Communication from the Commission to the Council and the European Parliament - Wider Europe - Neighbourhood: A New Framework for Relations with our Eastern and Southern Neighbours
Date: 2003-03-11
Institutions: European Commission
Subjects: Commonwealth of Independent States, EU relations, Mediterranean third countries, Russia, accession to the European Union, economic cooperation, enlargement of the Union

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 11.3.2003
COM(2003) 104 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Wider Europe — Neighbourhood: A New Framework for Relations with our Eastern
and Southern Neighbours

   
List of abbreviations

Acquis:
CEES:
CFSP:
EBRD:
EIB:
ERA:
ESDP:
EU:
FEMIP:
FTA:
GDP:
IFIs:
ILO:
INTERREG:

JHA:
Meda:
MFA:
NDEP:
NIS:

OSCE:
PCA:
Phare:

PRINCE:
RTD:
Tacis:

TENs:
UN:
WNIS:
WTO:

inter-regional

to  stimulate 

Acquis communautaire (Community legislation)
EU/Russia Common European Economic Space initiative
EU Common Foreign and Security Policy
European Bank for Reconstruction and Development
European Investment Bank
European Research Area
EU European Security and Defence Policy
European Union
Facility for Euro-Mediterranean Investment and Partnership
Free Trade Agreement
Gross Domestic Product
International Financial Institutions
International Labour Organisation
Community  programme  aiming 
cooperation within the EU
Justice and Home Affairs
Community assistance programme for the Mediterranean countries
EU macro-financial assistance
Northern Dimension Environmental Partnership
(Armenia,  Azerbaijan,  Belarus,
Newly 
Georgia,  Turkmenistan,  Kazakhstan,  Kyrgyzstan,  Moldova,
Tajikistan, Ukraine, Uzbekistan)
Organisation for Security and Cooperation in Europe
Partnership and Cooperation Agreement
Community  assistance  programme  for  the  Central  European
candidate countries
Information Programme for European citizens
Research and Technological Development
Community Technical Assistance programme for the
Commonwealth of Independent States
Trans-European Networks
United Nations
Western Newly Independent States (Ukraine, Moldova, Belarus)
World Trade Organisation

Independent  States 

2

1.

WIDER EUROPE: ACCEPTING THE CHALLENGE

On 1 May 2004, the European Union will enter a new and historic phase. An enlarged
Union of 25 countries, with a combined population of more than 450 million and GDP
of  almost  €10000  billion,  will  fundamentally  increase  the  political,  geographic  and
economic  weight  of  the  EU  on  the  European  continent.  Enlargement  will  boost  EU
growth  and  employment  opportunities  within  a  framework  of  shared  values  and
common respect for fundamental liberties. New patterns in the movement of people,
capital,  goods  and  services  will  increase  diversity  in  culture  and  traditions.  Beyond
the  EU’s  borders,  enlargement  will  change  the  shape  of  the  EU’s  political  and
economic relations with other parts of the world.

Enlargement  gives  new  impetus  to  the  effort  of  drawing  closer  to  the  385  million
inhabitants  of  the  countries  who  will  find  themselves  on  the  external  land  and  sea
border,  namely  Russia,  the  Western  NIS  and  the  Southern  Mediterranean11.  The
accession of the new member states will strengthen the Union’s interest in enhancing
relations with the new neighbours. Over the coming decade and beyond, the Union’s
capacity to provide security, stability and sustainable development to its citizens will
no longer be distinguishable from its interest in close cooperation with the neighbours.

Interdependence  –  political  and  economic  –  with  the  Union’s  neighbourhood  is
already a reality. The emergence of the euro as a significant international currency has
created  new  opportunities  for  intensified  economic  relations.  Closer  geographical
proximity  means  the  enlarged  EU  and  the  new  neighbourhood  will  have  an  equal
stake in furthering efforts to promote trans-national flows of trade and investment as
well  as  even  more  important  shared  interests  in  working  together  to  tackle  trans-
boundary threats - from terrorism to air-borne pollution. The neighbouring  countries
are the EU’s essential partners: to increase our mutual production, economic  growth
and external trade, to create an enlarged area of political stability and functioning rule
of  law,  and  to  foster  the  mutual  exchange  of  human  capital,  ideas,  knowledge  and
culture.

The EU has a duty, not only towards its citizens and those of the new member states,
but  also  towards  its  present  and  future  neighbours  to  ensure  continuing  social
cohesion and economic dynamism. The EU must act to promote the regional and sub-
regional  cooperation  and  integration  that  are  preconditions  for  political  stability,
economic development and the reduction of poverty and social divisions in our shared
environment.

For  the  EU’s  part,  the  whole  range  of  the  Union’s  policies  (foreign,  security,  trade,
development,  environment  and  others)  will  need  to  rise  to  meet  this  challenge.  The
November 2002 General Affairs and  External Relations  Council launched  the  work,
noting in particular the situation of Ukraine, Moldova and Belarus – new neighbours
on  the  Union’s  land  border.  The  December  2002  Copenhagen  European  Council
confirmed  that  the  Union  should  take  the  opportunity  offered  by  enlargement  to

1

Southern Mediterranean: Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestinian
Authority,  Syria,  Tunisia.  Western  Newly  Independent  States  (WNIS):  Ukraine,  Moldova,
Belarus

3

                                                
enhance  relations  with  its  neighbours  on  the  basis  of  shared  values2.  It  repeated  the
Union’s  determination  ttoo   aavvooiidd   ddrraawwiinngg   nneeww   ddiivviiddiinngg   lliinneess   iinn   EEuurrooppee   aanndd   ttoo
pprroommoottee   ssttaabbiilliittyy   aanndd   pprroossppeerriittyy   wwiitthhiinn   aanndd   bbeeyyoonndd   tthhee   nneeww   bboorrddeerrss   ooff   tthhee
UUnniioonn..  It reaffirmed that enlargement will serve to strengthen relations with  RRuussssiiaa,
and  called  for  eennhhaanncceedd   rreellaattiioonnss   wwiitthh   UUkkrraaiinnee,,   MMoollddoovvaa,,   BBeellaarruuss   aanndd   tthhee
SSoouutthheerrnn   MMeeddiitteerrrraanneeaann   ccoouunnttrriieess   ttoo   bbee   bbaasseedd   oonn   aa   lloonngg   tteerrmm   aapppprrooaacchh
pprroommoottiinngg   rreeffoorrmm,,   ssuussttaaiinnaabbllee   ddeevveellooppmmeenntt   aanndd   ttrraaddee33.  At  the  same  time,  the
Council  rreeaaffffiirrmmeedd   tthhee   EEuurrooppeeaann   ppeerrssppeeccttiivvee   ooff   tthhee   ccoouunnttrriieess   ooff   tthhee   WWeesstteerrnn
BBaallkkaannss  iinn  tthhee  SSttaabbiilliissaattiioonn  aanndd  AAssssoocciiaattiioonn  PPrroocceessss.

This  Communication  considers  how  to  strengthen  the  framework  for  the  Union’s
relations with those neighbouring countries that do not currently have the perspective
of membership of the EU4. It does not, therefore, apply to the Union’s relations with
the remaining candidate countries - Turkey, Romania and Bulgaria – or the Western
Balkans. The Communication argues that enhanced interdependence  –  both  political
and  economic  –  can  itself  be  a  means  to  promote  stability,  security  and  sustainable
development both within and without the EU. The communication proposes that  tthhee
EEUU  sshhoouulldd  aaiimm  ttoo  ddeevveelloopp  aa  zzoonnee  ooff  pprroossppeerriittyy  aanndd  aa  ffrriieennddllyy  nneeiigghhbboouurrhhoooodd  – a
‘ring  of  friends’  -  wwiitthh   wwhhoomm   tthhee   EEUU   eennjjooyyss   cclloossee,,   ppeeaacceeffuull   aanndd   ccoo--ooppeerraattiivvee
rreellaattiioonnss.

In  return  for  concrete  progress  demonstrating  shared  values  and  effective
implementation of political, economic and institutional reforms, including in aligning
legislation with the acquis, the EU’s neighbourhood should benefit from the prospect
of closer economic integration with the EU. To this end, RRuussssiiaa,,  tthhee  ccoouunnttrriieess  ooff  tthhee
WWeesstteerrnn  NNIISS  aanndd  tthhee  SSoouutthheerrnn  MMeeddiitteerrrraanneeaann  sshhoouulldd  bbee  ooffffeerreedd  tthhee  pprroossppeecctt  ooff
aa  ssttaakkee  iinn  tthhee  EEUU’’ss  IInntteerrnnaall  MMaarrkkeett  aanndd  ffuurrtthheerr  iinntteeggrraattiioonn  aanndd  lliibbeerraalliissaattiioonn  ttoo
pprroommoottee   tthhee   ffrreeee   mmoovveemmeenntt   ooff   ––   ppeerrssoonnss,,   ggooooddss,,   sseerrvviicceess   aanndd   ccaappiittaall   ((ffoouurr
ffrreeeeddoommss)).

