Spain and the European Community

SPAIN AND TH. EUROPEAN COMMUNITY I. INTRODUCTION . - . II. THE 1970 SPAIN-EEC TRADE AGREEMENT . . . . . 1. Provisions of the agreement . . . . . . . . . . . . . 2. Adapt.ation of the agreement . . . . . . . . . III. SECTORIAL PROBLEMS 1. Stee l . . . . . . . . . . . . . . . . . . . . . . 2. Fi sheries . . . . . . . . . . . . . . . . . 3. Texti les and shoes . . . . . . . . . . . . IV. TOWARDS SPAIN' S ACCESSION TO THE EUROPEAN COMMUNITY 1. Request for accession . . . . . . . . . . . . . . 2. The Commission s opinion . . . . . . . . . . . . . . . 3. Positions of the Council of Ministers, the European Parl iament and the Economi c and Social Committee . . . . . . . . . . . . . . 4. Progress of the negotiat ions . . . . . . . . . 5. Consequences of the enlargement for third countries . . V. THE SECOND ENLARGEMENT OF THE COMMUNITY Conclusions Annex : Economic profile of Spain . . . . . . . . . . . . - . 23/X/80 29/80 ...~/ May 1980 Free reproduction authorized, with or without indication of source. Voucher copies would be appreciated. INTROOUCTION The aim of this note is to retrace the history of relations between the European Camnmity and Spain since 1962 when, after a long period of inward~looking, Spain made its first approach towards association with the Ccmnunity. Spain is going to enter a Ccmaunity which, with Greece and Portugal, will extend further towards the South am will take on a new geographical, econanic and political dimension. II. THE 1970 SPAIN-EEC TRADE AGREEMENT Fran 1962 onwards, the Spanish Governroent had made approaches with a view to an "association which might one day reach total integration " . Exploratory conversations took place fran 1964 to 1966 with a view to negotiating an agreement which would have a strictly carmercial content. The negotiations lasted fran 1967 to 1970. The trade agreement between Spain am the me was signed on 29 June 1970 am entered into force on 1 October of the same year ( 1) . Provisions of the agreement The contracting parties undertook to "consolidate and extend the existing econanic am comnercial relations and to lay down "the bases for a progressive enlarganent of mutual trade ; they stressed the concern of the EEC to develop its econanic am ccmnercial relations with the countries of the Mediterranean basin. The preferential agreem:mt is based on Article 113 of the EEC Treaty. It provides, during a first stage which is to last at least six years, for "the progressive suppression of obstacles tothe bulk of trade. The passage to a second stage, aiming at establishing a free trade zone, the modalities of which have not been defined, is subject to negotiations between the parties. A joint comnittee, canposed of representatives fran the Ere and Spain, has been instituted to :roonitor the correct execution of the agreem:mt. The agreement maybe cancelled by either of the parties at six oonths ' notice. It does not cover the coal am steel sectors which are dependent on the ECSC Treaty. In the industrial field, the Community applies tariff concessions of 40% or 60% (according to products) on ahrost all imports fran Spain. In the agricultural sector, about half of the imports benefit from tariff preferences of between 25% and 60%. (1) Official Journal of the European Communities NO L. 182 of 1970. ~ 2Spain' s tariff concessions are of 25% or 60% according to products. A large part of the iroportscaning fran the Ccmnunity benefits from these concessions. The adaptation of theagreanent Shortly after the entry into force of the agreement, the Spanish authorities and theCcmnunity were concerned with the repercussions there might be fran the accession of New Member States - and in particular Great Britain - to the Ccmnunity. The United Kingdan, in fact, constituted the chief export market for Spanish agricultural products, often not covered by the agreement; and' its tariff was to be raised to be aligned with that of its new partners. Spain could not accept a simple technical am legal adaptation of the 1970 agreement: on the contrary, it was looking for basic adjustments, taking account of all the implications of the enlarganent, including the concessions already granted to certain countries of the Mediterranean Basin. Negotiations with a view to a new agreement in the context of the Camlunity s Mediterranean policy took place in 1973 am 1974, after a protocol had been signed on 29 January 1973 providing, for 1973, the provisional non~application of the 1970 agreement to the new Member States. The negotiations reached an impasse: the Camlunity proposed as an obj.ective industrial free trade acccmpanied by fresh agricultural concessions, whereas Spain wished to establish