Arab Maghreb Union: Overcoming Competition in Favor of Cooperation (Part II)

[This article is the final part in a two-part Jadaliyya series on the Arab Maghreb Union. Read the first part here.]

Comparison with ASEAN: From Crisis to Unity

The global economy is making it increasingly difficult for non-integrated countries to be economically viable. Regional alliances have paved the way, internationally, for greater economic harmonization. In this article, the Association of Southeast Asian Nations (ASEAN) will be briefly studied to show that most successful unions have had a rough past that forced them into developing regional integration. The major obstacles that ASEAN has faced are similar in nature to those that the Maghreb region faces today.

ASEAN, initially comprised Indonesia, Malaysia, Thailand, Philippines, Singapore, and was established in 1967. Later on, Brunei (1984), Vietnam (1995), Laos (1997), Myanmar/Burma (1997), and Cambodia (1999) joined ASEAN. While the union was initially formed as a response to intra-regional conflict as a political organization, it later developed into a full-fledged economic body. After twenty-five years of political cooperation to face the communist threat in the region, the ASEAN Trade Area (AFTA) was launched in 1992, with a single market planned for 2020.[1] Interestingly enough, progress during AFTA’s first decade was slow due to political suspicions and hostile competition between member states against one another in acquiring third-market dominance. However, the 1997 Asian crisis encouraged the countries to strengthen the free trade area as a means of coping with the deep recession in the area at the time.[2] The Framework Agreement aimed to establish the ASEAN Investment Area (AIA) was adopted in 1998, and has greatly increased FDI in the region as well as intra-regional investment.

The institutional framework has supported and promoted greater economic growth in the region – and because the AIA provided for the immediate liberalization of investment barriers and rules in all sectors for ASEAN investors, and the application of national status to all ASEAN investors, cooperation went beyond economic terms and helped develop social ties amongst the countries as well.[3]

Just as it worked for ASEAN countries, the need for stability can act as an impetus for the Maghreb region towards economic integration as well. Historically, this has been the case – without much follow-up, however. Zoubir (2011) argues that Maghreb countries have often reacted to crisis (both externally and internally driven) with continuous calls for unity. Cammett (1999) further argues that the Maghreb region pursued cooperation only when the prospect of increased European trade barriers posed severe economic threats to the region.

Regional cooperation in the sector of security and fighting terrorism was a major impetus for ASEAN’s formation. Following the formation of ASEAN, the percentage of intra-regional trade of total trade is 20.8 – compared with the Maghreb’s intra-regional trade percentage, without a functioning union as of yet, which is 1.2 percent. Singapore, Malaysia, and Indonesia have mainly dominated Intra-ASEAN trade. Similarly, Morocco, Tunisia, and Algeria dominate intra-AMU trade. However, ASEAN’s explicit timetable for eliminating tariffs within the group by the year 2003 has helped the union stay focused and achieve a number of measures that helped economic expansion to the remaining member states.[4] The Arab Maghreb Union, which is in a deep stalemate today, can learn a lesson or two from ASEAN particularly since the two regions have been historically marked with hostile regional competition.

The European Union`s Backbone: Regional Legal Framework

Whereas most contemporary accounts of European integration begin with the aftermath of the Second World War, the idea of European unity was in fact articulated long before then. For example, one of the most prominent calls to unity was in 1693 by a prominent English Quaker, William Penn. He advocated for the end of the ‘state mosaic’ in Europe. However, the process of integration was only vastly accelerated in the twentieth century due to external and internal pressures. Faced with the Cold War and with Europe’s severe post-war economic problems, several programs were created to bring Europe out of the rubble, all of which contributed greatly to the region’s integration by enhancing regional cooperation.[5] Eventually, and through the signing of international legal instruments that acted as contractual agreements between the states, the European Union was founded upon solid pillars. 

The Lisbon Treaty, which brought into effect many of the European Union’s main institutions (such as the European Central Bank and the European Council), was preceded by several other treaties. The Treaty made amendments to prior ones–such as the Maastricht Treaty and the Treaty on the Functioning of the European Union (TFEU), and completed the process of integration that was started by the Treaty of Amsterdam (1997), and the Treaty of Nice (2001). So much has happened prior to the Lisbon Treaty that it came to be called the "amending treaty." Between 1985 and 2006, the EU undertook fifteen initiatives in its efforts to harmonize industrial policy in Europe. During this period the EU was also granted the mandate, under Article 157 of the Maastricht Treaty, to implement industrial policies for Europe.

