News • 02 February 2003

Partnership proposal a rehash of 1998 agreement

Kurt Sansone compares the Labour Party’s document Partnership – the best option for Malta, with the recommendations made by the EU in 1998 to the then Labour government

The Labour Party’s recent document that explains the Partnership option is four years all the wiser than any previous explanation the Opposition has tried to give. It is undoubtedly modelled on the report drawn up by the European Commission in February 1998 on future relations between the EU and Malta.

The report by the Commission and the subsequent joint declaration issued by then President of the EU Council Robin Cook and Foreign Minister George Vella four years ago, provided a clearer framework for Labour’s option.

But Partnership 2003 is nowhere near the simple arrangement the Labour Party is trying to portray it. It is more than a half way road toward EU membership. It takes on board a number of issues raised by the EU in 1998, which would have a considerable impact on Malta’s economy and trade and conveniently ignores others that are deemed very sensitive.

Free trade with "no sector excluded"

Partnership 2003 has dropped all reference to ‘industrial’ when referring to the free trade arrangement sought with the EU. This is not by coincidence.

In 1998 the EU talked about establishing a free trade area as opposed to Labour’s electoral pledge to establish an industrial free trade area.

This was reaffirmed in the Commission report, which said that the Maltese government in response to a questionnaire submitted to it by the Commission had expressed the intention of moving "towards the establishment of a free trade area with the EC."

The Commission report also stated: "In order to be compatible with the WTO such a free trade area should cover substantially all trade, no sector excluded."

Free trade had to be achieved within three years at the most.

Both the Commission report and the joint declaration in 1998 spoke about the improvement of market access in services and further liberalisation of public procurement.

This means that Labour’s partnership option had to include also, trade in services and the chance for EU companies to compete for public tenders in Malta.

Partnership 2003 conveniently makes no reference to public tenders and the mutual right of companies from Malta and the EU to compete for them.

The decision taken this week by the Labour Party general conference to retain VAT can also be traced back to the common position adopted by the EU and Malta in 1998.

Then it was stated that trade barriers, in the form of customs duty or excise tax had to be removed before the implementation of the free trade area. The Labour government was faced with a dilemma having just replaced VAT with a regime of customs and excise taxes.

Partnership 2003 does not call for the removal of VAT because otherwise it would be impossible to implement a free trade area with the EU. On the contrary the policy states: "VAT in Malta will be run flexibly, in accordance with the operations of a free trade agreement with the EU."

Agriculture

Even the Labour Party’s stand on agriculture has had to change. Pre-1996 Labour said that agriculture would be ‘excluded’ from any deal with the EU. Both the 1998 Commission report and the joint declaration signed by George Vella spoke about the "progressive liberalisation" of agriculture. The EU had stated clearly that it would not exclude agriculture from any free trade agreement.

Based on that clear statement, Partnership 2003 says that mutual concessions would have to be given on agricultural produce. While insisting that protection for agriculture would be maintained, Partnership 2003 says: "Levies and other protective mechanisms will not be maintained, with respect to products, which are not produced by Maltese agriculture."

The document adds: "As part of a reciprocal contractual arrangement, Malta would seek to give concessions to EU farm products for entry to Malta, under special arrangements."

The same holds for fisheries. Partnership 2003 states that Malta will retain its 25 mile fishing conservation zone with "the rights it has traditionally enjoyed."

However, basing itself on the principles of a fully-fledged free trade area, Partnership 2003 says that Malta would seek mutual concessions on a contractual basis with the EU on fisheries.

State aid

Despite saying that state aid to the dockyards will be maintained at acceptable levels Partnership 2003 ignores what the EU Commission report said in 1998.

Then it was stated: "Malta and the EC should include in their trade relations provisions concerning competition rules compatible with the EC Treaty. These rules should cover the following matters: antitrust, mergers, state aids, public undertakings and state monopolies of a commercial character."

The EU’s competition rules do not allow state aid to industries or other entities in such a way that would constitute unfair competition. The current aid given to Malta Drydocks goes counter to the EU’s competition rules.

Partnership 2003 only makes reference to government firms, which still operate under protection and that these "will be exposed to free market competition in a graduated manner."

Even this statement can be directly linked to the 1998 EU position because prior to last week no reference was ever made to government firms being exposed to the free market.

kurt@maltamag.com