UMVERSITY OF BRISTOL

THE BARCELONA DECLARATION: TOWARDS MODERNIZATION OR BVCREASED DEPENDENCY EV ALGERIA AND MOROCCO?

Jos-Mara Taberna Abad

Dissertation submitted in partial ftilfilment of the requirements for the degree of Master of Science in Comparative and International Policy Studies: Development Administration and Planning November 1996

Declaration

Except where otherwise acknowledged in the text, this study is entirely my own work and has not been submitted for any academic award in this or any other university or institution.

Signed:

Jos-Mara Taberne Abad November 1996

CONTENTS
Declaration Acknowledgements Abbreviatons Chapter 1: Introduction Methodology Aims of the Study Chapter 2: Theoretical Elements Modernization and Dependency Eeonomic Reform and Liberal ization Globalisation and Integration Free Trade 13 15 17 21 11 12 3 4 5

Islamism Chapter 3: The Northern Partner

The European Model of Development The Common Agricultura! Policy EU's Mediterranean Policy The Barcelona Declaration SMEs and TNCs

23

25 30 31 35

39

Chapter 4: Ascent of Dependency in the Maghreb

The Colonial Structure Independence and War: the 1960s The 1970s Development Strategies: National ism vs. Free Trade 42 44

48

The 1980s: Bourgeois National ism and Liberal ization 50 The Arab Maghreb Union AMU The 1990s and Beyond: towards neodependence
53

54

CONCLUSIN Annex Endnotes

57

Bibliography

ACNOWLEDGEMENTS

I am thankful for the enlighment and friendship I enjoyed in Bristol, especially from my colleagues on the MSc, and from the lecturers and staff at the School for Policy Studies. To Peter, Sid, Hisham, Asther and Mara, for their giving me the chance to meet them. To the late Paul Richardson, who mus be in heaven by now after a shorter than usual a time in Purgatory. Thanks to Sally Fry for her hospitality and nice library. My thanks go to Zaheeda Anwar, for her kindness and eontinuous suppor, to Pervaiz Nazir, for his advice, and to Richard Hodder-Williams, for his guidance and encouragement. To the staff of the University Libraries. I am also grateful to the Bristolian beer lovers, Bristol City Rovers and St. Michael's (up)Hill Road for helping me keep in good shape. And to the University of Bristol, for the generous bursary it has granted me.

Glossarv of Abbreviations
ACP AMU CAP CEECs CSCE CSCM CFSP DMEs EBRD ECU EEA EC EEC EFTA EIB EMP EM EPC EC EEC EP ESC EU FIS FAO GATT GCC GMP HDI HDR IFls ILO IMF MFN MNMC MP NAFTA NATO NGO NICs NTB OAU OECD ODA POLISARIO RMP SADR UN UNDP VER WEU WTO African, Caribbean and Pacific (countries) Arab Maghieb Union Common Agricultura! Policy Central and Eastern European Countries ^ Conference on Securiy and Cooperarion in Europe Conference on Security and Cooperaton in the Mediterranean and the Middle East Common Foreign and Securiy Plice Developed Market Economies European Bank for Reconstruction and Development European Currency Uni European Economic rea European Community European Economic Community European Free Trade Association European Investmen Bank EU's Euro-Meditenanean Partnership Economic and Monetary Union European Political Cooperation European Community European Economic Community European Parliament EU's Economic and Social Committee European Union Islamic Salvation Army Food and Agricultura! Organisation (UN) General Agreement on Tariffs and Trade Gulf Cooperation Council Global Mediterranean Policy Human Development Index UNDP Human Development Report International Financial Institutions UN International Labour Organization International Monetary Fund Most-Favoured Nation Mediterranean Non-EU Member Counry EEC's Mediterranean Policy North American Free Trade Agreement North Atlantic Treaty Organization Non-Govemmental Organisation Newly-industrialising Countries Non-Tariff Barriere Organisation of African Uniy Organisation for Economic Co-operation and Development Official Development Assistance Sagua-el-Hamra and Ro del Oro Liberation Front EC's Renewed Mediterranean Policy Sanaran Arab Demoeratic Republic United Nations United Nations Development Programme Voluntary Export Restrictions West European Union World Trade Organisation

CHAPTER1 1NTRODUCTION

We live in 'the age of integration'. If integration is taken to denote a state of affairs or a process involving attempts to combine seprate national economies into larger economic regions, the appearance of the world economy today confirms the aptness of this characterisation'. One of the most important issues at the end of the twentieth century is how governments will respond to the challenges and opportunities of a rapidly changing global economy that shows growing disregard for the interests of nation-states as individual economic units2.

The European Union (EU) sits ai the centre of a web of relations, in principie of free trade, one or both ways, embracing the whole of Europe and virtually all the Mediterranean basin, 31 countries in all; this even extends to a further 68 African, Caribbean and Pacific (ACP) countries through the Lom Convention. The Mediterranean regin shares a common history and destiny, but differs greatly in economic, social and ecological terms. There coexist different religions and cultures; heterogeneous political regimes (parliamentary democracies, military dictatorships, non-recognised states, quasi-feudal monarchies);

persisten! conflicts among some of he region's members (Greece-Turkey, Israel-Arab states, Cyprus, former Yugoslavia, and the Western Sahara); and geographical spread over three continents, so that virtually no institution treats the Mediterranean countries as a collective regin in statistical terms. It is argued that the EU has long remained unable3 to follow a coherent policy vis-a-vis the Mediterranean rea, a group of countries which nowadays are the Union's third-largest customer and its fourth-largest supplief: commercial exchanges between the EU and the Mediterranean basin Non-Member Countries (MNMCs) amount to 6

ECU 78,000 million per year, with ECU 7,000 million surplus for the EU5.

As Engels suggesed, 'there is a contradiction in a thing remaining the same and yet constantly changing'. After a series of bilateral, case-by-case agreements, the Global Mediterranean Policy (GMP) has been the cornerstone of the Union's relations with the MNMCs since its adoption at the EC's 1972 Paris summit. The chief stimulus to the debate on international aid and trade policy in the last decades were he demands of developing counries for a 'new international economic order' (NIEO), spelt ou by the 1973 Algiers Conference of Non-Aligned Countries, among which several MNMCs held a relevan position; it was to involve a fundamental restructuring of the international economy for the benefit of he nations of the 'South'6. Disregarding this approach o internaional economic integration, he 1992 Renewed Mediterranean Policy (RMP) was launched, explicitly introducing Structural Adjustement and GATT components. The Barcelona Declaration followed suit after the Euro-Mediterranean Conference (EMC) of November 1995 announcing the new Euro-Mediterranean Partnership (EMP)- is he latest sep in his series, following EU's June 1995 Cannes summit approval of ECU 4,685 million -less han one year's EU surplus- in financial assisance for 12 Mediterranean associaed counries for he 1996-99 period7. The pars in the EMC hereby

establish a comprehensive partnership -the Euro-Mediterranean Partnershipthrough strengthened political dialogue on a regular basis, the development of economic and financial cooperaran and greater emphasis on the social, cultural and human dimensin.
l is widely accepted that the strongest hrea lo poliical and social insability in the regin sems from rapid populaion growth. Over the last decade, the EU has supported an economic resrucluring which has avoided tackling long-standing disribuive imbalances wihin he

MNMCs domestic economas in favour of adressing macroeconomic concerns8. The concerns

<.

lying at the base of the flurry of activity9 by the various organs of the EU on he occasion of the EMC appear to be clear. The most importan has to do with the deterioraron in the socio-economic circumstances of most Mediterranean countries and with the interest of he EU in alleviating them. Contractions in incomes and continued population growth generated substantial reduetions in per capita consumption levis, especially in Algeria, Morocco and Egypt.

The word Maghreb is Arabic for 'Oecident'. It is traditionally10 used to denote the countries lying west of the Nile valley: Lybia, Tunisi, Algeria, Morocco and Mauritania. They have considerable natural resources (iron ore, non-ferrous metis, coal, phosphates, oil and natural gas deposis), with an important industrial capacity (electrical power, basic chemicals and fertilizers, fisheries, textiles, foodstuffs). These countries are now experiencing the Malthusian dilemma faced by Less Developed Countries (LDCs) throughout he world: their populations are rapidly increasing, yet their resource base is limited. UN's International Labour Organization (ILO) has estimated hat 600,000 Jobs will have to be creaed each year to keep up with demand. By 2010, in several respects a milesone year as we shall discuss, the available workforce will be twice that of 1985. There is a whole set of socioeconomic challenges that the Maghreb has to meet in the future: a continued reliance on Europe for trade, fnance, technology, and the export of labour; the inclination to forgo regional cooperation in favor of national solutions that could not provide economies of scale; and the danger of fmding themselves involved in an Islamis against secularis competition".

This dissertation aims to study he North-Souh developmental and economic dynamics

with a focus on the EU and Algeria and Morocco, the two sub-region's largest economies, which constituted the heartland of former French North frica. As will be discussed later, the Barcelona Declaration envisages the creation of a Mediterranean Free Trade rea (FTA) by 2010, as the cornerstone of its policies to support the estimated 100 million entries into the population of working age in the MNMCs between 1990 and the year 201012. Liberalism maintains that an interdependent world economy based on free trade, specialization, and an international divisin of labour faciltales domestic development. For the EU's liberal economists, economic development requires the removal of political and social obstacles to the functioning and efectiveness of a market system. Trade can serve as an 'engine of growth', as flows of goods, capital, and technology increase optimum efficiency in resource allocation and therefore transmit growth from the developed nations to the LDCs'3.

Algeria is a paradoxical case study: a country that not long ago had a promising economic future, today finds iself in a number of difficulties that dwarf those of many LDCs. Its attempts at political and economic reform have led to a crisis of enormous proportions14; efforts at economic liberalization and adjustment have been taking place in the context of a preearious domestic situation: Civil war started in 1991, with a cost of 50,000 lives, amidst a highly restrictive and constraining international environment15. The situation in Morocco differs in two fundamental respects from thatprevailing in Algeria: firstly, Morocco does not have surplus energ.y, although it possess agricultural surplus; secondly, the resources provided by this surplus come within a structure which appears inadequate to transform it into development of the economy. The agricultural surplus is above all one of agricultural products for export, produced by the enclave modern sector; however both countries' food dficits are noteworthy and constitute a negative factor in the ir international economic

relations16. The country is waging a 20 years-old low-intensity war with POLISARIO, involving Defence expenditures higher than Algeria's.

The creation of the Arab Maghreb Union (AMU) by Mauretania, Lybia, Algeria, Tunisia and Morocco in February 1989, represented the region's latest attempt to form a common economic front against the European Continent17. Central to the concept of Maghreb unity is the idea that the region's historie links crate a wider umma (community), based within a geographically defined rea and bound together by social factors which include the Arabic language, a sociology based in the Berber past, and a near unanimous adherence to the Malekite rite of Sunni Islam18. On the other hand, the heavily centralized, arbitrary and authoritarian regimes that inherited the Maghreb states nave remained broadly the same for the past 30 years19. The AMU is -or, given the current developments, was- meant to promote economies of scale and regional efficiency and to coordnate financial cooperation in the face of growing European economic power. With the limited progress it made20, the AMU represents the best example of the uneasy interaction between local imperatives and international change the regin now faces. Despite a number of pious declarations that it wanted the AMU to succeed, the EU consistently resisted negotiations that would encourage the AMU countries to participate as a single unit. The continuing bickering and Morocco's de faci defection provide a vivid remainder of how economic cooperation among weak peripheral countries remains subject to extraordinary pressures21 and of the pitfalls faced by a form of regional unity in which the pivoal relationship apparently hinged on Algeria and Morocco22.