a link between free trade in the industrial and agricultural fields. A campranise began to emerge at the end of 1975, but the negotiations were interruFted by the Commmity which intended to protest against the violations of human rights in Spain. After the enthronement of the king Juan Carlos I on 22 November 1975, contacts were re-established. At the beginning of 1976, the Spanish government indicated that it nON wished to situate its relations with the Camnunity in the perspective of an accession to the Ccmnunity. In consequence, as the Spanish authorities saw it, there was no use in concluding a~ fr~ trade agreement as envisaged in the context of the Canmunity s overall Mediterranean approach. In these conditions, in April 1977, near the end of the trans~ i tional period provided by the act of accession for the United Kingdom, Denmark and Ireland, negotiations were entered into for the regu1arisation of econanic relations between Spain and the enlarged Ccmnunity. The solution was to conclude an exchange of letters dated 25 July 1977 which permitted the provisions of the agreeroont between the three new Manber States and Spain to be applied auton(IOC)usly on 1 July 1977. - 3 III. SECroRIAL PROBLEMS 1. Steel Spain has been a traditional importer of steel products from the Comnuni ty, and has also become its largest supplier. To attain price discipline and avoid disturbances on the Com~ munity market in the present crisis situation, an informal arrangement was concluded with Spain in April 1978. This arrangement, the validity of which was limited to 1978, was renewed for 1979 by an exchange of letters dated 11 April 1979. It was extended for 1980 by a second exchange of letters dated 25 February 1980. The anti -dumping procedures which had affected direct imports frc:m Spain of certain steel products were all abolished by the Commission in 1979. Consultations are held regularly between Spanish and Camnission representatives to examine trends in .exports of Spanish steel products to the COlIltlUni ty . There has also been a first exchange of views on the prospects of accession. The technical discussions on this subject have started . 2. Fisheries After the extension, on 1 January 1977, by a concerted action, of the limits of the fishing zones of Member States of the Corrmunity to 200 sea miles from the Atlantic and North Sea coasts, the Ccmnission was authorised to. open negotiations with certain third countries on access to fishery resources and control measures necessary in particular for the con~ servation of species. A framework agreement negotiated between the Comnunity and Spain was initialled on 23 September 1978 (1).. While waiting for the conclusion of this agreement, it is applied de facto in the sense that consultations take place on annual systems for reciprocal fishing concessions. These annual systems aim to achieve progressively a satisfactory balance in mutual fishing possibilities. 3 . Textiles and shoes At the end of 1977, the Community concluded with third countries, in the context of the international agreement on trade in textiles, :roore than twenty five-year agreements aimed at guaraJ:iteeing and disciplining textile exports to the Can~ muni ty whose production capacities appeared threatenend in the short term by competition fran low-cost suppliers. (1) The agreanent was signed on 15 April 1980. The overall Carmunity trade policy for textiles also covered imports from countries having preferential links wi t h the Ccmnunity, such as Spain. Negotiations were held to regu1arise imports fran those countries. For Spain, they resulted in the setting up, frcm May 1978, of a system of administrative cooperation aimed at permanently controlling patterns of trading and permitting, in case of difficulties, adequate solutions to any problems. This system was improved in the context of the joint actionJIlEm)randum concluded on 20 February 1979. In the context of this systEm the Camlission, by a Regulation of 1 February 1979, set up a system of Ccmaunitysupervision of imports of certain textile am clothing products frcm Spain. On 11 December 1979, this system was extended to 31 December 1980. It makes the admission to the market of products of Spanish origin dependent on the presentation of a document permitting import into the Member States of the Ccmnunity. The .institution of Ccmnunity supervision for all suppliers including Spain was also decided on for shoe imports, until a :roore flexible system could be set up which did not require the prior granting of an import licence. IV. 