12 - 18 July 2001

Need to focus on route to follow

The chairman of the EU Core Negotiating Group, Richard Cachia Caruana, was guest speaker at the latest Malta Business Weekly-Le Meridien Phoenicia business breakfast. This was the last in the series before the summer break

by David Kelleher

“It is time for us to begin to focus on the route to follow,” the
chairman of the EU Core Negotiating Group, Richard Cachia Caruana, said last month at a business breakfast organised by The Malta Business Weekly and Hotel Le Meridien Phoenicia.
In what was one the best atten-ded business breakfasts ever, Mr Cachia Caruana put forward a clear picture of what Malta has obtained in its negotiations with the EU and the road ahead.
“The past 16 months have shown me the real choices that the people will be facing (in the referendum). The people will be facing two options, and standing still, remaining how we are, is not one of the options.
“We can either move towards implementing the acquis (and becoming an EU member State) or to implement the WTO acquis. It is time for us to begin to focus on the route to follow,” he said.
In his prepared speech, Mr Cachia Caruana looked at the state of the negotiations at half-time. It is, he said, a particularly significant moment in which to engage in such an exercise. The Swedish presidency is drawing to a close and Belgium is waiting to take over the mantle for the next six months.
The accession conference at deputies’ level had, a day earlier, confirmed that 17 of the 29 chapters open for negotiations have been completed, thereby passing the halfway point.
“In terms of the time taken to reach this stage, we are also at mid-point, 16 months into the negotiations and about that distance from their expected conclusion during the latter months of 2002,” he said.
Moreover, the negotiations have reached a more interesting stage, he added. First of all Malta has gained agreement on transitional arrangements in two of the chapters that have been provisionally closed. “Of particular satisfaction, and perhaps more significant, is the fact that our request for safeguards on the free movement of workers has been agreed to.”
The closer we get to the end, the more relevant are the steps being taken, and this not only because the issues being dealt with are far more complex and sensitive. With the deliberations on the various special arrangements being requested, the negotiations become more achievement-oriented. He praised the work being done by public officials involved in the negotiations.