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METHODOLOGY This dissertation examines the relationship of the EU, Algeria and Morocco on the basis of both primary, but mainly secondary sources, which include academic and professional literature including books, journals, articles and newspapers. Although the review of existing literature is by no means comprehensive, it does attempt to analyse the major factors associated with historical and present EU undertakings with respect to the abovementioned countries in the framework of its Mediteranean policies, and the future implications of such policies.

As academic tools to this end, I shall use the line of argument of Faletto and Cardse, acknowledged as chiefly Marxist, but which also draws on elements of structuralism. Their third approach to dependency has certain elemens in common with the previous two, most notably that there is one integrated world capitalist system, and that economic and political conditions in the Third World are determined by the interaction of internal and external factors. They define dependency (from an economic viewpoint) as a situation in which

the accumulation and expansin of capital cannotfind its essential componen! inside the system23

identifying various stages and forms of dependency: export enclaves under mainly foreign ownership, dependency where the production system is nationally controlled, and contemporary (20th century) dependent industrialising economies controlled by multinational corporations, in which, unlike the export enclaves, industrial production is for the domestic market24. I shall also use, for the dependency study on chapters 2 and 3, the scheme devised by A.G. Frank for his works on Latin America.

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AIMS OF THE STDY

1. To give a deseription of the theoretieal concepts relevant to this dissertation's focus. 2. To analyse the above basic situatons of dependency: the 'enclave economies' and 'economies controlled by local bourgeoisies', arguing that they correspond, in the real world, to Morocco and Algeria respectively, and that both countries are merging into the firs type because of EMP terms, whils there are no traces that they could, because of EU action, turn into contemporary dependent countries. The starting point is a conception of the relationship between external and interna! forces as forming a complex whole whose structural links are not based on mere external forms of exploitation, but are rooted in coincidences of interests between Maghrebian dominant classes and international ones which, on the other hand, are challenged by locally dominated groups and classes25. 3. To describe the economic policy environment that was influential to the signing of the Association Agreements, the EMP and the potential advantages and disadvantages of the implementation of these agreements for the parties involved, thus realising one among Cardoso and Faletto's conclusions: that the most useful contribution that dependistas can make is to promote the study of different dependency situations and, through these, the more detailed characterisation of different forms of dependency26.

This dissertation is divided into four chapters. In chapter 2, I describe some of the main heoretical concepts that have informed it. In chapter 3 some aspects of the EU are discussed in relation to the EMP and previous Agreements. Chapter 4 provides a descriptive analysis of the Moroccan and Algerian situations, briefly discussing what the neodependency situation amounts to.

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CHAPTER2 THEORETICAL ELEMENTS

MODERNIZATION AND DEPENDENCY.

Among the various groupings of Western theorists of Development, modernization and dependency theories have evolved into two incompatible paradigms which share common features: powerful ideological stances; influence in the understanding of the mechanics of development; and methodological approaches. They all agree that industrialisation is the key to economic development, and that this is not promoted by indefinite concentration on expansin of primary exports in exchange for manufactured imports.

Modernization aims to provide an alternative to Marxian theory of modern history27 developing its model specifically to throw light upon the contemporary condition and future prospects of underdeveloped countries28, identifying five stages of growth, namely, the traditional society; the establishment of the preconditions for take-off; the take-off; he drive to maturity; and the age of mass consumption29. A factor which serves to lift an economy out of income stagnation on to sustained growth is a significant increase in the share of savings and investment in national income. The take-off is the central notion of the stages' schema; it is interpreted as a 'decisive transiion in a society's history'30. For this to occur, a new class of entrepreneurs and businessmen mus emerge, willing to take risks in pursuit of profit, notably in commerce. Financial institutions develop, and modern manufacturing enterprise appears. The economic 'take-off is, as will be discussed, a crucial element in the Barcelona Declaration.

13

On the other hand, dependency theories follow a more class-based analysis, focusing on the class distribution of control over the surplus in underdeveloped countries. Economic development consists in national reinvestmen of the surplus and the eonsequent expansin of national outpu3'. Economic underdevelopment is a process as well. The world capitalist system is a pyramidal structure with, at the base, the rural and commodity-producing regions of the periphery. These satellite regions are linked, through trade -the overriding method of surplus extraction- to small centres of surplus accumulation, their local metropolises. These in turn are satellites, and subject to surplus appropriation by the world centres of capitalism, the core; throughout history, merchant capital penetrated even the remotest corners of the periphery. Domestic industry mus not be confused with national industry as long as the former contains a signifieant share of foreign companies, and therefore control32. The phase of competitive capitalist development, when capitalism is at its most dynamic, can be undercut in the periphery by foreign competition. Underdevelopment in the periphery is the necessary counterpart of development at the centre. Thus, dependency is 'a situation in which economies of one group of countries are conditioned by the development and expansin of others'33.

The fundamental metropolis-satellite structure has remained the same throughout the centuries: Expansin of the system from Europe until it incorporated the entire planet; development of capitalism, at first commercial and later also industrial, on a world scale as a single system; polarizing tendencies generic to the structure; war; fluctuations within the system, like booms and depressions, and substitution of one metrpolis by anoher34. All these elements, to be later discussed, are present at the EU-Maghreb dynamics.

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However, if dependence were purely external, it could be argued that conditions exist which would permit the national bourgeoisie to propose an autonomous solution to the problem of underdevelopment. But such a solution does not exist because dependence is indivisible and makes the bourgeoisie itself dependent. Any policy is formulated in response to class interests, which are in turn determined by the dependence of the satellite on the metrpolis35. This interconnection produces increasing polarization between the two ends of the metropolis-satellite chain. Yet there is even more acute polarization at the lower end of the chain, between the local metropolises and their poorest rural and urban satellites whose real income is declining. This moral understanding goes further: the role of promoting historical progress has now fallen to the masses of people alone, including -in some dependistas' thunderous parlance- armed social revolution.

ECONOMIC REFORM AND LffiERALIZATION

'Economic reform' is a broad term, encompassing different strategies and policy approaches to economic development. One of the primary discussions that once engaged a generation of scholars and those who implement policy is, whatever the starting point, whether the Third World should intgrate within a global economy that is dominated by Western economic interests, dissociate from it, or find some kind of middle ground in which it could optimize its own economic opportunities. Generally speaking, this discussion has largely been abandoned, in favor of a market-oriented viewpoint36.

A crucial narrowing of options characerized policy choice across the Third World during the past 15 years compared with the earlier postwar era. The most significant carne from the

15

virtual abandonment of suppor for socialist economics: central planning, extensive state
*:

ownership, and distribution based primarily on need rather than material incentives37. The end of the cold war, new relations among advanced capitalis powers, increased globalization of trade and production, shifting patterns of international finance, and new ideolgica! eurrents are the five key elemente of what has been called the new international context of developmenf*. Dubbed the 'market friendly approaeh' by the World Bank or the 'Washington Consensus' by other International Financial Institutions (IFIs), this ideological stance has emerged worldwide differing substantially from the developmentalism of the 1950s and 1960s and the more radical approaches of the 1970s, going under ames ranging from neoliberalism to neo-orthodoxy. The consensus features three main principies: macroeconomic stability (especially smaller fiscal dficits), a reduced governmen role in the economy (deregulation and privatization) and greater openess to the outside (reduced barriere to trade and a more hospitable approaeh to foreign capital)39.

The liberalization argument has been heard loudly in favor of freeing international rade from the distortions caused by tariff and nontariff barriers (NTBs). These distortions lead to ineffciency in the allocation of investible resources, bringing about a net decline in economic welfare for all trading partners40. Concerning macroeconomic stability, structural adjustment programmes (SAPs) encourage, in theory, the integration of markets by reducing distortions and opening up the economies concerned". SAPs invariably discourage import substitution policies and promote openings for foreign capital investment and for export-led production, a strategy which gives primary emphasis to exports as opposed to producion for the domestic market. Their rationale is threefold: First, increased export production will reduce the trade dficit and facilitate deb servicing. Second, foreign participation and production for export 16

will promote greater efficiency. Finally, because of export's production labor intensity, it will promote greater equity. However, a significant body of research indicates that these relationships are not as strong as reform policy advcales proclaim, and that internal contradictions may do as much to retard economic development as they do to promote it4:, like in Maghreb's case.

The gnesis of the case for neoliberal reform is the neoclassical paradigm of competitive markets. In its strong form, the theory of competitive markets requires small firms or economic agents, none of which has the power to control prices; no externalities, and no government intervention43. While the economic arguments for liberalization have a long history, to many observers the effectiveness of deregulation in practice depends, nter alia, on the institutional structure of the country in question; so, broad policy prescriptions based on abstractions will be ineffectual unless they are tailored to suit the institutional conditions of the country concerned. But somehow the distinctiveness of institutional structures in the Third World is lost when it comes to the advocacy of economic policy in LDCs. As a result, the dominant policy advice emerging from the consensus and international institutions treats the Third World as an undifferentiated whole44. Thus, the policy packages (models) selected by LDCs will resemble those advocated by the developed countries that buy their goods, supply their finance, and provide their ideolgica! guidance45, as in the Maghreb-EU case.

GLOBALIZATION AND BVTEGRATION

Economic interdependence arises at all levis of international economic relations, speeifcally in trade, in capital movements, because of factor movements and in technology.

17

Historically, trade movements have been the most important link between national economies, followed by capital movements. In more recent years, factor movements and technological ties have come to assume a growng role in determining the nature and extent of economic interdependence among sovereign nations46.

At the macrostructural level, debate centers on whether the emerging system will be a multilateral, interdependent one, with cise cooperation among capitalist powers, or a regionalized one consisting of trade and investment 'blocs' in North America, Europe, and Asia. I arge that both these processes are happening -the nonhegemonic interdependence41-, but their consequences differ for the Developed Market Economies (DMEs) and the LDCs, the latter being at the bottom of the regional blocs, able to 'connect' only vertically with the capitalist powers, whilst the former can easily play on the multilateral arena. This new world order is best characterised either as a single global system superimposed upon individual nation-states, which are themselves losing importance, or a world breaking up into three blocs centered on the US, Japan and Europe, resulting in political-economic zones said to be further differentiated as to the models or styles** of capitalism prevailing there.

Economic integration -be it a Free Trade rea, a Customs Union or a Common Marketis basically concerned with effciency in resource use, with particular reference to the spatial aspect. Necessary conditions for its fullest attainment include the freedom of movement of goods and of factors of production, and an absence of discrimination amongst the members of the group49. Throughout Asia in the 1980s, defacto economic integration was occuring without any institutional framework, with Japan as the lead economy. The US-led NAFTA created the largest FTA in the world with a combined GDP of US$6.8 trillion, bringing

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together 363 milllion people, 37 million larger than the EU, but its details need not be spelt here.

