EU-Tunisian Trade Agreement: A Trojan Horse for Economic Domination
In his book Nikabat Rijal al-‘Amalal-Tunisiyyin [The Association of Tunisian Businessmen: A Struggle of Class or of Dialogue?], Tunisian historian Hadi Timumi describes the period between the two world wars as among the worst stages of France’s long colonization of Tunisia. Throughout this period, France sought to compensate for its losses during World War I by inundating the Tunisian market with French products. He writes that the French also forced the Bey of Tunis (the Tunisian monarch at the time) to sign an agreement for a Customs Union between the two countries in 1928 for the purpose of trade liberalization. The result was the bankrupting of tens of thousands of artisans and the impoverishment of thousands of small farmers, who left their lands and migrated to the cities where poverty prevailed. What remained of the local system of industry and agriculture was destroyed.
That agreement was nullified upon Tunisia’s independence in 1959. Yet ninety-one years after it was signed, Tunisia has embarked upon a marathon of negotiations with the European Union (EU) to sign what is referred to as a deep and comprehensive free trade agreement, known as DCFTA. Negotiations have been ongoing since 2015. Meanwhile, for the past nine years Tunisia has suffered from the burden of a global economic crisis that has hit all sectors.
Tunisia’s entry into the system of international trade began on 15 April 15 1994 with the Marrakesh Agreement. This was the starting point for a new economic policy that granted greater importance to trade when it came to driving development efforts and economic planning. Among the most prominent features of this new direction was developing Tunisian exports while opening the Tunisian market to an outpouring of goods and services from abroad. In this context, Tunisia’s northern neighbors sought to make themselves the first beneficiaries of the fruits of this economic opening, convening the Barcelona Declaration on 27 November 1995. This resulted in the Euro-Mediterranean Partnership Agreement (EUROMED) between the states of North Africa and West Asia, on the one hand, and the states of the EU on the other.
Thanks to Tunisia’s enthusiasm for trade liberalization and for swiftly joining what was termed the new world order, it was the first state to sign a trade partnership agreement with the EU on 17 July 1995. This agreement focused on dismantling trade tariffs in the industrial sector between the two parties; this aim was realized in 2008 when European industrial products imported to Tunisia became entirely exempted from tariffs. The Barcelona Declarationgave birth to the Draft Agreement of Deep and Comprehensive Free Trade: a second generation of mechanisms tying southern Mediterranean states into the European economic space.
The first negotiating sessions between Tunisia and the EU for this draft agreement began in 2015. It aims to expand the domain of tariff liberalization to include other sectors, specifically agriculture and services. The draft agreement also acts as a safety valve for preserving a “vital field of trade” for the states of Europe. Since the 1990s, these states have experienced escalating competition with China and the United States over what they consider to be their economic and trade safety belt.
The Limitations of the First Generation of Partnership Agreements Between Mediterranean Shores
Whatever the impositions of history and geography on close trading ties between Tunisia and the European states in centuries past, the EUROMEDAgreement of 1995 noticeably strengthened these relationships. Between 1990 and 1997, the volume of Tunisian imports from the EU jumped by 49% (from TND3.8 billion to TND7.8 billion [approx. US$1.3 billion to US$2.7 billion]), according to the United Nations Commodity Statistics Database. This rapid increase coincided with the strengthening of the EU’s dominance within most of Tunisia’s trade relationships, according to the same source. While European markets captured 75% of all of Tunisia’s exports abroad, the EU for its part was able to dominate the Tunisian market, providing 70% of the country’s imports.
According to the National Institute of Statistics, these commercial transactions exceeded TND34 billion [US$11.9 billion] in 2018. Yet this volume is not reflected in Tunisia’s trade balance, which has remained negative since the signing of the 1995 EUROMED Agreement. While the value of Tunisian exports to European markets did expand over the past 23 years, from TND4 billion to approximately TND31.1 billion [US$1.4 billion to US$10.8 billion], imports from the EU to Tunisia grew at an even higher rate during the same period – from TND5.8 billion to TND38.9 billion [US$2 billion to US$13.5 billion]. This disparity in bilateral exchange increased the Tunisian trade deficit to 20%, with a total value exceeding TND7 billion [US$2.4 billion].
