project email address:

[email protected]

1. Introduction The creation of a Euro-Mediterranean Free Trade Area (EMFTA) is a key component of the Euro-Mediterranean Partnership (EMP) between the European Union and its ten partner countries in the southern and eastern Mediterranean1 (Figure 1). The partnership, which was established by the Barcelona Declaration of 1995, covers the three areas of political and safety partnership, economic and financial partnership (including the EMFTA), and social, cultural and humanitarian partnership. The Barcelona Process has also adopted sustainable development as a guiding objective. At the Euro-Mediterranean Ministerial Meeting held in Stuttgart in 1999 the European Commission undertook to carry out a sustainability impact assessment (SIA) of the EMFTA, which commenced in 2004. This final report of the SIA project summarises the results of the study and presents conclusions and recommendations for policy-makers and other stakeholders. Figure 1. The Euro-Mediterranean Free Trade Area

The European Commission first introduced sustainability impact assessments of trade policy during the preparations for the World Trade Organisation (WTO) conference in Seattle in 1999. It has since adopted the process for all its trade agreements at the bilateral, regional and multilateral level. Although the EC expects trade liberalisation to contribute to economic growth in all partner countries and help to underpin political stability, it recognises that these goals have to be made compatible with the management of natural resources, environmental quality and social development2. The SIA process was conceived as a key component of achieving these aims, by contributing to an informed public dialogue on sustainable development issues. The process combines technical analysis with public consultation in

1 The ten EU-Med partner countries are Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the Palestinian Authority, Syria, Tunisia, and Turkey. 2 Trade Commissioner Pascal Lamy. Proceedings of EC Seminar on SIA of trade agreements - Making Trade sustainable? Brussels, 6-7 February 2003.

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order to provide an objective assessment of potential economic, social and environmental impacts in all partner countries, and identifies measures by which beneficial effects maybe enhanced and adverse ones reduced or avoided. The SIA study has been conducted in three phases. Phase 1 developed the methodology3; Phase 2 presented a broad overview SIA for the region as a whole4; Phase 3 has provided a more detailed assessment of mitigation and enhancement measures for key potential impacts5, and developed proposals for a participatory monitoring mechanism6. This final report of the project synthesises the findings of the previous phases, draws overall conclusions from the study as a whole, and presents recommendations for future actions. The principal reports published during the study are listed in Annex 1. Section 2 of the report presents a synthesis and review of the complete SIA study. The major findings are summarised in Section 3. Sections 4 and 5 present proposals for an ongoing monitoring mechanism and for raising awareness of the SIA findings. Section 6 presents the study’s overall conclusions and recommendations.

3 IARC (2004) 4 IARC (2006a) 5 IARC (2006b) 6 IARC (2007)


2. Synthesis and review of the SIA study 2.1. The SIA methodology Overall approach The methodology used for the SIA of the EMFTA is described in the final report of Phase 1. It was based on that developed for the EC’s sustainability impact assessments of World Trade Organisation (WTO) negotiations7, adapted and extended for the specific circumstances of the Euro-Mediterranean Free Trade Area. In developing the methodology a review wundertaken of trade in the Euro-Mediterranean region, of regional issues for sustainable development and of related studies and programmes.

as

The overall methodological approach includes the following elements:

• selection of trade measures and economic sectors to be assessed (screening); • identification of key sustainability issues (scoping); • definition of trade liberalisation scenarios to be assessed; • selection of country groupings and use of case studies for the assessment; • assessment of impacts; • evaluation of alternative mitigation and enhancement (M&E) measures; • monitoring and ex post evaluation

together with, at key stages of the process,

• consultation and stakeholder participation. The principal adaptations for the SIA-EMFTA relate to the consultation process, the quantitative and qualitative analysis and the evaluation of M&E measures. These included:

• engaging key stakeholders from the region at an early stage of the project, to help adapt and refine the SIA methodology;

• involving stakeholders throughout the project and its follow-up;

• a problem tree analysis;

• the analysis and interpretation of a wide range of economic modelling studies of Mediterranean trade liberalisation;

• refinement of the process indicators of sustainable development;

• regional consultations to identify practical and operational measures for moving towards regional sustainability based on the SIA findings.

7 Kirkpatrick, Lee and Morrissey (1999), Kirkpatrick and Lee (2002)


Problem Tree Analysis The European Commission initiated the SIA study in response to a recognition that, without appropriate action, the potential gains of trade liberalisation may be accompanied by adverse effects on natural resources, environmental quality and social development. A problem tree analysis was therefore undertaken as part of the baseline study in accordance with the Commission’s Project Cycle Management (PCM) methodology8. This identified the main cause and effect relationships between trade liberalisation and potentially adverse impacts on sustainable development, for use in the subsequent more detailed causal chain analysis of the SIA. The problem tree is shown in figure 2. It represents a simplified –worst case scenario- analysis of those effects of the EMFTA which may have a potentially adverse impact on sustainable development. The shaded boxes indicate areas where parallel measures may be needed in order to avoid or reduce adverse effects and enable positive outcomes. Figure 2. Potentially adverse sustainability impacts of trade liberalisation

Source: Impact Assessment Research Centre (2005)

Weak environmental regulation and management

Increased production

Improved market access

for exports

Increased pollution Increased resource

depletion

Reduced environmental quality

Loss of biodiversity

Higher incidence of disease

Deforestation and coastal degradation

Higher rate of climate change

Weak socio-economic policy

Improved market access

for imports

Decreased production

Increased transport

Loss of employment

Increased poverty

Differential gender effects

Decreased gender equity

Limited implementation of

Climate Convention

Incentive for more efficient production

Rigid markets, inadequate finance,

cumbersome regulations, lack of

institutional, technical, educational capacity

Lower economic growth

Lack of response to economic incentives

Greater waste

Changed consumption

patterns

Unsustainable development

Technical analysis The technical causal chain analysis is shown schematically in Figure 3. This shows the significant cause-effect relationships between a trade measure and its potential impacts,

8 European Commission (2004) Aid Delivery Methods Volume 1: Project Cycle Management Guidelines, EuropeAid Cooperation Office, Brussels


starting with the postulated scenario for the change in trade policy under negotiation. A change in tariffs or other trade measure will alter market incentives and opportunities, and induce changes in imports, exports, production and consumption. These changes in the production system may have significant effects on employment, wage rates, resource consumption, waste generation and related social and environmental factors. In parallel with these direct effects, the new trade measure may have indirect dynamic effects through its influence on economic growth rates or on processes of social transformation and environmental change. Figure 3. Assessment of impacts

Change in tariff, non-tariff measure or rule

Influence on prices, incentives and opportunities

The indirect dynamic effects represented on the right of Figure 1 will generally have sustainability impacts that occur in the long term, from five to ten years after implementation of the trade agreement and subsequently. The direct effects on the production system shown in the main body of the figure will have both short term and long term impacts. Those experienced in the long term are the impacts which remain after the production system has adjusted to the change in trade measure (typically after five to ten years). The short to medium term impacts are those which occur during the period of adjustment. The SIA therefore draws a distinction between short to medium-term adjustment effects, long term static equilibrium effects that occur once the adjustment is complete, and long term dynamic effects which reflect the non-equilibrium nature of the economy and of social and environmental systems. For tariff changes and some other trade measures, widespread use has been made of computable general equilibrium (CGE) techniques to model the first stages of the causal chain shown in Figure 1. These techniques may be used to project the static equilibrium economic impacts in quantitative terms. The SIA has reviewed some 80 economic modelling studies of Mediterranean trade liberalisation. The results have been used to indicate the potential magnitude of economic, social and environmental impacts of tariff changes for both the long

Changes in production system

Economic Impacts

Social Impacts

Environmental Impacts

Process Impacts

Dynamic effects


term static equilibrium effects and the shorter term adjustment effects. Dynamic long term effects and the effects of non-tariff measures have been evaluated primarily through qualitative analysis of the causal chains and empirical evidence related to past episodes of trade liberalisation. Some 200 sources of information have been used and are referenced in the previous reports of the SIA study. Impact significance Where quantitative information is available an indication of the significance of a projected impact may be obtained by comparing its magnitude with the base situation, i.e. the prevailing circumstances and their extrapolation into the future. Where impacts cannot be quantified, judgements are made of the likelihood that impact magnitude would reach the level at which it would be considered significant. The SIA methodology defines three levels of significance:

• non-significant impact – compared with the base situation • lesser significant impact – marginally significant to the negotiation decision, and if

negative, a potential candidate for mitigation • greater significant impact – significant to the negotiation decision, and if negative,

merits serious consideration for mitigation. Greater or lesser significance is judged according to compatibility with established norms and standards, levels of public concern, and concerns in the scientific community which have yet to spread to the more general public. In making these judgements the following factors are taken into account:

• the extent of existing economic, social and environmental stress in affected areas; • the direction of changes to base-line conditions; • the nature, order of magnitude, geographic extent, duration and reversibility of

changes; • the regulatory and institutional capacity to implement mitigation and enhancement

measures. Indicators and monitoring Indicators are used in the SIA methodology for two prime purposes. A set of aggregate core indicators is used to categorise the types of sustainability impact that can be expected, giving a general indication of the areas which the SIA should study, and providing a framework for summarising the results. In the course of the assessment more detailed indicators are developed for subsequent monitoring of impacts that are assessed to be significant. For the first of these purposes nine core indicators of sustainability outcomes were used, together with two indicators of sustainable development processes. These aggregate indicators are:

• Economic: real income; fixed capital formation; employment • Social: poverty; health and education; equity • Environmental: biodiversity; environmental quality; natural resource stocks


• Process: adherence to sustainable development principles; effectiveness of sustainable development strategies

For the first of the two process indicators, the assessment examined the consistency of the EMFTA with the relevant principles defined in the Rio Declaration on Environment and Development. For the second process indicator the assessment examined the effect of the EMFTA on capacity to implement the Mediterranean Strategy for Sustainable Development. The indicators needed for ongoing monitoring were developed in Phase 3 of the project. These were designed to be compatible with those developed by the Mediterranean Commission for Sustainable Development (MCSD) for region-wide monitoring of progress in achieving sustainable development. The set of indicators proposed for monitoring the EMFTA are described in Section 4 below, along with proposals for administration of the monitoring mechanism. 2.2. Consultation and dissemination Consultation is a key component of the SIA process, serving to promote dialogue and partnership with interested stakeholders and members of civil society. The consultation and dissemination strategy is described in the final report on Phase 1 of the project. It covers:

• EU and Mediterranean partner country governments; • the European Commission; • civil society; • an Advisory Committee of regional experts; • information dissemination.

Countries and Governments At the national level representatives of ministries of trade, environment, agriculture, industry and related public institutions in both the EU and MPCs were informed about the SIA/EMFTA project to solicit their input to the process. Many representatives attended public meetings held in Brussels and in partner countries, and project staff have consulted national government officials and other representatives at meetings held under the auspices of related programmes. European and partner country parliamentarians have been a particularly important point of contact, both directly and through the Circle of Mediterranean Parliamentarians for Sustainable Development (COMPSUD). European Commission The EC has played a pivotal role in the SIA project by providing input and guidance throughout the programme. Consultation with the EC was organised primarily through the SIA/EMFTA Steering Committee, which was formalised by the Commission under the leadership of the Directorate General EuropeAid Co-operation Office. Members of the Steering Committee included representatives from DG-Trade, DG-Agriculture, DG-Environment, DG-RELEX, DG Social Affairs, DG ECFIN, the European Environmental Agency and others. The Steering


Committee is an inter-service body that gathers and conveys the relevant expertise of the concerned Directorates General to the SIA-EMFTA Consortium. Civil Society Groups A wide range of civil society institutions expressed interest in the SIA from its outset. To ensure a balanced representation, a database of interested parties was developed and classified in accordance with constituencies identified by the EC. This classification system differentiates between organisations and experts primarily focused on issues concerning: consumers; development; health; environment; trade unions; women’s groups; indigenous peoples; education and research; agricultural producers; commerce; employers; service industries. Sub-classifications were also developed to build upon the EC framework, so as to target organisations focusing on social and economic issues of special interest to the region, covering textiles/garments, processed agro-food industries, tourism, cultural organizations and those specifically concerned with water or energy resources. Special consideration was given to networks and organisations representing a number of such groups, with the capacity to relay information about the SIA to its membership. Targeted consultations undertaken with these and other groups are listed in Annex 2. Advisory Committee An Advisory Committee was established to provide high-level advice and expertise on the preparation and implementation of the SIA/EMFTA, comprised of representatives of regional institutions directly engaged in issues related to the assessment. Four institutions were identified and invited to become members of the Advisory Committee:

• United Nations Environment Programme, Economics and Trade Branch, represented by

• Plan Bleu pour l'environnement et le développement en Méditerranée (Plan Bleu), represented by

• Economic Research Forum for the Arab Countries, Iran and Turkey (ERF), represented by

• Friends of the Earth (FoE), represented by (Friends of the Earth MedNet) and (Friends of the Earth Middle East).

