At the beginning of December 2020, Algeria and the European Union opened talks to review the Association Agreement in place between them. This trade treaty was signed by the two parties in 2002 and entered into force on September 1, 2005[i]. After 15 years of partnership, Algeria has come to consider this agreement as fundamentally unfair.
The hour of evaluation and review of the economic partnership agreement between Algeria and the European Union has come 15 years after it entered into force between the two parties, at a time when relations between Algiers and Brussels are going through an unprecedented stage of tensions.
Algeria exported $14 billion worth of non-oil goods to European Union countries between 2005 and 2015 while it imported $220 billion from Europe in the same period. Algeria considered such economic relations with Europe as “structural asymmetry” that should be corrected.
The EU is aware that Algeria is the gateway to Africa, and a market of 45 million inhabitants as well. Even more importantly, Algeria is the only Maghreb country that can ensure the region’s stability. With its powerful army, it can effectively mitigate all security threats that would reach EU states.
This article will analyze the Algerian-European relationship, focusing on its economic aspects by illustrating the historical complexity and the interplay between the two parties. To achieve the paper’s objective, post-colonial theory and macro-level analysis will be relied upon to look at all aspects of the subject.
A brief historical context of Algerian-European Union Relations
Algerian-European relations are natural due to history, geographical proximity, and geopolitical interdependence, having contributed to a vital interactive context for the two parties. The EU’s ancestor, the European Economic Community, launched in 1957 a series of trade and security accords with Maghreb countries. This started with the so-called micro-Mediterranean policy, moved to the global Mediterranean policy and then passed through the 5+5 dialogue to reach the Barcelona Conference of 1995. The following is a brief explanation of each of these conventions and agreements.
Since gaining independence, Algeria has occupied a particular position vis-à-vis the EEC; Algeria used to benefit from all customs preferences. Still, since the beginning of the 1970s, some European member states, for example Italy, individually decided to refuse to continue granting such preferential status to Algerian agricultural goods, prompting Algeria in 1972 to open a new set of negotiations with the European Community within the framework of the ECC’s global Mediterranean policy. The talks culminated in a final agreement on 26th April 1976, which entered into force on 1st November 1978.
The cooperation agreement was supported by financial protocols and renewed every five years. It aimed to promote an increase in the volume of foreign trade exchanges between Algeria and the EEC by removing barriers for the smoother entry of Algerian goods into the European market. As a result of the so-called four protocols (1978-1996), Algeria benefited from financial aid estimated at 784 million ECUs and 640 million ECUs from the European Investment Bank in the form of soft loans.
More than 90% of Community imports from Algeria consisted of hydrocarbons, 2% of manufactured products, and 0.4% of food products. This last item concerned mainly wine (6,7 million ECU in 1987), dates (6.2 million ECU in 1987), and fresh citrus fruits (2 million ECU in 1987). The Community’s exports were made up of 75% manufactured products and around 15% of food products.[ii]
However, these agreements, which were characterized by granting trade preferences in one direction, i.e., without reciprocity, are no longer applicable in the framework of the renewed Euro-Mediterranean policy, and the provisions and procedures of the World Trade Organization.
Starting with the Barcelona Declaration of 1995, Algeria initiated a new set of negotiations with the European Union to conclude an association agreement. The negotiations took 12 rounds to complete (April 22, 2002), and came into force in September 2005. Many scholars perceive that due to this agreement, Algerian-European relations have moved from a stage of establishing a fundamental law for cooperation to the stage of establishing a basic law for partnership.
The Algerian-European agreement contained eight axes represented in 110 articles, focusing on four well-known paths: the political-security, economic, financial, and socio-cultural paths.
