The Barcelona Process
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Association Agreement with Algeria Ratified

The Association Agreement between the EU and Algeria has now been ratified. It foresees an extensive liberalisation of the Algerian economy, the opening of its market, and the liberalisation of the energy sector. By Bernhard Schmid

​​Algeria's Association Agreement with the EU was signed in the Spanish city of Valencia in April 2002. Since then it has been ratified by the parliaments of 14 of the then 15 Member States of the EU and by Algeria itself. Before it can actually come into force, however, it must be ratified by the last remaining Member State to do so, the Netherlands.

The agreement foresees the complete liberalisation of the Algerian market for imports and exports as well as a restricted opening of the EU market to Algerian exports. The dismantling of all barriers to trade and competition and all duty barriers is due to begin in two year's time.

Real dialogue or the search for new sales markets?

Naturally, an agreement such as this always generates much talk about international understanding, dialogue of the cultures, and mutual benefits. And naturally the incantation of human rights is never far behind. But the facts speak a very different language: it is all about sales markets and market control.

The agreement is based on the logic of bilateral contracts between the EU as a block and individual North African or Near Eastern states; several such contracts have been concluded as part of the so-called Barcelona Process since 1995.

The example of Morocco and Tunisia

The first individual contracts with Morocco and Tunisia were concluded as far back as 1996. The aim of these contracts was to pave the way for the creation of a free-trade area between the EU and these countries by the year 2010 by eliminating barriers to trade and competition and opening up their markets.

However, this had nothing to do with "south-south integration" in the spirit of a mutual permeation of economies in the Maghrib and everything to do with a one-sided orientation of these markets to the North. This is why many observers fear that these countries will in the long run become more dependent.

Some 70 per cent of Tunisia's foreign trade is currently with the EU and, according to official figures, only 2 per cent with its largest immediate neighbour, Algeria.

Many sectors of these countries' existing industry will not prove competitive and will die out, while their remaining economic strength will be concentrated on a few niches; in other words on products and services for which there is a (temporary?) demand on the European markets.

At present, the World Bank predicts that at least 100,000 jobs will be lost in Tunisia in the coming years. However, the opening up of the Tunisian domestic market has just begun and is set to last until 2010.

"Motorway with no exits"

Similarly, the bilateral contract between the EU and Algeria foresees the complete liberalisation of the Algerian market for imports and exports, and a limited opening of the EU market to Algerian exports. The dismantling of all barriers to trade and competition and all duty barriers is due to begin in two year's time. The aim is that access to the Algerian market should be completely unrestricted by 2017.

The daily newspaper La Tribune quotes the EU ambassador to Algeria, Lucio Guerrato as saying: "This will put the players of the Algerian economy (alongside the Europeans) on a motorway with no exit."

Privatisation of the oil and gas sector

Shortly after the ratification of the Association Agreement, the Algerian parliament reversed the nationalisation of the oil and gas sector after 34 years. Almost all parties - with the exception of the twenty members from the left-wing populist (and former Trotskyist) workers' party (PT) -approved the government proposal. The parliamentarians of the moderately Islamist Islah (Reform) party abstained.

The bill foresees allowing foreign companies not only to acquire minority holdings in oil producing fields and plants, but to acquire stakes of up to 70 per cent. Under certain conditions, western companies will even be permitted to become 100-per cent owners of a deposit.

Only time will tell what massive changes the opening up of the oil sector to western private capital will actually bring. The nationalisation of the oil and gas industry in February 1971 originally formed the core of a development model that focussed on the Algerian domestic market by investing the "oil pension" creamed off by the state in the building up of a diversified industrial sector.

The goal was to overcome the structural underdevelopment of the former colony, whose economy had previously been tailored to meet the needs of "metropolitan" France. But it was evident in the 1980s that this policy had failed.

High dependence on imports

One of the reasons for this situation was the technical dictate of western companies that sold the North African country dilapidated or oversized plants that were sometimes unsuitable for local conditions, or made the Algerians dependent on western spare parts and maintenance work done by their own western "experts".

But the corruption of the local elite, which was willing to buy rubbish as long as it meant that they could pocket hefty commissions, also played its part in the failure of this policy.

Today, Algeria is extremely dependent on imports in most sectors. The only thing that allows it to finance its needs is the powerful "motor" of its economy - oil and gas production - which accounts for over 97 per cent of the country's currency receipts.

It goes without saying that the Europeans and the North Americans are eager to gain a foothold in this sector. Part of Algeria's former state socialist elite until recently put up massive resistance to such a move. Moreover, general strikes called in protest at the opening up of the oil industry in March 2001 and February 2003 paralysed most of the country's economic sectors.

WTO membership and privatisation of the water sector

But the pressure exerted by western creditors and "business partners" eventually proved too great to withstand. Algeria hopes to join the World Trade Organisation (WTO) in the coming months. To do so, it needs the support of western economic powers and, most especially, of the USA, which sets the tone in the committee of 40 WTO Member States that is negotiating with Algeria.

In late March, Algeria will also begin debating the privatisation of drinking water. The French company Vivendi is already in the starting blocks and ready to buy in to the sector. It remains to be seen what will be left of the country's sovereignty at the end of all this.

Bernhard Schmid

© Qantara.de 2005

Translation from German: Aingeal Flanagan

Qantara.de

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