Opinion of the Economic and Social Committee on 'The EU's Northern dimension including relations with Russia'
Date: 1999-10-20
Institutions: European Economic and Social Committee
Subjects: EU relations, Northern Europe, Russia, international cooperation

20.12.1999

EN

Official Journal of the European Communities

C 368/39

Opinion of the Economic and Social Committee on ‘The EU’s Northern dimension including
relations with Russia’

(1999/C 368/14)

In accordance with Rule 23 of its Rules of Procedure, the Economic and Social Committee decided at its
plenary session of 25 February 1999 to adopt an opinion on ‘The EU’s Northern dimension including
relations with Russia.’

The Section for External Relations, which was responsible for preparing the Committee’s work on the
subject, adopted its opinion on 6 October 1999. The rapporteur was Mr Hamro-Drotz.

At its 367th plenary session of 20 and 21 October 1999 (meeting of 20 October) the Economic and
Social Committee adopted the following opinion by 104 votes to two with three abstentions.

Introduction

The significance of northern Europe for the European Union
has grown since the enlargement of the EU in 1995. Over the
last few years the development of relations between the EU
and the Russian Federation has also become more important.
Effective relations between the EU and its Member States and
other northern European states and Russia are fundamental
for strengthening security and stability.

Economic improvements and greater prosperity in northern
Europe will be of benefit to the EU as a whole, as well as its
European neighbours.

With this in mind, proactive cooperation at every level, based
on common interests and including interaction between
different civil society organisations (for example, the social
partners, economic organisations and other non-governmental
organisations), is very important.

The Economic and Social Committee is presenting this opinion
because both the EU’s northern dimension and its relations
with Russia are among the EU’s priorities and are being actively
developed. In both areas efforts are currently being made to
flesh out and give concrete form to the follow-up measures. In
addition to the spread of organised crime and corruption,
political, economic and social
instability — particularly in
Russia — pose considerable challenges. Measures also need to
be taken to address the large gulf in living standards between
countries in northern Europe. Labour market mechanisms,
the social dialogue and the status of various civil society
organisations in the Baltic states, Poland and Russia in
particular, are very underdeveloped when compared to the
EU’s Member States.

Appendix 1 contains an overview of the EU’s northern dimen-
sion, the development of the EU’s relations with Russia, as well
as other related activities. Chief among these are Baltic Sea
cooperation and the preparations by the northern European
associated countries for EU membership.

The Economic and Social Committee wishes to support the
work begun by the EU through the objectives, recommen-
dations and proposals presented in this opinion.

In the course of work, the Economic and Social Committee
held a meeting in Moscow with representatives of Russian
socio-economic organisations. The Committee has also sent
out a questionnaire to obtain the views of organisations in
Russia and the countries in this region which have applied for
EU membership. Appendix 2 contains a summary of their
views and responses. These have been taken into account in
this opinion.

The Economic and Social Committee has previously adopted
several opinions and information reports relating to this
subject, the most relevant of which are listed at the end of
Appendix 1. The opinion draws on these documents without,
however, referring explicitly to them nor reiterating the views
presented in them.

The Economic and Social Committee will monitor
the
measures taken to develop the EU’s northern dimension and
strengthen the EU’s relations with Russia. The Committee will
present its views (opinions) on necessary follow-up measures,
with the intention of helping the EU to make solid progress
on these issues.

Objectives

The northern dimension is an essential initiative, as the

1.
EU should develop an integrated policy on northern Europe.

2.
For hundreds of years, relations between Russia and other
countries have had a decisive influence on the development of
the whole of Europe. They are also very important for its
future development. Since Russia is viewed as a strategic
partner, this partnership should also be endowed with appro-
priate instruments. This highlights the importance of the EU’s
Russia strategy, which is being used to coordinate the relations
between Russia, the EU and its Member States.

The events in the Balkans demonstrate the need and oppor-
tunities for EU-Russian cooperation. Stabilisation and recon-
struction work in the Balkans must strengthen the EU’s
cooperation efforts in eastern and northern Europe. Crisis
prevention is particularly important for enhancing stability.