According to the Algerian Ministry of Trade, after the implementation of the association agreement, Algerian imports from the EU increased by 200%, rising from USD8.2 billion (annual average) to USD24.21 billion in 2011. Algerian exports to the EU, on the other hand, have increased by 140%, rising from USD15 billion (annual average) to USD36.3 billion, of which 97% were accounted for by hydrocarbons.[iii]
In the security sphere, we observed The 5+5 Dialogue.[iv] This regional initiative aimed to establish a framework for cooperation among participating members on issues of Security and Stability, Economic and Regional Integration, and also Immigration in the Mediterranean region. Without any doubt, the 5+5 process was by far the most appropriate framework for regional cooperation to Algeria in comparison to other multilateral frameworks for dialogue with Europe. It corresponds to the principles on which Algerian foreign policy is founded. This regional cooperation format respects the limits of international relations imposed by Algeria (non-interference and a respect for international legality) and it is close to the notion of a fair partnership to which Algeria has aspired for long. The 5+5 dialogue helped to establish a climate of confidence between Algeria and the EU.[v]
Evaluation of Algerian-European Relations
The EU-Algeria agreement[vi] indeed brought Algeria out of the state of international marginalizaation and isolation that it had suffered from since 1992. This situation has contributed to improving Algeria’s image in front of the Union countries, particularly and on the international arena in general.
The Europeans, however, took advantage of the Algerian economy’s vulnerability, especially after the black decade (1992-2002), to sign the agreement. Algeria could not possibly implement the terms of the partnership agreement to the fullest extent since it neither had a competitive and diversified economy, nor an attractive market for investments. It is a rentier state that mainly depends on oil and gas.
Algeria recently experienced a financial crisis. After declining oil and gas revenues, starting in 2014 and inflated due to the COVID-19 pandemic, Algeria imposed temporary restrictions on EU imports.
Aware of such economic challenges, President Tebboune announced a series of measures to encourage and boost Algerian non-hydrocarbon exports. He argued that the country aims to achieve at least USD5 billion in revenues from non-oil exports by the beginning of next year. Featuring most prominently among the measures he cited were the creation of green corridors dedicated to specific products, the improvement of the relationship with the Ministry of Finance, and the strengthening of the role of diplomatic efforts in the promotion of Algerian products abroad. The end goal of the coming two years is to reduce Algeria’s financial dependence on hydrocarbons from the current 98% to 80%.[vii]
Anyone familiar with the stipulations of the Association Agreement between Algeria and the European Union is optimistic, but whoever observes the on the ground realities of relations between the two parties knows that a great degree of imbalance persists towards Algerians. We are talking about an agreement between a union of states on the one hand and a single country on the other hand. The agreement signed in 2005 was with 15 European countries, while the number increased to 27 countries in subsequent years.
The EU is indeed Algeria’s leading trading partner, making up 67% of its total foreign trade in 2019 and 44% of its total imports. If we look at the details, however, we figure out that Algeria’s exports to the European Union outside of hydrocarbons amounted to USD15 billion between 2005 and 2019 while its imports reached as much as USD675 billion, making it the most significant deficit recorded by Algeria with the Europeans. The European Union’s insistence on integrating Algerian gas exports into the proceeds of trade exchanges raises its value to USD450 billion over 14 years, which means a deficit of USD225 billion, which is the most contentious point for the two sides.[viii]
According to a report by Algex, Algeria’s National Agency for the Promotion of Foreign Trade, on the impact of the association agreement, which entered into force in 2005, Algeria’s losses between 2005 and 2020 would amount to USD19 billion. These losses are calculated as the consequence of the tax and customs benefits granted to European countries through the Association Agreement, which allow the EU to flood the Algerian market. As a result, local producers find it difficult to compete and are positioned even worse to export to Europe. Algerian consumers have been the ones bearing the most important consequences: increased prices of imported products and, therefore, lower purchasing power. The Association Agreement is supposed to boost Algerian exports, other than hydrocarbons, but 15 years after it entered into force, the Algerian economy’s structure has not changed as envisioned.[ix]
Also, we must not forget that the agreement would have been followed by European assistance to Algeria’s entry into the World Trade Organization, which has not been completed after a decade since the agreement’s signing. Instead, some European members of the Association Agreement such as France put obstacles in front of achieving this time and again. Perhaps this is part of a greater European strategy in keeping pressure on Algeria to achieve more significant concessions on the latter’s part within the framework of lifting tariff barriers and to benefit more from Algerian energy resources.