2.

NEIGHBOURHOOD – DIFFERENT COUNTRIES, COMMON INTERESTS

The situations of Russia, the countries of the WNIS and the Southern Mediterranean
are  very  different  judged  by  most  standards.  The  course  of  the  20th  century  saw
dramatic  changes  in  geography,  politics  and  culture  both  on  the  European  continent
and  in  the  Mediterranean.  These  forces  have  not  necessarily  led  to  greater
convergence.

Differences are reflected in the variety and intensity of the Union’s existing relations
with  and  among  the  countries  of  its  new  neighbourhood.  While,  for  example,  the
Union’s relations with Belarus have progressed little since 1996, the development of
EU/Russia  dialogue  and  cooperation  on  political  and  security  issues,  energy,

2

3

4

Notably democracy, respect for human rights and the rule of law, as set out within the EU in
the Charter of Fundamental Rights.
The European Parliament has also called for attention to be paid to the issues surrounding the
new neighbours, most recently in its 12 February 2003 report on relations between the EU and
Belarus.
Given their location, the Southern Caucasus therefore also fall outside the geographical scope
of this initiative for the time being.

4

                                                
environment  and  science  and  technology  over  the  past  few  years  has  accelerated
rapidly.  A  new  neighbourhood  policy  will  only  constitute  one  pillar  of  the  overall
EU/Russia strategic partnership.

NNEEIIGGHHBBOOUURRHHOOOODD  AANNDD  EEUU  MMEEMMBBEERRSSHHIIPP

(cid:1)(cid:1)   AArrttiiccllee  4499  ooff  tthhee TTrreeaattyy  oonn  EEuurrooppeeaann UUnniioonn ssttiippuullaatteess tthhaatt aannyy EEuurrooppeeaann  ssttaattee  mmaayy  aappppllyy
ttoo   bbeeccoommee   aa   mmeemmbbeerr   ooff   tthhee   EEuurrooppeeaann  UUnniioonn..  PPrroossppeeccttiivvee  ccaannddiiddaatteess   mmuusstt   mmeeeett   tthhee
ccrriitteerriiaa  ffoorr  mmeemmbbeerrsshhiipp::  ddeemmooccrraaccyy,, tthhee rruullee ooff llaaww,, hhuummaann rriigghhttss,, rreessppeecctt  ffoorr  mmiinnoorriittiieess;;
aa  ffuunnccttiioonniinngg  mmaarrkkeett  eeccoonnoommyy,, aanndd  tthhee ccaappaacciittyy  ttoo  ccooppee  wwiitthh  ccoommppeettiittiivvee   pprreessssuurreess;;   tthhee
aabbiilliittyy   ttoo   ttaakkee   oonn  tthhee   oobblliiggaattiioonnss  ooff  mmeemmbbeerrsshhiipp  ((mmeeaanniinngg  ttoo aappppllyy  eeffffeeccttiivveellyy   tthhee   EEUU’’ss
rruulleess  aanndd  ppoolliicciieess))..

(cid:1)(cid:1)   TThhee  iinncceennttiivvee  ffoorr  rreeffoorrmm  ccrreeaatteedd bbyy tthhee pprroossppeecctt ooff mmeemmbbeerrsshhiipp hhaass pprroovveedd  ttoo  bbee  ssttrroonngg
––   eennllaarrggeemmeenntt  hhaass   uunnaarrgguuaabbllyy  bbeeeenn  tthhee  UUnniioonn’’ss  mmoosstt  ssuucccceessssffuull   ffoorreeiiggnn   ppoolliiccyy
iinnssttrruummeenntt..

(cid:1)(cid:1)  

(cid:1)(cid:1)  

In some cases the issue of prospective membership has already been resolved. Accession
has been ruled out, for example, for the non-European Mediterranean partners. But other
cases  remain  open, such  as  those  European  countries  who  have  clearly  expressed  their
wish to join the EU.

IInn  rreeaalliittyy,,  hhoowweevveerr,,  aannyy  ddeecciissiioonn oonn ffuurrtthheerr EEUU eexxppaannssiioonn aawwaaiittss aa ddeebbaattee  oonn  tthhee  uullttiimmaattee
ggeeooggrraapphhiicc  lliimmiittss  ooff  tthhee  UUnniioonn.. TThhiiss iiss aa ddeebbaattee iinn wwhhiicchh tthhee ccuurrrreenntt ccaannddiiddaatteess  mmuusstt  bbee
iinn  aa  ppoossiittiioonn  ttoo  ppllaayy  aa  ffuullll  rroollee..

(cid:1)  TThhee   aaiimm   ooff   tthhee  nneeww   NNeeiigghhbboouurrhhoooodd  PPoolliiccyy  iiss  tthheerreeffoorree  ttoo  pprroovviiddee  aa  ffrraammeewwoorrkk   ffoorr   tthhee
ddeevveellooppmmeenntt   ooff  aa   nneeww   rreellaattiioonnsshhiipp  wwhhiicchh  wwoouulldd  nnoott,,  iinn  tthhee  mmeeddiiuumm--tteerrmm,,   iinncclluuddee  aa
ppeerrssppeeccttiivvee   ooff   mmeemmbbeerrsshhiipp   oorr  aa  rroollee  iinn  tthhee  UUnniioonn’’ss  iinnssttiittuuttiioonnss..  AA   rreessppoonnssee   ttoo   tthhee
pprraaccttiiccaall   iissssuueess  ppoosseedd   bbyy   pprrooxxiimmiittyy  aanndd  nneeiigghhbboouurrhhoooodd sshhoouulldd  bbee  sseeeenn   aass   sseeppaarraattee   ffrroomm
tthhee  qquueessttiioonn  ooff  EEUU  aacccceessssiioonn..

Regional  trade  and  integration  is  a  recognised  objective  of  the  EU’s  Mediterranean
policy,  not  least  because  of  the  positive  effects  on  regional  political  and  economic
stability that will result from the creation of a larger Mediterranean market. The EU
has  Free  Trade  Agreements  (FTAs)  in  place  with  the  countries  of  the  Southern
Mediterranean  and  the  Barcelona  process  envisages  that  these  should  now  be
expanded  to  include  the  services  sector  as  well  as  the  goods  sector  more  fully.
Regional 
rapid  negotiation  and
implementation  of  FTAs  between  the  Mediterranean  partners,  as  well  as  with  the
EU’s  customs  union  partner  Turkey.  While  some  Association  Agreements  with  the
EU still need to be ratified5, the Mediterranean partners are already being encouraged
to approximate their legislation to that of the Internal Market.

integration 

foreseen 

is  also 

through 

the 

In contrast to contractual relations with all the EU’s other neighbouring countries, the
Partnership  and  Cooperation  Agreements  (PCAs)  in  force  with  Russia,  Ukraine  and
Moldova grant neither preferential treatment for trade, nor a timetable for regulatory
approximation.

5

Association agreements with Tunisia, Israel, Morocco, Palestinian Authority and Jordan have
entered into force. Those concluded  with  Egypt,  Lebanon  and  Algeria  await  ratification.  An
association agreement with Syria is under negotiation.

5

                                                
Given these different starting points and objectives it is clear that a new EU approach
cannot  be  a  one-size-fits-all  policy.  Different  stages  of  reform  and  economic
development  also  means  that  different  rates  of  progress  can  be  expected  from  the
neighbouring countries over the coming decade.

On  the  other  hand,  it  is  increasingly  clear  that  the  EU  shares  an  important  set  of
mutual interests with each of its neighbours. All countries in the new neighbourhood
the  opportunities  and  challenges  surrounding  PPrrooxxiimmiittyy,
are  confronted  by 
PPrroossppeerriittyy and PPoovveerrttyy..

Proximity

Geographical proximity presents opportunities and challenges for both the EU and for
its  neighbours.  In  the  1995  Barcelona  Declaration,  the  EU  and  the  Mediterranean
partners  recognised  that  geographical  proximity  increased  the  value  of  developing  a
comprehensive policy of close association, reflected in the negotiation of Association
Agreements  with  each  country.  In  the  Partnership  and  Cooperation  Agreements  in
effect  with  Russia,  Ukraine  and  Moldova,  the  parties  also  agreed  on  the  need  to
establish a strong partnership, based on historic links and common values. Both types
of  agreements  were  designed  as  instruments  to  help  with  the  transition  process,
notably through gradual rapprochement between the EU and the partner countries and
to create a wider area of cooperation.