Coneerning Europe, it will be recalled that the orthodox theory of economic integration is eoncerned with the gains tha may be derived from changes in the existing patterns of trade. This theory was evolved with the DMEs of Europe. It is natural to ask how far, if at all, the theory is also relevant to the rather differen circumstances of LDCs. Although it is difficult to generalize usefully about the circumstances that favour trade creation, it appears more likely to arise when the existing external trade of prospective members is small relative to their domestic production and where a high proportion of external trade is already undertaken with prospective partners50; this is not occuring with MNMCs.

Europe covers its trade dficit with the US and Japan by means of a surplus in its trade with the Third World and the East51. EU's Economic and Social Committee (ESC) analysis of EU's Mediterranean integration policies states that

It is clear that the marginalization of the Mediterranean as an rea for the location of industry and the expansin of employement in tradeable services, is closely tied to the type of economic development which has prevailed in Europe, and especially to the way in which it has been shaped by the more negative trenas of the economic globalization proces2.

The conditions that favour trade creation are, to the ESC, precisely the opposite of those found in the Maghreb, whose existing external trade is large relative to its domestic producion but whose intra-group exchanges are a minor component of their total trade. The rationale of integration among developing countries rests mainly on the effects of the creation of regional markets on their more fundamental problems, which include the need to increase

19

the opportunities for profitable domestic and foreign investment and the need to mobilize
*

unemployed resources53. The principal policy issues of integration among developing countries centre on three issues, disregarded by orthodox analysis: the determination in international terms of the appropriate scope and direction of regional trade, development and specialization; the issue of equity in the distribution of benefits; and, policy towards foreign investment and transnational corporations (TNCs). In combination these issues produce a situation that dictates a different approach to integration among developing countries from what may be appropriae in DMEs54. The Lagos Plan of Action of the OAU enjoined all African countries to establish sub-regional economic communiies by he 1990s and a Regional Continental Community by the year 2000, foilowing five successive stages Preferential Trade rea, Free Trade rea, Customs Union, Common Market and Community- beginning at the sub-regional levis55. Surprising as i may appear to some, one of the main obstacles lies in the differences among the developing countries which form a unin. These disparities of size and stage of economic development cause problems so far as the equitable sharing of costs and benefits are concerned, as will be discussed on Morocco and Algeria. In fact, this emphasis in 'equity' might well prove the rock on which all such schemes founder. If indeed economic unions are instituted to take advantage of a larger market, to shift production to optimum localities and, in general, to stimulate economic efficiency, some sectors in some geographical reas will be adversely affected56. In particular, the complementary development of specific industries through a regional investment policy has considerable potential57. Another important rea of regional cooperation is that of channeling aid through regional integraion banks or development corporations58. As will be discussed, none of this aspects are present in the Barcelona Declaration; on the contrary, it appears to discourage their creation. 20

FREE TRADE

Based on the principie of comparative advantage and promoting the inernational divisin of labour, i has several major theoretical advantages for achieving modernization. The first is that trade enables all countries to escape from the limitations of their factor endowments and to consume commodities in combinations that lie outside their production possibility frontiers. Secondly, free trade will improve the efficiency of resource allocaion and thus maximize output by permitting every country to specialize in what it does best. Third, under free trade conditions the benefits of scale economies may be optimized. Finally, competition from abroad encourages a more efficient utilization of the factors of production within each firm, making markets more efficient by increasing competition59. There are, however, the famous infant industry, symmetry and starting point arguments agains FTAs and for protection. They have been considered among free traders as some of the most acceptable justifications for interference in free trade60; as will be discussed, the EMP overlooks these arguments. On the same vein, he establisment of the General Agreement on Tariffs and Trade (GATT) in the late 1940s marked the beginning of a systematic process aimed at the liberalisation of world trade within a multilateral framework. GATT's multilateralism -of which algeria never was a member- has gradually given way to bilateralism and regional arrangements. Against this background the Uruguay Round of Multilateral Trade Negotiations was launched in 198661. The World Trade Organizaron (WTO) has been se up as its resul, intended to change some of GATT's shortcomings and plot the course of world trade liberalisation for the next few years. Little, however, of substantive nature has changed and, according to some observers62, the dominaion of GATT by the large industrialised countries has been increased. Much of the agreements are concerned with North countries'

21

access to LDCs markets, and enforcing changes in LDCs domestic practices, so as to faciltate the domination of TNCs, providing legal forc for such strategies. Indeed, the American delegation anticipated that given

the fluid nature of WTO deliberations, the US could genrate enough support to block adoption of any proposed interpretation [of rules] that it opposed*.
Most probably, this anticipation could apply to the EU which, in turn, has requested its Euro-Mediterranean partners that the EMP

wl cover most trade fin the rea] with due obsrvame of the obligations resulting from the WTO.

The essential features of an FTA -emphasized in the Barcelona Declaration as the cornerstone of the partnership- are, the elimination of tariffs on imports from member countries; that member countries retain the power to fix their own seprate tariff rates on imports from the rest of the world; and, the FTA is equipped with rules of origin, designed to confine intra-area free trade to producs originating in, or mainly produced in, the rea. Its establishment will generally alter the relative prices of goods in the domestic markets of he member countries, with repercussions on trade flows, production and consumption. In earlier periods, international trade was the most important economic link among countries and regions. Now it is rivaled by investment and financia! flows, which sometimes obscure64 the meaning of trade figures. Prevalent economic orthodoxy maintains that -as underlined by the Barcelona Declaration- lack of savings is the major constraint to growth in LDCs; trade could help them by increasing the efficiency of local production or by providing a vent for surplus production of commodities65. Closely related to the problems of production and trade are the issues of international capital flows. The implications of this arrangement for

22

Morocco and Algeria will be examined on Chapter 4.

ISLAMISM

The majority of Muslims view their religious beliefs as an integrated body of teachings that form a unified faith. Some authors66 believe that Islam ignores the frontier most people draw between man's inner life and his public actions, between religin and politics. But the relationship between Islam and politics has several dimensions; it is with the nature and interpretation of the political role to be given to Islam that the eonsensus breaks down and there emerges a struggle between those in power and those in opposition and between secularists and Islamists67. In academic circles, the notion of Islam as a monolithic forc has by and large been replaced by the recognition that there exists a 'variety of Islams'68.

Europe and Islam have had a rough time in the past, including two penetrations by Muslim armies into Europe, and the absorption of virtually the whole Muslim world into various European empires in the 19th and 20th centuries69. The rising dissatisfaction with the project of the postcolonial modernizing state70, was made evident by the Islamists' success in Algeria -as in Irn or Sudan-, due less to a clear economic and social program than to an ideolgica! appeal for greater justice and to their challenge to the ruling party71. One of their stated objectives is to prevent further Western aid flowing into the country72. The Koran says little about economics

It is no sin for you that ye seek the bounty ofyour Lord (by trading). Allah permiteth trading andforbiteth usury. (Surah II, 198 and 275).
The Hadiths -Muhammad's handed-down sayings- are a bit more specific, again on usury. 23

Both are relevant to undersanding Islamists position vis-a-vis IFIs and external debt. Islamist intelleetuals are deeply skeptical73 about any economic program or reasons coming from industrialized nations: the reforms they advcate are integrally linked to their perceived real material interests. Has this anything to do with religin? Islamist radical economic programmes have been almost deliberately vague, including those by Morocco's political prisoners, though they are not against modernization per se. Fundamental ists claim to have a distinctive economic policy based on Islam: what it amounts to is a radical social project (tied to the law, family policy, gender relations, education) linked to a revived 1960s NIEO project (state intervention, income redistribution, protection of infant industry, consumer austerity), rather different to the one prevailing our days. Fundamentalism represents above all74 a new form of anti-imperialism, one that believes it can resist international pressures. So one can interpre that Islamist movements are essentially reactive75 in character. On the other hand, the West is not particularly interested76 in the relative merits of secular ism versus Islam, bu rather how best to maintain a political regime that will safeguard Western interests regardless of is ideological orientation77.

Summarising, two among the most ellaborated theories of development arge that trade is a key factor for international economic integration. The Washington consensos has designed the means to achieving it: the creation of FTAs, administraron of SAPs, the strengthening of the WTO, etc. From the three alternaives formerly available to LDCs -that is, full integration within the world economy, dissociation from it, and some kind of middle ground, represented by Morocco, the Islamists and Algeria respectively, only the frst one seems feasible. To clarify this, we must now turn to that part of the world, the EU, which appears to provide a suitable and encouraging model of progress for the Third World.

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CHAPTER3
^

THE NORTHERN PARTNER Although there are many aspeis of the EU's overseas development policies, I have restricted my analysis to the questions of institutional principies, Associationism and Mediterranean policies.

THE EUROPEAN MODEL OF DEVELOPMENT

The EU is no a supranational state, and its common policies do not make it such78. Europe's integration history is not only longer than that of any other regin, but also deeper79. It has coined the term negatve integration to denote those aspects of integration that involve the removal of discrimination and restrictions on movement, such as arise in the process of trade liberalization in the Mediterranean, and positive integration, concerned with the modification of existing instruments and institutions and the creation of new ones -such as the EU itself- for the purpose of enabling the market to ftmction effectively and to promote other broader policy objectives in the Union80. Accompanied by supranational institution building and enforced by an independent bureaucracy, European integration has extended to political and social questions as well as economic relations, none of them envisaged by the EMP. As will be later discussed, the EMP is a casde of negative integration, whereas tha AMU is one of positive integration.

It is not straightforward sketching out a Western European syle of capialism. In part, this is because Europe is internally much more heterogeneous than the US and Japan. So the 'European' model is typically described81 as sustained by strong social controls and

25

commitments that favor long-term orientations and supress preferences for short-term liquidity, representing a social democratic type of advanced capitalism in its own right. Debate over development policies has normally taken place within the European Commission -EU's administrativa body- and beween the Commision and the EU's executive Council of Ministers. This practice may have kept EU development cooperation policies 'safely' in the hands of technocrats and responsible government representatives -these elements lacking in the AMU-, and thus perhaps ensured a degree of continuity and stability whieh otherwise may not have been sustained. As highlighted in this dissertation, it has also stymied innovation and slowed down the path of adaptation82 of these policies to new needs and emerging realities in the Maghreb.

The EU negotiates partnerships under art. 113 of the 1958 Treaty of Rome; it therefore does not need European Parliament's approval, but only endorsement by the European Commission. Its only higher-rank political control comes from the Council's disapproval, as occured with Greece's veto to EMP disbursements for Turkey after sorne incidents in Cyprus. Neither an FTA would need EP's approval. The Treaty, in art. 131 esablished the association between the EEC and the countries and territories of frica, unilaterally creating a free-trade rea between the Community states and their dependencies and among these themselves83, whose evolution has led to the current Lom Convention for ACP states. It also established the possibility of yet another kind of associaion. Under art.238

the Community fcouldj conduele with a third country, a unin of states...agreements creating an association embodying reciprocal rights and obligations
which provides the framework for association with, for example, the EFTA, Mercosur, and

26

the MNMCs.