The Advisory Committee members have provided valuable advice at key stages of the project, and their support and assistance has been much appreciated. Dissemination of information Dissemination of information about the SIA has included a project website, management of an interactive e-mail discussion forum, an SIA-EMFTA newsletter, public meetings in Brussels and presentations at numerous conferences and seminars held by regional stakeholder networks and other organisations. The project website (http://www.sia-trade/emfta) includes introductory information in English, French and Arabic, with links to related websites. All project reports can be accessed and downloaded, with key texts available in French and Arabic as well as English. Other downloadable material includes information on major events, minutes of public


consultations, presentations given at regional seminars, and the SIA-EMFTA Newsletter (in three languages). A dedicated project e-mail address allows interested parties to request additional information, make comments and suggestions and discuss project issues. The European Commission has held public meetings during each phase of the project, open to all interested parties. Many consultative sessions have been held within the region at the invitation of relevant stakeholder organisations, as listed in Annex 2. The Commission has also hosted a regional consultative meeting in Brussels with invited participants from the region. Delegates from partner countries were selected to represent an overall balance of interests from government, NGOs, the private sector, academic and technical institutions and environmental, social and economic expertise. A second regional meeting to discuss the final SIA report is currently under consideration. 2.3. Baseline economic, social and environmental situation in the Mediterranean region The first report of Phase 2 of the SIA described the baseline conditions against which comparisons would be made for the projected outcomes of the EMFTA, with an emphasis on conditions in the Mediterranean partner countries. The baseline situation was reviewed in terms of:

• economic and trade situation and trends • social and health situation and trends • environmental situation and trends • institutions and technical capacities of Mediterranean partner countries

The results presented in the first report of Phase 2 remain broadly indicative of the current situation and are summarised below. Economic and trade situation The ten southern and eastern Mediterranean Partner Countries (MPC) vary considerably in size, per capita incomes and growth rates. Population ranges from 3 million people in the Palestinian territories to 73 million in Egypt. Per capita income is about US$1000 in the Palestinian territories and Egypt, rising to US$17000 in Israel. In 2004 the rate of growth of GDP per capita ranged from negative in the Palestinian territories (- 9%) and Syria (- 2%) to 0.5% in Egypt and just under 7% in Turkey. Turkey differs from the other partner countries in that it is the only candidate for accession to the EU. As a whole the MPCs have been characterised as being generally uncompetitive in international markets, with a lack of dynamism and innovation in their enterprises. Unemployment is a significant concern in many of the countries, averaging around 14%. About 40% of the population depend on agriculture for their livelihoods, varying between countries. The rural population is particularly high in Egypt, at 56%, compared with Israel at 2.5%. Unemployment is particularly high in Algeria and the Palestinian territories. Unemployment throughout the region tends to be biased strongly towards those under 25, and is generally higher for women than for men. EU trade with Mediterranean partner countries represents about 7% of total EU imports and 8% of total EU exports. By contrast, partner countries’ trade with the EU averages 50% of


their total trade. This bias is particularly strong for the Maghreb countries and Turkey, while the Mashreq countries trade less with Europe and more with the Middle East. Trade between MPCs and each other is only about 5% of their total trade. This figure is strongly influenced by oil exports from Algeria, Egypt and Syria. For non-oil-producers such as Jordan and Lebanon, trade within the whole of the Middle East and North Africa is more than 40% of total exports. The MPCs tend to import high value-added products and services from Europe, the USA and other high income countries, while most of their current exports are primary products and resource-based manufactures. The most important agricultural products imported from the EU are grains, dairy produce and sugar, and the most important products exported to the EU are fruits and vegetables and fish. Oil is the main export for Algeria, Egypt and Syria. The textiles and clothing sector has grown in importance in many countries of the region, particularly Jordan and Tunisia. Tourism is an important growth sector for many of the countries. Banking, other financial services, telecommunication services and other high value service industries are undergoing a process of transformation to lower levels of state control. Exports from MPCs tend to specialise in labour-intensive products with average technology intensity. Investment in science and technology is low in most of the region. Remittances from workers overseas make a significant contribution to foreign earnings in many of the partner countries. The EU employs large numbers of temporary workers from the region, mainly from the Maghreb countries and Turkey. Overseas aid is another significant source of income for most of the countries, and a major one for some. Social and health conditions Key health and social issues in MPCs include relative backwardness in literacy and gender equality, insufficient access to safe drinking water and sanitation in many partner countries, and rapid population growth (although fertility rates have fallen spectacularly in the past ten years). Poverty is still a dominant problem in many countries, especially in rural areas, although there is relatively little extreme poverty. Social concerns are aggravated by un-equitable distribution of wealth. The urban population was about 57% of the MPC total in 2002, and is expected to rise to about 62% by 2015. By 2015 Egypt is expected to be the only country with less than 50% of its population urbanised. Lebanon and Israel are expected to be at least 90% urban by 2030. Both inward and outward migration are significant. Traditional outward migration routes from North Africa are to France or to southern Spain, for opportunities in agriculture. Migration from the Mashreq tends to be to the Gulf States, for work in the oil and gas sectors and as unskilled labour. There is also a significant amount of inward migration to some of the partner countries, much of it for low-skilled labour. Largely as a consequence of past conflicts there is a high refugee population. Extreme poverty (than US$1 per day) is relatively low at around 1.5% for most of the countries for which statistics are available, but over 3% in Egypt. The number of people living on less that US$2 per day is particularly high in the Palestinian territories (60%) and Egypt (44%). Poverty levels are also high in Morocco and Algeria.


Food security is a concern throughout the region, which is a net food importer, and a large importer of grain. Significant improvements have been made in health in the region, although unemployment and urban poverty remain important determinants of poor health, related to lack of access to basic services. Considerable advances have been made in primary and secondary education in most countries of the region, with primary enrolment now close to 90%. Morocco and Syria are well behind the other countries in secondary school enrolment, but Syria has fairly high adult literacy. Adult literacy is lowest in Egypt and Morocco. Tertiary education and its alignment to the needs of knowledge-oriented economic growth remains weak. MPCs have advanced reasonably well on issues of female education, fertility, life expectancy and per capita income. However, women’s economic activity remains low by international standards, and their involvement in public life and politics remains weak in many of the countries. Environmental conditions The key environmental issues in the region include:

• depletion or degradation of water resources; • loss of agricultural land to urbanisation and salinisation; • traffic congestion, noise, poor air quality and the rapid growth of waste generation in

urban areas; • pollution of coastal areas and the sea, urbanisation and erosion of coastlines, depletion

of fish resources; • disruption, over-exploitation or abandonment of unique landscapes and biodiversity • potential impacts of climate change.

All the partner countries except Turkey and Lebanon are expected to be experiencing water scarcity by 2025. Much of the water resource is provided by large transboundary river basins. Uganda, Ethiopia and Sudan share the Nile Basin with Egypt, the river Jordan feeds Syria, Lebanon, Israel, West Bank and Jordan, and the Tigris and the Euphrates both rise in Turkey and flow into Syria and Iraq. Climate change is expected to exacerbate the region’s water resource problems. The projected precipitation increases are small, and temperatures and evaporation are projected to rise. Saline intrusion caused by over-abstraction of groundwater close to the coast has occurred in several countries, as has salination caused by poor management of irrigation. Water pollution arises from extensive use of fertilisers and pesticides and from industrial effluents associated with increasing industrialisation. Municipal waste water is still a major source of pollution in many partner countries. Desertification and soil erosion are of concern in several of the countries. Much of the region’s flora and fauna is damaged or threatened. Emerging threats to biodiversity include the bio-invasion of exotic and genetically modified species. On the positive side, protected


areas and biosphere reserves have been established, and several of the partner countries have recorded increases in their stock of forests. Air pollution is an important but relatively localised concern in many areas. Major sources include vehicular traffic, cement works and other industrial facilities close to urban centres. Sanitary waste disposal is largely lacking in many parts of the region, especially in rural areas and the poorer areas of major cities. Waste is often left or burned in dumps within inhabited areas. Institutions and technical capacities Relevant institutions in the region exhibit a number of weaknesses in their ability to respond to changing economic, social and environmental conditions, and technical capacity is often limited. The baseline report prepared during Phase 2 of the SIA identified a number of weakness in each of the following areas:

• governance institutions • social and civil society institutions • environmental institutions • technical and educational capacity for economic development • regulatory capacity for economic development • financial capacity for economic development • physical capacity for economic development

The mitigation and enhancement measures recommended in the SIA include measures to address these shortcomings. 2.4. Scenarios for trade liberalisation The SIA has been undertaken before the trade agreements have been finalised, so that the potential impacts can taken into account during the negotiations as well as in the development of parallel policy measures. The SIA assesses scenarios which represent an outer bound of the extent of trade liberalisation that may agreed in the negotiations, so that potential problems can be identified. As defined in the second report of Phase 2 of the SIA, the scenarios for the EMFTA are defined in four parts. These can be taken together to comprise a single overall scenario for full implementation of the EMFTA, whose impacts are assessed by comparison with the baseline scenario. They cover the following four areas:

• industrial products • agriculture • services and investment • south-south liberalisation


Baseline scenario This provides a ‘without EMFTA’ scenario, as a comparison against which to assess other scenarios. It is defined as the continuation of foreseeable trends, including traditional trade and foreign direct investment flows, as described in the first report on Phase 2 of the SIA study. Scenario for industrial products The scenario is as described in the existing Association Agreements between the EU and each of the partner countries, which define the liberalisation of industrial products in detail. Scenario for agriculture The scenario assumes full implementation of the Euro-Mediterranean Roadmap for Agriculture, as developed at the meeting of Euro-Mediterranean Senior Officials in Rabat in April 2005 and recommended for adoption by other Ministers at the Foreign Ministers’ meeting held in Luxembourg in May 2005. Potentially sensitive products are not excluded from liberalisation, except for any that may be defined as non-negotiable. All tariff barriers are assumed to be removed, and all non-tariff barriers are assumed to be removed as far as practicable. Scenario for services The scenario assumes the fullest practicable extent of liberalisation of all service sectors that are covered by GATS negotiations, including right of establishment and regulatory convergence. The scenario does not include intellectual property rights, government procurement or capital movements. Barriers which are assumed to be removed are those defined in GATS Article XVI. Full liberalisation is assumed for GATS Modes 1, 2 and 3, except for any cross-border trade restrictions that may be required for consumer protection. Commitments for Mode 4 are assumed to cover temporary movement of intra-corporate transferees and contractual service suppliers, for all service sectors. Scenario for south-south liberalisation The scenario assumes full liberalisation between MPCs, comprising elimination of tariffs on goods amongst partner countries, and removal of barriers to trade in services amongst partner countries. 2.5. Review and update of the SIA reports Much of the stakeholder consultation throughout the SIA study has been based on discussion of each of the project’s published reports (Figure 3).


3. Major findings The impact assessment analysis and the development of recommendations are described in detail in the final report of Phase 2 of the SIA and in the first two reports of Phase 3, along with details of the reference sources used. More than 200 published documents contributed information for the quantitative and qualitative aspects of the assessment. The major findings from the assessment have been reviewed and revised in the light of comments received during Phase 3 of the study, and are summarised in the following sections. The significant impacts are summarised in tabular form in Annex 4, distinguishing between impacts of lesser and greater significance. 3.1. Economic impacts Real income The broad conclusion from the modelling studies is that the direct change in static equilibrium economic welfare from the EMFTA is generally positive but small. In the EU welfare is estimated to rise by about 0.2% of GDP from liberalisation of industrial products, with an effect of similar magnitude from liberalising services. For agriculture and south-south liberalisation the estimated welfare effects in the EU are negligible. The expected welfare changes in MPCs lie in the range minus 1 to plus 2 percent of GDP for industrial products and between zero and 0.5% for agriculture. For services the effect is likely to be positive but small, and probably similar in magnitude to that of liberalising industrial goods and agriculture. The estimated welfare effect of south-south liberalisation is close to zero in North African countries but may be higher in Mashreq countries. The overall changes in static economic welfare, which will take place over a period of about ten years, are equivalent in magnitude to about three or four month’s normal economic growth at typical rates. Considerably larger dynamic effects may occur in the longer term in both the EU and MPCs associated with domestic reforms, regional economic integration and technological development, to which the EMP and EMFTA are expected to contribute. These effects are however strongly dependent on other factors, and cannot be attributed directly to the EMFTA. The MPCs tend to have similar comparative advantages for both industrial and agricultural goods, such that greater regional integration would expose MPC industries to greater competition from each other. In order to achieve the potentially large gains of regional integration, MPCs will need to develop cooperative strategies which ease the transition and guide the region as a whole towards higher added value activities. Necessary aspects may for example include the development of integrated regional industrial and agricultural policies, regional cooperation to manage the employment effects of greater complementarity in agricultural and industrial production, the creation of regional institutions, and cooperative investment in regional transport and other infrastructure. The EMFTA is expected to have a significant adverse impact on tariff revenues, which is strongest in Lebanon and the Palestinian Territories (which start from a very fragile fiscal position), while less strong in Israel, Syria and Egypt. For industrial products quantitative estimates indicate a decrease in total government revenue of around 5% of GDP in Lebanon, 2.4% in Tunisia and 2% in Morocco. For agriculture the effect is expected to be significant in


all MPCs except Israel, Tunisia and Turkey, but only between a third and a half of that expected from liberalisation of industrial products. Compensation through other revenue generating activities would have different economic and social effects depending on the method adopted. No significant direct impact on government revenues is expected from services liberalisation, but some aspects require sophisticated regulation in order to achieve the intended benefit and avoid potentially severe adverse impacts. Appropriate regulation would entail significant costs, which MPC governments will have to weigh against the emerging benefits in a carefully phased programme of reforms. Fixed capital formation The immediate effect of industrial liberalisation on fixed capital in MPCs will be negative, as imports replace domestic production and uncompetitive firms close. The exposure to competition will encourage investment in productivity improvements in some of the sectors where fixed capital initially declined, depending on comparative advantages relative to other countries. Opportunities for new investment may attract foreign and domestic capital contributing to long term growth, depending on other domestic policies and the dynamics of both foreign and domestic firms. For agriculture there may be some short term negative effects, but these are not expected to be significant in relation to overall capital formation. Long term investment in agriculture will depend more on domestic policies than on the effects of the EMFTA. For trade in services exposure of MPC service industries to greater competition will encourage investment in them. Since the services scenario includes the right of establishment, much of this investment may come from EU companies. The effects are expected to be significant, but not as large as those associated with domestic reforms. The impacts of south-south trade liberalisation will be broadly similar to those for liberalisation of trade in goods and services with the EU, but are expected to be smaller, in line with the smaller volumes of trade between MPCs. The effects of fuller south-south integration would be significantly greater than those arising from trade liberalisation on its own. Employment For industrial products employment in MPCs will decline initially in those sectors where domestic production is replaced by imports, and rise in those where an increase in production is stimulated. The net short term impact in the absence of effective mitigation is assessed to be significantly negative. Overall long term effects will depend on policies affecting wage rates, re-training, and the extent to which the exposure to competition generates consistent long run economic growth. Unemployment is likely to remain high in MPCs throughout the period of adjustment, as starting levels of unemployment are high, and additional pressures will arise as employment shifts from uncompetitive sectors to competitive ones. For agriculture the overall employment effects are expected to be small, but with significant positive and negative short term local effects in MPCs and southern EU countries. New jobs will be created in MPCs in the production of fruit, vegetables, olive oil, fish and some other products, but partly countered by loss of jobs in products such as cereals, livestock and dairy produce, and incentives to increase productivity. Following consultation on the findings of the Phase 2 study, priority was given in Phase 3 to small scale agriculture and the non-farm


rural sector. Agricultural liberalisation as a whole is not expected to have a significant short term impact on overall levels of unemployment Unless accompanied by successful domestic policies for integrated rural-urban development, the longer term impact on employment of agricultural liberalisation may be signficantly adverse in both rural and urban areas. For services no significant adverse impacts on employment are expected in the EU. In MPCs there will be negative adjustment effects in the short-run as sectors become more efficient and productive. Impacts are expected to be small overall, and restricted to service sub-sectors in which productivity increases rapidly. In comparison with similar changes associated with privatisation and other domestic reforms, impacts from services liberalisation in the EMFTA are not likely to be more than minor in significance. For liberalisation of south-south trade the employment impacts are expected to be smaller than those for liberalising trade with the EU. There may however be significant short term adverse impacts in Mashreq countries for agricultural and other products for which comparative advantages are similar. 3.2. Social impacts Poverty For industrial liberalisation gains in economic efficiency will enable a net beneficial effect to be achieved once the period of adjustment is over. This gain is small, but much larger benefits may arise from a wider transformation of MPC economies. Industrial trade liberalisation may contribute to this, alongside appropriate domestic policies. However, in the absence of mitigating actions in MPCs, the short term impact of industrial liberalisation on poverty of may be significantly adverse. For agricultural liberalisation there may be short term local adverse impacts on poverty in rural areas in the southern countries of the EU unless mitigated by domestic policy. The short term effects in MPCs will be mixed, with a net negative effect on employment as production shifts between sectors, and a net beneficial effect from falling consumer prices. The price of basic foods is expected to fall, with a beneficial effect on poverty. The longer term impacts in MPCs depend strongly on other factors. Commercial agricultural wages are expected to rise through incentives for greater productivity, but with lower agricultural employment and increased rural-urban migration. Unless urban employment with high added value per employee takes up the balance, rural and urban poverty may both rise. In the absence of appropriate mitigating policies, further adverse effects on poverty may occur in some MPCs, through increased vulnerability to food insecurity. Long term effects on poverty from services liberalisation are expected to be small but positive. In the short term, the liberalisation of distribution services may have adverse effects if not appropriately mitigated, through loss of employment in small retail outlets. For south-south trade liberalisation the long term effects are expected to be small but positive, arising from better economic performance and higher wage rates. There may however be short term adverse effects on poverty in some areas, through loss of employment in those sectors that have a comparative disadvantage compared with other MPCs. . Health and education