More specifically, geographical proximity increases the importance of a set of issues
revolving around, but not limited to, the management of the new external border and
trans-boundary  flows.  The  EU  and  the  neighbours  have  a  mutual  interest  in
cooperating,  both  bilaterally  and  regionally,  to  ensure  that  their  migration  policies,
customs  procedures  and  frontier  controls  do  not  prevent  or  delay  people  or  goods
from  crossing  borders  for  legitimate  purposes.  Infrastructure,  efficient  border
management  and  interconnected  transport,  energy  and  telecommunications  networks
will  become  more  vital  to  expanding  mutual  trade  and  investment.  Cross-border
cultural  links,  not  least  between  people  of  the  same  ethnic/cultural  affinities,  gain
additional importance in the context of proximity. Equally, threats to mutual security,
whether  from  the  trans-border  dimension  of  environmental  and  nuclear  hazards,
communicable  diseases,  illegal  immigration,  trafficking,  organised  crime  or  terrorist
networks, will require joint approaches in order to be addressed comprehensively.

Prosperity and Poverty

A  new  EU  approach  to  its  neighbouring  countries  cannot  be  confined  to  the  border
regions alone. If the EU is to work with its neighbourhood to create an area of shared
prosperity and stability, proximity policy must go hand-in-hand with action to tackle
the  root  causes  of  the  political  instability,  economic  vulnerability,  institutional
deficiencies, conflict and poverty and social exclusion6.

6

As  set  out  in  the  10  November  2000  Council/Commission  Statement  on  EU  Development
Policy.

6

                                                
Most of the EU’s Southern and Eastern neighbours have a nominal GDP per capita of
less than €20007. Poverty and social exclusion has increased sharply in Russia and the
WNIS over the past decade as a result of falling output and increased inequality in the
distribution  of  income.  This  has  led  to  an  increased  risk  of  social  and  political
dislocation.  In  Russia,  GDP  is  still  a  third  lower  than  its  level  in  1989;  Moldova
remains at below half of its former level of GDP. What is perhaps less known is that
the Mediterranean has also had a very poor rate of growth in GDP per capita. Egypt,
Israel  and  Tunisia  are  the  only  countries  to  have  exceeded  2%  growth  since  1975,
while  Algeria,  for  example,  shows  a  small  negative  growth  rate.  Only  sub-Saharan
Africa shows a worse overall growth rate than these two  regions.  Moldova is by  far
the  poorest  neighbouring  country  (€417  per  capita8),  Ukraine  the  next  most  poor
(€855). Israel is the richest of the EU’s neighbours (€19578), with Lebanon (€5284)
second  richest,  albeit  at  a  considerably  lower  level  of  GDP,  and  Russia  some  way
behind  both  countries  (€2382).  A  cluster  of  countries  –  Belarus,  Egypt,  Morocco,
West Bank/Gaza and Syria – has achieved between three and four times the level of
Moldovan GDP per capita (€1292 - €1663).

Despite the sluggish rate of economic growth, the Mediterranean region has long been
characterised  by  a  low  level  of  absolute  poverty9.  Relative  poverty  is,  however,  an
issue as nearly  30% of the population live on less than  $2  a  day  and  illiteracy  rates
remain high. Only 0.6% of population use the internet and only 1.2% have access to a
computer10. In Russia and the WNIS, poverty rates have increased considerably since
1990. Russia has seen some reversal of this trend in recent years.

Democracy,  pluralism,  respect  for  human  rights,  civil  liberties,  the  rule  of  law  and
core labour standards are all essential prerequisites for political stability, as well as for
peaceful and sustained social and economic development. Nearly all countries of the
Mediterranean, the WNIS and Russia have a history of autocratic and non-democratic
governance  and  poor  records  in  protecting  human  rights  and  freedom  of  the
individual. Generally, the countries of the WNIS and Russia have taken steps towards
establishing  democracy  and  market  institutions  over  the  past  12  years.  Yet  political
reform  in  the  majority  of  the  countries  of  the  Mediterranean  has  not  progressed  as
quickly as desired.

Trade  and  investment  are  vital  to  improving  economic  growth  and  employment.
Ensuring  secure  and  sustainable  energy  supplies  will  call  for  additional,  vast
investments in Russia, the WNIS and the Mediterranean. At the same time, economic
diversification towards labour-intensive, employment-creating industries and services
are urgently needed, not only in relatively  resource-poor countries, such as Ukraine,
Moldova and Morocco, but also in energy-rich countries, such as Algeria and Russia.
Energy dominates imports from both regions, more so for trade with Russia than from
the  WNIS  and  the  Southern  Mediterranean,  where  textiles  and  agricultural  produce
represent a considerable share of imports from certain countries (Moldova, Morocco,
Tunisia). In 2001, a year with high oil prices, exports to the EU from Russia and the
WNIS,  and  the  Southern  Mediterranean  amounted  to  approximately  €60  billion  for

7

8

9

10

See Annex for statistics on GDP, trade and investment, migration and assistance.
Nominal estimates for 2001, EBRD Transition Report update, 2002.
Individuals earning less than $1 per day, measured in purchasing power parity terms
UNDP Arab Human Development Report

7

                                                
each  of  the  two  regions,  while  imports  from  the  EU  were  only  just  over  half  the
exports for both. To compare, in 2001 Hungarian imports and exports to the EU alone
totalled around €25 billion each way. The neighbouring countries all face weak levels
of  foreign  direct  investment  when  compared  with  countries  at  similar  levels  of
development and relative to their needs. For example, per capita foreign investment in
Russia is less than one sixth of  the level  in  Poland, in addition to  which  Russia  has
seen an average annual domestic capital flight of $20 billion over the last 10 years.

PROMOTING REGIONAL AND INTRA-REGIONAL COOPERATION

(cid:1)  The  Euro-Mediterranean  partnership  offers  a  strong  policy  framework  for  the  EU’s
relations with Mediterranean countries. Since the Barcelona declaration was adopted in
1995  it  has  formed  the  basis  for  a  continuing  dialogue  and  cooperation  in  spite  of  the
political turmoil in the region.

(cid:1)  As  far  as  the  bilateral  dimension  of  EU  relations  is  concerned,  the  basic  framework  is
similar  for  both  groups  of  countries:  Association  Agreements  or  Partnership  and
Cooperation  agreements,  including  political  dialogue,  are  accompanied  by  national
Meda/Tacis programmes and agreements on specific issues (readmission, fisheries etc.).
The  most  important  difference  is  that,  in  the  Mediterranean,  an  explicit  regional
dimension encouraging the development of intra-regional initiatives and cooperation in a
broad range  of  sectors is included. This  policy  of  promoting  intra-regional  cooperation
consists  of  three  Chapters  defined  in  the  Barcelona  Declaration  supplementing  the
bilateral framework: the Political and Security Chapter, Economic and Financial Chapter
and  Social,  Cultural  and  Human  Chapter.  Since  1995,  seven  meetings  of  the  Foreign
Ministers of the 15+12 have taken place, together with 16 meetings of sectoral ministers.
These meetings have launched a number of joint cooperation initiatives, financed through
the Meda regional programme.

(cid:1)  On the future Eastern external border, regional economic cooperation among the WNIS
is already quite strong, oriented around traditional flows of trade and investment to and
from  Russia.  However,  encouragement  for  regional  political  cooperation  and/or
economic  integration  has  not  so  far  formed  a  strong  component  of  EU  policy  towards
Russia and the WNIS.

(cid:1)  The  Northern  Dimension  currently  provides  the  only  regional  framework  in  which  the
EU  participates  with  its  Eastern  partners  to  address  trans-national  and  cross-border
issues. But participation is restricted to Russia.

(cid:1) 

In  the  context  of  a  new  EU  neighbourhood  policy,  further  regional  and  sub-regional
cooperation and integration amongst the countries of the Southern Mediterranean will be
strongly encouraged. New initiatives to encourage regional cooperation between Russia
and the countries of the Western NIS might also be considered. These could draw upon
the  Northern  Dimension  concept  to  take  a  broader  and  more  inclusive  approach  to
dealing with neighbourhood issues.