The disadvantages of the trade partnership between Tunisia and other North African states and the EU are not limited to trade imbalances. They also extend to the matter of Tunisia’s share in international trade. According to a 2015 report issued by the research organization Solidar Tunisie, international trade experienced steady growth at a rate of 5.4% between 1980 and 2011, and European trade with the rest of the world saw similar levels of growth: 5.3% during the same period. Yet the countries of the Maghreb, including Tunisia, saw their shares in international trade fall from 2% in 1980 to 0.7% in 2011. Likewise, their share in foreign trade with the EU decreased from 4.7% to 2.1% in the same time period.
An Agreement of Partnership or Bolstering Hegemony?
1- Agriculture: Coup de Grace for a Dying Sector
While the Barcelona Declaration established the full liberalization of trade with regard to industrial products between Tunisia and the EU, the new draft of the free trade agreement proposes to broaden the scope further. It proposes to waive tariffs in other economic sectors like agriculture and service. As the Tunisian government concluded its fourth round of negotiations about this new agreement on 3 May 2019, the country was experiencing an economic situation that has been worsening for approximately a decade. This has prompted many economic experts to caution that this partnership will spell absolute European dominance given the total imbalance of economic power between the two sides.
In an exclusive interview with us on the subject, economic expert Mustafa al-Juwayli of the Mohamed Ali El Hammi Association for Economic and Social Research confirmed that liberalizing agricultural exchange and opening the Tunisian market to European products would mean placing Tunisian farmers in direct competition with European agricultural companies. This would pose numerous problems. Perhaps the most significant is the extent of the major differences in levels of productivity and profitability. According to the Food and Agriculture Organization, the average productivity of European farmers is seven times greater than that of Tunisian farmers. This means that Tunisian agriculture is objectively unable to compete with European agriculture. As al-Juwayli emphasizes, “these differences in productivity are not only due to technical obstacles. They are structural and historical in nature, and cannot be overcome with a mere “rehabilitation program.”” When it comes to the level of support they receive, he also points out that European farmers enjoy the significant support of Europe’s common agricultural policy, which occupies 40% of the EU budget; Tunisia cannot make similar guarantees.
The draft agreement also stipulates the imposition of European standards at all stages of agricultural production and product quality. This is to be done by way of copying the legal framework that has been adopted by the EU regarding animal and plant safety and the quality of food products. Yet adopting European standards will lead to increased costs for local agricultural production because of the additional material requirements it will impose on all areas of production.
This in turn will tip the scales in favor of European goods as Tunisian farmers will be unable to compete, given their current situations – particularly the 80% of these farmers who run small and medium-sized enterprises. Al-Juwayli added that the logical outcome of this agreement will be the destruction of Tunisia’s agricultural production system and the bankrupting of its farmers. This will trigger an expansion of poverty, unemployment, and marginalization in agricultural regions, increasing migration to cities, and consequently, worsening economic and social conditions in so-called poverty belts.
Underscoring this assertion is data reflecting the state of the Tunisian agricultural sector as a whole. Data from the National Institute for Statistics confirm that the crisis in the agricultural sector is not fleeting or circumstantial, or due to any one political or climatic condition. Indicators for agricultural production that were tracked over recent years indicate a downward trend that points to the depth of the sector’s structural problems. The decline in Tunisian agriculture’s capacity to meet local food needs is evident in the expansion of food imports between 2013 and 2017 by a rate of 24% to reach TND5.8 billion [US$2 billion]. This brings the fiscal deficit in the food trade budget to TND1.4 billion [US$487 million] versus TND1.1 billion [US$383 million] in 2016. This represents 8.7% of Tunisia’s total fiscal trade deficit.
The specter of food poverty coincides with the disappearance of lands specified for large farms of all kinds over the past five years by a rate of 10.7%. At the same time the area of fallow lands has increased from 814 hectares in 2011 to 1,270 hectares in 2015, a growth rate of 36%.
2- Services: A State of Subcontractors
Regarding the service sector, al-Juwayli draws our attention to the formula adopted to define services within the draft agreement. The proposed draft defines the service sector as any service in any sector with the exception of services provided under governmental authority. The latter are excluded on the basis that these are not commercial and do not feature competition between one or more economic actors.