Impacts on health and education arise indirectly through the economic effects. Significant long term gains in MPCs are dependent on the integration of trade policy with other aspects of development policy. In those MPCs where there is a significant loss of government revenues there could be a significant adverse effect on health and education programmes unless mitigated by raising revenue from other sources. The effect of agricultural liberalisation will be smaller than from industrial liberalisation, but may be significant in Egypt, Algeria and the Palestinian Territories. In those MPCs with high levels of trade between each other south-south liberalisation may have similar but smaller short term effects, but longer term improvements are expected through better economic performance. For trade in services a small improvement in education may occur, but this is not expected to be significant. A small beneficial impact is expected in health services, through the greater efficiencies stimulated by stronger competition. Impacts from liberalisation of environmental services may be positive or negative, dependent on effective regulation. Equity The gains in economic welfare in MPCs predicted by the economic modelling studies will in general tend to benefit high consumers more than low consumers and producers, with a small short term adverse effect on social equity. For agriculture high income households will in general benefit while short term effects on poorer households are more mixed. For trade in services the overall effect on distribution of real incomes is expected to be minimal, but short term losses of employment are expected in small retail outlets, with an adverse effect on social equity if not mitigated. Potential longer term effects on income distribution depend strongly on domestic policy. The impact on government revenues and unemployment is likely to have adverse effects on income distribution in the short term, with neutral impacts in the longer term. Longer term pressure towards increased adoption of western consumer cultures in MPCs will have both beneficial and adverse social effects, associated with the advantages and disadvantages of those cultures compared with local traditions. Significant gender impacts may occur in MPCs for agriculture, associated with a decline in traditional food production and the extension of commercial farming. For industrial liberalisation gender impacts are likely to vary between countries according to existing employment patterns and cultural influences, as well as the potential gender effects of inter-sectoral employment changes. Increasing feminisation of the workforce is likely to be an impact in many of the countries, but with uncertain effects on gender equality, dependent on domestic policy. 3.3. Environmental impacts Biodiversity For agricultural liberalisation the short terms effects on biodiversity will be mixed, with beneficial impacts where production declines and adverse pressures where production rises. The positive and negative impacts do not cancel. In the EU the overall effect is small, and in MPCs it is significantly adverse unless mitigated. Effects in both directions will be most significant in areas where water scarcity or land conversion are already causing pressure on


biodiversity. In the longer term, the adverse pressures from increasing production will be partially countered by greater resource efficiency from more competitive agricultural techniques. The impact of south-south liberalisation will be similar to that for EU-MPC liberalisation but smaller. Small effects may occur from liberalisation of services and industrial goods but these are not expected to be significant in relation to more general pressures. Environmental quality For industrial products significant beneficial impacts are expected in the short term in most of the MPCs, for those aspects of air quality, water quality and land degradation that are associated with industrial pollution. The greatest effects are expected in Egypt, and to a lesser extent Morocco and Tunisia. If domestic production falls rapidly the impacts could be large, and smaller but still significant if the economic impacts are effectively mitigated. Long term beneficial impacts are also expected, as expanding industries adopt more environmentally efficient production techniques. The benefits will be partially dependent on factors such as the willingness of producers to modernise, their access to management and technical expertise on more efficient, cleaner production systems, and regulators’ responses to the opportunities presented. For agriculture mixed effects on water pollution are expected in the short term. In the longer term, competitive pressures are expected to lead to greater intensity of production, with greater agro-chemical pollution. An increase in rural-urban migration will also lead to longer term adverse effects on urban environments, unless managed by appropriate policies and infrastructural investments. Services liberalisation is expected to help increase the use of environmentally efficient management techniques and technologies in MPCs, and add to the pressures on MPC governments to improve environmental regulation and enforcement. This will provide a fairly small addition to the promotion of such techniques by international agencies. Liberalisation of distribution services is expected to lead to goods being sourced from a wider area, with consequent adverse impacts on local pollution and climate change associated with increased transport. Changes in packaging techniques may have adverse impacts on waste generation, requiring stronger regulation to encourage recycling. Similar effects are expected for south-south trade liberalisation, but in most areas the impacts will be smaller than for liberalisation with the EU. The overall impact on climate change will be adverse, particularly in the long term. This arises primarily from increased international transport and the influence of the EMFTA on consumption patterns in MPCs. Natural resource stocks For industrial products both short and long term effects are expected for industrial energy consumption and water usage, with similar variations between countries. The benefits will depend partially on the introduction of energy efficient technologies and water use control


effective mitigating action is taken, there will be a small but significant adverse effect on Goals 1 (poverty), 2 (education) and 4 and 5 (health). Both positive and negative effects occur for Goal 7 (environment), while the impact on Goal 8 (global partnership) is positive. The potential adverse impacts arise primarily from a short term rise in unemployment and loss in tariff revenues, occurring mainly for liberalisation of industrial products, but with additional effects from the other components of the EMFTA scenario. Without effective mitigation, some of the short term effects may continue into the long term. 3.6. Opportunities for mitigation and enhancement The regional overview SIA conducted in Phase 2 of the SIA identified a range of policy measures and other actions that may be taken in both the EU and MPCs to enhance the beneficial impacts of the EMFTA and to avoid or minimise the potentially adverse ones. 3.6.1. Impacts in the European Union The main significant impacts of the EMFTA that have been identified for the EU are a small overall economic gain, accompanied by potentially adverse social effects arising from agricultural liberalisation. The adverse effects are restricted to local areas of EU Mediterranean countries (Spain, Greece, Italy, Portugal and southern France, and probably also Cyprus and Malta). They will be associated with local environmental impacts, which are expected to be beneficial for water consumption and biodiversity, with potentially adverse effects on amenity value. The local adverse effects may be mitigated by three alternative approaches:

• limiting the extent of agricultural liberalisation, e.g. for sensitive products • reducing the pace of agricultural liberalisation, to allow time for other measures to

take effect • parallel policy measures such as providing local support for the multi-functional role

of agriculture, associated with reforms of the Common Agricultural Policy (CAP). Further analysis is needed in order to identify an optimal balance between economic and other factors in the development of mitigation policies. 3.6.2. Impacts in Mediterranean Partner Countries Because EU-MPC trade is a greater proportion of total MPC trade than it is of total EU trade, the potential impacts of the EMFTA tend to be greater in MPCs than in the EU. A range of parallel policy measures may be undertaken by MPCs, in order to mitigate adverse impacts and enhance beneficial ones. Additional action may be taken within the Euro-Mediterranean Partnership, to provide assistance and support to MPCs in implementing the necessary policies. Mitigation of potentially adverse impacts The SIA has identified both beneficial and adverse impacts. The most important needs for effective mitigation of potentially adverse impacts are to avoid:


• a significant rise in unemployment, particularly for liberalisation of EU-MPC trade in industrial products (short term) and agriculture (long term), and to a lesser extent for services and south-south liberalisation;

• a fall in wage rates associated with increased unemployment; • a significant loss in government revenues, with consequent potential social impacts

through reduced expenditure on health, education and social support programmes; • higher environmental and social stress in cities, resulting from declining rural

employment and accelerated rural-urban migration; • greater vulnerability of poor households to fluctuations in world market prices for

basic foods, partially compensated for urban households by lower food prices; • adverse effects on the status, living standards and health of rural women, associated

with accelerated conversion from traditional to commercial agriculture; • significant adverse local impacts on water resources, soil fertility and biodiversity in

areas of high existing stress; • higher air pollution and coastal water pollution from greater international transport; • higher waste generation from greater use of packaging materials.

Many of these potential impacts would occur primarily in the short or medium term, which may be as long as ten to fifteen years over the full period of adjustment. Unless effective action is taken in the short term, some impacts may continue into the long term. As with impacts in the EU, many of the adverse impacts can be mitigated by restricting the pace of liberalisation to allow other measures to take effect, or by limiting the extent of liberalisation, e.g. for sensitive products. Other necessary policy measures may include action by MPCs themselves, and supporting action by the EU through MEDA and other partnership programmes. Economic measures • 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 Tunisia in its mise à niveau programme, adapted to local needs and to the positive and negative lessons learned from experience with the Tunisian programme. They may for example include assistance to both large scale producers and SMEs to access appropriate information and funding for modernisation, schemes to facilitate the development of MPCs’ internal supply chains, and initiatives to strengthen the responsiveness of education and training systems to changing private sector needs.

• 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.

• 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


• 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.

Social measures • 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.

• Specific policy measures to avoid potentially adverse impacts on women may include stronger labour standards for gender issues, for both agricultural and industrial employment.

• 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.

Environmental measures • In some MPCs such as Israel and Tunisia, existing environmental regulation is sufficiently

strong to counter most of the expected adverse impacts without extensive further development. In other MPCs many aspects of environmental regulation will need to be strengthened, particularly in relation to water resources, land use planning and controls, and protection of biological diversity.

• 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.

There is potential for important EU support in several of these areas, as identified in Section 6 below. Enhancement of potential benefits Several of the policy measures discussed above for mitigation of adverse impacts may in parallel enhance beneficial ones, including, for example, measures to enhance the competitiveness of MPC industrial companies, and to facilitate the transition from traditional to commercial agriculture. One of the main findings of the SIA study is that the potential economic benefits of the EMFTA on its own are relatively small, and that much larger benefits may be realised through fuller integration of MPC economies in conjunction with the EMFTA. The most effective enhancement measures would therefore relate to the broader aspects of regional integration. In this context, consideration should be given to integration not only between MPCs, but with other countries in North Africa and East Asia that are not part of the EMFTA. The SIA study has not attempted to evaluate the complexities of achieving wider integration of this nature, but it indicates that continued efforts in this direction would offer large potential rewards. Further, linking wider integration to the EMFTA and to the other aspects of the Barcelona process would help to secure the peace, stability and shared prosperity which the Euro-Mediterranean Partnership aims to achieve. The following are examples of policy measures which may be considered. • Measures to maximise the benefits of regional trade may include cooperative investment

in regional transport and other infrastructure.

• 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. This might for example include measures taken jointly by MPCs governments, similar to the structural fund programmes undertaken in the creation of the European Union.

• In support of such policies, regional institutions may be created by MPCs, with EU support where appropriate, to undertake research into common issues of economic, social


and environmental development, and contribute to the development of regional and national policy initiatives. Such institutions 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.

3.6.3. Mitigation and enhancement for key issues and sectors Following publication of the Phase Two Final Report many comments and suggestions were made by civil society representatives on priority areas for more detailed study in Phase Three. After discussion of these suggestions with the European Commission it was agreed to focus the Phase Three assessment on four key issues in the Mediterranean Partner Countries (MPCs):

• Environment-related aspects, with emphasis on impact on water resources, environmental services, and convergence of environmental and product standards.9

• Agriculture, with particular attention to small scale agriculture, rural livelihoods and the role of the non-farm rural sector.

• Tax reform, as a key mitigation measure for potentially significant adverse impacts arising from reduced tariff revenues

• Urban employment and industrial diversification, to provide a fuller understanding of the effectiveness of alternative measures to avoid or mitigate the potential employment effects of industrial liberalisation.

The first report of Phase 3 identified mitigation measures for the potentially adverse impacts of greatest concern in each of these areas. While these aspects were the prime focus of the report, it also examined enhancement measures for some of the potentially beneficial impacts of the EMFTA. The findings are summarised below. Environment-related aspects Water Resources Stresses on water resources are particularly high in Egypt, Israel and the Palestinian Territories, and are also high in Syria, Tunisia, Morocco and Algeria. The principal adverse impacts of the EMFTA are expected to occur in specific local areas where agricultural production rises and water resources are already under stress. The overall impact on water use is not expected to be significant, since consumption of water will decline for other products whose production decreases. Nonetheless, significant adverse impacts may occur in local areas if mitigating action is not taken. Problems are likely for products such as olive oil in Tunisia and Lebanon, sugar in Morocco, Egypt and Turkey, and fruits and vegetables in eastern Mediterranean countries. High levels of local stress are however experienced in all MPCs, and adverse impacts may occur for any agricultural products for which the EMFTA stimulates additional exports. Extensive research into water resource issues in the region has already been conducted, and considerable work has been done to develop appropriate water resource management methods 9 The convergence of standards is closely related to opportunities in EU markets for agricultural produce. It is therefore assessed along with other mitigation and enhancement measures for the agriculture sector.


and to encourage their implementation. The EMFTA does not introduce any new issues, but may add incrementally to existing stresses in particular areas. The EU’s Horizon 2020 initiative and other initiatives are already providing extensive support to MPCs in addressing water resource issues. Part of this effort should be specifically targeted to address impacts that are expected to arise through the EMFTA. Further research is needed to identify those particular localities where water stress is already high and production rises are expected. It is recommended that this research be undertaken by each country’s own institutions, with assistance where appropriate from Horizon 2020 and other relevant EU programmes. These programmes for EU support may then be further tailored, and if necessary extended, to ensure that the region’s water resource problems are not exacerbated by the EMFTA. Environmental Services

Water and wastewater treatment services are the main environmental services likely to have significant impact in MPCs. Liberalisation of these services is expected to give an economic benefit to MPCs through higher efficiency arising from greater competition, and may also contribute to reducing water stress. These potential benefits may be associated with social and health impacts, arising from changes in the level of access to water and sanitation for low-income communities. Liberalisation in the services sector has little or no effect if the service is within the public sector. Private sector involvement in the region is low but increasing. While the EMFTA does not include privatisation measures, it will create incentives that may accelerate the trend. Liberalisation may add further economic and environmental efficiencies to service delivery, but will not reduce the need for imaginative and effective public sector initiatives and administrative frameworks, nor reduce the level of public finance that is needed for delivering services to poorer sections of the community. In order to maximise the potential gains and avoid significant adverse social or health impacts, sophisticated regulatory frameworks will be needed for schemes which go beyond subcontracting to private sector management of the service. If private sector involvement is restricted to subcontracting, the EMFTA is expected to give low benefits with low risks. Potentially higher benefits would arise for higher degrees of privatisation, but with higher risks. In order to reduce or eliminate such risks, assistance with developing appropriate regulatory frameworks will be a valuable component of EU support. Agriculture Small scale farming and rural livelihoods It is expected that the opportunities arising through the EMFTA will be tapped most easily by commercial farmers, whereas many of the threats will be experienced in the small scale traditional farming sector. Prices are expected to fall for cereals, other field crops, livestock and dairy produce, reducing the ability of small farmers to compete. In areas where agriculture is primarily commercial, employment will rise. Elsewhere there will be increased incentives for commercial farms to expand their land use, reducing that available for traditional farming. This leads to risks of higher rural unemployment and higher poverty


levels, with significant gender impacts. Rising rural unemployment would increase migration to the cities, causing adverse social and environmental effects in urban as well as rural areas. Three key areas need to be addressed in order to avoid these problems and capitalise on the potential of the EMFTA to help reverse the adverse trends for rural livelihoods in MPCs:

• The social and economic capabilities of individual local communities need to be understood more fully than they currently are in all MPCs, such that they may be developed and tapped. Greater research is needed into the social and economic capabilities of individual local communities, particularly for women and young people.

