Free trade area with the EU: Algiers going backwards

Algeria requested the postponement of the entry into force of the free trade area with the European Union (FTA) which was to be effective on 1er September 2020. On September 21, Algerian President Abdelmadjid Tebboune announced to the media that Algiers would “review the schedule” for tariff dismantling accompanying the FTA mechanism. According to the Head of State, the European Union “agrees with this review which economists are working on”, while affirming that Algeria could not “renounce the association agreement with the ‘European Union, a partner to which we are attached’. Two weeks earlier, a spokesperson for the European Commission told AFP that Algiers had asked “orally” the EU to postpone the completion of the free trade area.

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Algiers wants to “review” the agreement

According to this Commission spokesperson, “the latest data available confirms that the Algerian authorities have not dismantled” the last scheduled customs duties, “which should have been done before 1er September 2020, ”AFP reports. “If this were confirmed, it would constitute a violation of the agreement. Any revision of the agreement should be the subject of a mutual decision within the EU-Algeria Association Council. “

At the beginning of August, the Algerian President asked his Minister of Commerce to “carry out an assessment of the file on the association agreement with the European Union which must be the subject of special attention, asserting our interests for balanced relationships ”. “Algeria has decided to review this agreement again to preserve its national production, in particular through the revision of the timetable for tariff dismantling”, insist official sources.

As a reminder, the European Union and Algeria have been working on this free trade area since September 2005 for the reciprocal and gradual opening of their markets, with a transitional period of fifteen years in order to allow Algeria to eliminate customs duties. This transition period, faced with the difficulties of adapting the uncompetitive Algerian economy, has been extended until September 2020. In vain.

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Foreign direct investment deficit

“The promises to see a massive influx of foreign direct investment have never been realized. While Algeria’s trade balance with its European partner is tilted more in favor of the northern shore of the Mediterranean. In short, very little investment and a deterioration in the trade balance, sometimes to the chagrin of entire activities that have become less protected because of the freedom of trade, ”comments the daily. El Watan, which summarizes the grievances of the Algerian government, employers and experts against this agreement.

Same story with the government media: “The association agreement between Algeria and the European Union will not have served national economic interests. Far from it, since it is the countries of the other side which will have found their profits in a consumer market and, consequently, a simple outlet for their goods. “

The agreement therefore did not meet Algiers’ expectations: “Selling in Algeria was more promising than coming to invest. In any agreement, everyone must defend their interests in a win-win relationship. Did the association agreement protect our interests? No. We haven’t really seen any FDI [investissements directs étrangers, NDLR], following this agreement, ”reproached Sami Agli, president of the Algerian Confederation of Citizen Employers (CAPC) at the end of September.

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National operators not consulted

However, to qualify this observation, it would be necessary to recall the lack of attractiveness of the destination Algeria for foreign investments. According to the firm Deloitte and the Africa CEO Forum, Algeria occupies the 30e position, out of 50, in the general ranking on the attractiveness of investment in Africa. “Attractiveness has been undermined by bureaucracy and investment laws deemed too restrictive and continually changing. This observation is widely shared by a large number of business leaders ”, supports the daily Freedom.

For Abdelwahab Ziani, president of the Algerian Federation of Agrifood, with this agreement “local production will face unfair competition, especially in areas related to agrifood, chemicals and pharmacy”. He also criticizes this agreement since, according to him, it was concluded “by negotiators who did not consult the national operators”.

“According to the president of the National Association of Algerian Exporters, Ali Bey Nasri, Algeria imported 320 billion dollars (more than 270 billion euros) of goods between 2005 and 2019 while its exports to the EU reached only 15 billion dollars, excluding oil and gas, during the same period, ”explains the French site Capital. “Algeria represents less than 1% of the EU’s foreign trade, but the EU represents 55% of Algeria’s, so any shocks will not hit both parties with the same violence. In any case, it is Algeria which will be the epicenter of the earthquake, because the negotiations were only a formality that it endorsed, and not the result of negotiations between two partners ”, explains the researcher Kheladi Mokhtar in a study analyzing the agreement.

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Turn to Africa

For the moment, Algiers is looking to its south while waiting to renegotiate the terms of the agreement with the EU. At the start of 2021, Algeria will join the African free trade zone (Zleca), created in 2018 and which has 53 countries with a population density exceeding 1.2 billion inhabitants. According to the Ministry of Commerce, “Algeria should benefit from Africa’s gross domestic product (GDP) of $ 2.5 billion and African market receipts worth $ 3 trillion”. The idea would be to revitalize inter-African trade and exchanges. As of mid-September, 164 semi-trailer trucks loaded with Algerian goods transited to Niger as new trade cooperation intensifies with neighboring Mauritania, where Algeria wants to establish itself as a leading African supplier. To do this, the project to create free zones in several regions of the Algerian Sahara (Tindouf, Adrar, Illizi and Tamanrasset) is underway as well as the launch of “special economic zones” in the southern border perimeters to make them “points. economic integration with Africa ”, according to an official.

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