Clarifying this, al-Juwayli infers that with the exception of administrative and security services, all social services that the state provides, such as education, health, and transportation, are classified as belonging to the market of the service sector and therefore will become subject to the requirements of trade liberalization for services. He fears that in this way, the agreement could result in large segments of the Tunisian population being denied access to these services and that they will be transformed into areas of direct foreign investment.
He adds that passing such an agreement will put Tunisian companies working in the service field in competition with large European companies with superior capabilities and technical capacities. Seventy percent of Tunisian companies in the sector are small and medium-sized businesses with a workforce of fewer than 10 employees. The DCFTA agreement also entails the unification of technical standards. The legal statutes of both parties would be brought into closer alignment through the integration of European legislation into Tunisian law.
But Tunisian institutions cannot adopt European standards, especially as these standards are specific to technical specifications that are controlled by European companies according to intellectual property mechanisms. For this reason, requiring the adoption of European standards is nothing but paving the way for European companies’ dominance in the service sector – which is ripe for investment and profit accumulation. In the end Tunisian companies will have no power to compete. They will find themselves extinct or, in a best case scenario, merely working as subcontractors on behalf of European companies.
In conclusion, al-Juwayli refers to the negotiations regarding a free trade zone between the United States and the EU, which began in 2013. He points out that these negotiations were nearly suspended because the EU refused to liberalize agricultural trade, on the pretext of the dominance of their American counterparts. Meanwhile, the EU is taking the exact opposite position when it comes to countries that it seeks to tie into “deep and comprehensive free trade” agreements.
Everyone Sees Danger... Except the Government
From the moment that negotiations were announced about four years ago, a number of economic experts and research centers raised their voices to warn of the disastrous results that the agreement could be expected to bring about. At the time, they were limited to newspapers and reports as well as specific interventions within the popular and political consciousness which was preoccupied with the reverberations of party conflicts, developments in governmental transformation, and the uptick of social protests.
However, the pace of negotiations accelerated in 2018, with two consecutive rounds in June and December of the same year. During his most recent visit to Brussels on 24 April 2018, Prime Minister Youssef al-Shahed pledged to sign the agreement in 2019. This united the ranks of his opponents, prompting them to take tangible steps to raise awareness of the pending dangers. The evolution of this process can be seen clearly in farmers’ protest movements, which reached their peak on 10 April 2019 when hundreds demonstrated. They proclaimed slogans rejecting the new free trade agreement in advance of the fourth round of talks between Tunisia and the EU, which began on April 29.
In parallel to sector-based movements, national organizations and a number of parties and associations coalesced around a united position rejecting the government’s stance on the agreement. This position was rendered into an agreement during a national forum on 30 April 2019 in the capital, Tunis. Attendees signed a “Tunisian Declaration to End Negotiations Regarding the Deep and Comprehensive Free Trade Agreement between Tunisia and the European Union.”
The declaration, which was put forward by the Tunisian General Labour Union (the biggest labor organization in the country) alongside dozens of parties and associations, granted a sense of dynamism to anti DCFTA actions. A number of practical steps were initiated, beginning with a campaign to gather signatures on an electronic petition for parties, associations, organizations, and citizens calling for the halting of negotiations about the free trade agreement in late May. Meanwhile the Mohamed Ali El Hammi Association for Economic and Social Research, along with a number of other associations, organized a number of protest sites on Avenue Habib Bourguiba and convened popular symposia around the country.
Meanwhile, in the heart of the Tunisian capital, a group of DCFTA opponents made up of a mix of activists and youth worked to distribute pamphlets outlining the most significant dangers the agreement poses to citizens. Their actions culminated on 23 May 2019 with the announcement of a unified working group named the “National Coordination to Oppose the Deep and Comprehensive Free Trade Agreement between Tunisia and the European Union.”
As we await the fifth session of negotiations for the free trade agreement between Tunisia and the EU, it seems that the government remains determined to ignore warning cries regarding the negative consequences of the agreement. This makes foreign trade into a tool for political and economic domination of the country – a policy that makes no break with a continuous trajectory of betting on solutions projected from abroad. Previously this is how opponents to the administrative reconciliation law, or those who oppose the annual public budget, have been treated: with either attempts to pacify and defer crises, or with willful ignorance.
Keywords: Tunisia, European Union (EU), Free trade agreement