• National development strategies in MPCs need to take full account of capabilities identified through such research, and capitalise on them in such a way as to make rural development a central component of national development.

• EU support within the Barcelona process needs to provide all appropriate assistance towards developing and implementing such strategies.

The European Union itself has considerable experience in addressing rural development issues as an integral part of overall development strategy, particularly in Mediterranean countries. However, the economic situation of MPCs is significantly different from that of European countries, either as part of the Union or during their accession. Closer parallels can be found in those developing countries that have made successful transitions from low productivity small scale agriculture to high income diversified economies. The example of South East Asia contains many lessons that were reviewed in the first report of Phase 3 for their relevance to MPCs. One of the key factors in the South East Asian success was the use of a variety of types of rural intervention which changed as the overall national economy changed, linked to the evolving urban economy, and itself making a significant contribution to the region’s rapid economic growth. In the light of this experience the following types of initiative have been identified for more fully integrating rural development into national development: • Promoting economically viable rural industries with close linkages between the

agricultural and industrial sectors and between rural and urban industrial activity.

• National priority for rural infrastructure through a wide range of individual programmes.

• Incentives for farming communities to improve their own living environments.

• Support for local initiatives such as building farm roads, small-scale irrigation, village meeting halls, credit unions.

• Encouragement of cooperation in income-generating and knowledge-building projects such as group farming, common seedbeds, off-season vegetable cultivation, community forestation, improved production methods (tapping the experience of EU counterparts), local processing factories and common marketing systems.

• Promotion of rural-urban linkage industries producing component parts or semiprocessed goods for large-scale urban enterprises.

• Decentralisation of industries into rural areas.

• Promotion of specific cottage industries.


Where EU support is targeted at economic development in either urban or rural areas, this support may be designed in such a way as to promote these types of measure within an overall framework for integrating urban and rural development. This would enable the potentially adverse impacts of agricultural liberalisation in the EMFTA to be reduced or avoided, while also enhancing the potential contribution to economic growth in MPCs. Environmental and product standards and market opportunities The EMFTA is expected to improve export opportunities to the EU for products such as olive oil, sugar, sugar products and fruits and vegetables, and also for expansion in food processing. The available benefits may be enhanced by appropriate marketing strategies, while the convergence of environmental and product standards offers further potential benefits. The opportunities may however be constrained by the ability of MPCs to respond to the opportunities. Account needs to be taken of the relationships with issues such as product labelling, geographical indications, cumulation of rules of origin, liberalisation of related services, quality certification, and organic farming. All of these may affect MPC marketing strategies for increased exports to the EU and elsewhere. The assessment presented in the first report for Phase 3 suggests that for both conventional agricultural produce and new initiatives such as organic and hydroponic products, the scope for successful government intervention is low. Agricultural producers are themselves considered best equipped to identify potential market opportunities and undertake the market research that is needed to evaluate their economic viability. Market research of this nature needs to be coordinated with agricultural research as necessary, to evaluate the viability of appropriate production techniques. The need for government initiatives is restricted mainly to coordinating iterative research of this nature, to identify areas where coordinated intervention might contribute to demonstrably profitable private sector initiatives. It is concluded that the principal scope for additional interventions or EU support in this area relates to improving the capabilities of the private sector in MPCs to undertake thorough market analysis and research, so as to better identify viable commercial opportunities and fully evaluate the nature and level of investment needed to successfully exploit them. Such actions would include the introduction of production methods and certification systems for compliance with EU standards, in cases where market research confirms the commercial viability of the necessary investment. No other types of intervention related specifically to the EMFTA were identified, which would enhance its potential benefits beyond those that are expected to emerge through market incentives Tax reform As identified in Phase 2 of the SIA the reduction of import taxes under the EMFTA in some of the MPCs may be significantly larger than the increase in tax revenue expected from increased GDP. The consequent loss of government revenues would result in reduced expenditure, with significant risk that cuts would be made in social support and environmental protection. Tariff reform is therefore a key mitigation measure to avoid such impacts. Most MPCs have introduced VAT systems which can in principle replace lost tariff revenues. All countries’ tax systems have scope for significant improvements in their efficiency, as well as the need for higher rates in response to the EMFTA.


Tax reform is promoted in the Barcelona+10 work programme under the heading of macro-economic policy, but is not identified as a specific action. It is considered to be an important area for EU support in order to avoid significant adverse EMFTA impacts. This assistance may be targeted at tapping the experience of EU countries in developing fair and efficient tax systems for raising the necessary revenues, such as has been provided by the EC in Tunisia and Jordan. A second potential area for EU support arises through rising concerns for climate change. As argued in the UK government’s Stern report, it may be appropriate for high income countries to contribute some of the finance that is needed for low income ones to introduce carbon taxes. A contribution to incorporating carbon taxes into the tax reforms would allow the adverse climate impacts of the EMFTA to be more than compensated, in parallel with improving system efficiency and avoiding adverse impacts from declining tariff revenues. Urban employment and industrial diversification The industrial liberalisation component of the EMFTA is expected to have potentially significant adverse impacts on employment in MPCs unless mitigating action is taken. The EU has supported mise à niveau programmes in MPCs since the mid-1990s, to help enable MPC industries to respond to increased EU competition and avoid rising unemployment. These programmes have been relatively successful in some countries and less so in others. The main success factor has been identified as strong direction and ongoing funding by national government. The study reported in the first report of Phase 3 drew on research undertaken by the World Bank for Morocco, drawing parallels with the success of South East Asian economies. Many of the recommendations for Morocco are relevant for all MPCs, in addressing the common problems of lack of competitiveness and potential unemployment during the implementation of the EMFTA. Key principles derived from international research are:

1. Incentives should be provided only to “new” activities. 2. There should be clear benchmarks/criteria for success and failure. 3. There must be a built-in sunset clause. 4. Public support must target activities, not sectors. 5. Activities that are subsidised must have the clear potential of providing spillovers and

demonstration effects. 6. The authority for carrying out industrial policies must be vested in agencies with

demonstrated competence. 7. The implementing agencies must be monitored closely by a principal with a clear

stake in the outcomes and who has political authority at the highest level. 8. The agencies carrying out promotion must maintain channels of communication with

the private sector. 9. Optimally, mistakes that result in “picking the losers” will occur. 10. Promotion activities need to have the capacity to renew themselves, so that the cycle

of discovery becomes an ongoing one. Several key points may be made in the application of these principles to MPCs. The focus should be on products that are new to the local economy and on new technologies for


producing an existing product, rather than subsidies for general categories of business such as SMEs. Criteria for success should depend on the rate of increase of productivity and its absolute level, and not on employment or output. Government programs should subsidise specific activities needed for increased competitiveness, such as bilingual training, feasibility reports for non-traditional agriculture, infrastructure investment, adaptation of foreign technology to local conditions, or risk and venture capital. Supported activities should be structured in such a way to maximise the spillovers to subsequent entrants and rivals. Promotion activities should be lodged in existing “pockets of bureaucratic competence”, instead of creating new agencies from scratch. Close monitoring and coordination of the programme should be by a cabinet-level politician who shoulders full responsibility for it, or even the president or prime minister. Typical initiatives which may be appropriate in MPCs include:

• Subsidising private-sector pre-investment proposals.

• Mechanisms for higher risk finance.

• Support for chambers of commerce and industry, farmer associations and labour associations.

• Public R&D integrated with private sector activities, targeted to their needs.

• Subsidising general technical training for specific skills, through grants to private firms or institutes.

• Creating an enabling environment for specific types of financial services and business services.

Such initiatives would need to be tailored to address specific local issues in individual MPCs, and to capitalise on their particular competitive advantages. For example, solar energy may present an opportunity for the development of internationally competitive industries in many of the countries, and may be linked to desalination technologies to provide further export opportunities as well as addressing local water resource issues. Provided that EU assistance in this area is used to support locally driven strategies and initiatives, it is expected to make an important contribution to mitigating the potentially adverse employment impacts of the EMFTA and to enhancing the potential economic gains. 3.7. Institutional strengthening and capacity building Many of the mitigation and enhancement measures discussed above cannot be satisfactorily implemented without significant strengthening of institutional capacity in MPCs. Support from the EU through the various initiatives of the Barcelona process would be particularly beneficial in the following areas. • Support for collaborative research among all MPCs into the cost-effectiveness of past

measures to enhance the competitiveness of MPC industrial companies, and of potential future ones.

• Support for detailed collaborative research involving both EU and MPC institutions into the economic, social and environmental impacts of agricultural liberalisation, in both MPCs and southern EU countries, taking account of the interactions. This may lead to


coordinated policy responses, to achieve optimal outcomes for both the EU and partner countries.

• Assistance for schemes providing wider dissemination of information on EU product standards and other market access constraints and opportunities.

• Continued support for stronger environmental management in MPCs, targeted towards measures that are particularly relevant to EMFTA impacts. This may include strengthening institutional capacity for integrated economic, social and environmental planning, and integrated urban-rural and industrial-agricultural planning.

• Support for cooperative investment in regional transport and other infrastructure.

• Assistance with the development of integrated regional industrial and agricultural policies.

• Support for regional cooperation to achieve a smooth transition to greater complementarity in agricultural and industrial production.

• Assistance with the creation of regional institutions to undertake research into common issues of economic, social and environmental development.

• 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.

3.8. Case studies In the second stage of Phase 3 of the SIA two case studies were undertaken to provide more detailed information on the potential impacts and mitigation and enhancement measures identified in Phase 2 of the assessment, with particular reference to the four priority areas examined in the first stage of Phase 3. Morocco was selected for the first of the two case studies because the impacts of the EMFTA are expected to be larger in magnitude in the Maghreb countries than in the Mashreq (in view of their closer proximity to Europe) but broadly similar in nature. Impacts in Morocco and Tunisia are expected to be more representative of those in other countries than Algeria, because of the influence of oil on the Algerian economy. Morocco was selected rather than Tunisia partly because of the ready availability of research findings, partly because of Morocco’s greater size, and partly because the country has yet to liberalise its trade with the EU as fully as Tunisia. The second case study examined the implications of the Morocco study for the Eastern Mediterranean countries. The results of both studies are summarised below. 3.8.1. Morocco case study The case study examined nine key issues:

• rural development; • regional targeting for agricultural policies;


• gender issues in rural development; • optimizing water use and the choice of agricultural products; • agricultural competitiveness and production factors; • risks and opportunities of the agricultural free trade area; • industrial policy choice: the McKinsey study; • the mise à niveau policy; • compensation for lost tariff revenues.

The findings in relation to EMFTA impacts and their mitigation or enhancement are summarised in the following sub-sections. Rural development Morocco’s Strategy 2020 for rural development is an example of strategic development planning which goes some way towards implementing one of the main recommendations made in the Phase 2 SIA report and the Stage 1 report of Phase 3, where it is argued that all MPCs should develop a national development strategy in which rural development is fully integrated with urban development. Morocco’s Strategy 2020 provides an example of a step in this direction. Morocco’s education reform strategy provides an example of another of the recommendations made in the Phase 2 report, that education strategies and actions need to be based on the findings of further research into the social and economic capabilities of individual rural communities, with a focus on specific needs identified in a national development strategy. The case study also presents proposals for development of traditional fishing, rural tourism and rural crafts. This is an example, based on specific country characteristics, of action to promote the diversification of rural economies as recommended in the Phase 2 SIA report. Regional targeting for agricultural policies The case study examined regional variations in terms of size of landholdings, the management of droughts, improvement of productivity, marginality in mountainous zones, pastoralism and the development of oasis systems. The recommendations are typical of the local variations which need to be allowed for in implementing the mitigation and enhancement measures recommended for facilitating the transition to commercial agriculture and supporting the livelihoods of subsistence farmers. Gender issues in rural development The case study identified several key issues for which information is limited. It reinforces a need identified in the other SIA reports, for further research in all MPCs into the social and economic capabilities of individual rural communities, particularly women and young people. Optimizing water use and the choice of agricultural products The case study provides information for Morocco that contributes to satisfying a need identified in the other SIA reports, to identify those particular localities where water stress is already high and agricultural production rises are expected. This information needs to be


complemented by further research in Morocco as well as other MPCs, in order to link action to detailed forecasts of production changes for specific agricultural products arising from the EMFTA. Agricultural competitiveness and production factors The case study shows that a shift of agricultural production away from cereals and towards crops such as tomatoes and olives, as stimulated by the EMFTA, could have beneficial effects for both rural employment and water use. The other SIA reports indicated that the EMFTA is likely to accelerate the transition to commercial agriculture in MPCs, and recommended the adoption of measures to help support the livelihoods of subsistence farmers during the transition period. Such measures should be designed to take full advantage of beneficial effects such as those identified in the case study. Risks and opportunities of the agricultural free trade area The case study uses the results of economic modelling studies to evaluate impacts on household incomes for two products whose production is expected to be strongly affected by the EMFTA: early tomatoes, for which exports to the EU are projected to increase; and soft wheat, for which domestic production is projected to decline in favour of increased imports from the EU. The study reinforces and refines the needs identified in the other reports for measures to accelerate the creation of alternative sources of income in rural areas, and for revised provisions for food subsidies in order to buffer world price fluctuations Industrial policy choice: the McKinsey study The McKinsey study was commissioned by the Moroccan government to identify key economic sectors that have the potential to drive export-led growth, and to articulate an industrial policy to improve the competitiveness of the entire industrial sector. It recommends a strategy based on four main components:

• Off-shoring. Provision of administrative and other services based on Morocco’s comparative advantage in languages (French and Spanish) and the cost advantage of medium-skill labour.

• Export-oriented outsourcing zones. Arrangements to enhance Moroccan outsourcing for European industry, primarily for the automotive and electronics industries.

• Modernization of the traditional industrial sectors. Food-processing, processing of sea products, textiles, traditional crafts.