'l'QNARDS SPAIN' S ACCESSION 'IO THE ElIROPEAN C(II1MUNITY 1. The application for accession In February 1976, shortly after the enthronem:mt of King Juan Carlos, the Spanish Foreign Minister, M. de Areilza, indicated during a visit to the Ccmnission, that Spain might apply for accession to the Ccmnuni ty as soon as the process of progressive democratisation of the country had been canpleted. On 28 July 1977, immediately after the June elections, the new Spanish Foreign Minister, M. Oreja Aquirre, officially presented to the President in office of the Council, the 13elgian MinisterM. SiIIDnet, the letters fran President Suarez containing his country' s request for accession. This application came two years after that of Greece (June 1975) and four months after that of Portugal (March 1977) . The European Ccmnission welcaned the wish expressed by Spain, am on 20 September, the Council officially acknowledged receipt. The Council then charged the Ccmnission, in contact with Spain and the Menber States, with preparing an opinion prior to the opening of negotiations . Many contacts and meetings took. place in Brussels and Madrid with the Spanish authorities to identify the problems which might arise when Spain was integrated into the Carmunity, and to draw the conclusions on these problems which were to be stated in the opinion. - 5The Opinion was adopted by the COrmission on 29 tbvBnber 1978 an:l cx:mmmicated to the Council of Miidsters ( 1) . 2 . The Camlission' s Opinion The Carmission informed the Couooil that it welcane d t he app lie at ion for accession am was happy about the prospect of seei.n1 a dsIDcratic Spain participating in the unification of~. It t1'o.1gh t that negotiations on accession should be opened as soon as J;OSsible . am carried through with a will to fin::1 the nPst satisfactory solutions to the problems posed The COrmissionconsidered that the addition of the Spanish marlcet, which had considerable developnent .potentialities, walld have beneficial effects on intra-camn.mity trade, am that these ~d still further accentuated by the possibilities opened on Iatin American markets, because of Spain' s traditional links with that continent. However, the accession would not be made witb;)ut difficulties, it was therefore :iIrp)rtant, in the interests both of the Ccmnunity and of Spain, to take the neCessary measures am precautions to ensure its success. This success could be coonted on only if the insertion of the Spanish econany into that of the Ccmwnity could be carried out without intolerable tensions for either party an:l if, when this was achieved, the Camtunity were stren:ft.hened rather than weakened - and this made it all the mre urgent to take action to stren:Jthen the cohesion of the Camtunity. After having reviewed the Camtunity s ecoronic situatioo am that of Spain, the opinion proceeded to evaluate the inpact of the accession on the various sectors of activity. Sectorial aspects in general In certain sectors, the Spanish econcmy is a nPst effective canpetitor to the Camtunity. This might lead to considerable tensions for certain sectors of the Camnmity econany, .if adequate measures were not adopted in good time am worked intO the process of integration which would follow the accession itself. This would in particular apply to certain regions which were npre exposed than others, either because of their ecoronic structure or because of their geographical situation. For the Spanish side, the weight of the Carmunity econany might, unless similar precautions were taken, also cause tensions of the same nature for certain sectors and certain regions where incare is essentially earned frcm productions which could stand up to Camnmi ty carqJeti tion. (1) upp emen '1/ n:s European Ccmnunity Bulletin - 6~ This is why it is imperative to take the necessary precautions on both sides to facilitate the insertion of Spain into the Camnmity. In particular, the gap between the respective develq:ment levels, which constitutes one of the rrost obvious sources of tension, must be reduced as far as possible. Industrial sector In the industrial sector, we would haVe to meet three requiranents eliminate the present imbalance in dismantling of tariffs para-tariff barriers between the Ccmnunity and Spain, in virtue of the application which was made of the 1970 preferential trade agreement; harn"Pnise the basic conditions of canpetition, in particular of taxes and subsidies: rapidly associate Spain with the actions of industrial r~structuring and joint disciplines foreseen for crisis sectors both in the Comnuni ty and in Spain. Agriculture Spain occupies a particular place among the candidate countries, from the agricultural point of view: its accession would, in fact, involve for the Carmunity a 30% increase in its agricultural surface, a 31% increase in its active agricultural population