Spreading the benefits of increased economic growth to all sectors of society requires
positive  action  to  promote  social  inclusion  via  mutually  reinforcing  economic,
employment  and  social  policies.  Attention  to  areas  including  education,  health,
training  and  housing  is  equally  important.  Increasing  environmental  and  economic
efficiency  should  also  proceed  hand-in-hand.  Serious  environmental  pollution  and
deficiencies  in  managing  nuclear  and  toxic  waste  affect  public  health  and  living
standards  in  many  of  the  neighbouring  countries  and  contribute  to  shortening  life

8

expectancy  in  some.  At  the  same  time,  the  wasteful  and  inefficient  use  of  natural
resources reduces present and, crucially, future prospects for economic growth.

A  functioning  legal  system,  implemented  by  strong  regulatory  authorities  and
effective  and  independent  judiciaries  equipped  with  the  powers  to  protect  property
rights, are also required to maximise economic activity and production, and accelerate
economic growth.

The  negative  effects  of  conflict  on  economic  and  political  development,  especially
where  sustained  over  a  long  period,  cannot  be  over-estimated.  These  effects  are  not
only domestic – so long as conflicts persist there is a danger of spill over. Conflict and
political division in the Mediterranean (Western Sahara, Palestine) over the past half
century has seriously  retarded the development of the region. Unrecognised  statelets
such as Transdniestria are a magnet for organised crime and can de-stabilise or throw
off  course  the  process  of  state-building,  political  consolidation  and  sustainable
development.

TThhee   EEUU   hhaass   aa   cclleeaarr   iinntteerreesstt   iinn   eennssuurriinngg   tthhaatt   tthheessee   ccoommmmoonn   cchhaalllleennggeess   aarree
aaddddrreesssseedd..

3.

A NEW VISION AND A NEW OFFER

The EU can and should work to spread the benefits of enlargement for political  and
economic  stability  in  the  neighbouring  countries  and  to  help  reduce  prosperity  gaps
where  they  exist.  This  should  be  reflected  in  a  cclleeaarr   vviissiioonn  for  the  development  of
closer and more coherent relations with the Union’s neighbours over the medium and
long term.  The EU should act to reinforce and unite its existing neighbourhood policy
towards  these  regions  around  two  overarching  objectives  for  the  next  decade  or
longer:

–  To  work  with  the  partners  to  reduce  poverty  and  create  an  area  of  shared
prosperity  and  values  based  on  deeper  economic  integration,  intensified
political  and  cultural  relations,  enhanced  cross-border  cooperation  and
shared  responsibility  for  conflict  prevention  between  the  EU  and  its
neighbours.

–  To anchor the EU’s offer of concrete benefits and preferential relations within
a differentiated framework which responds to progress made by the partner
countries in political and economic reform.

The establishment at pan-European level of an open and integrated market functioning
on the basis of compatible or harmonised rules and further liberalisation would bring
significant  economic  and  other  benefits  to  both  the  EU  and  the  neighbourhood.  A
political,  regulatory  and  trading  framework,  which  enhances  economic  stability  and
institutionalises  the  rule  of  law,  will  increase  our  neighbours'  attractiveness  to
investors and reduce their vulnerability to external shocks. Further reciprocal market
access  through  preferential  agreements  covering  goods  and  services  will  have  the
greatest  positive  impact  if  accompanied  by  measures  to  facilitate  economic  activity.
Sustainable  development  requires  a  common  understanding  that  the  adoption  of  a
broader range of policies, including environmental protection, will support more rapid

9

economic  growth.  Research  and  scientific  cooperation  can  catalyse  technological
progress.  The  EU  acquis  offers  a  well  established  model  on  which  to  establish
functioning  markets  and  common  standards  for  industrial  products,  services,
transport,  energy  and  telecommunications  networks,  environmental  and  consumer
protection,  health,  labour  and  minimum  quality  requirements.  Enhanced  and  better
targeted  EU  development  assistance  could  accompany  reform,  helping  to  build
administrative capacity and mitigate social adjustment costs.

In  return  for  concrete  progress  demonstrating  shared  values  and  effective
implementation  of  political,  economic  and  institutional  reforms,  including  aligning
legislation with the acquis, the EU’s neighbourhood should benefit from the prospect
of  closer  economic  integration  with  the  EU.  Specifically,  aallll   tthhee   nneeiigghhbboouurriinngg
ccoouunnttrriieess   sshhoouulldd   bbee   ooffffeerreedd   tthhee   pprroossppeecctt   ooff   aa   ssttaakkee   iinn   tthhee   EEUU’’ss   IInntteerrnnaall   MMaarrkkeett
aanndd   ffuurrtthheerr   iinntteeggrraattiioonn   aanndd   lliibbeerraalliissaattiioonn   ttoo   pprroommoottee   tthhee   ffrreeee   mmoovveemmeenntt   ooff   ––
ppeerrssoonnss,,   ggooooddss,,   sseerrvviicceess   aanndd   ccaappiittaall   ((ffoouurr   ffrreeeeddoommss)).. If a country has reached this
level, it has come as close to the Union as it can be without being  a member.11 The
EU therefore should  stand  ready to  work  in  close partnership  with the  neighbouring
countries who wish to implement further reforms and assist in building their capacity
to align with and implement parts of the acquis communautaire.

The EU’s approach could therefore be based on the following incentives:

(cid:1)(cid:1)
EEXXTTEENNSSIIOONN   OOFF   TTHHEE   IINNTTEERRNNAALL   MMAARRKKEETT   AANNDD   RREEGGUULLAATTOORRYY   SSTTRRUUCCTTUURREESS:
Common  rules  and  standards  are  vital  to  ensure  that  our  neighbours  can  access  and
reap the benefits of the enlarged EU internal market as well as to create a more stable
environment for economic activity. The EU acquis, which has established a common
market based on the free movement of goods, persons, services and capital, ensuring
competition  and  a  level  playing  field  based  on  shared  norms  and  integrating  health,
consumer  and  environmental  protection,  could  serve  as  a  model  for  countries
undertaking institutional and economic reform.

Both  the  Association  and  Partnership  and  Cooperation  Agreements  set,  in  broad
terms,  an  agenda  for  legislative  and  regulatory  approximation,  albeit  without  fixed
deadlines. For the WNIS, this agenda could be developed as currently explored in the
Common  European  Economic  Space  (CEES)  initiative  launched  with  Russia.  The
CEES  itself  should  be  developed  to  set  out  a  deeper  and  broader  timetable  for
legislative  approximation  between  the  EU  and  Russia.  Participation  in  selected  EU
activities and programmes, including aspects such as consumer protection, standards,
environmental  and  research  bodies,  could  be  opened  to  all  neighbouring  countries.
Efforts  to  support  the  further  development  of  enterprise  policy  by  the  partner
countries should accompany regulatory approximation.

(cid:1)(cid:1)
PPRREEFFEERREENNTTIIAALL   TTRRAADDIINNGG   RREELLAATTIIOONNSS   AANNDD   MMAARRKKEETT   OOPPEENNIINNGG:  Although
countries can benefit from approximating their economic rules and structures on those
of  the  EU  before  proceeding  with  trade  liberalisation,  more  open  trade  is  a  key
component for market integration.

11

President Prodi’s speech to the Sixth ECSA-World Conference, Brussels, 5-6 December 2002

10

                                                
As provided for in the Barcelona process, the free trade agreements that are already in
place  with  the  Mediterranean  countries  should  cover  more  fully  the  goods  and
services  sectors.  Creating  a  more  integrated  market  requires  that  our  partners  also
conclude  agreements  of  a  similar  depth  among  themselves,  as  well  as  with  Turkey.
For Russia and the WNIS, Free Trade Areas are envisaged in the PCAs, but with no
timetable attached.  Objectives  and  benchmarks  could  be  developed.  The  sequencing
of  economic  rapprochement  is  important  to  ensure  that  liberalisation  really  helps
development. For Moldova which does not currently possess the competitive strength
or administrative capacity to take on the reciprocal obligations of an FTA yet, the EU
is ready to consider developing new initiatives to  grant better market access,  in  line
with WTO obligations.

(cid:1)(cid:1)
PPEERRSSPPEECCTTIIVVEESS  FFOORR  LLAAWWFFUULL  MMIIGGRRAATTIIOONN  AANNDD  MMOOVVEEMMEENNTT  OOFF  PPEERRSSOONNSS: The
EU  and  the  partner  countries  have  a  common  interest  in  ensuring  the  new  external
border is not a barrier to trade, social and cultural interchange or regional cooperation.
The  impact  of  ageing  and  demographic  decline,  globalisation  and  specialisation
means  the  EU  and  its  neighbours  can  profit  from  putting  in  place  mechanisms  that
allow workers to move from one territory to another  where skills are needed most –
although  the  free  movement  of  people  and  labour  remains  the  long-term  objective.
Significant  additional  opportunities  for  cultural  and  technical  interchange  could  be
facilitated by a long-stay visa policy on the part of the EU member states.