• Competitive modernization of the industrial structure. Improvement of the general business environment, and mechanisms to improve operational and financial management in businesses.

The SIA has identified a need for measures to help industrial companies in all MPCs increase their competitiveness against European companies, in order to respond to increased competition resulting from the EMFTA. The case study provides an example of how in-depth research into the competitive strengths, weaknesses, opportunities and threats (SWOT) for key industrial sectors can make an important contribution to the design of such measures.


The mise à niveau policy The Phase 3 stage 1 report examined the effectiveness of mise à niveau programmes in several MPCs, intended to mitigate the effect of trade liberalisation on uncompetitive industrial companies. The case study provides further details of the Moroccan programme. It provides examples of successes and shortcomings in the development and implementation of a mise à niveau programme that are relevant for all MPCs. The case study reinforces the recommendation made in the Phase 3 Stage 1 SIA report, that the provision of technical and financial assistance for such programmes should be tailored to address specific local issues in individual MPCs, in support of strategies and initiatives that are nationally driven with national long-term funding. Compensation for lost tariff revenues The case study examines the potential magnitude of loss of government revenues in Morocco resulting from tariff reductions through the EMFTA. It reviews the existing tax structure, and considers alternative reforms to improve the efficiency of the system while raising the additional revenues to compensate for reduced tariffs. The study provides an example of the alternative approaches to tax reform which may be adopted to compensate for lost tariff revenues, as recommended in the previous SIA reports. 3.8.2. Lessons for Eastern Mediterranean Countries Background The principal similarities and differences between Morocco and the Eastern Mediterranean Countries (EMCs) are summarised, in terms of their economic structure, their trade with Europe, and their principal socio-economic and environmental characteristics. Although there are many differences, Morocco and most EMCs face similar challenges related to socio-economic development and environmental sustainability, and have a similar development vision. Environmental protection is also a common concern. Rural Development For the agriculture sector many EMCs are oriented more towards other Arab markets than towards the EU, but nonetheless have significant trade links with Europe. An exception to this arises in Palestine, where the current local situation has prevented exports to the EU in any significant quantities. Many of the positive and negative impacts of the EMFTA on rural development, income and employment may be less significant in EMCs than for MPCs in general. Rural populations tend to be less economically dependent on agricultural exports, while other local characteristics dampen influences towards larger-scale production and monoculture. However, as in Morocco, care has to be taken to differentiate between the responses of small, medium and large agricultural producers to external shocks, particularly in rural areas that are less integrated into regional or global production chains.


For tourism and traditional crafts, opportunities in EMCs are similar to those identified for Morocco. Value-added food industries in rural areas also present opportunities similar to those identified for the traditional fishing industry Morocco. Aquaculture production is also increasing, but is associated with environmental concerns. The number of food processing plants certified for export to the EU is far lower in most EMCs than in Morocco, Algeria, Tunisia and Turkey. This is an important area for attention in enhancing the benefits of the EMFTA. Water use optimization The optimization of water use is a central issue in EMCs as well as Morocco. The effects of the EMFTA are strongest for producers of agricultural commodities such as Egypt and Syria. Livestock production, particularly for beef, is also a heavy water consumer. As for Morocco, food security concerns may still drive Egypt and Syria to cultivate cereals, and water valuation issues are similar. There is a need for investment and training in new agricultural practices and irrigation technologies. Preferential technology transfer arrangements and more liberalized trade regimes in relevant environmental goods would have a significant environmental benefit. Industrial competitiveness The structure of the industrial sector in EMCs is broadly as described for Morocco, contributing less than 30% of GDP but providing a significant share of exports and foreign currency. As in Morocco the vast majority of industrial establishments are SMEs. Large industries and state-owned enterprises are relatively limited in number and mostly associated with petroleum-based industries or with preferential trade arrangements with the United States. Trade between GAFTA member countries has increased in recent years, particularly towards Iraq and the Gulf States, while Israel also manufactures and exports high-technology industrial goods with exports to the EU and Turkey. Integration into regional and global value chains is gradually increasing, but not necessarily with Europe. Trade in manufactured goods with the United States surpasses trade with the EU in several EMC sectors, due in large part to preferential trade agreements. As in Morocco, opportunities for creating value-added production raises policy issues associated with reducing costs for imported primary inputs, on which import duties are levied. The opportunities and barriers for export growth in SMEs are similar to those discussed for Morocco, as are the other constraints on the competitiveness of the business environment and access to finance. Industrial development policy As in Morocco, off-shoring of business from Europe offers significant potential. Egypt, Israel and Jordan have sought to establish industrial zones outside urban centres as a means to stimulate non-agricultural employment in rural areas. Qualified industrial zones (QIZs) have been established in Jordan and Egypt as a means to improve access to the US market and increase the integration of supply chains between EMC countries. This serves as an effective vertical measure to increase export-oriented investment in the garment sector. There is a need for public authorities to develop the capacity for managing the environmental issues of these initiatives.


The need for regulatory reform to take advantage of opportunities presented by the EMFTA identified in the Morocco study is common to all MPCs. Cumbersome and inefficient business regulations and procedures are particularly significant in Lebanon, Syria and Jordan. Most EMCs have engaged in “mise à niveau” programmes similar to Morocco’s, and several examples of successes are noted in the study. Barriers to modernisation include the prevalence of SMEs and the fragmentation of industry. Several research and development initiatives to support innovation and adaptation of new technologies are being pursued, with Israel and Egypt among the leaders. The study reviews several successful initiatives to improve access to finance for both large companies and SMEs, and the need to strengthen mechanisms to enable producers to meet environmental, health and safety standards in destination markets. The impact of agricultural trade liberalization The study identifies issues in EMCs similar to those discussed for Morocco, including the need for better water valuation techniques. Syria in particular may be affected by liberalization of trade in wheat, but with differences associated with the continued dominance of state-run enterprise and agricultural intermediaries. Like Morocco, most EMCs are producers of olive oil, while maize and corn-based vegetable oils continue to be food staples. The issue of price volatility associated with the import of staple foods may be greater in many EMCs than identified for Morocco, particularly in Egypt and Lebanon.


4. Proposed monitoring mechanism Proposals have been developed for a participatory mechanism for ongoing monitoring of the EMFTA and its impacts on sustainable development. The proposals are presented in full in the second report on Phase 3. They cover:

• indicators and data requirements • institutional responsibilities • dissemination and capacity building • integration with policy-making

4.1. Indicators and data requirements As well as monitoring sustainability indicators for the potential impacts that have been identified in the SIA, the monitoring mechanism will also need to monitor the actual status of the EMFTA by comparison with the scenarios for which the impacts have been assessed. Indicators are therefore proposed for the monitoring of:

• negotiated agreements by comparison with the SIA scenarios • implementation of agreements (e.g. level of tariffs, NTBs etc.) • parallel actions by comparison with the SIA recommendations • changes in trade flows and production by comparison with SIA estimates • sustainability impacts (economic, social, environmental, process) in each of the MPCs

and the EC. To cover these requirements a set of 40 indicators is proposed (Annex 5). Six of these monitor the implementation of the EMFTA and of parallel actions. The other 34 indicators are based on the potentially significant impacts identified in the SIA study, making use of indicators that have been developed for monitoring the Mediterranean Strategy for Sustainable Development (MSSD). Most of the monitoring would be at a secondary level, drawing together the results of other monitoring activities, interpreting them in the context of the EMFTA, and deriving relevant recommendations for policy-makers. Much of the data required are currently available for some countries, and actions are already in hand under other programmes to strengthen national data reporting systems and make them more coherent. In order to reinforce these initiatives it is proposed that:

• a regular statistical survey be established by the EC and MPC governments,as initiated in the MEDSTAT I and II projects.

• collation of data would be undertaken by an institution appointed or established within the framework of the EMFTA monitoring mechanism, to continue the work undertaken in the MEDSTAT projects. This institution would need to ensure that there is a standardised survey to be completed in a timely manner by all the national agencies and government bodies.

• EUROSTAT and the European Environment Agency (EEA) would be expected to play significant roles, in cooperation with the Mediterranean Action Plan (MAP), the World Bank and relevant UN bodies. Assistance may be provided as required by regional institutes such as Plan Bleu and FEMISE. Other institutions with relevant


expertise include CITET and ESCWA, two of the partners in the SIA consortium. From experience with the North American Free Trade Agreement (NAFTA) it is argued that the monitoring mechanism should include at least some provision for research studies or ex post assessments in order to address issues that may arise. It is proposed that:

• the monitoring mechanism should include provisions for research studies to investigate issues arising from the monitoring results. Such studies would initially be undertaken on an ad hoc basis, but a more formal approach should be considered if accumulating experience indicates an ongoing need

DG Research could provide a suitable funding line for the necessary research. 4.2. Institutional responsibilities The monitoring mechanism for the EMFTA needs to cover economic, social and environmental impacts, as a basis for developing integrated responses which allow for interactions between the three spheres of sustainable development and between the countries of the region. One of the key findings of the SIA is that if the EMFTA is to deliver the major contribution of which it is capable to the sustainable development of the region and to the objectives of the Euro-Mediterranean Partnership, it needs to be more fully integrated with the other components of the EMP (political and safety partnership, economic and financial partnership, social, cultural and humanitarian partnership) and with other strategic actions for regional economic integration. The EMP itself faces new challenges from climate change, economic globalisation, regional migration and the objectives of the Millennium Development Goals. All of these require integrated action across the region and across economic, social and environmental issues. There is a close correspondence between these challenges and the needs of the monitoring mechanism. It is therefore proposed that institutional responsibilities for the monitoring mechanism be designed to address all of these challenges. The overall monitoring framework proposed for the EMFTA is broadly similar to that adopted for NAFTA, extended to cover economic and social as well as environmental issues, and adapted to integrate more fully with government decision-making. The environmental monitoring system for NAFTA is administered by an independent secretariat, the Commission for Environmental Cooperation (CEC), with a joint public advisory committee that includes civil society representatives from the three countries involved (Canada, Mexico and the USA). This enables a high degree of public accountability, but places no direct responsibility on governments for monitoring the consequences of their policies and for taking action on the findings. For the EMFTA it is proposed that the supervisory body should include government as well as civil society representatives, from the EC and each of the MPCs. The prime aim of the proposed monitoring mechanism is to achieve fuller integration of the economic, social and environmental aspects of regional cooperation in relation to the impacts of the EMFTA and its interaction with the other elements of the Euro-Mediterranean Partnership. Many mechanisms already exist within the EMP for regional cooperation on economic, social and environmental issues. If the proposed regional supervisory body were to be introduced separately it would create an additional administrative burden with significant duplication of effort. It is therefore proposed that these existing mechanisms should be


reviewed and revised, and the opportunity to improve their operation, and possibly complement them with an independent monitoring system be assessed. It is recommended that the EC and MPC governments should:

• pending a review of existing mechanisms for regional cooperation, prepare terms of reference for a regional institution (or alternatively a consultant consortium) to be contracted to implement the monitoring mechanism on an interim basis;

• review existing mechanisms for regional cooperation on economic, social and environmental issues;

• develop an action plan for fuller integration and improved reporting and accountability of these mechanisms;

• evaluate the opportunity of a parallel introduction of a regional body to supervise the monitoring mechanism on a long term basis, with top level representation by government officials representing economic, trade, social and environmental issues, and including civil society representation from the EU and MPCs, covering the private sector for agriculture, industry and services, environmental and social NGOs and other social actors such as trade unions and universities;

• seek political agreement on a long term monitoring mechanism, involving full consultation between the Mediterranean partners;

• establish a mechanism for reporting the monitoring results on implementation and impacts of the EMFTA to the Euro-Mediterranean Parliamentary Assembly and to high level and other Ministerial meetings of the Barcelona process.

At the level of the Association Agreements between the EU and individual MPCs, Action Plans have been defined for implementation of the EMFTA in parallel with the other aspects of the Neighbourhood Policy. Each of these includes provision for monitoring its implementation. It is therefore recommended that the EC and MPC governments should additionally:

• establish a formal relationship between the mechanism for monitoring the EMFTA and the joint EC-MPC bodies responsible for monitoring Action Plans under the Neighbourhood Policy.

Whereas the EC has taken the initiative in commissioning the SIA study and fully funding it, it is proposed that supervision of the monitoring mechanism should be regional initiative under the joint responsibility of the EC and MPC governments. This would include joint but differentiated responsibility for provision of the necessary funds. 4.3. Dissemination and capacity building The monitoring results would be collated annually and incorporated into an annual report. Dissemination of the report would include:

• government and civil society stakeholders in the EU and MPCs; • committees in the European Parliament and MPC parliaments dealing with trade,

environment, social issues and regional issues; • the Euro-Mediterranean Parliamentary Assembly (EMPA) and the Circle of

Mediterranean Parliamentarians for Sustainable Development (COMPSUD);


• presentation on request at key stakeholder fora such as the EuroMed civil forum and national Association Agreement committees;

• presentation at Ministerial meetings of the Barcelona process. It is further recommended that:

• Relevant parliamentary groupings should be enabled and encouraged to establish close links to the monitoring work programme.

• Capacity building measures be undertaken to ensure that stakeholder groups in all regions of the Mediterranean have the capacity to provide appropriate contributions. Such measures may for example include regional workshops in which the objectives and mechanisms of the monitoring programme are explained, together with discussion of the types of contribution needed, and development of the necessary expertise.

• Such workshops should bring together representatives from all stakeholder groups in the region, covering non-governmental and private sector stakeholders across the full range of economic, social and environmental issues.

4.4. Integration with policy-making In order to ensure that the mechanism responds adequately to a balanced range of interests in each government, and that governments can coordinate their responses to the findings, it is recommended that the following proposals be considered in the review and revision of existing mechanisms for regional cooperation:

• the EC and each MPC government should establish an inter-departmental Steering Committee similar to that set up by the EC for the SIA, to monitor the implementation and impacts of the EMFTA

• participation on each Steering Committee should include the Ministries or Directorates General responsible for trade policy and negotiation, environment, social issues, key economic sectors, international relations and development assistance.

• the Steering Committees should consult publicly at a national level with civil society. The EC publishes its responses to SIA recommendations by preparing position papers which describe the actions taken or explain the reasons for not taking action. It is proposed that similar arrangements are adopted by the EC and all MPC governments for responding to the monitoring results:

• the EC and each MPC government should prepare and publish a position paper responding to the recommendations given in each annual monitoring report, including the input from prior consultation with civil society.

• the body that implements the monitoring mechanism should collate and analyse the position papers prepared by each of the partners, and present the results in its annual monitoring report.

• progress in implementing the actions defined in the position papers should also be monitored and reported.

• each monitoring report (except for the first) would present and comment on responses to the recommendations in the previous report, and on the implementation of all outstanding actions defined in past position papers.


