Syria: Re-study the future impact of the European Association Agreement

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jan 08 2010

Syria: Re-study the future impact of the European Association Agreement

Hopes that an ongoing deadlock between the EU and Syria might meet an early resolution were dashed earlier this month, as the Syrian government announced it was demurring on signing an association agreement (AA) with its largest trading partner.

The AA, which is the cornerstone of the EU's neighbourhood policy (ENP), is designed to replace the prior model of cooperation created by the Euro-Mediterranean Partnership (also known as the Barcelona process). Since 2004 the EU has successfully concluded AAs with all of its neighbours, with the remaining exceptions of Syria and Libya.

Negotiations with the Syrians to sign an AA have been ongoing for a number of years, and indeed a document has already been initialled by both parties. However, opposition from certain EU members (notably The Netherlands and the Czech Republic, which until recently held the rotating EU presidency) has until now prevented a final signing and implementation of the agreement. Sources at the European Commission (EC) in Damascus, however, were hopeful that with the EU presidency passing on to Sweden, and a high-level EU meeting planned for October where the subject of the AA with Syria would be discussed, the final hurdles to signing the AA would be removed.

However, Syrian officials have told the EU that they need more time to study the future impact of the agreement on the economy, with the deputy prime minister, Abdullah Dardari, recently informing the media that, "We are taking our time to see the impact on our agriculture, our industry, and when we have finished the study we will inform the Europeans."

The move is a blow to the EC, which has worked hard since 1995 to establish a good relationship with the Syrian government, to support its efforts to liberalise and modernise the economy. Several of Syria's most successful new economic institutions, such as the Syrian Enterprise and Business Centre (SEBC, formerly the Syrian-European Business Centre) were joint initiatives springing from this partnership. Without an AA however, the EC effectively has its hands tied as to the extent of economic assistance it is able to offer. Indeed, sources within the EC told OBG earlier this year that several new policies were already "ready-to-go", yet remained indefinitely on hold until the AA is signed.

The Syrian government's motivation for delaying the signing is not difficult to fathom however. An ongoing drought had a profound effect on the agricultural sector for the past three years, while accession to the Greater Arab Free Trade Area, and a free trade agreement with Turkey have exposed the strategically important textiles industry to tough competition. Reports from earlier this year suggest that up to 80 textile factories in Aleppo, the nation's textile capital, closed during 2008, while domestic demand plummeted 80% thanks largely to illegally imported Chinese goods.

In such an environment, the government is understandably wary of immediately opening the economy to further competition. When combined with the flood of lower-priced goods already hitting the domestic market, industry figures are concerned that their products will simply slip through the cracks. As one Syrian industrialist told the Wall Street Journal earlier this month, "It's as if I have a 1945 model car, and you're asking me to compete with a 2010 model."

However, the EC for its part responds by arguing that the partnership model offered by the AA differs radically from those already implemented by Syria with Turkey and its fellow Arab states. A source working with a Syrian enterprise at the SEBC told OBG in September that the initial terms of trade following the signing of an AA would favour Syrian industry, with EU companies only gradually being offered equal terms.

Whatever the reasons for the delay, it is clear that the EU has more supporters than opponents amongst the influential voices of Syria. Once the national economy is back on more solid ground, an AA is likely to follow.

Global Arab Network