An  efficient  and  user-friendly  system  for  small  border  traffic  is  an  essential  part  of
any regional development policy. The EU is currently looking at ways of facilitating
the  crossing  of  external  borders  for  bona  fide  third-country  nationals  living  in  the
border areas that have legitimate and valid grounds for regularly  crossing the border
and do not pose any security threat. The EU could also consider the possibilities for
facilitating  the  movement  of  citizens  of  neighbouring  countries  participating  in  EU
programmes  and  activities.  EU  member  states  should  also  consider  using  the
possibilities  for  granting  visa-free  access  to  holders  of  diplomatic  and  service
passports. Beyond this, provided the necessary conditions are in place, the EU should
be open to examine wider application of visa free regimes. The EU should develop a
common  approach  to  ensure  the  integration  of  third  country  nationals,  with  special
emphasis on citizens of the neighbouring countries lawfully resident in the Union. The
EU  should  assist  in  reinforcing  the  neighbouring  countries’  efforts  to  combat  illegal
migration  and to  establish  efficient  mechanisms  for  returns,  especially  illegal  transit
migration.  Concluding  readmission  agreement  with  all  the  neighbours,  starting  with
Morocco,  Russia,  Algeria,  Ukraine,  Belarus  and  Moldova,  will  be  an  essential
element in joint efforts to curb illegal migration.

(cid:1)(cid:1)
IINNTTEENNSSIIFFIIEEDD  CCOOOOPPEERRAATTIIOONN  TTOO  PPRREEVVEENNTT  AANNDD  CCOOMMBBAATT  CCOOMMMMOONN  SSEECCUURRIITTYY
TTHHRREEAATTSS: Cooperation, joint work and assistance to combat security threats such as
terrorism and trans-national organised crime, customs and taxation fraud, nuclear and
environmental hazards and communicable diseases should be prioritised.

Both  domestic  measures  and  intensified  bilateral  and  multilateral  action  are
indispensable  to  fight  organised  crime.  Particular  attention  should  be  paid  to  drugs
trafficking, trafficking in human beings, smuggling of migrants, fraud, counterfeiting,
money  laundering  and  corruption.  The  EU  should  explore  the  possibilities  for
working  ever  more  closely  with  the  neighbouring  countries  on  judicial  and  police
cooperation  and  the  development  of  mutual  legal  assistance.  The  approach  taken  in

11

the EU/Russia Action Plan against organised crime and the Justice and Home Affairs
(JHA) Action Plan for Ukraine, which includes a scoreboard, could be developed for
other neighbouring countries. The EU should capitalise on the cooperation initiated in
the Mediterranean to introduce reforms to the judicial system, improve police training
and other cooperation in the fight against organised crime. The fight against terrorism
is a potential area for closer cooperation. The new neighbours should also be assisted
in the implementation of all the relevant international instruments in this field, notably
those developed in the UN. EU political focus and assistance must continue to support
efforts  to  take  forward  nuclear  clean-up  in  north  west  Russia  and  follow-up  to  the
closure  of  the  Chernobyl  Nuclear  Power  Plant.  Efforts  to  combat  trans-boundary
pollution - air, sea, water or land - should be modelled on the collaborative approach
taken  by  the  Northern  Dimension  Environmental  Partnership  (NDEP)  and  the
Danube-Black Sea Task Force.

(cid:1)(cid:1)
GGRREEAATTEERR   EEUU   PPOOLLIITTIICCAALL   IINNVVOOLLVVEEMMEENNTT   IINN   CCOONNFFLLIICCTT   PPRREEVVEENNTTIIOONN   AANNDD
CCRRIISSIISS   MMAANNAAGGEEMMEENNTT: Shared values, strong democratic institutions and a common
understanding  of  the  need  to  institutionalise  respect  for  human  rights  will  open  the
way for closer and more open dialogue on the Union’s Common Foreign and Security
Policy  (CFSP)  and  the  development  of  the  European  Security  and  Defence  Policy
(ESDP). A shared neighbourhood implies burden-sharing and joint responsibility for
addressing the threats to stability created by conflict and insecurity.

The  EU  should  take  a  more  active  role  to  facilitate  settlement  of  the  disputes  over
Palestine,  the  Western  Sahara  and  Transdniestria  (in  support  of  the  efforts  of  the
OSCE  and  other  mediators).  Greater  EU  involvement  in  crisis  management  in
response  to  specific  regional  threats  would  be  a  tangible  demonstration  of  the  EU’s
willingness  to  assume  a  greater  share  of  the  burden  of  conflict  resolution  in  the
neighbouring  countries.  Once  settlement  has  been  reached,  EU  civil  and  crisis
management  capabilities  could  also  be  engaged  in  post-conflict  internal  security
arrangements.  Additional  sources  of  funding  for  post-conflict  reconstruction  and
development would be required.

(cid:1)(cid:1)
GGRREEAATTEERR   EEFFFFOORRTTSS   TTOO   PPRROOMMOOTTEE   HHUUMMAANN   RRIIGGHHTTSS,,   FFUURRTTHHEERR   CCUULLTTUURRAALL
CCOOOOPPEERRAATTIIOONN  AANNDD  EENNHHAANNCCEE  MMUUTTUUAALL  UUNNDDEERRSSTTAANNDDIINNGG: Shared values and mutual
understanding  provide  the  foundations  for,  inter  alia,  deeper  political  relations,
enhanced cooperation on justice and security issues, environmental improvement and
governance. The importance of dialogue between civilisations and the free exchange
of  ideas  between  cultures,  religions,  traditions  and  human  links  cannot  be  over-
emphasised.  The  EU  should  contribute  to  the  development  of  a  flourishing  civil
society to promote basic liberties such as freedom of expression and association. The
EU also needs to make a greater effort to create a positive image in the neighbourhood
and act to combat stereotypes which affect perceptions of the neighbouring countries
within the EU.

EU  programmes  and  activities  in  research,  education,  culture  and  bilateral  visitor
programmes  should  be  expanded.  Exchange  programmes  between  youth  and
universities,  the creation  of  European  studies  courses  and  the opening  of  new  Euro-
information 
professional
exchange/visit  programmes,  activities  in  the  field  of  media,  training  and  journalists
exchanges  merit  close  consideration.  Ideas  circulated  by  the  new  member  states
should  be  looked  upon  favourably.  Exchanges  on  a  regional  level  regarding

‘people-to-people’ 

activities, 

including 

centres, 

12

governance  and  human  rights  training  issues  have  proven  beneficial  and  should  be
explored  further.  In the  Mediterranean, work  could  take  place  under  the  auspices  of
the  Euro-Mediterranean  Foundation.  Attention  should  be  given  to  strengthening  EU
information  policy  in  Russia  and  the  WNIS  in  cooperation  with  the  member  states.
Twinning opportunities between local government and civil society organisations and
judicial  cooperation  should  be  fully  utilised.  A  PRINCE  information  campaign  to
make the European public aware of the benefits and challenges of the  wider  Europe
framework will be launched.

(cid:1)(cid:1)
IINNTTEEGGRRAATTIIOONN   IINNTTOO   TTRRAANNSSPPOORRTT,,   EENNEERRGGYY   AANNDD   TTEELLEECCOOMMMMUUNNIICCAATTIIOONNSS
NNEETTWWOORRKKSS  AANNDD  TTHHEE  EEUURROOPPEEAANN  RREESSEEAARRCCHH  AARREEAA: Full integration into EU markets
and  society  requires  compatible  and  interconnected  infrastructure  and  networks  as
well  as  harmonised  regulatory  environments.  EU  policies  such  as  Trans-European
Networks (TENs), Galileo and other research activities should draw up strategies for
the Eastern and Southern neighbours.

for 

regional  programme 

is  producing  blueprints 

The  Meda 
infrastructure
interconnection and regulatory approximation and harmonisation in transport, energy
and  telecommunications  (Trans-Euro-Mediterranean  Networks).  These  blueprints
should be implemented with loans and risk capital from the EIB through the Facility
for  Euro-Mediterranean  Investment  and  Partnership  (FEMIP)  as  well  as  the  other
International  Financial  Institutions  (IFIs).  The  EU  should  encourage  and  support
telecommunications markets in the neighbouring countries, improving the availability
of  Internet  access  for  business  and  private  use  and  encouraging  the  growth  of
knowledge-based  economies.  As  set  out  in  the  6th  Framework  programme  for
Research  and  Technological  Development  (RTD),  the  EU  should  take  forward  the
opening of the European Research Area (ERA) to integrate the scientific communities
of  the  neighbouring  countries,  exploit  scientific  results,  stimulate  innovation  and
develop human resources and research capacities.