Two distinct and partly conflicting approaches of development cooperation have remained, uneasily coexisting, within EU members: the globalist view supported by the Netherlands and Germany, and the regional supported by France, Italy and Belgium, steeped in the tradition of 'Eur-Africa'. Regionalism was fmally enshrined in the Lom construction84 with its particular features: the Systems for the Stabilization of Export Earnings (STABEX), and the Promotion of Mineral Production and Exports (SYSMIN), and the Sugar Protocol, all devised to ensure minimum prices for some commodities, that is, one among the NIEO claims. In EU's terminology, associationism stands one step behind regionalism, lacking the above features. As a less expensive model, it seemed to be easily extensible to the Mediterranean and usable to protect Europe from its main 1970s structural weakness: dependency on imported energy85.

Another split concerns where EU development funds, aid and loans should be invested. The northern EU countries have preferred86 to channel money toward Central and Eastern European Countries (CEECs). Insofar as they will be in competition with industrializing LDCs for the markets of the DMEs, the consequences will be negative for he MNMCs, but this mus be countered by the longer-run possibilities, provided economic collapse is avoided87. Moreovef, given the relevance of migration -as shall be later discussed- into the EU for both sub-regions, anxiety about ethnic and religious diversity will make the supply of white, more or less Christian, migrants from the CEECs more attractive then the Maghrebis88 on top of EU's already 10M89 Muslims.

27

Another dichotomy, beween bilateral and multilateral EU aid has become one of the key
4.

structural characteristics of the Union cooperation policies90. Collectively, EU countries are the largest group of shareholders in the World Bank and IMF91. The prevailing explanation among Western IFIs for the uneven performance of LDCs economies, and their subsequent stagnation and debt brises, is that economic performance is linked to a combination of misconceived or ill-managed government interventions and to incoherent local institutions92. These problems had not been tackled by the GMP and subsequent declarations. The agreed creditor strategy of 'cooperation without reform' means dealing with each debtor on a caseby-case basis rather than attempting to fmd a systematic overall solution93. Although there have been modifications in the EU's creditor strategy, its primary principie (that the major task in resolving the debt problem rests with the debtors themselves) has not been altered94 on the EMP. Finally, like multilateral loans, bilateral ODA generally involves explicit economic and/or political conditionality whose features depend on the criteria of individual donor governments95. Among the member states, France, Germany, Spain and Italy have the largest commercial interests in the Maghreb, whilst the UK opposes favoring the sub-region.

As with trade, over 60 percent of European foreign investment takes place within the EU itself5; more than 95% of industrial value-added in the Mediterranean originates in its northern shore97. In reality, the Community is passing hrough an introspective phase in which its member countries are reorienting a large par of their trade towards intraCommunity exchanges at the expense of trade maintained with other regions. Faced with a continuation of this phase combined with the prospect of a European Economic rea (EEA) that foresees incorporation of several CEECs, it canno be hoped that European commercial interests in the Maghreb will experience a positive change98: in the allocation of ODA,

28

Europe has not assigned high priority to the Maghreb (see Tables 2 and 4): of the total development aid provided by the EU in the last decade, only 12% has been destined for MNMCs, compared to 67% to ACP countries and 21 % to Latn America and Asia. In purely commercial terms, the EU only conducts 4% of its external trade with the Maghreb, of which 3.2% is with Algeria and Morocco. The whole Mediterranean accounts for 8% of Union's commeree, and records an annual surplus of ECU 7 billion with the entire group of MNMCs99. Three-ffths of MNMCs exports to the EU are oil and phosphates, neither of which generales much employement, but in manufactures, the EU's exports were almost four times theirs in return100; this is tha classic picture for dependency. However, if trade recedes, the EU has more to lose by the difficulties of the MNMCs in financing their imports from Europe than it has to gain by reducing its own imports which threaen employement in sensitive sectorsm (those in direct competition with LDCs) at home, unless those imports will be fnanced with additional external loans. On the other hand, some authors arge that the most important function of the economically liberal structural adjustment 'solution' may well be to serve the interests of international capital in solving its own stagnation problems, rather than finding a lasting solution for the economic difficulties of the Third World.

Following the cancellation of Algeria's first multiparty parliamentary elections in 1992, controversy has arisen on whether political or economic realism leads European governments to tolrate, if not openly support, the dictatorial regimes in the Mediterranean, which might be the true powder kegs of instability102.

29

THE COMMON AGRICULTURAL POLICY

The problem of world trade in agriculture almost defes solution. Global overcapacity in agricultural production has arisen because many countries have become self-sufficient in food103. A milestone EC Memorndum104 states that

development cooperation is a cornerstone ofEuropean integration.

It is sufficient to compare the EU resources devoted to aid to those that go into the Common Agricultural Policy (CAP) to see the oddity of such a claim. EU spending on agriculture has increased exponentially, and vas funds are now sucked into the seemingly botomless pit of agricullural policy; about half of all EU expenditure goes to agriculture, and about half of that is spent on storage and the disposal of excess food production105. The main obstacle106 is the so-called organization ofthe Mediterranean agricultural space, a euphemism for the reconciliation of he agricultural interests of the MNMCs with those of the more developed countries to the north.

The CAP affects both members and non-member countries in the Mediterranean rea. By devices that influence the price of key producs and reglate access to the Community's market, preference is given to the produce of member counries. Non-members canno compete simply by offering goods at a lower price107. Community preference is a polite lerm for proleclionism which guaranees lo all EU farmers the same minimum price for their produce, regardless of how much they produce and of prevailing levis of supply and demand; all member states share the fmancial burden for making this possible108. CAP is not a policy for agriculture, it is a policy for the Union: that is to say, its central concern is not

30

the level of farm output, farmer ineomes or food prices but the creation and continuance of the EU by defusing competition among members. Such a starting point is essential if the immense importance of political as distinct from economic forces in shaping the CAP is o be understood109. In practice, CAP has virtually isolated"0 the internal European market for temperate-zone food products from the rest of the world, regardless of neoliberal manifestos.

EU cercis are sold on concessional terms to MNMCs governments, which use the proceeds from local sales to supplement their budgets: strictly speaking, this is not food aid, but a form of government budgetary support'" with serious implications vis-a-vis food security.

EU's MEDITERRANEAN POLICBES

Throughout the 1960s the EC established a series of agreements of different contents with several MNMCs, under he term Mediterranean Policy (MP). This first phase was characterized by a case-by-case approach, looking like temporary responses to local trade problems"2. At the end of the decade there was pressure on industrial powers from the LDCs through the United Nations Conference on Trade and Development (UNCTAD), to provide guaranteed free entry for all Third World exports, nter alia to make it easier for developing countries to plan and implement development. Thus, by 1970 a variety of pressures were making for the replacement of bilateral agreements by multilateral ones"3.

The second phase began at the 1972 EEC Paris summit, with the appreciation of the need to treat the countries in the rea in a more systematic fashion"4 following the widespread

31

dissatisfaction with the patchwork of aggreements reached"5, calling the area's development 'a natural extensin of European integration'. Thus the Commission designed the GMP. Henceforth, the new agreements had a similar structure although its contents differed according to the situation of each specifc country, but failed to crate the FTA envisaged by the Commission as the pillar of the 'global' approach of the Community"6. The Commission's guidelines for the economie cooperation between the Community and the MNMCs stressed Maghreb's reduction of food dependence, support for regional cooperation and attraction of risk capital"7, in line wih the NIEO agenda.

Correspondingly, there were two 'generations' of relations: the first began in 1969 with the EEC-Moroccan Association Agreemen (along with Tunisia and Libya), which permited free access for industrial exports, although for the first time restricted agricultura! produce"8. This Agreement set what is known as agricultural traditional exports, the small quantity of Moroccan (and Tunisian) produce allowed to enter the EU outside Community preference. No agreements were signed with Algeria at all. The second, the 1976 Cooperation Accords broadening economie cooperation, technical and fmancial assistance and commercial treaies, included Algeria (see Annex I), started the five-yearly terms for the Accords which have prevailed to date. In light of the little progress and severe imbalances affecting most MNMCs, the 1992 Renewed Mediterranean Policy (RMP) was put in place alongside the Fourth Protocol, reinforcing the existing provisions for GMP with agreements concerning commercial (in line with GATT's Uruguay Round), fmancial (for the first time including SAP grants, of which ECU 60M and 55M were for Morocco and Algeria respectively), technical, and horizontal (regional) programmes, including the new Med-Invest (cooperation among SMEs), Med-Urbs (urbanization), Med-Media and Med-Campus (universities). These 32

aimed to involve the economic, social and institutional actors of the Mediterranean countries"9 and crate a link between these countries and the process of European integration120. An examination of these agreements can be conducted in different ways. Community retoric took it for granted that they represented an advantage for Maghreb nations, concentrating its attention upon the improvements in agrcultural aspects of the agreements. In fact, the efforts exerted to maintain a place121 in the European agricultura! produce market tended to consoldate the present Maghrebian expon structure. The growth in their sale of industrial goods to Community markets did not result in qualitative improvement in their position as commercial partners with the EC122. The following table shows the GNP disparity among selected countries:

Table 1: GNP per Capita of Mediterranean Countries (thousand USD): Rank Country 1992 1980 % Growth

1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

France Italy Spain Israel Cyprus Malta Greece Libya* Yugoslavia* Turkey Algeria Tunisia Jordn Syria Morocco Lebanon Egypt Palestine

22,630 20,790 14,230 13,460 10,300 n.a. 7,390 n.a. n.a. 2,030 1,850 1,760 1,130 n.a. 1,050 n.a.

11,730 6,480 4,500 5,350 3,560 3,470 4,520 8,640 2,620 1,920 1,460 1,310 1,420 1,340

860
n.a.

650
n.a.

580
n.a.

192 221 216 151 189 63 5 13 34 -8 22 12 -

* Not a member of EMP. Source: World Bank Atlas, 1980 and 1991, World Bank; Informe de Desarrollo Humano 1995.

33

Over the past 12 years of GMP, the GNPs of Italy and Spain trebled and the French almost doubled, whereas those of Morocco and Algeria grew little. In light of the stagnation in the regin, he ESC first re-examined the Mediterranean policy of the EC and then expressed two 'opinions' about it123. The first one has been discussed in 1.3. From its second Opinin, again on the effect which the globalization of the economy is having on the Mediterranean regin124, it would follow that an adequate theory of international economic integration must embody a broader set of criteria or goals than that of allocative efficiency125.

According to Maghreb spokesmen, the following reas126 represented the chief sources of disappointment in their relations with the EC: Freedom of access for industrial producs (imposition of NTBs, i.e. textiles); systems of preferences for agricultural goods (efficiency of the protectionist mechanisms of the ACP countries, stagnation in demand for Mediterranean products, increase in ndex self-sufficiency); equitable treatement in the social sphere (discrimination against Maghreb nationals residing in EC); and Cooperation (scarcity of fnancial flows) at a time when, in the rea of commerce, the Community was the principal partner and provider for the Maghreb countries, representing 65 % of their total trade with the rest of the world; the character of this trade responded to the classic scheme of Nort-South relations: the EC sells manufactured products and equipment and acquires raw materials and energy, from which can be deduced a commercial surplus favourable to the North, except in its trade with Algeria, because of hydrocarbons. Of all products entering the EC from the Maghreb at the end of the 1980s, 55% carne from Algeria, while Morocco (25%) remained well behind127.