5. Proposals for awareness raising In addition to the proposals for institutional strengthening and capacity building presented in Section 3.6, implementation of appropriate mitigation and enhancement measures will depend on effective dissemination of information on the SIA findings and increasing public awareness. This will be especially relevant during the transitional period of negotiating and implementing revisions to the Association Agreements and developing support through the European Neighbourhood Policy and other mechanisms. The future development of the EMFTA and its relationship to other aspects of the Barcelona process are expected to be discussed at the inter-Ministerial meeting of the EMP to be held in November 2007. It will therefore be particularly important to raise stakeholder awareness during the preparations for the meeting. 5.1. SIA-EMFTA website The project website will be maintained for consultation on this final report, which will also be made available on the EC website. Information on the report has been circulated to the database of stakeholders developed during the project. 5.2. Presentations by the SIA team It is intended that presentations on the SIA findings and recommendations will be made by representatives of the SIA-EMFTA consortium at stakeholder meetings in the region, particularly during the preparations for the 2007 ministerial meeting of the EMP. Potential opportunities have been identified at events organised by the League of Arab States and UNEP, BusinessMed and Wilton Park (British Foreign and Commonwealth Office). Advantage will be taken of other opportunities that arise. 5.3. Presentations by the Commission services During the course of the study materials have been prepared by the SIA team for use by the Commission services for in-house and public presentations. Similar material will be prepared as required for presentations by the Commission on the project final report, covering: • Summary documents and slide presentations providing information for presentations to

involved stakeholders, e.g. Council and Parliament, Euro-Med Ministers Meeting, NGO representatives;

• Blueprint of a second SIA-EMFTA newsletter aimed at public information, to be considered for publication by the Commission.

5.4. Regional workshops At the beginning of Phase 2 of the project the Commission organised a regional workshop in Brussels for invited participants from the region, which made an important contribution to raising stakeholder awareness of the aims of the project and the proposed methodology. The Commission has undertaken to explore in the course of the study the scope for organising two similar regional workshops for invited participants during Phase 3. These would be convened in Brussels and/or the Euro-Mediterranean Partner countries, to cover:


• One workshop to include representatives of the major authorities concerned from the Mediterranean Partners to consider the proposed monitoring mechanism and the draft conclusions and recommendations (2 days).

• One workshop at Mediterranean expert level to discuss experience related to the activities undertaken during Phase 3 (2 days).

The first of these workshops should if possible take place during the preparations for the inter-Ministerial meeting on 27-28 November 2007, for example in association with the LAS/UNEP meeting in Cairo on 11-13 November. It is suggested that the second of the proposed workshops be devoted primarily to capacity building for the participatory monitoring mechanism as discussed in Section 4.3, bringing together representatives from all stakeholder groups in the region. Consideration should also be given to complementing these regional workshops with national workshops in each of the MPCs, devoted to monitoring and analysing the specific national and local impacts of the EMFTA and the actions needed for enhancing and mitigating these impacts.


6. Overall conclusions and recommendations 6.1. The role of the EMFTA within the Euro-Mediterranean Partnership The findings of the SIA study indicate that the EMFTA can help to deliver large economic benefits to both the EU and MPCs, but only if carried out as part of a comprehensive development strategy in each of the partner countries, in combination with measures to achieve fuller economic integration across the region as a whole. In the absence of strategic measures of this nature, the economic benefits of the EMFTA are small, and may be accompanied by significant adverse social and environmental effects. The EMFTA is an integral component of the Euro-Mediterranean Partnership (EMP), and can in principle make a significant contribution to the goals of the Partnership as a whole. These are:

1. Establish a common Euro-Mediterranean area of peace and stability based on fundamental principles including respect for human rights and democracy (political and security partnership);

2. Create an area of shared prosperity through the progressive establishment of a free-trade area between the EU and its Partners and among the Mediterranean Partners themselves, accompanied by substantial EU financial support for economic transition in the Partners and for the social and economic consequences of this reform process (economic and financial partnership), and;

3. Develop human resources, promote understanding between cultures and rapprochement of the peoples in the Euro-Mediterranean region as well as to develop free and flourishing civil societies (social, cultural and human partnership).

These three goals are highly interdependent, between each other and between countries. This is particularly so for the goal of shared prosperity, for which the EMFTA is the main instrument. As well as being dependent on peace, stability and the development of human resources, the prosperity of each country in the region depends on the country’s particular economic role in the region in relation to the others. The SIA study has argued that the potentially large benefits of regional integration cannot be realised without a regional development strategy that fully integrates the development strategies of each of the countries. The EMFTA and the other components of the EMP are formalised through bilateral Association Agreements between the EU and each of the MPCs. These are developed individually, alongside separate south-south agreements between MPCs. The EU-MPC Action Plans under the Neighbourhood Policy are monitored individually, with no formal mechanism for reviewing the achievement of each country’s economic objectives in relation to each others’. The monitoring arrangements proposed for the EMFTA would provide such a mechanism. Additionally, the proposed arrangements include provisions for integrating economic objectives with social and environmental objectives in the monitoring and promotion of sustainable development across the region as a whole. The EMFTA monitoring mechanism therefore presents a significant opportunity for using all the instruments of the EMP in support of this objective. It is proposed that:


• The proposed review of existing mechanisms for regional cooperation should involve the joint bodies established under each Association Agreement in undertaking a formal review of the EMP and the Barcelona process. The review process should be undertaken in a transparent manner with involvement of the private sector, NGO representatives and other social actors. The aim of this review would be to re-invigorate the Barcelona process and re-direct it towards clearly defined economic, social and environmental goals for each of the partner countries and for region as a whole.

• Each of the instruments of the Euro-Mediterranean Partnership would be subject to revision in a coordinated manner to fully support these revised goals.

• The first stage of such a review would be presented at a high level conference in 2010 (Barcelona+15). This would define and agree an action plan for further development and implementation prior to a second high level conference in 2015 (Barcelona+20).

6.2. SIA recommendations and Neighbourhood Policy Action Plans Country Action Plans in support the EU’s Neighbourhood Policy have been or are being developed between the EU and each MPC. The second report on Phase 3 identified a close correspondence between many of the recommendations that have been made in the course of the SIA study and many of those defined in the Country Action Plans. Each of the Action Plans states that it is to be reviewed within two years of its adoption. It is recommended that:

• Within these reviews and in the subsequent development of the Action Plans, the plans be refined as necessary to ensure that the specific recommendations derived from the SIA study are appropriately incorporated.

6.3. Specific recommendations for negotiators and policy-makers The preliminary recommendations made in the course of the study have been reviewed in the light of contributions from the consultation programme and are presented in Annex 6 in six groups:


The case studies presented in the second report on Phase 3 give examples of initiatives that have been taken to implement such actions, along with a discussion of their effectiveness and of related issues. The footnotes to the recommendations in Annex 6 indicate aspects for which additional information can be found in these studies.


6.4. Overall conclusions of the SIA study Six broad conclusions may be drawn from the SIA study:

1. In parallel with other strategic measures at the national and regional level the Euro-Mediterranean Free Trade Area is capable of making a major contribution to achieving the objectives of the Euro-Mediterranean Partnership and hence to the sustainable development of the region.

2. Implementation of the EMFTA on its own will make only a small contribution to the economic objectives of the EMP, and needs to be accompanied by appropriate parallel measures if significant adverse social an environmental impacts are to be avoided at the local, regional and global level.

3. The parallel measures that are necessary to enhance the beneficial effects of the EMFTA and to avoid significant adverse impacts include actions both at the regional level and nationally in each of the partner countries.

4. In order for the EMFTA to make its full potential contribution to the sustainable development of the region, the Euro-Mediterranean Partnership itself needs to be re-invigorated and re-directed towards clearly defined economic, social and environmental goals for each of the partner countries and for the region as a whole. This reinforces a similar regional need arising from the challenges of addressing climate change, economic globalisation, regional migration and the Millennium Development Goals.

5. The monitoring mechanism proposed for the EMFTA may be used as a framework for addressing all of these challenges.

6. Any such re-invigoration of the Euro-Mediterranean Partnership should be based on a strategic review of its objectives and of the interactions between the EMFTA and the other components of the Barcelona Process in contributing to those objectives.


References IARC (2004) Sustainability Impact Assessment Study of the Euro-Mediterranean Free Trade Area: SIA Methodology. Final Report on Phase 1 of the SIA-EMFTA Project, Impact Assessment Research Centre, Institute for Development Policy and Management, University of Manchester

IARC (2005a) The Evolving Economic, Social and Environmental Conditions in Mediterranean Partner Countries. First Report on Phase 2 of the SIA-EMFTA Project, Impact Assessment Research Centre, Institute for Development Policy and Management, University of Manchester

IARC (2005b) Scenarios for Trade Integration Between the EU and Mediterranean Partner Countries. Interim Report on Phase 2 of the SIA-EMFTA Project, Impact Assessment Research Centre, Institute for Development Policy and Management, University of Manchester

IARC (2006a) Sustainability Impacts of the Euro-Mediterranean Free Trade Area, Final Report on Phase 2 of the SIA-EMFTA Project, Impact Assessment Research centre, Institute for Development Policy and Management, University of Manchester

IARC (2006b) Enhancing or Mitigating Sustainability Impacts in Identified Key Sectors, First Report on Phase 3 of the SIA-EMFTA Project, Impact Assessment Research Centre, Institute for Development Policy and Management, University of Manchester

IARC (2007) Monitoring Proposals, Case Study Findings and Preliminary Recommendations: Second Report on Phase 3 of the SIA-EMFTA Project, Impact Assessment Research Centre, Institute for Development Policy and Management, University of Manchester


Annex 1. Principal reports published by the study

Methodology report

Sustainability Impact Assessment Study of the Euro-Mediterranean Free Trade Area: SIA Methodology.

Final Report on Phase 1 IARC (2004)

Baseline report The Evolving Economic, Social and Environmental Conditions in Mediterranean Partner Countries.

First Report on Phase 2 IARC (2005a)

Scenario report Scenarios for Trade Integration Between the EU and Mediterranean Partner Countries.

Interim Report on Phase 2 IARC (2005b)

Phase 2 final report

Sustainability Impacts of the Euro-Mediterranean Free Trade Area.

Final Report on Phase 2 IARC (2006a)

Sector report Enhancing or Mitigating Sustainability Impacts in Identified Key Sectors.

First Report on Phase 3 IARC (2006b)

Case studies and monitoring

Monitoring Proposals, Case Study Findings and Preliminary Recommendations.

Second Report on Phase 3 IARC (2007)

Final SIA report Sustainability Impact Assessment of the Euro-Mediterranean Free Trade Area.

Final report on Phase 3 this report


Annex 2. Major consultation activities

Mar 2004 Blue Plan, Sophia Antipolis, France

May 2004 Council for Arab Ministers Responsible for the Environment (CAMRE), League of Arab States, Cairo, Egypt

May 2004 Department of Economic Affairs, League of Arab States, Cairo, Egypt

June 2004 Mediterranean Information Office for Environment, Culture and Sustainable Development (MIOECSD), Athens, Greece

June 2004 9th Meeting of the Mediterranean Commission on Sustainable Development (MCSD), Genoa, Italy

Sep 2004 European Environmental Agency, Copenhagen, Denmark

Sep 2004 METAP National Focal Points meeting, Tunis, Tunisia

Sep 2004 Executive Bureau of the Council of Arab Ministers Responsible for the Environment (CAMRE), Cairo, Egypt.

Oct 2004 First Euro-Mediterranean Industrial Cooperation Forum, Barcelona, Spain

Nov 2004 Policies and Strategies for SME Development, Cairo, Egypt

Nov 2004 SIA-EMFTA Public Meeting held in Brussels to discuss the Final Report for Phase One.

Dec 2004 Regional Consultation on the Sustainability Impact Assessment of the Euro-Mediterranean Free Trade Area (pre-conference side event to the 9th Annual Meeting of the Economic Research Forum for the Arab Countries, Iran and Turkey), Beirut, Lebanon

Mar 2005 2nd Euro-Mediterranean Sustainable Development Forum, Barcelona, Spain

Mar 2005 Mediterranean Civil Society Stakeholder Conference: The Mediterranean Strategy for Sustainable Development (MSSD), Rome, (Friends of the Earth MedNet in collaboration with Amici Della Terra Italy).

Apr 2005 Regional Workshop to review the Mediterranean Strategy for Sustainable Development (MSSD) report, Rome, Italy

Apr 2005 9th Annual Conference, Euro-Med Partnership Economic Transition conference, Brussels, (EC).

Apr 2005 Studies on the Impact of Trade Agreements on Sustainable Development: Assessment and Prospects, seminar (GRET/MESD), Paris

Oct 2005 Consultation with Civil Society, FoE NGO Conference (to follow NGO Pre-Barcelona meeting), Malaga, Spain.

Nov 2005 Joint Committee on Environment and Development in the Arab Region, organised by the Technical Secretariat of the Council of Arab Ministers Responsible for the Environment (CAMRE); Cairo.

Nov 2005 Joint Sessions of The Seminar on Water Governance: The Role of Stakeholders and the 4th Meeting of the Circle of Mediterranean Parliamentarians for Sustainable Development (COMPSUD) (Organised by ESCWA, Global Water Partnership-Mediterranean, and COMPSUD; Beirut.


Nov 2005 METAP National Focal Points and Partners Annual Meeting (Organised by METAP); Casablanca.

Dec 2005 Sustainable Development and Competitiveness of the Agro-Food Sector organised by ESCWA; Beirut.

Dec 2005 Greening the European Neighbourhood Policy conference, European Parliament, Brussels, Heinrich Böll Foundation and WWF, in cooperation with EP.

Dec 2005 Workshop on Free Trade and Rural Livelihoods (Organised by IUCN Regional Office for West/Central Asia and North Africa WESCANA and Oxfam); Amman

Mar 2006 SIA-EMFTA Civil Society Meeting, Brussels (EU).

Mar 2006 Trade SIA Stocktaking Conference, Brussels (EU).

Mar 2006 Regional Workshop on Trade and Environment Capacity Building, Muscat, Oman ESCWA-LAS-UNEP/ROWA.

May 2006 11th Meeting of the MCSD, Nicosia, Cyprus (UNEP/MAP).

Jun 2006 Joint IISD-WTO Seminar on Modelling the Gains from Trade Liberalisation, Geneva (WTO/IISD)

Sep 2006 Conference on The Impact of the Euro-Mediterranean Partnership on Employment and the Right to Work, Friedrich Ebert Stiftung, Tunis, Tunisia

Nov 2006 Regional Seminar on Trade and Environment, League of Arab States (Cairo, Egypt).

Dec 2006 Working Group Meeting and National Roundtable on Trade and Environment (Amman, Jordan).

Dec 2006 National Roundtable on Trade and Environment (Damascus, Syria).

Dec 2006 Roundtable on Trade, Environment and the Competitiveness of Small and Medium Enterprises (SMEs) (Beirut, Lebanon) .