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3.
The ESC considers that the point of departure for the
northern dimension — namely that efforts must be made
within this context to emphasise the beneficial mutual depen-
dence between Russia, the Baltic Sea region, and the EU — is
the right one. Developing cooperation in the Baltic Sea region
is essential, mainly because it is in this region that the EU and
Russia come into direct contact. The northern dimension
should be used to strengthen cooperation between the EU, its
Member States, association and non-EU EEA countries in the
Baltic Sea region, and Russia, particularly its northwestern and
northern regions. The objective of the northern dimension
must be to reduce the political, economic and social diver-
gences between these societies. At the same time, efforts must
be made to help the associated countries prepare for EU
membership and to step up partnership between the EU and
Russia. The northern dimension must act as a cohesive force
in helping these efforts to converge.

Another prerequisite for success is the full commitment and
involvement of Russia and the other non-EU countries in this
region in the northern dimension.

the EU’s future enlargement

4.
The need to develop good neighbourly relations between
countries in northern Europe is becoming more pressing
towards Central
because of
Europe, as well as the fact that the Baltic Sea is in practice
becoming an internal sea within the EU, and that, as the EU
expands, Kaliningrad will become a Russian enclave within
the Union. An economically prosperous and politically and
socially stable Russia which has good relations with its
neighbours is the best kind of partnership country for the EU
to have in the east. The northern dimension should become a
key instrument for promoting neighbourly relations between
these countries.

5.
The promotion of economic growth and prosperity also
depends on the effective rule of law and an operational civil
society. This consideration is, therefore, of central importance
at all stages of developing the northern dimension and relations
with Russia.

6.
The Commission’s November 1998 communication on
the northern dimension, the recommendation adopted by the
Council
in May 1999, the Russia strategy adopted at the
Cologne European Council in June 1999 and the first work
programme relating to it provide appropriate guidelines for
developing cooperation.

ensure the recovery of the economy it is important, particularly
in Russia, to restore the confidence of investors. The scale of
Russian investment is critical.

Investment can be increased in particular by reforming legis-
lation on company taxation, by bringing the rules on company
accountancy and auditing into line with those of the EU’s
Member States, and by improving the legislation on invest-
ment. Improving financial and security arrangements to gain
the confidence of financial institutions and opening up the
banking sector to foreign banks would also increase the
in the target countries. Partners in
propensity to invest
investment projects should consolidate their relations with
international funding sources (the World Bank (the IBRD and
IFC), the EBRD, EIB, NIB). Funding sources should, for their
part, tighten up their monitoring of investments in order to
prevent abuse.

is also important

It
for credible rules to be drawn up
which serve to safeguard inward investment. In line with the
EU-Russia PCA agreement, standards and technical regulations
— including those on product safety — should be brought
into line with EU rules.
In addition, the development of
labour-related factors, such as vocational training, working
conditions, health and safety, and labour market stability,
influences investment decisions.

2.
In order to promote economic growth and prosperity,
the main shared economic interests and cooperation objectives
need to be identified. These include:

— promoting trade and production cooperation, for example

in the field of subcontracting;

— improving the operating conditions

for

small- and

medium-sized enterprises

— equitable privatisation of state-owned companies undergo-
ing structural reform and measures to adapt them to the
market economy;

— developing production methods

for
exploiting the energy (natural gas, oil and electricity) and
considerable forest and mineral resources;

and transport

— developing diversified transport routes and networks based
taking into

on the specific conditions of
account the needs of combined and transit transport;

the region,

Recommendations

1.
Economic growth and more stable markets, as well as
the prosperity and increased employment which stem from
them, should be the priorities in developing the EU’s northern
dimension.
In Russia and the associated countries in the
region, this can be achieved by considerably increasing both
domestic and foreign investment. The greatest obstacle to
is the unpredictability of how the operating
investment
environment will develop. The situation is not yet ideal in all
associated countries in the region and is poor in Russia. To

— improving the food supply, including primary production
and processing, transport, logistics, and the functioning of
the wholesale and retail trade;

— developing integrated communications and IT communi-

cation for the entire region;

— developing environmental protection, including Baltic Sea
conservation, reducing dangerous emissions,
improving
nuclear safety and public health, including the provision
of high-quality drinking water and improving sewage
processing;

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— attaining a high level of competence among the relevant
public authorities (competition authorities, tax authorities,
the product certification body, customs authorities, etc.)
responsible for monitoring compliance;

— strengthening measures to combat organised crime and

corruption;

— developing vocational training for young people.