34

Table 2 shows EC Financial Protocols (1978-1996) with these Countries (Million ECUs), showing an important decrease since the implementation of the RMP:

Protocol No.

Algeria

Morocco

Total

T o t a l % of Tot Protocol Protocol

I (1978-81) II (1982-86) III (1987-91) IV (1992-96) Total

114 151 239 350 854

130 199 324 438

1,901

244 350 563 788

1,945

900
1,308.5 2,028 5,234 9,470.5

27.1 26.7 27.7

15
20.5

Source: Revista Econmica de Catalunya, No.29. May 1996.

Thus the implementation of RMP reduced both counries' share from one-fourth to less than one-sixth of the total EU fmancial aid o MNMCs.

THE BARCELONA DECLARATION

Is the final document, with its Work Programme, of the Barcelona Euro-Mediterranean Conference held on November 1995, adopted by the 15 EU members plus Algeria, Cyprus, Egypt, Israel, Jordn, Lebanon, Malta, Morocco, Syria, Tunisia, Turkey and the Palestinian Authority. It took place after the Cannes European Council of June 1995 set aside ECU 4,685 million for financial assistance to MNMCs for the period 1996-1999.

As discussed in the Introduction, the Declaration envisages three aspects for the EMP: Political and security partnership; Economic and fmancial partnership; and Partnership in social, cultural and human affairs, underlining that the initiative is not intended to replace others undertaken in the interests of the regin. It sets out a follow-up Euro-Mediterranean

35

Committee for the Barcelona process consisting of the EU Troika and one representative of each Mediterranean partner. Given the focus of this dissertation, the security and social componente of the Declaration will not be discussed except for some issues of direct economic relevance, i.e. drug production and smuggling, legal and illegal immigration, gender relations, and the role of NGOs.

Summing up the major economic and finaneial partnership issues, in order of appearance, the parties acknowledge the question of debt and agree to continu the dialogue in the competent fora. They encourage regional cooperation and integration, agreeing to establish an EU-MNMCs FTA with 2010 as the target date for its gradual establishment; trade in agricultural producs will be progressively liberalized through reciprocal preferential access among the parties. They agree to adopt measures for the protection of industrial and intellectual property rights, the development of policies based on the principies of market economy and the integration of their economies giving priority to the promotion of the private sector, the adjustment and modernization of economic structures, and mechanisms for technology transfers.

The participante acknowledge that economic development mus be supported by internal savings and FDI (see Table 4). Regional cooperation will be carried out on a voluntary basis, particularly with a view to developing trade between the partners themselves. Industrial modernization will be achieved mostly through SMEs. There are references to the environment -envisaging a short and medium-term priority action programme-, to the fish stocks, the water supply, the pivotal role of energy, the modernizing and restructuring of agriculture and the erradication of illicit crops. The EIB will supplement the Cannes funds

36

with loans, sound macro-economic management provided. The worrying population trends, the reduction of migratory pressures, and the readmission of illegal immigrants are stated as general objectives, as well as the mitigation of the negative social consequences of adjustment.

The Work Programme lists the bodies or Treaty depositories in eharge of the implementation: European Standards Organization, Mediterranean Waterborne Transport Organization, Treaty of the European Energy Chapter, Mediterranean Tourism Charter, Mediterranean Water Charter, General Fisheries Council for the Mediterranean, and EuroArab Business School.

Any critical discussion of the Declaration's main features should include at least five issues in light of the theoretical elements examined above: First, the fact of its being issued after the Cannes meeting has led some observers to think128 that its financia! aspects had been drafted in Brussels prior to the Conference. Furthermore, all of the bodies in eharge of implementation are Europe-based.

Secondly, as the ESC noted when discussing the Commission's proposal to apply welfare economics to trade policy and integration, the point can be made that the empirical justification for the removal of trade distortions (in terms of good consequences for economic growth) is made entirely without reference to he differing social and political structures'-9 of the countries concerned: The variety of current affairs in the rea, i.e. those of Israel and Algeria, or those of Malta, or Egypt, and Turkey, constitute subsiantial gaps which preclude economic integration. Moreover, this economic integration appears to be a vertical one -

37

taking place across a gap in processing levis, the higher ones generating economic linkages and external economies, and most probably denying them in the peripheries130-, since the Declaration expeets trade to be developed between the partners (MNMCs themselves) on a voluntary basis, but does not provide the institutions for this to happen.

Thirdly, the case is one of across-the-board131 trade liberalization, with procedural emphasis on ataining the objective through the operation of market forces by the negotiation of a suitable tariff structure, which is expected to work broadly in the desired direction including agricultural producs-, instead ofacomplementarityagreementappToach"2 involving

trade liberal ization for certain existing industries or product groups in the context of a delibrate planned rationalization of production among the MNMCs.

Fourthly, concerning agricultural exports, the Declaration takes as its quantitative starting point the traditional flows achieved in the 1970s, pointing out that such matters are covered under bilateral relations on the main.

Fifth, on the internal savings needed for development, there is only an evasive reference to the US$150 billion the MNMCs owe, half of it to the EU countries133. Both Morocco and Algeria are termed 'higly indebted countries', owing almost one year's GNP each; a further important argument for regional integration among developing countries, lacking in the Declaration, is that it may increase the group's bargaining134 power in its external relations.

Although not specifically economic, there have been criticisms135 to the little elaboration on the social, cultural and human aspects of the EMP, even though most of its tems were

38

included in previous cooperation agreements. Some more radical observers136 of these aspects analyse its overall unspecificity: disregard for NGOs or any other civil or grass-root associations; the lack of specific reference to the embarrasingly large democratic dficit in the regin or to female economic independence, except for employment purposes, raising a key question related to the rush to promote markets and the private sector: what public institutions are needed to outline private activity and maintain social cohesin while economic change is taking place?

SMEs and TNCs

Most MNMCs are still essentially in the early stage of industrial development, dominated by ligh industries. The main weight of production is in food processing, textiles and clothing. The funds allocated at the Cannes summit are aimed at

modernizing the productive sectors ofthe Mediterrnean countries.

The MEDA program -wich will replace the former horizontal programmes described in 2.3- envisages solidarity and competition altogether. The EU will retain 30% of the total funding to be redistributed among the MNMCs according to their success in implementing their respective programs, the so-called guillotine stipulations13*, whereby the funding that any contry will not be able to spend will be allocated to other countries which, after having spent their quotas, submit further viable projects.

The sharp increase in risk capital -the amount that stands to be los by a certain action or

39

investmen139- goes parallel to the mentioning of SMEs as a key factor for economic take-off. Because of the lack of reference to the institutions in charge of monitoring the implementation of the funding, it remains to be seen how this component will be carried out. As will be discussed on the next chapter, this reference to SMEs might entail the appeal to TNCs with regard to backward and forward linkages.

It is widely accepted that TNCs constitute units of integration in the world economy'*. The implications of TNCs operations for the practice of integration in developing countries need careful consideration. Without question, the promotion of inter-industry linkages, the reduction of dependence and the enhancement of external bargaining power, the attainement of effciency, equity and other policy objectives in many countries, and the policies of the group and of its individual members towards TNCs might well be regarded as a primary issue in contemporary integration processes141. The behaviour of TNCs in LDCs with respect to transfer prices may also have an important impact on the ability of smaller enterprises to survive, with consequent implications for the viability of a competitive market structureu:. The distinguishing feature of a TNC is that the range of its major decisions is based on the opportunities and problems that the Corporation confronts in all countries in which it oprales143. Considering relations between TNCs and host countries, dependisteis, as discussed on Chapter 1, allege that MNCs siphon off an enclavis economic surplus that could otherwise be used to finance domestic development144. On the other hand, when foreign capitals start to promote development some deepening of internal markets occurs and some forms of income distribution benefit at least the upper levis of the middle class, benefits which might expand to include parts of the working classes145.

40

Summarising, the European model of development has long-term aims by means of

"K

positive integraion (the CAP, Lom Conventions, eontributions to IFIs, etc). Howeverm concerning the Mediterranean basin, it promotes negative integration, leaving to market forces and prvate companies the solving of the external debt repayment as well as the enormous employement and development challenges. As for Algeria and Morocco, their share of funding and grants decreased substantially despite their growing dependence on the EU. Does the Barcelona Declaration represent an improvement, or at least an advantage for the development of Algeria and Morocco? To answer this question, we mus now turn to the specificities of these countries.

41

CHAPTER 4
v.

ASCENT OF DEPENDENCY IN THE MAGHREB This chapter aims at describing the evolution of both countries' position with reference to their alternative metropolises: France, the EU, the IFIs and, to a lesser extent, other European countries with commercial interests in the rea. To this end, we need to examine the nature of the interactions between this regin and the world economy, the changes (if any) as a result of the above new International context of development, and the impact of these changes on economic performance. For the matter, I have divided the chapter following a chronological order, with particular focus on the historical features in terms of their international relationships, trade and financial base, and foreign capital.

THE COLONIAL STRUCTURE

The twelfth-century Almohad dynasty brought political unity to the Maghreb Moors, integrating the Berber pastoralists, with the Arab agrculturalists. They were defeated by the Ottoman, from whom the French took Algiers in 1830; an independen! Moroccan Sultanate remained to the west. By 1904, the year the entente cordiale had been signed between France and Brilain, it was clear that the Sultn was unable to mainlain law and order in Morocco. So Britain allowed France to 'do what she pleased"46 in the whole Maghreb in exchange for Egypt. In 1905, Kaiser Wilhelm II, offended by the entente, precipitated he Moroccan crisis, solved in the 1906 Algeciras Conference: Germany gave France a free hand in Morocco in return for part of the French Congo, establishing two formal Protectorales, the smaller one for Spain. Morocco had spent several centuries in relative isolation from the rest of the Arab world (so ensuring the preservaron of its

42

culture), and when Moroceo carne under French and Spanish rule, these made no serious attempt to destroy its heritage. Morocco's present Alawite dynasty has ruled for 300 years, tracing its ancestry back to Muhammad's son-in-law147.

The arrival of the Europeans -the French in Algeria (1830) and Morocco (1912), and the Spaniards in Morocco (1912)- interrupted the model of traditional subsistence economy. French colonization produced a profound transformation148 in the economic structures of both countries, specially Algeria which became a Dpartement. It left a deep mark on its culture and altered the physical landscape with the sustained expropriation and purchase of lands with the objecive of putting them in the hands of European colonswg, among which were the pied noirs, poor immigrants who reoriented the partly or wholly agricultural and livestock selfsufficient economies towards the production of marketable commodities150, thus establishing one of the enduring legacies of the colonial period in both countries: the local economies' continuing reliance on, or outright vulnerability151 to, European (particularly French) markets. The introduction of Western technology did involve some destruction of the artisanate152.