and a 31% increase in the number of its fanns. Agricultural exports, which represent about 23% of total exports, play animpportant role in the country' s trade balance. About 58% of these exports go to the present Camlunity, whereas only 10% of Spanish imports ccme from the Carmuni ty . The :roost difficult problems will be concentrated around "Mediterranean productions" and, for this reason, will have repercussions which will affect certain regions which are among those least de~ velope. in the Carmunity. This is why, although Spain should be able to adopt the Carmon Agricultural Policy as soon as it accedes to the Canmunity, the convergence of prices would have to be made progressively while, during the transition period, mechanisms would have to be set up in order to avoid the free circulation of products causing disturbances in Comnunity markets during that period. - 7In addition, the enlargement would bring about an increase in the problems connected with structural imperfections of fanns and inadequacies of farmers ' incanes. The result would be that we would have to incre.ase our efforts to reduce differences in product i vi tYbetween fanns in the Ccmaunity. Structural actions would have to be adapted to regional requirements, and consider in particular the situation of the least favoured regions, since, in addition, these would be IOOst affected by the accession of Spain. The financial participation of the Ccmnunity would have to take account of the degree of acuteness of the problems caused for these regions. Regional and social policy In the enlarged Camnuni ty, there would be a considerably greater proportion of under-developed regions, faced with problems of reconversion, and characterised by a weak economic environment.. Besides, in Spain, the restructuring foreseen for industrial sectors in difficulty and the very extensive constraints in the craft sectors of the country might cause pa:cticularl y acute problems of adaptation and reconversion for certain provinces. The measures of restructuring in irdustrial sectors, both in Spain and in the Camumi ty, and the acceleration of the flight fran the land, would also have, in the first stages, considerable repercussions on employment. The extent of the problems that would face the enlarged Ccmnuni ty in the labour market would make it still IOOre necessary to give particular attention to employment in coordinating econanic and social policies of Member states at Canmunity level, in particular to avoid disparities between rates of employment in different regions, and migration caused by the constraint of unemployment. External relations The accession of Spain would have a double impact on the CamIunity external relations. On the one hand, it would increase the ccmnercial power of the Carununi ty, and on the other hand it would have repercussions on certain aspects of its external policy, particularly concerning its relations with the Mediterranean countries, whose exports are oore canpetitive than those of Spain, which .Spain would tend to develop after accession. The Ccmauni ty would have, as soon as possible, to carry out a policy of active concertation with these countries, and seek. for ways and !reans of restructuring trade. The transition period We should first of all stress that Spain would be a canplete member of the Ccmnunity frcxn the nanent of its accession. However, taking account of the extent am ca:nplexity of the problems involved, it is necessary to have a transition period during which, among other things, the custans territory between Spain and the Ccmnunity would be unified, the free circulation of labour would be achieved, and during which would be app l i ed the provisions of the Carmon Agricultural Policy and of the agreements with third countries. The Ccmnission, in consequence, had estimated that transitional measures should be applied within a period of ten years, and that the duration of each of these transitional J;Xr'0visions should be fixed at the time of negotiations. 