Analysing the chapters
Mr Cachia Caruana analysed in detail the various chapters that had been opened and those closed.
“Malta has opened 28 of the 29 substantive chapters and closed 17. These closures have occurred as follows: seven chapters under the Portuguese presidency during the first four-and-a-half months of negotiations, five chapters during the French term-in-office and a further five during the past six months of Swedish stewardship.
“Our unfortunate focus on negotiating chapters suggests that the pace is slowing down. This would be wrong for two reasons: one, not all chapters are of equal importance or of equal volume; two, significant progress has been achieved in a number of other crucial chapters, even though they have not yet been provisionally closed,” he said.
“The EU’s body of laws has as its basis four freedoms: the free movement of goods, the free movement of persons, the freedom to provide services and the free movement of capital.
“Malta has provisionally closed negotiations on all but the free movement of capital and, here, the only item outstanding is our request to retain controls on the purchase of secondary homes
in Malta. There are three other areas fundamental to the single market: competition, customs and taxation.
“The discussions on competition will be lengthy, due to our requests for special arrangements concerning the dockyards, and are unlikely to be completed before next year.
“The negotiations on customs are almost concluded. The negotiations on taxation will focus on our requests for special arrangements concerning value added tax.
“Though limited in economic importance for Malta, the agricultural and fisheries chapters are important negotiating chapters. For us, because of our desire to foster viable farming and fishing in the Maltese islands; for the Union, because it spends half its budget in this area. Our negotiations on the fisheries chapter are proceeding and we hope to make substantial progress in the next few months. The principal issue on our side is the request to manage the 25 miles around Malta as a conservation zone. Negotiations on the agriculture chapter should start in the coming months,” Mr Cachia Caruana said.
He added that the five most complex chapters will be finalised during 2002. These are agriculture, competition, taxation, regional policy and financial and budgetary provisions. “We will be prepared for membership, as targeted, on 1 January 2003 and should enlargement occur later, it will be for reasons that have nothing to do with Malta’s state of preparedness.”
Mr Cachia Caruana then concentrated on the most recent step along our way – our request for safeguards within the context of the free movement of workers.
He called this achievement historic, because it is the first time a candidate country has sought and obtained an arrangement of this nature. It is significant for so many reasons.
“First of all, it sends a clear signal to us that the EU understands our request and realises the specific needs of our country.
“Secondly it is evidence of the trust and goodwill Malta enjoys. The Union has agreed that in urgent and exceptional cases, Malta may suspend full application of the acquis, followed by a reasoned notification of the motivations behind such suspension. This means that Malta will itself be able to assess the manner in which the labour market will be adapting to the free movement of workers and will be able to act accordingly,” he said.
The government remains of the opinion, he added, that the economic growth brought about by accession will mean that any labour movement into Malta can be sustained. Since it was evident, however, that many people were apprehensive of this prospect, it was felt that it was imperative to address this issue.
This measure will apply for seven years, but the time beyond is also catered for. The EU has agreed that a joint declaration will be annexed to Malta’s treaty of accession specifically providing that Malta may raise concerns related to the free movement of workers before the institutions of the Union.
This agreement says a lot about the kind of Union that Malta is joining. It is also evidence of the fact that in the process of negotiations, new and creative solutions can be found to solve complex issues.
“In asking for this and other arrangements, we have been particularly careful to ensure that we are focusing on the specific concerns arising from Malta’s own particular circumstances and that we are applying the most appropriate remedies in their regard.”
The nature of the accession negotiations, Mr Cachia Caruana said, is such that the exercise is much more of a joint venture than a contest of wills. “The Union – both the Commission and the member States – recognise that we are involved in an inexorable process that will make us their partners in a very short time. They are as interested and committed as we are in ensuring that Malta becomes a vital and effective part of the Union from the first day of membership.”
Although people talk about there being so many years to go before the next enlargement, the fact is that it cannot be delayed too long. This was reaffirmed in the strongest terms during the European Council held in Gothenburg.
“The commitment towards enlargement remains one of the keystones of EU policy and we all need to register the fact that negotiations are expected to end in 18 months’ time.”
Despite the fact that we are not yet a member State of the EU, we are already being consulted on the future construction of the Union. The current members are clearly aware that as prospective participants in the European project, we have a contribution to give. In fact, the Foreign Affairs Minister has spoken just two days ago at a Colloquium in Brussels on the future of Europe. It is significant that the candidate States have been invited to participate in this debate, a fact underlined by Minister Borg in his contribution to the discussion.
Concluding, Mr Cachia Caruana reiterated that the EU is a natural home for us, one we can truly
participate in irrespective of any actual or perceived limitations.
“I do not in any way wish to suggest that there are not going to be issues or problems either along the route or after membership. There will be. But the structures of this partnership that is the EU will allow us Maltese not just to cope but to thrive.”
In what was probably his first question-and-answer session with the public, Mr Cachia Caruana was asked a range of questions on the implications of membership and the state of negotiations.
Anthony Manduca, editor of The Malta Independent on Sunday asked how confident he was that Malta would get derogations on the EU nationals getting the right to set up second homes in Malta.
Mr Cachia Caruana answered that there is a fundamental difference between the Maltese request for a derogation on the free movement of workers and the Maltese request for a derogation on second homes.
“At the basis of the request for a derogation on the free movement of workers, there is the assumption that the economy will do well after accession, as it did in the case of the other Member States. As the economy does well, we will presumably be able to cope with the influx of more workers. The reality is that these influxes are related to the standard of living and incomes,” he said. “The derogation that Malta has been given allows the government of Malta to take immediate steps when the labour market is under pressure,” Mr Cachia Caruana said.
With regards to property, he added, one must consider the following aspects: we have the small size of Malta, the rent laws, where emergency World War II laws were operative until 1995, and the fact that there is no rental market. This puts further pressure on land and on the need to purchase rather than rent property.
“With regards to property, the facts will speak for themselves. Looking at previous negotiations with other countries, one sees that the EU took certain particular concerns on board in this regard.”
Mr Cachia Caruana expressed his belief that Malta and the EU will reach a satisfactory conclusion on this issue.