Dec 2006 Arab Civil Society Organizations (CSOs) Consultation on the Follow Up to the Arab Initiative for Sustainable Development, League of Arab States and Ministry of Regional Planning & Environment, Algiers

Jan 2007 Civil Society Dialogue meeting: Trade Sustainability Impact Assessment (SIA) of the Euro-Mediterranean Free Trade Area (SIA-EMFTA): Phase III: first report Meeting in Brussels.

Feb 2007 Regional Seminar on Sustainable Development Policy Tools, SMAP III TA in Istanbul, Turkey.

May 2007 Annual meeting of the Circle of Mediterranean Parliamentarians for Sustainable Development (COMPSUD), Corfu.

May 2007 12th Meeting of the Mediterranean Commission on Sustainable Development (MCSD) in Istanbul, Turkey.

Jun 2007 Economic Transition Conference, Brussels.


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: 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 Tunisia in its mise à niveau programme, adapted to local needs and to the lessons learned from experience with the Tunisian programme. They may for example include assistance to both large scale producers and SMEs to access appropriate information and funding for modernisation, schemes to facilitate the development of MPCs’ internal supply chains, and initiatives to strengthen the responsiveness of education and training systems to changing private sector needs. 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.

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.

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.

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.

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:

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.

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. 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.

8. i) Strengthen impact analysis of economic reforms and co-operation in the region;

Phase 3 of the SIA-EMFTA will contribute to this

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 Mediterranean by 2020, based on the recommendations of Euromed Environment Ministers using inter alia the MSSD and the UNEP Mediterranean Action Plan towards this end, while providing adequate financial and technical assistance to this end. The goal should be to tackle all the major sources of pollution including industrial emissions, municipal waste and particularly urban wastewater. Exchange experience on sustainable development in the Baltic Sea, the Mediterranean and the Black Sea;

In some MPCs such as Israel and Tunisia, existing environmental regulation is sufficiently strong to counter most of the expected adverse impacts without extensive further development. In other MPCs many aspects of environmental regulation will need to be strengthened, particularly in relation to water resources, land use planning and controls, and protection of biological diversity.

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 Barcelona process would be particularly beneficial [inter alia] in the following areas. • 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,


negative one. Specific comments: 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.

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.

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.

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.

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

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.

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 Barcelona process”. The mechanisms for achieving this could be examined in more depth in Phase 3.

Regarding the coordination with other cooperation bodies, you mention the coordination of all EU activities within the Barcelona process towards common sustainable development objectives and you also mention the MSSD. I think, you should also add that activities of the EU have to be coordinated with activities of other cooperation bodies in the region in particular dealing with sustainable development issues (such as UNEP/MAP, World Bank, …).

We agree that this point is important. It can be highlighted in Phase 3.

The clean development mechanism of the Kyoto protocol can also be cited as a financial tool coming from environmental negotiations and able to encourage FDI in specific key sector such as transportation or energy where GHG emissions are strong.

This can be considered in Phase 3.

We nevertheless wonder why MAP (Mediterranean Action Plan) is cited only for the MSSD in your report. Let’s remind that the MCSD

We agree entirely on the importance of all the MAP work


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 distributional effects within the country, if the lost revenue is not replaced by other taxes on the same consumers.

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.

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.

Trade liberalisation: general issues 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.

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.

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.

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.

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.

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.

Industry 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.

The informal economy in MPCs should be studied. Consider for detailed study in Phase 3 Agriculture 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 Southern Europe. The experience of the North American Free Trade Area and its impacts on Mexico, in particular in rural areas and the related loss of rural livelihoods of millions of small farmers, should be carefully evaluated for lessons on possible impacts of the EMFTA.

This experience contributed to the Phase 2 findings, and may be considered for more detailed study in Phase 3.

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.


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.


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.

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.

Disastrous impacts on agriculture had been observed in Lebanon as a result of South-South trade liberalisation with neighbouring countries.


Social issues The critically important issue of migratory flows in the Mediterranean was not mentioned in the SIA, nor the possible impacts of trade liberalisation on immigration.

This is discussed fairly fully in Section 4.2.1. Unemployment and Migration. It may be considered for more detailed study in Phase 3.

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.

Consumer gains from cheaper prices of EU imports in MPCs would be offset by local producer losses.


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.

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.

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 Barcelona process itself may be regarded as a form of co-responsibility. The report’s recommendations suggest possible means of strengthening this.

Environmental issues 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.

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.


was presented to participants. The European Commission commissioned Manchester University to carry out the independent SIA of the EMFTA to examine the potential impacts of agreed trade measures on sustainable development in the region. It is expected that the SIA will provide reliable and widely accepted analysis of the impact of these trade measures, as well as recommendations to inform ongoing and future trade negotiations on the EMFTA. The SIA phase II study (http://www.sia-trade.org/emfta) identifies some social impacts that may be significantly adverse unless effective mitigating action is taken. The potential impacts of greatest concern are:

Except where noted below, the summary is an accurate reflection of the report’s findings.

a significant rise in unemployment, particularly for liberalisation of trade in industrial products and agriculture a fall in wage rates associated with increased unemployment; a significant loss in government revenues, with consequent social impacts through reduced expenditure on health, education and social support programmes; greater vulnerability of poor households to fluctuations in world market prices for basic foods; adverse effects on the status, living standards and health of rural women.

The main potential adverse environmental impacts that have been identified are:

significant local impacts on water resources, soil fertility and biodiversity in areas of high existing stress; higher environmental stress in cities, resulting from declining rural employment and accelerated rural-urban migration; higher air pollution and coastal water pollution from greater international transport; higher waste generation from greater use of packaging materials. The assessment indicates an overall adverse impact on climate change and global biodiversity, arising primarily through increased transport and greenhouse gas emissions, and pressures for increased agricultural production in biologically sensitive areas in MPCs.

The report goes on to enumerate a number of mitigating measures that Mediterranean countries need to take to avoid the adverse impacts predicted above. Significantly the EU needs to do little or nothing while MPCs will have to take a long list of very costly measures to avoid the adverse social and environmental impacts previewed.

Significant adverse impacts are also identified within the EU, although the EU has stronger institutions for taking mitigating action. A number of alternative measures are recommended for MPCs, and for joint EU-MPC action, not all of which need be costly. Consider for more detailed study in Phase 3.

Given that little or no significant welfare gain (as measured by GDP % increase) is expected in the region from the setting up of the free trade area, one must ask oneself, why bother? The European Commission rhetoric which says that the EMFTA will deliver the EuroMed partnership goals of peace, stability and prosperity to the region is frankly not correct if this SIA report is to be taken seriously. Meanwhile unemployment remains dangerously high in the region, migratory flows and their often tragic consequences witnessed day after day on our televisions continue, and democratic reform in MPCs not forthcoming.

Without enhancement measures the direct welfare gain is expected to be small, but potentially much larger benefits are available in association with parallel measures identified in the report. The EMFTA is only one component of the EuroMed partnership, whose goals are those of the partnership as a whole. The SIA assesses only the incremental impact, in either direction, of the EMFTA on unemployment and migratory flows, whose causes are complex.


economic model since in some cases some ex-post observation can be done. The case of tomatoes sector in Sousse could be a good case study.

study to be considered for Phase 3.

2. The part for services could really bring value added since not so many studies were produced on that sector. This is also the difficulty because data (except headers of the balance of payment classification statistics) and studies are very rare. What we observe in most of the Meda beneficiaries countries is that the service sector develops in a sort of independent way from the rest of the economy. The service sector (at least the formal one) does not seem to provide all the necessary services to the development of a modern and dynamic economy, e.g. business to business services are very low, as well as consultancies in all field, intermediation in all kinds.


3. The financial sector has also this characteristic. That sector is strongly dominated by the traditional banking activity, which has a near monopoly on saving. At same time a lack of competition is observed. Credit by the bank is offered only with very high guarantees. As a result, the access to credit is very difficult or impossible for thousands of small and medium enterprises.


4. Also, transport, energy and construction are very key sectors for the sustainable development of the region. For transportation it is also very linked with the importation of transport equipment. Those three areas are also priority fields of the Mediterranean Strategy for Sustainable Development.


5. Regarding the energy part, trade in renewable energy and services may be linked. The trade of emission rights is also an interesting field. Things are evolving very quickly and it seems that some direct links between the EU emission trading scheme and the MDP emission credit could be formalised. Plan Bleu has a mandate to follow the progress toward the MSSD targets, and is starting for 2006-2007 to focus on "water" and on "energy and climate change". For energy also, we plan to include some activities about carbon finance

Coordinate Phase 3 studies with Pan Bleu, and incorporate available results into Phase 3 final report.

PHASE THREE: SECTOR STUDIES, MONITORING MECHANISM AND PRELIMINARY CONCLUSIONS Table 9. Phase 3 First Report: mitigation and enhancement for key sectors Public meeting, Brussels, 26 January 2007

The report concentrates on impacts in Mediterranean Partner Countries (MPCs), with less emphasis on impacts in the EU.

This is intentional. The Phase 2 report identified some significant impacts in the EU as well as MPCs, but the consultation on the findings had led to the selection of key impacts in MPCs as the priority issues for further study at this stage. The subsequent reports will combine the findings of Phases 2 and 3, to cover both EU and MPC impacts.

The report assesses production systems rather than trade.

The impacts on trade flows were assessed in the Phase 2 report, which identified impacts that were taken as the starting point for the Phase 3 analysis of potential mitigation and enhancement measures.

Other trade agreements such as US-Morocco may affect EMFTA impacts.

Agreed. This was considered in the Phase 2 treatment of the baseline situation, which allowed for other factors such as this. Some, such as Chinese accession to the WTO, had a significant influence on the impact of the EMFTA, which had been allowed for. The agreements with the US would have significant


impact of their own, but were expected to have relatively little influence on EMFTA impacts.

Many of the impacts were incremental additions to existing problems. Would mitigation measures address only the additional impact, and not the overall problem?

Agreed. The final SIA report would reinforce the need for more general action. The SIA does however identify specific impacts of the EMFTA which need to be addressed as well.

The recommendation for integrated development planning was welcomed. This should include land tenure reform, which was a key factor in countries such as Morocco.

Land tenure is discussed in the case studies of the second report. Land reforms are included in the final report recommendations.

Income support measures should be considered as a mitigation measure, e.g. for small cereal producers, with a timeframe limited to the period of adjustment.

Temporary income support included in the final report as part of a package of mitigation measures

It was pointed out that MPCs cannot have the same level of VAT as EU countries.

Agreed, but MPCs should have no difficulty in levying additional VAT of the same amount as the tariff revenue lost.

VAT has significant distributional impacts, and income tax is more equitable.

VAT has been shown to have similar distributional effects to tariff revenues, so that replacement of tariffs by VAT would not have a significantly adverse distributional impact. There may be a case for tax reforms which alter the distributional effects, but this is a separate issue from the impacts of the EMFTA.

The Tunisian Mise à Niveau programme has not been an unqualified success. The report should recommend other countries to learn from its failures as well as its successes.

Noted in the final report.

Not all the beneficial impacts of the EMFTA have been identified in the report.

Agreed. The report addresses particular impacts identified in the Phase 2 report (some positive and some negative). The final report has been checked to ensure that it does not give undue weight to adverse impacts.

More work should be done on the impacts of trade facilitation measures.

Included in the final report recommendations

Clarification was requested on whether the findings for services liberalisation included distribution services.

The report considered only environmental services. Other service sectors, including distribution, had been assessed in the Phase 2 report.

The EC should not leave action to MPC governments. It too has a responsibility to act on the report’s findings and recommendations and adjust its strategy accordingly.

Noted.

Small farmers in MPCs would benefit from greater cooperation among themselves, to facilitate transfer of knowledge on production methods and standards from counterparts in the EU.

Included in final report.

The danger of plant diseases and pests being spread through greater trade should be considered. There is a need for better labelling systems to identify the origin of products, and for stronger inspection at ports.

This was considered in the Phase 2 study. A case can be made for stronger controls, but the EMFTA is not expected to have a significant additional impact.


Table 10. Phase 3 Second Report: monitoring proposals, case studies and preliminary recommendations Suggestions from FoE MedNet on EMFTA monitoring, 14 May 2007

The issue of capacity building at institutional and civil society level to enable EMFTA stakeholders to contribute to the monitoring of the EMFTA needs to be addressed.

Wide government representation in supervising the monitoring mechanism is essential.

The supervisory body would have to have the full political support of the EuroMed Foreign ministers

The supervisory body should include representation of social actors such as trade unions, and universities

All EuroMed countries should ratify the Aarhus convention

Capacity building measures need to be taken to strengthen the contribution to the monitoring mechanism from all stakeholders from all regions of the Mediterranean.

Relevant parliamentary groupings should be closely linked to the work programme of the regional body charged with monitoring the EMFTA

DG Research could provide a funding line for research related to monitoring the EMFTA

If EU and MPC Steering Committees are appointed to coordinate monitoring actions they should consult publicly at a national level with Civil society.

Positioning papers published in response to monitoring results should include the input from prior civil society consultation.

All of the FoE suggestions were taken into account in preparing the Phase 3 second report

Public meeting, Brussels, 10 July 2007

It was asked whether the proposed monitoring mechanism would monitor the impacts of climate change on environmental, social and economic issues in the region and their influence on the EMFTA.

Climate change is one of many parallel influences which will interact with the effects of the EMFTA, and has not been singled out to be tracked within the EMFTA monitoring mechanism. This and other interacting influences will instead be examined as appropriate in the analysis of the monitoring results, in order to identify the causes of observed effects in the evaluation of EMFTA impacts.

There is still a lack of awareness of the SIA study in the Mediterranean region, and greater emphasis is needed on outreach in Mediterranean Partner Countries.

Recommendations have been included in the final report

To this end it was urged that a regional multistakeholder conference should be held in the region to discuss the SIA and its recommendations within the next 6 months.

Included in the recommendations of the final report

This should be complemented by multilingual summaries of the reports and national workshops to examine specific national and local impacts and relevant mitigation and enhancement measures.

It is planned to produce Arabic and French versions of the final report executive summary


The study has identified numerous mitigation and enhancement measures that will be costly for partner countries to implement. It was asked how these would be financed.

Financial assistance for some measures will be available from EC programmes. Other measures will need to be financed by MPCs from the economic benefit they expect to get from the EMFTA

The report’s proposals for fuller integration of decision-making in the monitoring mechanism were welcomed. It was stressed that the proposed monitoring body should report annually to the Euro-Mediterranean Parliamentary Assembly and annual conferences of EuroMed Foreign Ministers.

Noted

It was urged that action on the monitoring mechanism be taken sooner rather than later. A mandate should be secured at the forthcoming November Ministerial meeting, and the Euromed Committee should begin work now on drafting a decision.

Noted

Parliamentarians should be specifically included in the monitoring mechanism.

Included in the final report

In the light of the SIA findings and to allow time for necessary mitigation and enhancement measures, the 2010 target date for completion of the EMFTA should be put back to 2015.

Noted

The Mediterranean countries do not act as a coherent region, and agreements are made between the EU and individual countries.

This point has been stressed in the final report, with recommendations for action

It was asked if any of the SIA reports include a list on non-tariff barriers.