When defining cooperation objectives, the various service
needs relevant to these objectives and social development
needs arising from structural changes in the business world
(including employment, training, and living conditions) should
be taken into account.

In identifying the cooperation objectives,
the views and
proposals of socio-economic organisations in the EU should
be taken into account. Cooperation makes sense as the
objectives require joint planning, funding and implementation.
The EU must take the initiative in drawing up and launching
practical projects.

In addition to current EU documents, there are also some
other reports on development needs which are worth drawing
upon in the future (1).

3.
The countries in the region, with the exception of Russia,
belong to the WTO or are in the process of joining. Equally,
they are EU members or in the process of preparing for EU
membership. It is important that Russia also brings its laws
and regulations into line with the WTO agreement. This is the
best way of ensuring that businesses in all these countries
benefit from sustainable operating conditions which promote
cooperation between companies. This will also help Russian
companies to establish themselves successfully in markets
outside Russia.

The EU and its Member States must continue to support Russia
in preparing for WTO membership even though conditions in
Russia do not hold out much hope that it will be able to join
in the near future. This adjustment to WTO rules will form the
basis for starting negotiations on free trade between Russia
and the EU.

4.
Improvement of cross-border and border regional co-
operation among all the countries in the region must be

(1) A few examples: Suomen Keskuskauppakamari:

‘Suomalaisten,
luoteis-venäläisten ja virolaisten yritysten näkemyksiä pohjoisesta
ulottuvuudesta’ [The Central Chamber of Commerce of Finland:
The views of Finnish, northwest Russian and Estonian companies
on the northern dimension], June 1999, ISBN 951-8967-48-2;
Prof. Simon Clarke: ‘New Forms of Employment and Household
Survival Strategies in Russia’, Moscow 1999, ISBN 0-9535519-0-3;
Baltic Business Advisory Council:
‘Survey on Conditions for
Growth and Development in the Baltic Sea Region’, May 1999.

considered a priority. In addition to trade in goods and services
and other economic cooperation, cooperation must also
extend to cooperation between citizens, cultural exchange,
crime prevention, and promoting local entrepreneurship. In
particular, those regions in direct contact with the common
borders between the EU, the associated countries and Russia
— the Murmansk region, the Karelian republic, the Leningrad
region, St Petersburg, the Pskov region and Kaliningrad —
require special attention from the EU.

5.
Attention should focus on the task of local and regional
authorities in the associated countries in the region, and
especially in Russia. They are responsible for implementing
legislation as well as monitoring compliance with it. Local
authorities have a key role to play in promoting responsible
entrepreneurship and favourable investment conditions, as
well as crime prevention. The EU must improve the effective-
ness of its support for measures which provide local authorities
with sufficient information, know-how and other resources to
achieve these objectives.

6.
A successful market economy also needs efficient labour
markets and effective dialogue between individuals and rep-
resentative socio-economic organisations, as well as between
these and the public authorities. The survey carried out when
the opinion was being drafted and other contacts with
organisations in non-EU countries in the region (see Appen-
dix 2), have demonstrated that in most countries the national
government has laid down a framework for the labour market,
tripartism and social dialogue. However, in many cases the
institutional structures and legislation are clearly inadequate
and the arrangements do not function well. Organisations
state that they can exert at least some influence, for example
in the legislative process, but there is a feeling in quite a few
cases that they are not sufficiently prepared to act as a credible
guardian of interests and to participate in a civil society
dialogue. In many cases the organisations are weak, and their
representativeness and resources inadequate.