Nevertheless the commercial sector, either Arab or that of the Mediterranean minorities functioning in Maghreb lands, was competing and struggling with the colonists to wrest every possible gain out of the economic flow of colonial capitalism. The Maghreb made anything but a passive response to the pressures exerted by the world market through local rulers. Maghreb lands did not produce systems on the periphery of the world market resembling in shape or in culture or in coercive technique what emerged in Europe. However, they did participate in he development of the modern Europe through the international divisin of labor with its well-known unequal trade relations before the colonial period. So it was said

43

of the 1955 Maghreb that it

was capable of 'economic take-off'. This was true onfy in a strictfy academic sense. It was true to the extent that local saving capacities were adequate to finance rapid development, but onfy on condition that the investment of such saving was redirected into new channels, awayfrom the European sectors and basic capital projects; and on condition that a centmlized planning authority could utilize the financial resources thus released for internalfy based industrial development. But none ofthe elementar? conditions essentialfor this was met: the European sectors, appendages ofthe metropolitan economy and sociey, obstinately refused to cooperte. Then, once the juxtaposition of these complementary but hostile societies, each with its own economy, had been abolished, decolonization radically transformed conditions1".

INDEPENDENCE AND WAR: THE 1960s

The extent of the economic and social upsets which accompanied the departure of he Europeans and local Jews is not in dispute154. The non-Muslim population numbered 1.8 million persons in 1955; by 1965 it had fallen to 0.6 million. This departure did not slow down the urbanization which, accompanied by a negligible rate of economic progress, gave rise to unemployment whilst, on the other hand, caused a very significant (20% to 33%) increase in the apparent income per head of the Muslim population155; this indicates much sharper contrasts in the new Muslim society which had arisen than existed in the od: a development explained by the establishment of new national lites, especially in the civil service, and the creation of new classes through the change in possession of previously settler-owned land.

The independence of the Maghreb countries did not end the dual character of their agriculture. Each of these countries attempted to face its new situation by adopting distinctive economic policies. The 9 million Algerian Muslims had won their independence after one

44

of the bloodiest colonial wars in history with a cost of 1 million lives136. French colonization
*:

had emphasized political authority from France via French civil service; it destroyed indigenous educational instiutions and discouraged the education of Algerians. Algeria opted for a route based on a wager for oil-finaneed industrial isation in which agrieulture occupied a lowly position. The Soviet Union served as an alternative model157 for modernization; it provided Gosplan economic planning services and aid workers to assist Algeria in reducing its dependence from French expertise.

In 1963 French farms left vacan were taken over by workers' management committees. The system of workers' self-management, - autogestin- became a special feature of the Algerian revolution. It was idealistic because it was an attempt to avoid creating a Soviet-type central ized state bureaucracy, but it was realistic because there were no Algerian managers with experience of running large estates; often inefficient, but there was no real alternative at that stage158. Agrarian reform was the means upon which the Algerian planners relied to meet this fundamental difficulty. Expropriated land available for redistribution amounted to 1M hectares. So each grantee could receive about 2 heactares, a sort of farm incapable of creating a wide market. The alternative was to grant plots of 10 hectares each, so as to obtain an agricultural sector suited to the mechanical implements which Algerian industry had begun to produce. So only 100,000 peasants received land, resulting in further unemployement and khammes, a new agricultural sub-proletariat, but not a market for the growing industrial sectors. This policy also created a rift between tradition and reform, thus preparing the way for failure of the latter159. Mounting food subsidies and food imports resulted in low crop prices -a major disincentive to farmers- creating a vicious circle of production decline, massive rural exodus, and heavy dependence on cheap food by large numbers of urban

45

poor

A crash training programme was needed to run the new industries. Young Algerians were sent to any country which would provide the instruetion; initially they went mostly to Eastern Europe. They returned to run the socits nationales, or autonomous state companies, which controlled nearly all industry161. Compared with 1955, the number of executives and civil servants had multiplied six times by 1965, whereas the number of manual and blue-collar workers and artisans had only risen by 30 percent. The Muslim society exhibited much greater class distinctions han before, when the choiciest jobs were all occupied by Europeans162.

In contrast to the profound ehanges that shook the Algerian economy, continuity was, after a peaceful independence, the hallmark of tha of Morocco. After a brief experience with a nationalistic government which attempted to lay the foundations for independen! development, Morocco's monarchy renounced development of the industrial sector adopting a decisiva line of support for its agriculture, although tipped towards the modern export sector with successive plans for agricultural reform and irrigation163, and excluded the local middle class from political power. One of the key aspects of Morocco's political system was the stability afforded to foreign investors by the monarchy. Policy ehanges were effected by royal decree, enabling swifter implementation than in other contexts164. Based on the comparative advantages of inexpensive land, phosphate rock and abundant sunshine, water and labourforce, it initiated growth without development165 -that is, negligible improvement of social indicators- of the Moroccan economy.

46

The longstanding Moroccan feeling of resentment that Algeria's borders were artificialiy enlarged by France at Morocco's expense before independence'66 sharpened the rivalry between Algiers and Rabat, leading to the 1963 'war of the sands', the first war between independent African statel<r7, a prelude of the costly West Saharan conflict. The 1960s also saw the beginning of a rapid population growth in both countries, stemming from high birth rates,

Table 3: Population trends, in milons. 1960 1992 2000

Algeria Morocco

10.8 11.6

26.1 25.4

31.2 29.6

as well as the pressure to migrate to Europe. This term168 Ilstrales migratory flows by means of three factors: an extraordinary demographic growth factor, a differential in living standards, and a shorter distance between two specifc regions. One example serves to picture it: in 1993 Greece, the poorest EU member, has a USD 67.3 billion GNP with 10.3 million inhabitants, whereas Algeria and Morocco GNPs are USD 35.7 and 28.4 billion respectively, with combined GNPs of USD 64.1 billion and populations of 51.5 million.

The average annual rate of increase in the total population in both countries was at least a sustained 2.8% in the period 1950-80169, having more than doubled their inhabitants since the late 1950s170. It is widely accepted that population growth tends to depress savings per capita and retards growth of physical capital per worker, since the economy has to allocate a higher proportion of resources to consumption rather than investment171. Even though a demographic transition -a shift in population trends- is already underway down to 2.2% by
47

2010, the year on which the Euro-Mediterranean FTA should be completed, the implications vis-a-vis the domestic savings objective of the Barcelona Declaration are self-explanatory, as well as food security matters examined below.

THE 1970s' DEVELOPMENT STRATEGIES: NATIONALISM vs. FREE TRADE

Morocco and Algeria showed determination pursuing strategies of growth-through-trade and growth-through-ISI respectively. This decade saw oil and phosphate incomes skyrocket bringing along the Maghreb's Golden Years. The aim of Algeria's planners was nothing less than the creation of the conditions needed to support a modern industrialized economy, virtually ex nihilm. The sustained success of this straegy depended on two presumptions, however: tha prices for hydrocarbon exports remain high, and that investment result in high economic growth and shared benefits within Algerian soeiety173. In 1971 the Algerians expropriated al! French interests, entailing a 25% oil output fall. It held back consumption with a tough programme of austerity and maintained a high level of investment174. Algeria benefited from the 1973 oil price rises, though remaining a LDC with fifteen millions to feed. Much of the increase in revenues was counterbalanced by the rise in prices of food and manufactured imports. The Achules heel of Algeria's development strategy was the considerable175 inequality it allowed in the distribution of the benefits and costs of growh and crisis. The bourgeoisie strenghened, both in the prvate sector and in connection to the powerful straum of bureaucrats and military men who ran the sate-dominated economy.

Moroccan laissez-faire policies of the immediate post-independence era did not provide growth in industrial production; governement intervention stimulated public investmen and

48

encouraged some import-substitution industrialization, with Moroccanization of ownership and management n prvate enterprise. Studies suggest that the income from one hectare of vegetables equals that from 15 hectares of cercis176. So the 1972 agrarian reform tripled citrus production through irrigation; a privileged capitalist class emerged, linked to the protection of hese activiies. In both countries, the revenues to maintain those distributiva coalitions were based in par on domestic economic productivity and local axation, but relied as well on the sale of natural resources and remittances and, as in olher peripheral reas that were judged imporant to one of the superpowers, on aid and preferential access lo credit; an imporant element of state power was based in a combination of internal re seeking, external rent, and the use of both lo fashion polilical alliances with nalional lites, exactly as discussed in Chapter 1.

In 1971 ihe EC introduced the Generalized System of Preferences (GSP), applied unilaterally to aii LDCs withoul discrimination and withoul demands for reciprocal concessions. The practica! effect was lo remove all customs duties from imporls on manufaclured goods. However, there were restriclions on ihe upper limiis sel on the volume of imports of tems benefiting by Ihe exemplion from cusioms dulies177. Boh countries suffered relatively less than other LDCs from non-lariff barriere NTB erecied by ihe EC against sensitive producs -those directly compeling wilh blue-collar Europeans- officially because of these countries' position in the EC's pyramid of privilege; less officially1" because European companies had invested heavily and applied political pressure to safeguard iheir investments. Highly-polluling induslries had been eslablished179 -e.g. cement, fertilisers, plaslics, lealher-, given ihe increasing environmenial protection imposed by EU countries in Iheir home economies.

49

Morocco accelerated the drive towards export-led growth, at the expense of extensive
j;

overseas borrowing180. Attempts were made to diversify economies, but political factors dominated economic policies, revealing the ambivalent altitudes181 of the country's leaders the King and a few proxys- towards the prvate sector. Capital-intensive, state-dominated development projects neglected the creation of domestic employment whilst the number of urban unemployed began to swell dramatically.

By the late 1970s, export-led growth aggravated structural imbalances within domestic economies. In Algeria, the traditional agricultural sector was allowed to stagnate, while the modern sector consistently failed to respond. In Morocco, the concentration of investment in irrigation severely limited the development of the traditional sector. Twenty dams built from 1960 to the mid-1980s represented an enormous drain on resources, with no comparable growth in exports; agricultural trade dficit started to develop in 1974, when the growing cost of cercis caused its food import bil to become larger than its receipts from exports of oranges and market vegetables182, so food imports and subsidies became a major reason for growing indebtedness. In Algeria, the absence of efficient, capital-intensive heavy industry using standarised technologies183 and the fall in demand, had exports at a much lower level than foreseen. Socialism as an economic strategy was discredited by the end of the decade. igeria's coherent structure had failed. Dissafection was the consequence of the failure of the FLN184 to develop as a ruling party responsible for 'mobilizing the masses'.

The 1980s: BOURGEOIS NATIONALISM AND LffiERALIZATION.

The 1980s were described as the lost decade for most LDCs. Morocco and Algeria

50

experienced a significan! setback in growth rates; their per capita incomes actually
fe

declined185, being affected by instability of exchange rates, high nominal and real interest rates and, above all, unprecedented deterioration in their terms of trade. At the same time, the crushing burden of externa! indebedness posed a serious threat to their growth and development prospects.