(cid:1)(cid:1)
NNEEWW   IINNSSTTRRUUMMEENNTTSS   FFOORR   IINNVVEESSTTMMEENNTT   PPRROOMMOOTTIIOONN   AANNDD   PPRROOTTEECCTTIIOONN:  A
stronger  and  more  stable  climate  for  domestic  and  foreign  investment  is  critical  to
reducing  the  wealth  gap  that  exists  between  the  EU  and  its  neighbours.  Foreign
investment  can  encourage  reform  and  improved  governance  at  the  same  time  as
contributing to the transfer of know-how and management techniques and the training
of local personnel.

Future agreements concluded with our neighbours could include reciprocal provisions
granting  companies  national  treatment  for  their  operations  as  well  to  strengthen  the
overall framework to protect investment. The EU should  continue  to  assist  the  fight
against  corruption,  strengthening  of  the  rule  of  law  and  the  independence  of  the
judiciary.  The  EU  should  help  to  enhance  business-to-business  dialogue  initiatives,
involving  EU  and  the  neighbours’  companies.  The  EU-Russia  Industrialists  Round
Table process and the Business Summits with the Mediterranean countries have been
useful  instruments  for  entrepreneurs  to  develop  practical  suggestions  on  how  to
improve the investment and business climate in the neighbouring countries. Regional
bodies  representing  entrepreneurs  and  EU  business  associations  in  the  neighbouring
countries are valuable partners in this area.

13

(cid:1)(cid:1)
SSUUPPPPOORRTT   FFOORR   IINNTTEEGGRRAATTIIOONN   IINNTTOO   TTHHEE   GGLLOOBBAALL   TTRRAADDIINNGG   SSYYSSTTEEMM:  WTO
Membership  is  an  integral  part  of  a  positive  economic  agenda  and  expanding  trade
and investment links.

The  EU  should  support  a  high  rhythm  of  WTO  negotiations  with  the  applicant
countries  -  Russia,  Ukraine,  Algeria,  Lebanon  and  Syria  –  and  continue  to  offer
assistance to prepare for accession on acceptable terms as soon as possible. The Tacis
and  Meda  programmes  could  provide  further  trade-related  technical  assistance  and
training  for  customs  cooperation  and  trade  facilitation,  intellectual  property  rights,
regulation of the service sector and the approximation and implementation of Internal
Market legislation.

(cid:1)(cid:1)
EENNHHAANNCCEEDD   AASSSSIISSTTAANNCCEE,,   BBEETTTTEERR   TTAAIILLOORREEDD   TTOO   NNEEEEDDSS:  Proximity  calls  for
further  efforts  to  encourage  cross-border  and  trans-national  cooperation  and
development, both locally and regionally. This includes the strengthening of all forms
of  economic,  legal  and  social  cooperation  across  the  borders,  especially  between
regional and local authorities and within civil society. The EU should work with the
neighbours  to  facilitate  common  management  of  migration  flows  and  border  transit
and  to  address  trans-border  organised  crime,  including  illicit  trafficking,  as  well  as
corruption,  fraud,  environmental,  nuclear  issues  and  communicable  diseases.  The
EU's cooperation instruments must be sufficiently flexible to address the entire range
of needs.

For  Russia  and  the  WNIS,  constraints  on  coordination  between  the  existing  EU
instruments  create  obstacles  to  cross-border  and  sub-regional  activities.  Taking  into
account the constraints that may arise in the short-term, the Commission will consider
the  possibility  of  creating  a  new  Neighbourhood  Instrument  which  builds  on  the
positive  experiences  of  promoting  cross-border  cooperation  within  the  Phare,  Tacis
and  INTERREG  programmes12.  This  instrument  will  focus  on  trans-border  issues,
promoting regional and sub-regional cooperation and sustainable development on the
Eastern border. For the Mediterranean, consideration should be given to whether such
a unified proximity instrument could also apply to shorter sea crossings (between the
enlarged  EU  and  a  number  of  Barcelona  partner  countries).  The  EU  should
accompany progress made in reforms with enhanced assistance to mitigate the impact
of adjustment on the poor and vulnerable. The WNIS should benefit from more direct
grant aid and budget support for tackling poverty, social and economic inequality and
exclusion to achieve greater social cohesion. Criteria for eligibility for EU exceptional
macro-financial  assistance  (MFA)  should  be  clarified.  The  need  for  a  MFA
framework regulation could be re-assessed.

(cid:1)(cid:1)
NNEEWW  SSOOUURRCCEESS  OOFF  FFIINNAANNCCEE: EU technical and grant assistance is not the only
means  for  promoting  reform  or  catalysing  private  investment.  The  IFIs  have  a  key
role  to  play  in  reducing  poverty,  helping  to  mitigate  the  social  consequences  of
transition, assisting accelerated reform and increased investment as well as developing
infrastructure and the private sector.

12

Although outside  the  geographical  scope  of  this  paper,  similar  considerations  apply  to  cross
border aspects of the CARDs programme in the Western Balkans.

14

                                                
instruments  and 

the  EIB  should  continue 

to  support
Community  financial 
infrastructure investment in the Mediterranean. FEMIP or, subject to Council review,
a  possible  Euro-Med  bank,  are  means  of  providing  additional  support  for  private
sector development in the region. For Russia and the WNIS, community, EBRD and
EIB supported initiatives should  be further  developed. While the central  role  played
by  the  EBRD  should  continue  to  be  supported,  the  EU  could  also  consider  the
progressive  and  targeted  increase  of  EIB  lending  to  Russia,  and  its  extension  to
Ukraine,  Moldova  and,  eventually,  Belarus.  The  EU  should  ensure  the  IFIs  take
adequate account of the importance of spending on education, health and social safety
net provisions in their policies towards the neighbouring countries.

4.

A DIFFERENTIATED, PROGRESSIVE, AND BENCHMARKED APPROACH

The  long  term  goal  of  the  initiatives  set  out  in  Chapter  3  is  to  move  towards  an
arrangement whereby the Union’s relations with the neighbouring countries ultimately
resemble the close political and economic links currently enjoyed with the European
Economic Area. This implies the partners taking on considerably deeper and broader
obligations,  specifically  when  it  comes  to  aligning  with  Community  legislation.
However, the new neighbourhood policy should not override the existing framework
for EU relations with Russia and the countries of the Western NIS, and the Southern
Mediterranean.  Instead,  it  would  supplement  and  build  on  existing  policies  and
arrangements.

BELARUS

(cid:1)  EU-Belarus  relations  stalled  in  1996-7  as  a  consequence  of  serious  setbacks  in  the
development of democracy and human rights in Belarus, in particular the replacement of
the  democratically  elected  parliament  with  a  national  assembly  nominated  by  the
President in violation of the 1994 constitution.

(cid:1)  The  GAC  reacted  in  1997  by  freezing  conclusion  of  the  PCA,  signed  in  1995,  and

restricting ministerial level contacts and the scope of EU assistance to Belarus.

(cid:1)  Despite  repeated  approaches  by  the  EU,  OSCE  and  Council  of  Europe  since  1997,
Belarus has applied a constant policy of deviation from its commitments to the Council
of Europe and OSCE. Confrontation with the OSCE over its representation in Minsk led
to a decision of 14 member states to impose a visa ban on government representatives in
November 2002.

(cid:1)  The EU faces a choice in Belarus: either to leave things to drift – a policy for which the
people of Belarus may pay dear and one which prevents the EU from pursuing increased
cooperation  on  issues  of  mutual  interest  -  or  to  engage,  and  risk  sending  a  signal  of
support for policies which do not conform to EU values.

(cid:1) 

In  the  run-up  to  the  parliamentary  elections  in  2004,  the  EU  should  aim  to  engage
Belarus in a measurable, step-by-step process focused on creating the conditions for free
and fair elections and, once achieved, the integration of Belarus into the neighbourhood
policy, without compromising the EU’s commitment to common and democratic values.

As noted above, the neighbouring countries do not start from the same point in their
relations  with  the  EU.  Some  partners  already  have  FTAs  with  differing  degrees  of
scope and depth; others have begun the process of developing a strategic partnership

15

with the EU, with economic integration with the EU as one aspect of this. While the
EU should aim to ensure a more coherent approach, offering  the same  opportunities
across the wider neighbourhood, and asking in return the same standards of behaviour
from  each  of  our  neighbours,  ddiiffffeerreennttiiaattiioonn   between  countries  would  remain  the
basis for the new neighbourhood policy.