The ESC information report on ‘Stocktaking of the Employ-
ment Situation and the Social Situation in the Applicant states
in the context of the application of the existing body of EU
law covering the internal market’ has also outlined the
prevailing situation.

The association countries and Russia should consolidate
the labour market action, social dialogue and the related
institutional structure which have been initiated by them. The
different operators must be helped to organise themselves
better and to improve their capabilities and their operating
conditions, and they must be consulted regularly, for example
in the legislative process. The EU should provide much more
focused support than at present to these development efforts
and the ESC is in a good position to help with this. The
Committee is pleased to note that Part 2 of Annex II of the
EU’s Russia strategy (areas of action) states that the EU is,

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among other things, seeking to integrate Russia into a
European economic and social cooperation area. This is to be
achieved (point 2.c) by promoting social dialogue, setting
up modern trade unions and employers’ organisations and
encouraging compliance with the most important ILO conven-
tions.

introducing effective monitoring in order to improve the
effectiveness of support programmes and to retain their
credibility. Laying down strict conditions for support is crucial
to achieving the desired objectives. The diversion of support
to unintended beneficiaries should also be prevented.

Proposals

1.
On the basis of the conclusions of the Cologne Summit,
the EU should draw up an action plan for northern Europe on
the basis of the northern dimension. The action plan should
take account of
the recommendations presented in this
opinion. Both short- and long-term measures should be
devised and agreement should be reached as soon as possible,
preferably as early as the presidency conclusions of
the
Helsinki Summit of the European Council in December 1999.

The action plan must include an effective follow-up mechan-
ism, in which implementation and responsibility are carefully
defined. Administrative arrangements are necessary: the EU’s
relevant administrative units should coordinate their work and
focus on the priorities of the action plan.

2.
The action plan should concentrate on the priorities
presented in the ESC’s recommendations. Feasibility studies
need to be undertaken and care taken to ensure that investment
is targeted at the main priorities. For example, food aid from
the EU and other Western countries may have a detrimental
impact on agricultural production in Russia and its neighbours.
Indeed, the priority of Western support should be to modernise
Russian agriculture and its system of food supply in order to
ensure that they meet the basic needs of the population.

3.
The resources of the EU’s support programmes (Tacis,
Phare, Interreg, etc.) should be concentrated on implementing
this action plan. Impartial and targeted coordination between
these programmes is necessary in order to maximise benefits
from the limited resources. According to the information
received, there are still serious shortcomings in the implemen-
tation and management of the programmes, namely that the
projects are not targeted at essential needs, the programmes
and projects are inadequate and too slow, etc.

The EU should take determined action to improve the support
programmes and the way in which they are managed. The new
Tacis regulation must be implemented by early 2000. The
needs of target countries must be taken into account more
effectively, but greater emphasis must also be placed on the
operational and financial responsibility of these countries
themselves.

With regard to Russia in particular, monitoring of the use of
funds needs to be improved. It is essential to solve the problem
that part of the support is swallowed up by intermediate
administration, which does little to help the development of
the economy. The EU must be firm and lose no time in

Adequate arrangements must be targeted at preventing corrup-
tion, money laundering and the establishment of front com-
panies.

The EU should continue to develop its action plan on
4.
northern Europe through bilateral links with the association
and EEA countries in the region as well as with Russia.

In addition, the EU should initiate regular multilateral dialogue
between the EU and the other states in the region in order to
identify common interests and priorities. Efforts should be
made to link the work of the regional cooperation councils
(CBSS, BEAC) to the dialogue. The EU should support this
regional cooperation and participate fully in the implemen-
tation of projects.

Efforts should be made to coordinate the work and
5.
objectives of the EU and other organisations providing support
for northern Europe and Russia. The EU should, therefore,
initiate a multilateral dialogue between all parties, including
one between countries receiving support. The EU should also
promote cooperation on these issues within the framework of
the transatlantic dialogue, on the basis of the action plan on
northern Europe.