After two decades when economic policy differed sharply from state to state, a common theme ran throughout policy makers: the need to reform inefficient and low-performing economies186. Algeria's first major reform program was launched in 1981. Liberalizing investment laws and restoring prvate ownership and production in agriculture were meant to stimulate the prvate sector into producing consumer goods and food producs'87. But it failed. Due to their major dietary significance, cereals are a good indicator of the food security situation in North frica. Until the 1950s, both countries were self-sufficien in the production of wheat and barley. By the 1980s, cereal imports had become a major fmancial burden for both countries. Per capita production declined by 7% in Morocco to 50% in Algeria over those three decades183, so the former is currently importing one-third and the latter two-thirds of their needs respectively. Meanwhile, Algeria saw aid from the EC budget shrink the most in relation to total fmancial resources commited by the Community189. Table 4 shows the evolution of net Foreign Direct Investmen (FDI) for Algeria and Morocco (USD Millions): 1986 Algeria Morocco MNMCs 5 1 1,562 1991 12 320 1,439 1992 12 424 1,842 1993 15 522 1,435 Total 44 1,267 6,278 % of Total MNMCs 0.07 20.2 100

Source: Revista Econmica de Catalunya, No.29. May 1996.

51

Showing that Morocco ranks seeond in FDI among all MNMCs, whilst Algeria is last. Impatience with corruption and illicit dealings have characterized much of the social activism of those years'90. The new Algerian lite, having suceeded in joining economics and politiesrthf@witself91 towards the last bastin yet to take, the State, to impose its domination and that of its foreign cominercJal partuers. it was revealed that Algerian negotiators with foreign companies had received throughout 20 years, a total of $26 billion -equivalen! to Algeria's foreign debt- in state-financed softeners192. Islam and the trabendo (black market) became society's answer193 to these moves, by two groups that in many cases overlap: the younger generation and the marginalized urban population denied access to the fruits of earlier gains. The opening of borders between Algeria and Morocco saw an unprecedented growth in the 'informal' sectors, facilitating the distribution of goods in the black market, accounting for 50% of their rade, thus demonstrating some sort of complementarity between both economies.

Another source of dependency is migration; by 1990, it was estimated194 that 4.5 million Maghrebis were living in Europe, that is, 8% of Maghreb's total population.

In 1981, the IMF stepped in to provide Morocco with a three-year extended fund facility. In 1984, more of Morocco's foreign reserves were derived from migrant's remittances than from phosphates and their derivatives195. International indebtedness -more than 70 percent of which was owed to prvate commercial lenders- outpaced the ability of exports to service the debt. Foreign exchange shortages is a longstanding problem for Morocco, which took part in the 1985 Baker Plan aimed at fifteen highly indebted countries. The IMF got involved again in 1987. The World Bank joined with a supplementary SAP in 1988. Among he

52

conditionalities, the World Bank and the IMF implied that prior to the creation of any FTA,
'f.

macroeconomic stability must be achieved. Despite the reforms, the dollar volume of exports continued to lag behind that of importe. In the 1980s, export revenues covered between 59 and 68% of importe196. Debt stabilized at about $20 billion -around 75 percent of GDP-its debt service ratio elaiming about 20% of exporte. In 1986, Algeria's debt-service ratio rose to 75% of export revenues, remaining unchanged over the last decade.

AMU

Unity offered a strategy for growth which could potentially alter the face of Maghrebian trade as 'complementary', staring to supply each other with essential goods and services, rather than looking towards their traditional EU suppliers and markets197. The creation of the AMU in 1989 aimed to tackle food dependency, the rate of food importe to national consumption, which had grown in Algeria from 32% in 1971 to 70% in 1989. In Morocco it grew from 18 to 28 percent over the same period198. Both governments remained, however, cautious in reducing food subsidies: the attempt to do so precipitated the rite in Morocco in 1981 and 1984, and in Algeria in 1988. The failure of both governments to resolve the problems of their dryland cereal sectors made them increasingly vulnerable to economic disruption199, which finally caused AMU's abortion. Imbalances worsened because of the drain of resources by the skewed pattern of trade and by the deterioration in terms of trade and fmancial flows resulting from he high evel of debt servicing200. There is the possibility -hotly denied both by EU and Moroccan officials, that Morocco's defection from AMU was less a sign of the country's relative strength than of Europe's ability to entice any country o defect rather than to adhere to the AMU's attempts at joint negotiations201.

53

THE 1990s AND BEYOND: TOWARDS NEODEPENDENCE?

fe

The late 1980s was marked by a more resolute intervention by the IMF, increasingly to assure international creditors that they would be repaid and that governments were following policies to maximize inflows of foreign exchange from export sales, remittances, and capital investment202. North frica in the 1990s seems to be experiencing a period of institutional change, different from that of the post-independence years. The impasse of the 1980s has placed the economies of Algeria and Morocco in a similar position. Cardoso and Faletto, writing on contemporary dependency and its consequences, observe that

the new forms of dependency mil give rise to novel political and social adaptations and reactions inside the dependent countrie^.

Political reforms remain an lite occupation204; the needed economic refornis, however, are popular preoccupations. The rules that characterized earlier development had to give way to market forces, simply because funds are no longer available to maintain the od systems. In both cases, the result has been the adoption of SAPs; the current attempt at EuroMediterranean integration and the move toward market principies are portrayed by local governments and supporting international agencies as essentially economic in nature. They, in fac, conain powerful political assumptions and objectives that may prove as difficult to achieve or change as the envisioned economic measures205. On the other hand, Islamists are not functioning in a vacuum or are they or their message marginal: Islam is capturing the imagination of people, particularly among the young, aided by the apparent bankruptcy of secular alternatives206.

54

It is remarkable that aid continued to be denied to Algeria in the 1990s, considering that Algeria never defaulted on a debt service payment. Western governments and international money lenders increasingly expressed reservations concerning continued investment in Algeria; extending further fmancial aid to the country was seen as increasingly risky as the Islamist movement gathered strenght207. In light of the fact that the diar devaluations raised of imports, that industrial production remained import-dependent, and that over 15 percent of the populaion lived beiow poverty levis -5% of the population earned 45% of the national income208-while large numbers of middle class families experienced a falling standard of living, the lack of outside aid was devasating to Algerian society. It became inevitable that Algeria would have o turn to the IMF and the Paris Club for debt relief; a 1994 standby arrangement was sufficient to restore imports of raw materials. In 1995, another agreement with the IMF for external debt rescheduling meant $1.8 billion on further concessional terms. The world's largest LNG supplier, having spent most of its investment funds buying capital goods form the OECD countries and serviced its debt through the crisis years, was now in a new situation209. Algeria is now transfering its public sector large-scale industries, represenng 60% of the domestic economy2'0. The stipulations of the program envisaged reorganization of fmancial institutions, liberalization of foreign trade and privatization of state-owned companies. A full circle had been completed: oil fields could now be sold to foreign buyers2". The results of privatization have nevertheless been mixed due to the unpreparedness of domestic markets; the banned Islamist party made public its total rejection to the agreement promising that, if it carne to power, it would not abide by IMF stipulations.

55

Agricultural reforms are intertwined with SAPs. No attempts have been made to adress
'f.

the question of land reform and domestic food production: Algeria spends nearly a quarter of its hydrocarbon revenues on foreign-grown cercis. In 1994, Algeria's privatization of the state agricultural sector was completed, while in Morocco- which imports one-third of its grain- the cultivated rea increased to 5.4 million hectares, a 1-million increase in just 4 years; topsoil is completely lost from 22,000 hectares each year. Between 1960 and 2025, water supply per capita will drop by 80%212. One-third of Morocco's deb has been in concessional form, ten times higher man Algeria's213; it received $6 billion in structural adjustment funds from the World Bank, the largest amount on any country in the Middle East and frica214, while leading the world cannabis exports, bringing $2 billion in revenues in 1994. These, toghether with migrant remittances, genrate more foreign exchange ($4 billion annually) han all legal exports put together.

EU export dependence is extreme (almost 68%) for both countries: Tabie 5; Destination of Maghreb Exports 1981 and 1991 Exports to the World (Millions of US$) Country 1981 1991 Algeria Morocco 13,296 2,287 12,314 5,149 Exports to the EC as % of Total Exports 1981 1991 51.0 57.9 67.7 67.8

Source: IMF, Direction of Trade Statistics Yearbook, 1988 and 1992.

The exploitation of natural comparative advantage in Mediterranean-type producs has been impaired both by the EC's CAP and lately by the southern enlargements of the EU. Agricultural exports from the Mediterranean regin have sagnated. This trend has continued until 1996, when transition period to full agricultural integration of Spain and Portugal into 56

the EU ended. The only possible strategy for Morocco (viable only if Spain does not take
t:

similar steps) has been devoting resources to the production of tropical or other crops (such as flowers, grapefruit or hazelnuts) that are not yet mass-produced in Spain215.

Neodependence is a term not yet fully coined216. It applies to several Sub-Saharan countries pa^siglfugiTmmense hardship. In Morocco and Algeria, certain current tensions -hiperpopulation, unemployement, low agricultural productivity, environmental degradation- could reach breaking point and transform into vehicles for a new dependency, with full-scale war and humanitarian catastrophe as a possible outcome

CONCLUSIONS

The principal arguments of this dissertation can be summarized by a set of general and specifc points. Ai the general level, I have discussed the three sorts217 of social interests that are served by state action: the interests of state office-holders as an autonomous group, as in Algeria; the interess of a hegemonic class or class coalition, as in Morocco; and the interests of the nation isef vis-a vis other nations, whieh the Islamists claim to defend.

Cardse and Faletto give, on their basic situations of dependency, greaer emphasis to the scope for internal generation of change, stating that 'social structures are...continuously transformed by social movements'218 likely to be 'nationally divisive in nature'. Peripheral economies are diversified not only in terms of resource endowment and timing of inegration into the international system but in terms of

the different moments al which sections of local classes allied or clashed with
57

foreign interests, organised different forms of state, sustained different ideologies, or tried to implement varous policies or defined alternative strategies to cope with imperialist challenger in diverse moments of history219.
At the general level, I have shown how the results of the various formulas of EU-Maghreb relations show qualitative and quantitative gains on the imporance that Brussels attaches to its southern neighbours: the perspective has evolved from a bilateral to a regional one, not being solely circumscribed to commercial issues. However, none of these formulas has effectively attended the ever more serious problems that affliet MNMCs. The continuous succession of proposals, the majority of which emanated from the southern EU countries, makes it clear that along with a preoceupation with events in the regin, there exists misorientation concerning the best way of fmding sustainable solutions220. To some observers,

all that the EC had developed under the ame of its Mediterranean Policies has been a trading systenf2*
This visin is reinforced by the Medierranean FTA proposal for economic integration: It does not take into aecount the inequalities at the starting situation, whilst its demands for trade openings are asymmetrical, since it is requested from MNMCs to open their economies although the EU keeps the agricultural impors restricted. It is also unable to include any solution to he deb problem, the funds for financial assistance being of secondary importance in light of the volume of the deb's service. This burden makes impossible the development of the MNMCs.

So the need to change the European model of development for the Mediterranean is recognized, i.e, competitiveness and employement objectives must be revised, and thought mus be given to ensuring a development of the regin which will overeme he marginalisation which is holding the Mediterranean rea back. During a period when a 58

difficul external environment has put added pressure on governments already under intense
if.

pressure to cater for the needs of youthful (and increasingly cynical) populations, Maghreb unity initiatives offered one popular alternative model of development223. The emphasis should be on a multicentered224 development pattern, in which the Mediterranean becomes an rea of renewed balance and regional cooperation.