Despite the wide net that the Lisbon Treaty eventually cast, a number of other agreements took shape before it was signed. The Presidency of the Council of Ministers, together with the Commission, negotiated several multilateral agreements in the pre-Lisbon Treaty era. These agreements usually included trade provisions and also other objectives that fall partly within the shared competence of the member states (such as environmental protection).

The role of these treaties was essential to the establishment of the European Union and epitomizes the overlap of economics and law–without the treaties, there would arguably be no such thing as a union in Europe. The situation is entirely different with Maghreb countries, as the only such legal instrument vocalizing intent to integrate is the Arab Maghreb Union treaty itself. I argue that North African countries must without a doubt further develop the legal framework surrounding the values of socioeconomic unification. Not only do such instruments aid in the foundation of a functional union, they also act as a living check on the progress of such a union. The region’s shared history of colonization (three of the five countries were colonized by France) and its impact on its respective governmental and educational systems provides a foundation upon which these legal treaties can be built. The Arab Maghreb Union’s Council of the Heads of State can be a starting point for any such negotiations.

Policy Recommendations and Proposals

For the revitalization of the Arab Maghreb Union and the socioeconomic environment of the region in general, below are a number of policy recommendations: (1) bettering territorial relations between Morocco and Algeria on the international stage, (2) establishing a regional bank between all five countries, and (3) general intra-regional trade integration. These measures will bring the Maghreb region better security, faster and more sustainable economic growth, modernized economies, and higher trust in the region by foreign investors. 

First, bettering territorial relations between the two principal countries of the Maghreb, Morocco and Algeria, on the international stage is crucial to moving forward with the AMU project. While the Western Sahara issue may not be solved for some time to come, the negative spillover it has on the rest of the region is toxic if not fatal. While a full resolution of the Western Sahara dispute is ideal, many scholars have disagreed on how negotiations should be undertaken, if at all. Still, commentators, scholars, politicians and citizens alike cite the dispute as the main hindrance in pursuing regional integration. Stories of Moroccan figures not attending meetings because of Algerian presence and vice versa should never be seen on the news anymore. The dispute is a legitimate one of sovereignty, historic claims, and significant economic interests. However, to hold the region hostage to this dispute is a disservice to all actors involved and the citizens of the region as a whole. The issue should be resolved on a local level between Algeria, Morocco, and the indigenous Sahrawi population and its representatives, and special attention should be paid to the conflict by the United Nations and other relevant authorities for potential human rights violations in the disputed territory. Algerian and Moroccan authorities must reopen the border crossing and permit the passage of trade through ground borders.

Simply put, the dispute should not blind the region’s long-term political vision, which it has been doing since the 1994 flare-up. Improving the bilateral relations between the two North African giants not only promises to facilitate and liberalize trade in the region, but it also promises to reverse the trend of flight of capital and of educated people who have been unable to find good investment opportunities or jobs in a too-slowly growing economy.[6]

As a final note on the Western Sahara issue, this author suggests the renaming the “Arab Maghreb Union” to “Maghreb Union” to further facilitate the prospect of direct reconciliation between Algeria and Morocco. Having “Arab” in the title is a point of contention for the some of the Sahrawi population as well as Imazighen (Berbers) in the region (the Maghreb’s original inhabitants). Imazighen do not identify as Arab, and nominal dynamics play a huge role in an already sensitive region.

Second, establishing a regional bank between all five countries can enhance financial cooperation and help harmonize financial regulations. According to Ghilès, creating new banking instruments that are common to the Maghreb as a whole could strengthen the financial market, consolidate macroeconomic stability, and address the issue of unused liquidity mentioned above, converting the large volume of unused liquidity into productive use.

It is worth mentioning that early on, the AMU treaty envisaged the establishment of the Maghreb Bank for Investment and Foreign Trade (BMICE) to spearhead financial integration and promote trade and investment within the region. The agreement was signed in 1991 but took another fifteen years before it was enacted. The Maghreb Ministerial Commission for Finance finally approved the draft statute of the BMICE in March 2006. The bank was supposed to be headquartered in Tunisia with an equally subscribed capital of 500 million dollars. This specialized bank never materialized. In general however, a regional bank with a broader mandate could lead to compromise: encouraging regional mergers and acquisitions, offer shareholdings across the Maghreb, and advocate for policies of sustainable development through specific lending programs for borrower institutions and organizations from under-developed regions.