The reports examine NTBs more broadly, and do not include any detailed list. It would however be necessary to examine NTBs is detail in order to set up an indicator for the monitoring mechanism.

Friends of the Earth MedNet submission to the stakeholder consultation of 10 July 2007

General Remarks.

The trade liberalisation process under the EMFTA should specifically be geared to:

a) facilitating the full implementation of the MSSD and national NSSDs.

b) within this context support and enhance the attainment of the Millennium Development Goals by the Mediterranean Partner Countries (MPCs).

c) be supportive of policies and programmes to prepare for and adapt to the impacts of climate change, in particular as regards water resources, soils, biodiversity, and the related need to introduce and sustain resilient agricultural and forestry systems, as well as water-efficient agricultural and industrial techniques.

These three points also apply to Overall Conclusions 4 and 5.

All these points have been taken into account in the final report

We consider that both capacity building and outreach activities have a fundamental role to play in the implementation of the recommendations of the SIA. They need to be prioritized now. Knowledge of the SIA and its findings is too low particularly in MPCs but also generally throughout the region.

Proposals for awareness raising are included in the final report

Friends of the Earth MedNet believes outreach in favour of the Recommended in the final report


SIA can best be done by holding a regional multistakeholder conference in the Mediterranean to discuss the SIA and its recommendations in the course of the next 6 months.

This should then be complemented with national workshops in MPCs analysing the specific national and local impacts of the EMFTA and the recommendations for enhancing and mitigating these impacts.

Included for consideration in the recommendations of the final report

In terms of visibility to complement the outreach activities suggested above, Friends of the Earth MedNet calls on the European Commission to immediately publish a multilingual CDROM on the SIA of the EMFTA as well as country specific fact sheets/leaflets to disseminate the results of the SIA as widely as possible in the Mediterranean region.

Mediterranean stakeholders need to hear from the European Commission on how it will address the results and recommendations of the SIA. We call on the European Commission to prepare a communication reacting to this SIA report and indicating what it plans to do to implement the recommendations contained therein.

We call on Mediterranean Partner Countries (MPCs) to take into consideration the largely adverse social and environmental impacts of free trade with the EU when adopting their negotiating positions and consider the advantages of a multilateral approach to free trade negotiations with the EU in order to achieve a more just trading system in the region.

Noted

We note the numerous and costly mitigation measures that MPCs will need to take to avoid the worst of the adverse social and environmental impacts of free trade, and at the same time the limited mitigating measures that EU needs to take. We wonder how and if these measures will be financed.

Financial assistance for some measures will be available from EC programmes. Other measures will need to be financed by MPCs from the economic benefit they expect to get from the EMFTA

SECTION A. Monitoring Mechanism

We support the establishment of a multi-stakeholder mechanism along the lines suggested in the latest SIA EMFTA report (Phase 3).

We urge that its setting up should be mandated by the forthcoming 9th Conference of Euro-Mediterranean Ministers of Foreign Affairs, Lisbon, on 5 November 2007 so that it can its start work in 2008.

Therefore, work should start immediately within the Euromed Committee on the draft decision to submit to the Foreign Ministers.

Noted

The issue of capacity building at institutional and civil society level to enable EMFTA stakeholders to contribute to the monitoring of the EMFTA needs to be addressed to strengthen the contribution from all stakeholders from all regions of the Mediterranean.

Allowed for in the recommendations of the final report

‘environmental groups’ should be described as environmental NGOs.

Amended in final report


Parliamentarians should also be represented in the monitoring mechanism.

Included in the final report

The proposed monitoring body should report annually to

• The EuroMediterranean Parliamentary Assembly (EMPA)

• The annual conferences of EuroMed Foreign Ministers.

Included in the final report recommendations

SECTIONS B and C.

Specific comments

C2. We advocate the use of the term ‘Sustainable agriculture and Rural Development’ in view of its endorsement by the World Summit on Sustainable Development 2002 and its central role in programmes of UN agencies (e.g. UN Food and Agriculture Organisation)

The wording in the final report has been amended to ‘sustainable agriculture and economically diversified rural development’.

E 1. The wording needs to be refined to refer to Multilateral Environmental Agreements of critical relevance – especially the UN Convention on Biological Diversity and the UN Convention to Combat Desertification – and their co-ordinated implementation at Mediterranean regional level

Wording amended in final report, and extra recommendation added

Finally, in view of the preliminary findings of the SIA EMFTA, and the need for careful modulation of negotiations to avoid the adverse impacts of free trade, as well as time to design national and regional support measures needed to maximise benefits, the target date of 2010 for full trade liberalisation should be adjusted.

We suggest 2015. In the end the goal is to set up a free trade system, which delivers sustainable development rather than economic and social instability to the region.

Noted


Annex 6. Detailed recommendations for negotiators and policy-makers During the course of the study specific policy measures have been identified for actions which may be taken by the EC and MPC governments to mitigate adverse impacts and enhance beneficial ones. These are presented below in six groups:


The case studies presented in the second report on Phase 3 give examples of initiatives that have been taken to implement such actions, along with a discussion of their effectiveness and of related issues. The footnotes to the recommendations indicate aspects for which additional information can be found in these studies. A. Trade-related measures Measures that may be taken within negotiated agreements include both the extent of liberalisation and the timing of implementation.

A1. For industrial goods, the phasing of liberalisation may be adjusted to take account of the evolving conditions in individual MPCs, particularly in respect of the level of unemployment and the implementation of tax reforms to compensate for lower tariff revenues10.

A2. Similar flexibility in timing may be incorporated into agreements for agriculture, services and south-south liberalisation, and may be linked to the monitoring of actual conditions for key economic, social and environmental indicators.

A3. For agriculture, special arrangements may be identified for those products for which large production changes are anticipated in either southern EU countries or MPCs. Such arrangements may be optimised by a thorough evaluation of the alternative options. This may for example take the form of collaborative research into the interacting impacts in both the EU and MPCs, including participatory evaluation on both sides of the Mediterranean of the alternative lifestyles of affected groups, and a fuller evaluation of the environmental issues. The options to be considered would include: continued protection for sensitive products; the removal of protection combined with programmes to support the multifunctional role of agriculture; phased transition from one to the other; and phased transition to full liberalisation. The timing of negotiations would need to be compatible with the availability of the research findings.

A4. For services, special arrangements may be identified for those services for which strong regulation and/or government subsidies may be needed in order to avoid potentially adverse impacts. This may for example apply to distribution services (with potentially significant adverse impacts on small traders), environmental services (related to the availability and cost of supply to poor communities) and financial services (related to lenders’ sensitivity to local cyclical pressures and gaps

10 The case studies discuss alternative approaches to tax reform.


in the credit system). Such arrangements may for example include linking the timing of liberalisation to monitoring the implementation of the necessary regulatory reforms.

A5. Similar arrangements may be incorporated into south-south agreements. A6. In negotiating these and other measures, negotiators are encouraged to note the

specific effects discussed in the full SIA report, alongside the arguments presented by their counterparts in other countries.

Negotiators in the EU and partner countries are urged to review the extent to which these recommendations have already been acted on in implementing the existing agreements and in the ongoing negotiations. B. Domestic policy in the EU Adverse impacts within the EU occur primarily for agriculture.

B1. Develop social policy and environmental policy for affected areas of southern EU countries in line with the findings of detailed research on agricultural reform, for example as developed for CAP reforms, extended to cover the specific impacts of EU-MPC liberalisation..

C. Domestic policy in MPCs For all four components of the EMFTA scenario, action needs to be taken by MPCs to avoid or minimise significant adverse social and environmental impacts, and to enable the potential benefits to be realised.

C1. Direct measures to help industrial companies increase their competitiveness against European companies11, based on in-depth research into competitive strengths, weaknesses, opportunities and threats for key industrial sectors12. Measures may for example include assistance to both large scale producers and SMEs to access appropriate information and funding for modernisation, schemes to facilitate the development of internal supply chains, mechanisms to strengthen the ability of producers to meet EU environmental, health and safety standards, and initiatives to strengthen the responsiveness of education and training systems to changing private sector needs13.

C2. Develop national development strategies in which sustainable agriculture and economically diversified rural development14 are fully integrated with urban development15. Strategies should be based on further research into the social and

11 See the case studies for examples of successes and shortcomings in the development and implementation of mise à niveau programmes. 12 See the Morocco case study for an example of industrial development strategy based on in-depth research of this nature (the McKinsey study). 13 The case studies review a number of initiatives that have been taken to address these needs. 14 See the case studies regarding traditional fishing, rural tourism and rural crafts. 15 See the Morocco case study regarding the Strategy 2020 for rural development. Such strategies need to be developed further, and fully integrated into an overall national development strategy.


economic capabilities of individual rural communities16, particularly women and young people17.

C3. Measures to facilitate the transition to commercial agriculture, and to accommodate changes in the types of agricultural produce. These should be fully integrated with parallel measures to support the livelihoods of subsistence farmers and low income farm workers during the transition period18. Facilitation measures such as land reforms, skills training and micro-credit schemes may be combined with temporary income support measures and initiatives to promote the development of rural industries and accelerate the creation of alternative sources of income in rural areas19.

C4. Measures to provide wider dissemination of information on EU product standards and other market access constraints and opportunities, and to facilitate certification to

order ale within the region, and achieve

t stem of

.

. r resources,

here water stress is already

d small companies in environmental management and cleaner

nergy initiatives into energy policy

ing of environmental standards for marine transport and commercial vehicles.

these standards20. C5. The development of integrated regional industrial and agricultural policies, in

to take greater advantage of economies of scgreater synergy of development strategies.

C6. The creation of regional institutions to undertake research into common issues of economic, social and environmental development, and contribute to the developmenof regional and national policy initiatives, such as developing a common syrules of origin, and regional approaches to dismantling non-tariff barriers

C7. Cooperative investment in regional transport and other infrastructure. C8. Revised provisions for food subsidies, designed to buffer world price fluctuations21

C9. Strengthened environmental regulation, particularly in relation to wateland use planning and controls, and protection of biological diversity.

C10. Further research to identify those particular localities whigh and agricultural production rises are expected22.

C11. Assistance to large anproduction systems.

C12. Action to combat climate change and improve economic performance through the integration of energy efficiency and renewable eand related legal and institutional frameworks.

C13. Promotion of environmentally sound farming practices. C14. Strengthen

16 See the Morocco case study regarding the education reform strategy. Education strategies and actions need to be based on the findings of such research, and targeted at the specific needs of the development strategy. 17 The case studies reinforce this need for further research into socio-economic situation and developmental capabilities of rural women. 18 Such measures need to take account of variations in the socio-economic, environmental and agricultural characteristics between regions within each MPC. See the case studies for examples of the changes in crop types that may be expected, and of regional targeting of agricultural policies. 19 The Morocco case study indicates that the EMFTA will encourage the conversion of land from cereal production, with low labour requirements and high water use, to products such as tomatoes and olives with higher labour requirements and lower water use. Measures to facilitate the transition should be designed to take full advantage of beneficial effects of this nature. 20 The case studies indicate that certification is particularly weak in the eastern Mediterranean countries. 21 The need for such revisions is reinforced by the case studies, which take account of the beneficial impact of falling import prices, and the relative isolation of subsistence farmers from world prices. 22 The case studies provide information that contributes to satisfying this need. Further research is needed to link this information to detailed forecasts of production changes for specific agricultural products arising from the EMFTA.


D. EU development assistance The development assistance programmes of the Barcelona process already address many of the issues in varying degrees. In order to counter the incremental effects of the EMFTA, these efforts need to be strengthened in particular areas.

D1. Promotion of collaborative research among all MPCs into the cost-effectiveness of past measures and potential future ones to enhance the competitiveness of MPC industrial companies. Provision of technical and financial assistance for such measures, in a manner that is tailored to address specific local issues in individual MPCs, and which supports strategies and initiatives that are nationally driven with national long-term funding23.

D2. Assistance based on the experience of EU countries in developing efficient tax systems which replace the lost tariff revenues24.

D3. Support for action by MPCs to mitigate climate change, including the possible incorporation of carbon taxes into tax reforms.

D4. Detailed research into the social and environmental impacts of agricultural liberalisation in MPCs and southern EU countries.

D5. Where EU support is targeted at economic development in either urban or rural areas, this support should be designed in such a way as to promote measures which link rural development to urban development within an overall national development strategy.

D6. Tailor and where necessary extend existing EU programmes on water issues to support MPC institutions in conducting further research to identify those particular localities where water stress is already high and production rises are expected.

D7. Assistance with schemes providing wider dissemination of information on EU product standards and other market access constraints and opportunities.

D8. Targeting of continued support for stronger environmental management towards measures that are particularly relevant to EMFTA impacts. This may for example include strengthening institutional capacity for integrated economic, social and environmental planning, and integrated urban-rural and industrial-agricultural planning.

D9. If MPCs choose to wholly or partially privatise water services and other environmental services, assistance based on experience in EU countries may be provided in developing the necessary frameworks for regulating the industry and subsidising poorer sections of the community.

D10. Assistance with strengthening institutional capacity for the use of environmental economics techniques in development planning.

D11. Coordination of all EU support within the Barcelona process towards common sustainable development objectives, through, for example, inter-agency screening of programme proposals against the priority actions defined in the Mediterranean Strategy for Sustainable Development (MSSD).

D12. Support for further development of the MSSD, taking account of continuing research into the economic, social and environmental impacts of greater regional integration, such that it may be formally adopted as the overarching regional strategy for development.

23 The case studies reinforce this need for tailoring of development assistance in support of nationally driven strategies and initiatives. 24 The case studies discuss alternative approaches to tax reform.



D13. Review Country Action Plans in the EU Neighbourhood Policy to ensure that the specific recommendations of the SIA study are appropriately incorporated.

E. EU support for stronger global governance

E1. Reinforce efforts to strengthen Multilateral Environmental Agreements (MEA) andassociated governance mechanisms which effectively address climate change and declining global biological diversity, including the Framework Convention on Climate Change, the Convention on Biological Diversity and the Convention to Combat Desertification. Impacts in these areas would otherwise deteriorate incrementally under the EMFTA scenario that has been assessed.

E2. Strengthen mechanisms to co-ordinate the implementation of MEAs at Mediterranean regional level.

F. Joint action to monitor the future evolution of EMFTA

F1. Establish a mechanism for monitoring, reporting and disseminating information onthe future evolution of the EMFTA and its impacts on sustainable development, as a formal component of the Euro-Mediterranean Partnership and the Barcelona process25.

F2. Establish a formal relationship between the joint EC-MPC bodies responsible for monitoring Action Plans under the Neighbourhood Policy, and the regional body appointed to supervise the EMFTA monitoring mechanism.

25 The monitoring proposals are presented in Section 4 of this report.

Documents

Sustainability Impact Assessment of the Euro-Mediterranean Free Trade …trade.ec.europa.eu/doclib/docs/2008/february/tradoc... · 2019-05-07 · Executive Summary . This report presents