3. Positions of the Council of Ministers, the European Parliament am the Econanic and' Social CCmnittee. The Council of Ministers, having taken note of the Ccmnission' s opinion, pronounced in favour of Spain' s request for accession during its meeting on 18 am 19 December 1978. It was agreed that the preparatory work indispensable for the establishment of a carmon negotiating basis should be carried out as soon as possible and in a positive spirit, and that the negotiations for Spain' s accession should open formally in February 1979. The position of the Council was made clear by its President in Office, M. Jean Franc;:ois-Poncet, during the solemn opening of the negotiations (see point 4 following). In a resolution adopted on 18 January 1979, the European Parliarnent welccm:d the re-establishment of d.emxratic regimes in Greece, Spain am Portugal, and confinned its political will to see these countries united with the CoIrmunity. It noted with satisfaction the establishment of regular relations with the Spanish Parliament (+) and asked for the many links existing between the Institutions of the Carmuni ty, the Mamber States am the candidate countries to be developed am strengthened. (+) In this context, we should single out the visit of a delegation frcm the Spanish Cortes to the European Parliament on 14 to 16 January 1980. During this visit, the first since the election of the European Parliament by direct universal suffrage, a series of recarmendations was adopted, in particular on (a)' the necessity rapidly to finish the accession negotiations am (b) to be regular I yinfonned on the progress of negotiations. The next meeting between the European Parliament and the Cortes will take place in Spain May/June 1980. 15 Agriculture Agriculture, like industry, has played a fundamental role in Spain I S econanic develor;.roent. Agricultural exports represent one quarter of total exports. Spanish agriculture is above all cqnpetitive in the production of fruit and, in particular, of citrus fruit, vegetables and olive oils, which constitute :roore than a third of total production and 74% of Spanish agricultural exports (of which more than half to the Ccmmunity) The climatic condlitions of the country and the heterogeneity of production structures mean that highlyccmpetitive sectors such as that of the "Mediterranean" products co-exist with others where productivity is less satisfactory. This sector has, however, a real developnen.t potential, and important efforts are being made to improve structures, develop irrigation and use the soil which so far has been inadequately exploited. Energy The energy resources are relatively uniroportant. In spite of its hydroelect r i and coal production, Spain depends on outside sources for 75. (1967) of its energy supplies. An energy plan, established in 1978 , aims at IIPderating consumption, while ensuring satisfactory and diversified supply which allows gnp growth. The measures proposed aim at reducing, between now 1987, dependence on imports to 54. 2%, and at diversifying sources of supply. This leads to a :roore than proportional growth in the production of electric energy based on national resou,rces of coal and hydroelectricity , and on less onerous foreign resources (in the nuclear field). These, and the uranium depoSits possessed by Spain are, on the other hand, the basis of a vast investment progranme for the construction of supplementary nuclear power stations. In preparing this strategy, account has been taken of enviromental protection and the defence of consumers in the domestic sector and in small industries. 16Spain s trade The sectorial distribution of Spain' s trade with the rest of the world was as follcMS for 1978 Food , drink and tobacco Energy and lubricants Raw materials, oils am fats Machinery and transport materials Other products IJ:rq?orts % 11.7 28. 14. 19. 25. Exports % 19. 25. 46. Source : Basic Statistics of the Community, 1979 The Ccmnunity is by far the biggest suppl ier and the biggest custcmer of Spain. As first custarer group, the Ccmnunity (46.3% of total exports) is ahead of Africa (11.4%), North America (10.1%), Asia (9.8%), the other European countries such as SWitzerland SWeden, etc. (8. 9%), AL'PJ.J::, (The Latin-American Free Trade Association) (7 . 5%) am CCMEDJN (2.7%). (1978). As first geographical supplier group of Spain, the Ccmnunity (34. of total imports) is ahead of Asia (25.5%), North America (14.1%), Africa (9%), AL'PJ.J::, (6.7%), the other European countries (SWitzerland, Sweden, Austria, etc.) (5. 5%) and cx:MEXX)N (2%) (1978). Source : OECD. Balance of payments Spain' s current balance of paynents, until 1977, was greatly in deficit, but this' was transformed' into a surplus of 2 milliard dollars for 1978 and was of the sane order for 1979. The origin of this positive result, aIIDng other things, was a partieularincrease in exports. IJ:rq?orts , on the' other hand, increased far :roore slowly. Besides, revenues fran tourism increased, although less rapidly than before. For 1980, because of the general slow~down in the war ld econany, the current balance of paynents should once :roore be in deficit. Gross internal product In 1978, the gross internal product per head was 3, 147 UCEwhich was between that of Italy and that of Ireland. Services represent the largest cClIlpOnent in GNP (50%), follCMed by industry (40%) and agriculture. (10%) .