Finally, while there have been renewed calls to create a regional bank as recently as early October 2013, no concrete steps or measures have been planned for its execution. Still, these calls are certainly welcome. The establishment of other regional institutions (cultural, religious, and economic) is also encouraged. However, a financially integrated Maghreb is the first step to countering the challenges of an increasingly globalized world and enhancing the region’s resilience to external economic shocks.

Third, the harmonization of domestic trade policies that affect trade incentives and production (such as product standards and conformity assessments) and the homogenization of related legal regulation are crucial.[7] General intra-regional trade integration and lower tariffs are, arguably, the raison d’être for a union. However, without the appropriate and supportive conditions for fruitful trade relations, a union would be very difficult to achieve. Cammett observes that in many least-developed countries, integration entails a greater focus on planning and does not arise automatically through regulatory competition. 

Integration, however, is not only linked to abstract regulations and policies. The most obvious barrier to trade in the Maghreb is the closure of borders. Reopening road and rail services between Algeria and Morocco, connecting the motorways being built in all five countries, and increasing the frequency of flights between the Maghreb’s major cities can only improve the free flow and movement of trade and human capital[8]. These measures must be taken complementarily with a desire for political integration and better multilateral relations in the region. 

The legal framework on the foundation AMU must be re-drafted and supplemented. The reality is that for the purposes of advancing the region’s economic interests, one single treaty does not suffice. As discussed above with the European Union, several treaties between the five countries must be drafted and signed – each articulating and detailing a particular goal. Beyond the harmonization of domestic laws, regional agreements must be created to properly codify the goals and aims of any cooperative arrangement.

Conclusion

Regional liberalization alone cannot and will not work. Cammett  (1999) notes that liberalization of national trade and financial regimes throughout the Maghreb would expose national economies to volatile international markets. As Testas argues, in order for the Maghreb region to reap the full benefits of integration, costs and benefits need to be equally distributed between the five countries. Testas bases this argument on the fact that differences in income and level of economic development between the Maghreb countries often led to polarization, since trade integration tends to work in favor of already relatively advanced member countries. Lifting trade barriers alone, then, can lead to greater polarization. Unless special measures are taken in favor of the less advanced countries, integration may widen the developmental gap in the region. In fact, bridging these developmental gaps can serve as an incentive for the Arab Maghreb Union to liberalize responsibly by integrating sustainable development values in its agenda. The perils of blind liberalization are well studied–and they are most felt in less developed, poorer regions. Thus the need for carefully planned integration is crucial. This includes the incorporation of sustainable banking and state regulations that simultaneously promote investment and protect the local populations.

The proposed recommendations in this article are two pronged, as they involve both economic and political approaches.  AMU member states must work hard to resolve the Western Sahara issue without it interfering in the broader goal of developing the AMU. Regional trade integration between member states is crucial and will naturally set up the framework to usher in the AMU. A regional bank will help support economic initiatives benefiting the Maghreb and support financial integration and organization both on regional and national levels. While there is no one single solution that will please all five governments, the above-mentioned measures would deliver major benefits to the Maghreb and can, most importantly, facilitate the successful establishment and operation of the Arab Maghreb Union. Following the uprisings in Tunisia and Libya, the respective domestic economies have plummeted and security fears and political instability continue to push away foreign direct investment. Whereas the European Union saw its southern neighbors as potential economic partners back in 1995, when the prospect of a free trade zone was offered to the Maghreb during the Barcelona Process, the EU today is extremely cautious on pursuing any type of trade with the Maghreb (Ghilès).

North African countries have much to gain from working together–the security fears can be mitigated with appropriate regional cooperation measures. Successful unions that were born out of strife, such as ASEAN, give Maghreb leaders hope, and some strategy to consider. It is time for the Maghreb countries to overcome their history of hostile competition in favor of regional cooperation that will benefit all actors. To outgrow the Arab Maghreb Union’s paralysis, political leaders must overcome the lack of willpower by recognizing that the crisis the Maghreb is currently undergoing should lead to more cooperation and not the opposite.