6. Within the context of the action programme, it must be
ensured that civil society organisations can participate in
development work, including the following:

— The involvement of socio-economic organisations in
implementing the action plan on northern Europe through
the consultation mechanisms — such as the consultative
group — established for this purpose.

— Regular cooperation between EU and Russian socio-
economic organisations should be developed as part of the
implementation of
the PCA agreement. Consideration
should also be given here to the possibility of setting up
an advisory panel, of which the ESC would be a member.
The EU presidency work-programmes on the Russia
strategy should take this into account.

— The Europe Agreement articles on the establishment of a
consultative committee for these organisations must be
implemented without delay in those association countries
which have not yet done so.

— Support should be given to developing multilateral cooper-
ation between socio-economic organisations
in the
countries of the region as well as forging closer links
between these organisations in Russia and the associated
countries and the various relevant European cooperation
bodies.

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With regard to Russia, improving the effectiveness of labour
markets and tripartite relations, requires strengthening the
special Tacis programme,
to Social Reform
Implementation and Labour Relations (social partnership and
labour disputes)’. With regard to the associated countries, the
Commission should meet its commitment, as expressed in the
communication on the adaptation and development of the
social dialogue to also support these countries. In addition, the

‘Support

Commission’s direct
(TAIEX unit) should be reinforced.

technical assistance and information

The Economic and Social Committee should be consulted
when the above-mentioned arrangements are being made. It is
also in a good position to participate in their implementation
and in making any necessary contacts.

Brussels, 20 October 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

Opinion of the Economic and Social Committee on ‘Transparency and the participation of civil
society organisations in the WTO Millennium Round’

(1999/C 368/15)

On 27 May 1999 the Economic and Social Committee, acting under the third paragraph of rule 23 of its
rules of procedure, decided to draw up an opinion on ‘Transparency and the participation of civil society
organisations in the WTO Millennium Round.’

The Section for External Relations, which was responsible for preparing the Committee’s work on the
subject, adopted its opinion on 6 October 1999. The rapporteur was Mr van Dijk.

At its 367th plenary session (meeting of 20 October 1999), the Economic and Social Committee adopted
the following opinion by 103 votes to one with five abstentions.

1.

Involvement of socio-economic organisations

1.1.
The interest of NGOs and social partners in inter-
national trade has increased considerably in recent years (1).
This interest was already expressed in negotiations for the
GATT Uruguay Round. The involvement reached a peak in the
discussions on the Multilateral Agreement on Investment.
Above all, many NGOs complained of a lack of transparency
on the part of the negotiators with regard to the subjects under
discussion and the consequences of the forthcoming agreement
for the various countries and groupings. The feeling of mistrust
was increased in the course of
the negotiations by the
discouraging reaction of the government representatives. There
was also a feeling that only the industrialised countries
benefited from the agreements.

1.2.
The NGOs’ interest in international trade is now largely
tinged with suspicion. Many organisations have a sceptical
attitude towards the negotiations, and are afraid that the

(1) A distinction is made in this opinion between economic and

social interest groups and NGOs.

governments of the participating countries do not take suf-
ficient account of the interests represented by the socio-
economic organisations and groupings and those of
the
under-developed countries. This found its clearest expression
in the OECD negotiations on the MAI. Lack of information
and of possibilities to exercise influence appeared to be the
main causes for the NGOs’ suspicious attitude. In order to
avoid such a reaction in the coming WTO negotiations, the
ESC takes the view that the involvement of socio-economic
organisations must be organised as far as possible in an
optimum way. This opinion will deal mainly with the involve-
ment of socio-economic organisations in the process leading
to new agreements. The ESC will not express a view in this
opinion on the possibility for socio-economic organisations to
be involved also in the implementation of the agreements
reached.

1.3.
The ESC has a long tradition of taking an interest in
international trade. It has issued many opinions, including
own-initiative opinions, on the subject. In these it has always
endeavoured to stress the importance of this subject for social
and economic interest groups. The most recent ESC opinions
in this area are: