Oxford Business Group, April 30, 2002

In response to the Israeli offensive in the West Bank, Lebanon and Syria boycotted the Euro-Med Conference last week. The meetings, which took place in Valencia on April 22nd and 23rd, were intended to promote economic ties between the countries of the Mediterranean and the EU but were eclipsed by recent developments in the Middle East. The EU is Lebanon's largest trading partner, and Beirut was to have finally signed an Association Agreement with Europe at the meeting, but this has now been postponed.

Syria had proposed that the European Union ban Israeli participation in the conference or, at the very least, a suspension of Israel’s Euro-Med membership pending a UN Security Council Resolution and a withdrawal from the occupied territories because of Israeli Prime Minister Ariel Sharon’s "barbaric aggressions" towards the Palestinians. The European Commission responded that Israel’s presence was "essential" for the conference’s success, thus prompting Syria’s boycott. Lebanon quickly followed suit as its political agenda is inextricably linked to Syria’s. With nearly 20,000 Syrian troops stationed in Lebanon, Syria remains the most influential political authority over the small country.

By protesting the conference, Lebanon postponed the highly anticipated signing of the Association Agreement between itself and the European Union. The Agreement, which was initialised in Brussels in January, is part of the larger aim of the Euro-Med Partnership to establish a free trade zone amongst the 15 member EU and the 12 countries of the Mediterranean Basin, which include Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, the Palestinian Authority, Syria, Tunisia, and Turkey. Representatives from Libya, Mauritania, the Arab League, and the Arab Maghreb Union have been given customary invitations. Created in 1995, the partnership, then known as the Barcelona Process, envisions a free zone bloc between the north and south shores of the Mediterranean by 2010. A significant vehicle for modernisation for these countries, the partnership has totalled nearly $4.8bn in European aid and $5.5bn in soft loans in the 2002-2006 period although with few concrete results to date.

After nearly seven years of negotiations, the two sides agreed in Brussels to allow Lebanon freer access to European markets, effective upon signing of the accord, thus eliminating the need for ratification by each European parliament. This interim agreement also allows Lebanon a five-year grace period to remove tariffs on industrial goods before falling to zero in 12 years, whilst EU countries are required to begin removing trade barriers immediately. The EU has pledged support for Lebanese custom reforms, competition rules, intellectual property protection, and liberalisation of services, whilst aiming to also intensify a political dialogue between the two. The EU has signed similar agreements with Egypt, Tunisia, the Palestinian Authority, Jordan, Israel and most recently with Algeria at last week’s conference. Lebanon’s Association Agreement replaces the 1978 Co-operation Agreement, which allowed Lebanese industrial products to be imported to EU markets duty and quota free.

Facing a massive public debt of $27bn and an estimated $112m repayment in external debt in 2002, Lebanon has undertaken the task of constructing liberal economic policies, tax reforms, and privatisation in an attempt to boost tax revenue and cut expenditures. With a fiscal deficit that rose 16.5% in 2001. Lebanon’s partnership with the European Union is a cornerstone of their economic liberalisation programme. In an interview with the Oxford Business Group, Lebanon’s Minister of Economy, Dr. Basil Fuleihan, stated that the "agreement harmonises legislation with the infrastructure of economic activity and consequently creates room for greater investment for European, Lebanese, and third party investments that hope to export to the EU." He also stated that it creates a framework for a dialogue, allowing Lebanon to rely on Europe for future trade negotiations, such as membership to the World Trade Organisation.

The European Union, Lebanon’s principal trading partner, accounts for 32% of the country’s imports and 7% of imports, indicating an unbalanced bilateral trade relationship. Since 1977, Lebanon has received $1.7bn from the EU and has benefited from regional co-operation programmes worth $299m intended to harmonise sectoral policies between the 27-country partnership. In addition, Lebanon expects to receive nearly $460m in compensation for reducing its tariffs.

Though Lebanon has been eager to sign the Association Agreement, its refusal to attend the Euro-Med meeting is the second time in three years, prompting criticism. Boycotting the meetings in November of 2000 in Paris because of its belief that France did not show support for the Palestinian cause, it decided to attend in 2001, despite the Intifadah, only to refuse again this year. In a statement announcing Lebanon’s decision, Prime Minister Rafik Hariri stressed Lebanon’s commitment to sign the accord in coming weeks, but Lebanese Christian groups criticised the government’s decision. Describing Lebanon’s absence as a "significant loss", the National Co-ordination Committee argued that Lebanon "blindly" tagged behind Syria, referring to Syria’s strong influence on most Lebanese policies. The committee, which is comprised of the banned Lebanese Forces, the National Liberal Party and the Free Patriotic Movement, deplored the fact that other Arab countries attended the meetings whilst Lebanon "could not do the same".

In response to Lebanon’s decision, Egypt’s Foreign Minister Ahmed Maher commented that while he understood Lebanon and Syria’s reasoning, "boycotting Valencia means boycotting Europe." Furthermore, he stated that the meetings were an opportunity for Arab states to confront Israel about their repeated violations against Palestinians. Tensions mounted at the conference when Tunisian Foreign Minister Habib Ben Yahia accused Israel of massacring Palestinians during his opening remarks. Arab delegates also abruptly left the room during Israeli Deputy Foreign Minister Michael Melchior’s speech. The Euro-Med’s annual "family photo" was also cancelled when the Arab delegates refused to smile at the camera because of Ariel Sharon’s inclusion in the photograph.