Strategic funds
Stefano Mallia asked whether he had any idea how many strategic funds would be available for Malta.
Mr Cachia Caruana replied that with the improvements that there have been in the standard of Maltese statistics, and with the establishment of what is Malta’s Purchasing Power Parity, it is now possible for us to assess what funds will be available for us.
“The coming year will give us a clear idea of the funds which Malta can tap into. The real issue will not be settled until the financial provisions chapter is discussed, which is at the very end of the negotiations, and which will also be when the member States get involved in a more direct way.”

Lack of consensus
Lawrence Grech, editor of The Sunday Times asked whether the lack of consensus in Malta and the Irish referendum result have had any impact on the negotiations.
They have had an impact, Mr Cachia Caruana replied. “For the past 20 or 30 years, Malta has given the impression of a yo-yo, that it lacks credibility. Thus there are cases where one would need the other side to go further, where one would need the other side to trust us more. This is an issue which looks like continuing to be present for the time being.”
A lady guest asked whether Malta is in line with the Maastricht criteria and what will Malta do about the euro.
Mr Cachia Caruana answered that Malta is in line with the Maastricht criteria except for the government deficit. The progress registered by government in this regard is acceptable and Malta is currently on track with its plan.
“When all the Maastricht criteria are in place, like the other
candidate countries, Malta will be eligible for EMU two years after accession. The decision on the Maltese lira will most probably be taken in the period between accession and two years later.”

Right to establish a business
A guest asked Mr Cachia Caruana if the derogation on the free movement of workers means the corresponding right for EU nationals to establish a business here, especially with regards to the self-employed.
Mr Cachia Caruana said the two issues overlap: there is no clear distinction between the rights of the employed and the rights of the self-employed.
“Malta still has the trade licence regime but it is reforming this area. The bill approved by Cabinet this week, which will now be open for consultation, should be passed by Parliament by the end of this year.
The aim of this bill is to streamline the licence regime in line with the EU acquis and to clear up the red tape involved. The current licence legislation is 100 years old.”

Member States’ interests
Michael Mallia asked Mr Cachia Caruana whether during the negotiations there had been cases where particular member States have been for or against us on particular issues.
Mr Cachia Caruana replied that all countries have particular interests. In the EU, countries will always be countries and will always have interests. We must simply learn to foresee and understand these particular interests. Clearly, Malta needs to discuss things on a multilateral basis, but it must also discuss things on a bilateral basis. For instance, as regards tax harmonisation, it may be that Malta would have more in common with Country A than with Country B who have opposite opinions about tax harmonisation.

Winning the referendum
Asked to comment on the recent Moody’s statement that said the anti-EU view seems to be prevalent in Malta.
Mr Cachia Caruana said that as regards the information campaign, he does not believe it is government which should campaign for a Yes vote in the coming referendum. The government’s job is to provide information to enable the people to reach a conclusion in their interests.
“This is why government created MIC. We should not have been having a political debate at this point: people must first of all know. However, this is not what has happened. As I said in my recent interview on The Malta Independent on Sunday, there has been a deliberate squeezing of the issue into a political debate and the non-political people who spoke out on the issue had their heads cut off,” he explained.
Tactically, the question is when will the referendum and the election be held and which one will be first.
“If there is at this point in time a strident Yes campaign, it could peak far in advance of the referendum. There are approximately two years before the referendum. There must be more information and more communication on the negotiations. But it would be better if the real political debate comes in at a later stage. It is also convenient for non-politicians to hide while there is a political battle going on.”
Candidate countries
Stefano Mallia asked whether there have been ongoing contacts with the other candidate countries with a view to perhaps establishing common positions.
Mr Cachia Caruana replied that there has been collaboration with the other candidate countries, but here again, national interests
prevail.
“For instance, with regards to property, Cyprus asked for eight years and revisable after that, and was given five. Hungary and the Czech Republic asked for five years and for seven years with regards to agriculture. Things are different for us. Cyprus has its split and anyway it is 14 times larger than Malta. However, Malta is conscious that what
concessions are made to other
candidate countries may be made to apply for us.”