Written by Johannes Hahn, Member of the EC in charge of European Neighbourhood Policy and Enlargement Negotiations
Trade and economic cooperation are at the heart of the EU’s relations with our neighbours, and they are both in the EU’s and in our partners’ vital interest. We want to make sure the benefits of economic cooperation with the EU spread to small and medium-sized enterprises, and eventually to citizens: increasing market opportunities, especially for the countries which have signed Association Agreements, will in turn help increase growth and create jobs.
Looking towards the East, the EU’s total trade with Eastern Neighbourhood countries amounted to €65.5 billion in 2014, approximately 1.94% of the EU’s global trade that year (€3.386 trillion). There is much more potential there, and we are working on seizing more opportunities for cooperation. Towards that end, the upcoming Summit in Riga on 21-22 May will see the launch of cooperation in the area of digital economy. We are also working with Ukraine to help prepare for the provisional application of its Deep and Comprehensive Free Trade Area (DCFTA) from 1 January 2016 onwards. EU support for sustainable, socio-economic development and inclusive growth continues also in Azerbaijan, Armenia and Belarus.
Important challenges still lie ahead. Determined, comprehensive and sustainable reforms are key to the success. These are for Ukraine alone to implement. But the EU is committed to continue substantially supporting Ukraine in these efforts. Since March 2014, together with EU-based international financial institutions (IFIs), we have mobilised €6 billion in grants and loans to help stabilise the macro-economic situation in the country and facilitate the reform process. We pay particular attention to areas which play a crucial role in the economy as a whole, and in creating growth and job opportunities, such as the development of small and medium enterprises (SMEs), or the energy sector. All our measures combined could bring overall support of at least €11 billion over the coming years from the EU budget and IFIs.
With its southern neighbours, the EU’s trade was worth €188 billion in 2014 -about 5.5% of its total trade. More than four years after the start of the Arab uprisings, the macroeconomic situation remains very vulnerable and does not take sufficiently into account the potential of regional cooperation and trade integration. Syria and Libya are bogged down in bloody conflicts which will have repercussions for years to come.
It is essential for the countries in the region to move ahead with their economic stabilisation and policy agendas at national level, as well as to enhance regional cooperation through the opportunities offered by the Euro-Mediterranean partnership.
In this regard, the EU supports partners in the South comprehensively, both at country level and in a regional context, to make progress in economic sustainability based on a more equitable growth model. EU support tackles a wide range of issues, from stimulating SME development, enhancing innovation, facilitating trade and investment, strengthening business linkages among chambers of commerce and business institutions, to enhancing employment creation and income generation particularly for youth and women. Access to finance is promoted through our Neighbourhood Investment Facility.
Key initiatives on trade are the negotiation of a DCFTA with Morocco and the launching of DCFTA negotiations with Jordan and Tunisia as soon as is feasible for our partners; the implementation of the Euro-Mediterranean Association Agreements (including Free Trade Areas) which are in place with most partners in the region, except for Libya and Syria; and the regional Euro-Mediterranean trade partnership. The DCFTAs will be ambitious and comprehensive agreements in scope and their implementation will require significant efforts in terms of regulatory reform and modernisation from our partners. The EU intends to provide appropriate support for the negotiations and for the future implementation of these agreements, including for the administration, the business community and civil society.
The ongoing review of our European Neighbourhood Policy will also help to redefine ways to deepen economic cooperation between the EU and its neighbours as well as between our neighbours themselves.
The benefits of closer, open economic relations between the EU and its partners obviously apply also to the countries wishing to join the EU. Our enlargement policy gives a strong push to economic integration with the EU. The agreements the EU has with the enlargement countries liberalise trade for almost all goods and establish cooperation in areas like energy, transport and the environment. These agreements and the process of accession negotiations lead to the adoption of EU rules, extending the EU’s Single Market and giving new opportunities to firms on both sides.
To embrace new economic possibilities, the enlargement countries need to strengthen competitiveness. They also need to implement reforms to guarantee the functioning of a market economy, improve regulation and support SMEs. A sound business environment and the fight against corruption are key to attracting investors. Experience of past enlargements shows that the best reformers can reap economic benefits before the accession takes place. Pre-accession support to economic development is diverse and depends on the countries’ economic structure. Actions include facilitating loans from the International Financial Institutions, improving SMEs’ access to finance, and boosting the energy and transport infrastructure.
In the case of the Western Balkans, cross-border transport, energy and communications networks are underdeveloped in the region and further infrastructure investments are much needed to boost economic development. This is why I have initiated together with my colleague, Violeta Bulc, the Transport Commissioner, the identification of the so called “core transport network” for the region. This network will connect the capitals, economic centres and the ports in the region via road, rail, water and air. We are currently preparing the Vienna Summit to press ahead with further progress on the connectivity agenda and economic development of the region.
Only by working together can the EU and its neighbours ensure financial stability, sustainable growth and competitive businesses – and we are committed to achieving this.