The  overall  goal  will  be  to  work  with  partner  countries  to  foster  the  political  and
economic  reform  process,  promote  closer  economic  integration  and  sustainable
development and provide political support and assistance.  The  EU  should start from
the premise that the institutions of state need to be capable of delivering full transition
to  comply  with  international  political,  legal  and  human  rights  standards  and
obligations.  Partners  will  start  from  variable,  in  some  cases  limited,  capacity  to
undertake rapid reform and comprehensive transition. They will need to show a strong
commitment to building up their administrative, institutional and legal capacity. There
is therefore no alternative to a step-by-step approach. The extension of the benefits set
out in Chapter 3, including increased financial assistance, should be conducted so as
to encourage and reward reform – reforms which existing EU policies and incentives
have  so  far  not  managed  to  elicit  in  all  cases.  Engagement  should  therefore  be
introduced   pprrooggrreessssiivveellyy,,  and  be  ccoonnddiittiioonnaall   oonn   mmeeeettiinngg   aaggrreeeedd   ttaarrggeettss   ffoorr
rreeffoorrmm.  New  benefits  should  only  be  offered  to  reflect  the  progress  made  by  the
partner  countries  in  political  and  economic  reform.  In  the  absence  of  progress,
partners will not be offered these opportunities.

This communication proposes that  the  principles  of  differentiation  and  progressivity
should  be  established  by  means  of  country  and/or  regional  AAccttiioonn   PPllaannss.  These
should be political documents – drawing together existing and future work in the full
range of the EU’s relations with its  neighbours,  in  order  to  set  out  clearly  the  over-
arching strategic policy targets and benchmarks by which progress can be judged over
several  years.  They  should  be  concise,  complemented  where  necessary  by  more
detailed plans for sector-specific cooperation.

The  setting  of  clear  and  public  objectives  and  bbeenncchhmmaarrkkss  spelling  out  the  actions
the EU expects of its partners is a means to ensure a consistent and credible approach
between countries. Benchmarks also offer  greater predictability and  certainty for the
partner countries than traditional ‘conditionality’. Political and economic benchmarks
could be used to evaluate progress in key areas of reform and against agreed targets.
Beyond  the  regulatory  and  administrative  aspects  directly  linked  to  market
integration,  key  benchmarks  should  include  the  ratification  and  implementation  of
international commitments which demonstrate respect for shared values, in particular
the values codified in the  UN Human Rights Declaration, the  OSCE and Council  of
Europe standards. Wherever possible, these benchmarks should be developed in close
cooperation  with  the  partner  countries  themselves,  in  order  to  ensure  national
ownership and commitment.

International  organisations,  notably  the  OSCE  and  the  Council  of  Europe,  the
International  Labour  Organisation  (ILO)  and  the  IFIs,  can  assist  with  establishing
benchmarks. These organisations should also be engaged in the process of supporting
related reforms.

Action  Plans  and  accompanying  benchmarks  should  be  established  by  the  Council,
based  on  proposals  from  the  Commission,  wherever  possible  with  prior  discussion

16

with the partner countries concerned. The  Action Plans, once  agreed, will supersede
common  strategies  to  become  the  Union’s  main  policy  document  for  relations  with
these countries over the medium term.

When it comes to the iinnssttiittuuttiioonnaall  aanndd ccoonnttrraaccttuuaall  aarrrraannggeemmeennttss of the Association
Agreements and Partnership and Cooperation Agreements, the full implementation
and exploitation of the provisions contained in the existing Agreements remains a
necessary precondition for any new development.

(cid:1)  The EU has no contractual relations with Libya.

LIBYA

(cid:1) 

In April 1999, following the suspension of UN sanctions, Libya acquired observer status
in  the  Barcelona  Process and  was  invited to  become  a  full  member  as  soon  as  the  UN
Security Council sanctions have been definitively lifted and once Libya has accepted the
full Barcelona 'acquis'.

(cid:1)  The EU has suspended sanctions against Libya and lifted restrictions on diplomatic and

consular personnel and visas; the embargo on arms exports remains in place.

(cid:1)  Although  Libya  has  not  so  far  accepted  the  Barcelona  acquis,  in  particular  because  of
disagreement  over  the  position  of  Israel  and  the  Palestinian  Authority,  it  regularly
observes in Foreign Ministers and Senior Official's meetings.

(cid:1)  The  EU  should therefore  give  consideration  to  how  it  could incorporate  Libya  into  the
neighbourhood policy. In order to send a coherent message, further engagement needs to
be pursued within a conditional framework and a clear understanding of the benefits of
making progress towards cooperation based on respect for shared values.

Thereafter,  the EU will examine the scope  for new  NNeeiigghhbboouurrhhoooodd   AAggrreeeemmeennttss  to
build  on existing  contractual  relations.. These would  supplement  existing  contractual
relations where the EU and the neighbouring country have moved beyond the existing
framework, 
the
Neighbourhood  Agreements  contain  provisions  going  beyond  those  of  the  Euro-
Mediterranean  Association  Agreements,  similar  arrangements  could  be  offered,  on
equivalent terms, to the Mediterranean partners.

taking  on  new  entitlements  and  obligations.  If,  however, 

5.

NEXT STEPS

A three step process could be envisaged for developing and implementing the Action
Plans for each country:

I.

II.

Dialogue  in  the  existing  frameworks  (Association  and  Partnership  and
Cooperation Agreements) jointly analysing the achievements and failures of
reform  hitherto.  The  Association  and  Cooperation  Committees  should  be
mandated to prepare this work.

A  document  would  then  be  drawn  up  by  the  Commission  and  the  Member
States,  to  be  agreed  in  association  with  each  country,  setting  out  common
objectives and benchmarks and a timetable for their achievement. This action
plan  should  be  given  a  political  endorsement  by  the  EU  and  the  partner(s)

17

involved,  if  appropriate  at  the  level  of  the  Association  and  Cooperation
Councils.

III.

An  annual  review  of  progress  in  implementing  the  Action  Plan,  integrated
into  the  existing  institutional  cooperation  framework  with  the  partner
countries,  would  be  a  concrete  demonstration  of  enhanced  EU  political
interest and provide governments with the opportunity to receive credit from
the EU for their political and economic reform efforts.

The  financial  implications  of  the  new  Neighbourhood  Policy  should  be  reflected  in
the  Commission's  future  budgetary  proposals.  The  Commission  will  consider
proposals  for  a  new  Neighbourhood  Instrument  focussing  on  ensuring  the  smooth
functioning and secure management of the future Eastern and Mediterranean borders,
promoting sustainable economic and social development of the bordering regions and
pursuing regional and trans-national cooperation. The Commission will consider how
objectives  and  benchmarks  could  help  regarding  regulatory  approximation,  further
market opening and preferential trade relations with Russia, Ukraine and Moldova in
line with the commitments and obligations in the PCAs. Where justified by progress
made against the Action Plans, the Commission will also put forward initiatives to:

(cid:1)  extend existing Community policies, programmes and instruments to neighbouring

countries not already benefiting from them.

(cid:1)  implement  a  progressive  and  targeted extension of the EIB’s external  mandate  to
Russia and the WNIS, in close collaboration with the EBRD and the other relevant
IFIs.

(cid:1)  evaluate  FEMIP  and  consider  its  possible  incorporation  into  an  EIB  majority

owned Euro-Med Bank.

The contribution of the new member states will be fundamental to the development of
the new neighbourhood policy.

18

ANNEX: Tables and Charts

Table 1: Basic economic indicators

Population

in million
6.4
30.7
65.3

5.4
29.2
9.7

5.2

3.6

3.0

17.1
10.0

Israel
Algeria
Egypt

Libya
Morocco
Tunisia

Jordan

Lebanon

Occ. Palest. Terr.

Syria
Belarus

GDP
per capita
in EUR
19 578
1 974
1 663
1776(1)
1 296
2 301

1 901

5 284
1591(1)
1 292
1 352
417(1)
2 382
 855

Overall
Imports

Overall
Exports

EUR million EUR million

36721
12882
14063

4867
12192
10622

5344

7072

3339(1)

6970
8966

32 032
21 788
4 614

12 548
7 945
7 379

2 553

1 030
653(1)
6 121
8 286

Imports from Exports to

FDI

 the EU
EUR million
 15 557
 8 234
 4 191

 3 247
 6 302
 7 563

 1 535

 3 366
31(3)
 2 287
 1 387

the EU

EUR million EUR million

 8 544
 14 473
 1 453

 10 331
 5 562
 5 892

  98

  274
6(3)
 3 747
  917

3 397
1 335
 569

- 112
2 966
 543
189(2)
278(2)
57(2)
229(2)
 189

4.3
144.8
49.1

Moldova
 167
2 835
Russian Fed.
Ukraine
 862
Source: WDI 2002 (World Bank), IMF (GDP per capita), IMF (trade data), EIU, UNCTAD/DITE for FDI data. Data refers to 2001.
(1) 2000 data
(2) estimates
(3) Inversion of data reported by EU

  278
 16 597
 5 437

  136
 35 703
 3 316

 636
91 864
16 139

998
41006
18665

Chart 1: GDP per capita in % of EU

EU = 100

19.1

7.8

7.3

n.a.