Concerning the AMU, I have discussed the duality in its approach: on the one hand, its long-term aim was to decrease dependence on Europe; on the other, the cooperation of foreign investors is needed o put most of these projects into practice225. Anyway, Western power politics seem persistently hostile226 to regional realignements in the Third World.

At the specific level, I have demonstrated that, given the histrica! pattern of exchanges between the EU and Morocco and Algeria, the advanages entailed by the new EMP have been in the EU discourse for already a long time. The gradual resort to a more regulated approach has nol accompanied a recognition of the special problems confronting integration among LDCs which, o some observers227, render rade liberalization on its own an inadequae, and someimes even an inappropriate, strategy even when he potential for fruitful cooperation exists. This dissertation shows that, while the promotion of exports can have significant economic benefits, 'export-led' growth has been too narrow an strategy for sustained development in Morocco. When implemented through non-selective trade liberal ization policies, it may result in trade imbalances and setbacks to domestic industry and agriculture due to cheaper imports228. The across-the-board EMP does not include AMU's complementarty approach229 which, although limited to specified producs or industries, takes the form of measures to promote and reglate investment in regionally based industries that

59

enjoy economies of scale, so as more economically meet the combined demand of member
fe

countries. At these levis of development, because of widespread distortions, trade liberalization itself gives rise to major problems.

Success for integration among MNMCs seems likely to cali for apositive integration, more delibrate approach than has been found in advanced economies. Major unforeseen changes will have to occur if poverty and exclusin are to be avoided in this part of the world230. The ESC requests the establishment of a Mediterranean Cooperation Council, emphasizing training and socioeconomic support to local economies by encouraging new enterprises, assistance for cooperatives, trades unions, professional associations, and NGOs. It asks to develop a coordinated program for a radical reorganization of Mediterranean agriculture and food industry, including the coordination of production on the basis of the developmental needs of MNMCs, the exploitation of seasonal differences, specializing in local producs, the reform of CAP by revising the current support-price mechanism, and the establishment of a trade promotion agency to market produce in world markets231.

It is here that planning would have an important role to play, were it not that current economic thinking disregards it.

60

BILATERAL GRANTS

SAP Grants

RISK CAPITAL

EDB LOANS

Protocol MOROCCO ALGERIA

From EU Budget 1 2 \6 1978-81 16 25 28

67 ;
214 145 115 15

3 1987-91 162 52 4 1992-95 193 52 3 1987-91 11 4

4 1992-95 60 55

4 1992-95 25 18

1 1978-81 56 70

2 1982-8 90 107

TOTAL

41

95

43

126

197

ENDNOTES
1. Robson, P. (1990), p.l 2. Pfeiffer, K. and Vandewalle, D. (1996), p.3 3. Toye, J. (1993), p.l79 4. Grilli, E. (1994), p.l81 5. Yesilada, B. (1991), p.362 6. Nez, J. (1996), p.38 7. Ibid, p.39 8. Spencer, C. (1993), p.41 9. Grilli, E. (1994), p.211 10. Donges, J. (1976), p.9 11. Vandewalle, D. (1996), p.5 12. Bnini, M. (1995), p.394 13. Gilpin, R. (1987), p.226 14. Layachi, A. (1996), p.129 15. Ibid 16. Aliboni, R. (1976), p.l90 17. Vandewalle, D. (1996), p.95 18. Marks, J. (1989), p.57 19. Spencer, C. (1993), p.7 20. Vandewalle, D. (1996), p.95 21. Ibid, p.96 22. Marks, J. (1992), p.57 23. Hunt, D. (1989), p.213 24. Ibid. 25. Ramrez-Faria, C. (1991), p.l74 26. Hunt, D. (1989). p.215 27. Ibid, p.96 28. Ibid, p.l00 29. Ibid, p.97 30. Meier. G.M. (1995), p.69 31. Hunt, D. (1989), p.163 32. Frank, A.G. (1967), p.42 33. Ibid, p.34 34. Ibid, p.48 35. Frank. A.G. (1967 b), p.43 36. Pfeiffer, K. (1996), p.9 37. Stallings, B. (1995), p.364 38. Ibid, p.2 39. Ibid, p.l2 40. Hamilton, C. (1987), p.l523 41. Directorate-General for Deveiopment of the European Commission (J993), p.67 42. Pfeifier, K. (1996), p.41 43. Roemer, C. and Radelet, S. (1995), p.515 44. Hamilton, C. (1987), p.l523 45. Commission of the European Communities (1995), p.31 46. Makdisi, S. (1988), p.l 12 47. Stallings, B. and Streeck. W. (1995), p.67 48. Ibid, p.70 49. The Economist (1994), p.l 50. Robson, P. (1990), p.l94 51. Amin. S. (1992), p.25 52. Economic and Social Commiaee of the European Communities (1995), p.31 53. Nomvete, B. (1993), p.49 54. Robson, P. (1990), p.l95 55. Ibid, p.l99 56. Meier, G.M. (1995), p.510 57. Ibid. 58. Ibid, p.511 59. Kiljunen, K. p.l 10 60. Ibid, p.119 61. Kelly, M. and Fritz-Krockow, B. (1992), p.21 62. Walker, L. p.556 63. Ibid, p.557 64. Stallings. B. and Streeck, W. (1995), p.73

61

65. Grilli. E. (1994), p.13 66. The Economist (1994), p.3 67. Azzam. M. (1994). p.90 68. Ibid. p.89 69. The Economist (1994), p.5 70. Halliday. F. (1995), p.61 71. Layachi. A. (1996). p.136 72. Ibid. p.139 73. Harrold. D. (1996). p.167 74. Halliday. F. (1995). p.61 75. Spencer. C. (1993). p.23 76. Azzarn. M. (1994). p.91 77. Vasconcelos. A. (1996). p.58 78. Amin. S. (1992). p.46 79. Stallings. B. and Streeck. W. (1995). p.80 80. Robson. P. (1990). p.l 81. Stallings. B. and Streeck. W. (1995). p.91 82. Grilli. E. (1994). p.xiii 83. Ibid. p . l l 84. tokK p.68 85. Ibid. p.42 86. Vandewalle. D. (1996). p.104 87 Halliday. F. (1995). p.58 88. Ibid. 89. The Economist (1994). p.8 90. Grilli, E. (1994). p.77 91. Ibid. p.330 92. Pfeiffer. K. and Vandewalle. D. (1996). p.l2 93. Gilpin. R. (1987). p.320 94. Ibid. p.319 95. Stallings. B. (1995). p.361 96. Ibid. p.358 97. Tovas. A. (1994). p.l3 98. Lpez. B. and Nez. J. (1994). p. 136 99. Ibid. 100. Commission of the European Communities (19951. p.24 101. Ibid. 102. Lpez. B. and Nez. J. (1994). p.139 103. Gilpin. R. (1987). p.200 104. Grilli. E. (1994). p.98 105. Me Cormick. J. (1996). p.246 106. Grilli. E. (1994). p.98 107. Marsh. J.S. (1976). p.75 108. Me Cormick. J. (1996). p.245 109. Marsh. J.S. (1976). p.77 110. Grilli. E. (1994). p.24 111. Jackson. T. and Eade. D. (1982). p.l 112. Grilli. E. (1994), p.l81 113. Commission of the European Communities (1995). p.31 114. Grilli. E. (1994). p.185 115. Ibid. p.l86 116. Ibid. p.l88 117. Ibid. p.203 118. White. G. (1996). p.l 19 119. Bataller. F. and Jordn, J. (1996). p.26 120. Lpez. B. and Nez. J. (1994). p.134 121. Aliboni. R. (1976). p.194 122. Lpez. B. and Nez. J. (1994). p.!38 123. Grilli. E. (1994). p.211 124. Economic and Social Committee of the European Communities (1995). p.21 125. Robson. P. (1990). p.209 126. Lpez, B. and Nez. J. (1994). p.139 127. Ibid. p.138 128. Maciiman. A. (1995), p.4 129. Toye. J. (1993). p.l 19 130. Kiljunen. K. p.l23 131. Robson. P. (1990). p.l97

62

132. Ibid 133. Nez. J. (1996). p.39 134. Robson. P. (1990). p.196 135. Nez. J. (1996). p.37 136. The Economist (1994). p. 11 137. Vidal-Foich. X. (1996). p.22 138. Ibid. p.23 139. The Economist Books (1992). p.87 140. Gilpin. R. (1987). p.294 141. Robson. P. (1990). p.209 142. Ibid. p.210 143. Meier, G.M. (1995). p.257 l*rlbd. p.108 145. Ramrez-Faria. C. (199!;. p. 1?0 146. Packenham. T. (1995). p.110 147. Hobsbawm. E. (1994). p.442 148. Gran. P. (1979). p.25 149. Lpez. B. and Ne/.. ). (1994). p.131 150. Ramirez-Faria. C. (1991). p.145 151. Vandewalle. D. (1996). p.94 152. Gran. P. (1979). p.186 153. Ibid. p.234 154. Amin. S. (1972). p.222 155. Ibid. p.220 156. Hobsbawm. E. (1994). p.436 157. Harrold. D. (1996). p.157 158. Hobsbawm. E. (1994). p.433 159. Aliboni. R. (19769. p.186 160. Sweanngen. W. (1996). p. 80 161. Hobsbawm. E. (1994). p.435 162. Amin. S. i!970l. p.223 163. Lpez. B. and Ne/. J M994i. p.132 164. While. G. (19%). p.126 165. Aliboni. R. (1976). p.186 166. Hobsbawm. E. (1994). p.441 167. Marks. J. (1992). p.55 168. Hruni. M. and Venlurini. A. (1995). p.379 169. Ibid. p.389 170. Swearingen. W. (1996). p.68 P l . Meier. G.M. (1995i. p.276 172. Pfeiffcr. K. (1996). p.27 173. Ibid. p.29 174. Hobsbawm. E. (1994). p. 175. Pfeiffer. K. (1996). p.31 176. Commission of the European Communities (1985). p.77 177. Ibid. p.32 178. Tovas. A. (1994). p.20 179. Ibid. p.13 180. Spencer. C. (1993). p.18 181. Ihid. p.17 182. Swearingen. W. (1996). p.72 183. Tovas. A. (1994). p.13 184. Hobsbawm. E. (1994). p.437 185. F.l-Naggar. S. (1992). p . l l 186. Marks. J. (1992). p.44 187. Pfeiffer. K. (1996). p.32 188. Swearingen. W. (19961. p.69 189. Grilli. E. (1994. p.i97 190. Spencer. C. (993). p.56 191. Harrold. D. (1996). p.166 192.~Spencer. C. (1993). p.26 193. Zartman. W. (1996). p.232 194. Talha. L. (1995). p.20 195. Spencer. C. (1993). p.61 196. Pfeiffer. K. (1996). p.39 197. Marks. J. (1992). p.62 198. Nez. J. (1996). p.49

63

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