The present situation has caused understandable tension with the EU, leading Algeria to consider contravening the Association Agreement. Since then, the EU instrumentalized all its institutions, especially the European Parliament, to compel Algeria to re-open in front of imports by adopting a series of resolutions highlighting “the deteriorating human rights situation” in the country.
It seems that Algerian-European Union relations, as we described, lead to one possible scenario in the long run: that of growing fears of the EU’s dominance persisting ad vitam aeternam on Algeria.
Algeria and the EU will continue to live between the will and the desire to achieve common goals. However, the lack of unity of opinion and decisions, and the continuation of excessively exploiting petroleum resources without assistance provided for the modernization and diversification of Algeria’s economy, confirm Algeria’s ongoing dependence on the EU’s will.
Many researchers expect the Algerian-European partnership to be disrupted or to even collapse in the presence of these lapses. The only way to save the initiative is to implement a real partnership by encouraging and multiplying sub-regional projects, especially within The Arab Maghreb Union’s activation.
However, should the European Union continue with the same policy towards Maghreb countries in general and Algeria in particular, it is possible that we will see new partnerships emerge that may threaten the example that the Barcelona path set. Britain’s potential initiation of new partnerships with these countries after Brexit might pave the way for this. If Algeria wants to break out of servitude, facilitating this process might even be advisable.
[i] This came into force according to Presidential Decree No.05-159 of April 27th, 2005, which includes the ratification of the Euro-Mediterranean Agreement to establish a partnership between the People’s Democratic Republic of Algeria on the one hand, and the European Community and its member states, on the other hand, signed in Valencia on April 22nd, 2002 https://www.joradp.dz/FTP/jo-francais/2005/F2005031.pdf
[ii] Conseil de Cooperation CEE Algerie, https://ec.europa.eu/commission/presscorner/detail/fr/MEMO_89_33, p3.
[iii] Abdennour Benantar, Algeria and the European Union: uncertainties of a dense relationship, Changing Euro-Mediterranean lenses, Euromed Survey, 9th edition, https://www.iemed.org/publicacions-en/historic-de-publicacions/enquesta-euromed/euromed-survey-2018/contents, p75.
[iv] is an informal discussion forum created in 1990 by the Ministerial Meeting of Foreign Affairs in Rome. This dialogue brings together countries from both shores of the Mediterranean. On the European side: Portugal, Spain, France, Italy, and Malta, and on the Maghreb side: Algeria, Mauritania, Morocco, Tunisia, and Libya. It operates with a rotating presidency between its members. See: Mestek, Y. M. L. The Algerian foreign policy facing upheavals in the Mediterranean region. Voice of Law journal Volume 4, Numéro 2, Pages 109, https://www.asjp.cerist.dz/en/article/34875
[vi] The former Algerian Minister of Commerce El Hachemi Djaaboub declares that: “The association agreement with the European Union is an accession contract, and the Algerian side has not negotiated any article of its content.” See: Arezki Benali, Un ancien ministre révèle les dessous de la signature de l’accord d’association entre l’Algérie et l’UE, https://bit.ly/3kpjflv
[vii] Algeria press service, Tebboune: diversifier les exportations et promouvoir l’investissement pour relancer l’économie,https://www.aps.dz/economie/108778-tebboune-diversifier-les-exportations-et-promouvoir-l-investissement-pour-relancer-l-economie
[viii] Commission européenne, Rapport sur l’état des relations UE-Algérie 2018–2020: un partenariat privilégié dans un contexte difficile, décembre 2020, https://eeas.europa.eu/headquarters/headquarters-homepage/89563/rapport-sur-l%25C3%25A9tat-des-relations-ue-alg%25C3%25A9rie-dans-le-cadre-de-la-pev-renouvel%25C3%25A9e-avril-2018-%25E2%2580%2593_fr
[ix] Abdennour Benantar, Op.cit. p75.