5.6

9.9

8.3

6.4

4.8

5.7

8.3

3.4

1.8

79.7

120

100

80

60

40

20

0

Israel

Algeria

Egypt

Morocco
Libya

Tunisia

Jordan

Lebanon
Occ. Palest. Terr.

Syria

Belarus

Ukraine

Moldova
Russian Federation

Source: WDI 2002, Worldbank, Commission staff calculation

19

Chart 2: Total FDI flows

USD bilion

Average 1997-2001

Average 1999-2002

5.5

4.5

3.5

2.5

1.5

0.5

-0.5

Israel

Algeria

Egypt

Libya

Morocco

Tunisia

Source: UNCTAD, DITE

Jordan

Lebanon
Occ. Palest. Terr.

Syria

Belarus

Ukraine

Russian Federation
Moldova

Chart 3: Share of World Foreign Investment Inflows

EFTA
2.6%

 EU
17.9%

(Average 1998-2001)

New EU Member 
States & Candidates
3.4%

Latin America
11.4%

Asia (ASEM)
11.2%

MED
1.1%

Rest of the World*
17.9%

 USA
33.9%

Russia
0.4%

Belarus
0.03%

Moldova
0.02%

Ukraine
0.1%

Israel
0.5%

Algeria
0.1%

Egypt
0.2%

Morocco
0.2%

Tunisia
0.1%

Jordan
0.03%

Lebanon
0.04%

Palestinian A.
0.01%

Syria
0.03%

20

Chart 4: Share of World Inward Foreign Investment Stock (2001)

New EU Member 
States & Candidates
2.7%

EFTA
2.4%

Latin America
11.0%

 EU
17.7%

Asia (ASEM)
15.2%

MED
1.5%

Rest of the World*
22.9%

 USA
25.9%

Russia
0.4%

Israel
0.5%

Algeria
0.1%

Egypt
0.4%

Morocco
0.2%

Tunisia
0.2%

Jordan
0.03%

Lebanon
0.03%

Moldova
0.01%

Ukraine
0.1%

Belarus
0.03%

Syria 
0.04%

Palestinian A.
0.01%

Chart 5: Trade integration with the EU

imports/exports conducted with the EU as % of total 

82.3

79.8

70.0

66.4

Imports

Exports

61.2

100

90

80

70

60

50

40

30

20

10

0

26.7

31.5

Israel

Algeria

Egypt

Libya

Morocco

Tunisia

Jordan

Source: DOTS (IMF)

26.6

21.4

11.1

38.9

20.5

3.8

0.0

Occ. Palest. Terr.
Lebanon

Syria

Belarus

Ukraine

Moldova
Russian Federation

21

Chart 6: Exports to EU-15
EUR billions

Russia

BY+MD+UK

DZ+EG+IL+JO+LB+LY+MA+PS+SY+TN

70

60

50

40

30

20

10

0

1995

1996

1997

1998

1999

2000

2001

2002

Source: Eurostat, COMEXT

Chart 7: Imports from EU-15
EUR billions

Russia

BY+MD+UK

DZ+EG+IL+JO+LB+LY+MA+PS+SY+TN

70

60

50

40

30

20

10

0

1995

1996

1997

1998

1999

2000

2001

2002

Source: Eurostat, COMEXT

22

Table 2: Population - Growth rates

Population

1990

1995

2000

2001

in million in million in million in million

Israel
Algeria
Egypt
Libya
Morocco
Tunisia
Jordan
Lebanon
Occ. Palest. Terr.
Syria
Belarus
Moldova
Russian Fed.
Ukraine
Source: IMF, EBRD, EIU, World Bank

4.7
25.0
51.9
n.a.
24.2
8.2
3.5
2.6
n.a.
12.1
n.a.
n.a.
n.a.
n.a.

5.5
28.1
57.5
4.8
26.4
9.0
4.3
3.2
n.a.
14.2
10.3
4.3
148.3
51.5

6.3
30.3
64.0
5.3
28.7
9.6
5.0
3.5
3.0
16.6
10.0
4.3
145.4
49.3

6.4
30.7
65.3
5.4
29.2
9.7
5.2
3.6
3.0
17.1
10.0
4.3
144.8
49.1

Population growth rates
Avg. 1995 -2000
2001
in %
in %
2.4
1.5
2.1
2.3
1.6
1.4
3.0
1.7
0.0
3.1
0.0
0.0
-0.4
-0.4

2.5
1.5
2.1
2.2
1.7
1.3
3.2
2.0
n.a.
3.2
-0.5
0.0
-0.4
-0.8

Chart 8: Immigration of South. Mediterranean, Western NIS, and
Russian nationals to the EU-15 as percentages of all non-EU
immigrants, 2000*

Russia  (RU) 
3.2%

Western NIS 
(BY+MD+UA) 
2.2%

Southern 
Mediterranean
(DZ+EG+IL+JO
+LB+LY+MA+P
S+SY+TN)
8.4%

Other non-EU 
immigrants  
86.2%

Total non-EU 
immigrants
 = 1,490,891**

*Source: Eurostat. 1999 data:  B, D, F, I. 1998 data:  EL 
**Includes non-EU immigrants into IRL but nationality-specific details for Eastern and Southern countries are not available.

23

Chart 9: Immigration of Southern Mediterranean, Western NIS, and
Russian nationals to the Acceding countries as percentages of all non-
national immigrants, 1999*

Russia  (RU) 
8.0%

Other non-
national 
immigrants 
75.1%

Total non-national 
immigrants
 = 41,007**

Western NIS 
(BY+MD+UA) 
15.0%

Southern 
Mediterranean
(DZ+EG+IL+JO
+LB+LY+MA+P
S+SY+TN)
1.9%

* Source: Eurostat. No data available for PL. 2001 data:  SK
** Includes non-national  immigrants into MT but nationality-specific details for Eastern and Southern countries are not available

Chart 10: Southern Mediterranean, Western NIS, and Russian
nationals as percentages of all non-EU nationals in the EU-15, 2001*

Russia  (RU) 
1.5%

Western NIS 
(BY+MD+UA) 
1.0%

Southern 
Mediterranean
(DZ+EG+IL+JO
+LB+LY+MA+P
S+SY+TN)
17.0%

Other non-EU 
nationals  80.6%

Total non-EU nationals
 = 13,032,387**

* Source: Eurostat. 2000 data: B, I, A, P, S, UK. 1999 data: F. 1998 data: EL
** Includes non-EU nationals in A and IRL but nationality-specific details for Eastern and Southern countries are not available

24

ASSISTANCE

Community assistance to Russia, Western NIS and Southern Mediterranean countries 1995-2002 (commitments, € millions)

Algeria WB/

Egypt

Jordan

Lebanon Morocco

Syria

Tunisia

Russia

Ukraine Moldova

Belarus

Total  S.
Med

Total
Russia/
WNIS

Bilateral
Aid 95-02

304.2

Gaza

307.7  +
151.11

776.7

381

194

1,038.6

181

685.9

912.3

498.1

62.7

17

3869.12

1490.1

Meda
Regional  &
Tacis  cross-
border
programme

MFA/Food
Security
Programme

Fuel gap

1125
+10

2

+151.1

974.53

1052.24

453

50/15.5

30

124

(97-01)

(CBC:
228.9,
96-03)

558/15.
5

115

1

2

3

4

5

B7-420B for 2000-2002
Meda, part B of the budget (B7-410B)
Meda,  parts  A  and  B  of  the  budget  (B7410A  and  B7-410B).  This  does  not  include  monies  committed  to  the  United  Nations  Relief  and  Works  Agency  for  Palestinian
Refugees in the Near East (UNWRA) for Palestinian refugees in Jordan, Lebanon, Syria and West Bank/Gaza
Estimates based on Russia and Ukraine receiving a proportionate (50% and 25% respectively) share of the overall budget for the Tacis Regional Programme
Amount allocated via UNRWA, WFP and ACAD

25