Friday, April 27, 2007

The EU and Arab reform
by Charles Grant and Tomas Valasek

The Arab Reform Initiative held its annual conference in Amman, Jordan, on 18th April. Founded in 2005, ARI is a consortium of a dozen research centres that advocate peaceful and gradual political, economic and social reform in the region. A few non-Arab think-tanks are also involved, including the Centre for European Reform, but it is very much led and managed by Arab research centres (the CER’s own website has a page on the ARI see The CER is part of ARI because it believes that ARI offers an excellent opportunity to encourage reform in a region that is deeply suspicious of outside influence.

The mood among the Arab think-tankers in Amman was relatively bleak. Prince Turki Al Faisal of Saudi Arabia set the tone. The prince is known for being both strongly pro-reform and somewhat sceptical of the United States, despite having served as ambassador in Washington until recently. However, as he said, US influence is increasingly corrosive of the very cause of reform in the Middle East. The invasion of Iraq – which the prince described as ‘illegitimate’ – had been particularly damaging. The message that Arab reformers took from the conflict and its aftermath was that solutions devised outside the region would not work, and that they must distance themselves from Washington if they are to have credibility with their own people.

The second blow for reformers was the West’s reaction to the 2006 elections in Palestine that brought Hamas to power. Khalil Shikaki, a respected Palestinian researcher, noted that the refusal by Washington to engage a legitimately elected Hamas government sent a terrible message, showing contempt for free and fair elections. In doing so Washington had sided with the entrenched authoritarian elite in Fatah, which had been discredited in the eyes of many Palestinians. And by throwing its support behind President Abbas and strengthening his office at the expense of the Prime Minister, even directly funding the presidential guard, Washington had undermined the Palestinian constitution. Not surprisingly, concluded Khalil Shaliki, support for democracy among the Palestinians had dropped after the events of the last year.

There is no doubt an argument to be made that without a heavy US intervention in the form of the Afganistan and Iraq wars reforms may never have become as prominent an issue as they are today. By jumpstarting the movement even at the expense of damage to its popularity, Washington may already have accomplished its most important goal in the region. This will be a question for historians to resolve. For the time being, US influence on Arab governments and societies seems at an all-time low. Reforms must indeed come principally from within, from the relevant governments and initiatives such as ARI. Nevertheless, one outside body, the European Union, can play a legitimate supporting role. In fact there is probably no greater challenge for Europe than getting its relationship with the Muslim world right. Because of the intertwined nature of European and Middle Eastern societies, Europeans have more direct interest than Americans in wanting to encourage reform in the Arab world.

The EU does have its ‘Barcelona process’, through which it tries to promote closer political and economic ties with the Mediterranean states. But though this process has soaked up billions of euros of EU money, nobody seems to think that it has achieved a great deal. One problem has been the reluctance of the governments in the region to accept the concept of conditionality – the idea that they should only get trade and aid if they behave in certain ways – and the reluctance of EU governments to apply that principle.

The EU also has its ‘neighbourhood policy’, which now applies to several Arab countries. The EU has agreed ‘action plans’ with Jordan, Morocco, the Palestinian Authority, Tunisia and Egypt. The EU promises closer relations with the countries concerned in return for their fulfilling promises to reform. The neighbourhood policy includes the concept of ‘positive conditionality’, rewarding good performers with extra funds, which may be easier to apply politically than old-fashioned negative conditionality. Jordan has been a star pupil and thus won extra EU funds in 2006.

The Barcelona process and the neighbourhood policy have undoubtedly done some good in some ways. But ultimately what affects Arab views of the EU is its performance on the Middle East peace process. And to judge from the mood in Amman, most Arab intellectuals have a poor view of the EU’s role. Last summer, when Israel invaded Lebanon, the EU’s initial inability to condemn the act as ‘disproportionate’ – because of the reluctance of the UK and some others to break from the US line – was noted with contempt. More recently, the EU’s divisions over whether to talk to Syria and Hamas have not impressed Arab think-tanks.

Indeed, Bassma Kodmani, the feisty lady who runs the ARI, remarked that the EU’s efforts to forge a common foreign policy were benefiting no one. The European insistence on unity meant that the EU could not engage with Hamas – though the Swiss and the Norwegians were doing so. She said it would be much better for those EU countries that were willing and able to engage with Hamas to do so on their own.

Such frustration with the slowness of EU decision-making is understandable. But in fact Arab think-tanks should not oppose the EU’s efforts to forge a common line. When it does pursue such a line, as it has done on Iran, it can make a difference and influence the behaviour of others. A united EU has more potential to shift the policy of Israel or the US than half a dozen EU states forming a sub-group of their own.

Many Arab think-tankers now seem to think that the EU is no better than the US. Indeed they cite the example of the EU’s diplomacy over Iran as an example of its ‘doing the US’s bidding’. Although many Arab governments are suspicious of Iran’s nuclear plans, Arab researchers criticise the EU’s diplomatic efforts to prevent Iran developing a nuclear bomb. Iranian President Ahmedi-Nejad has become a popular figure in many Arab countries, on account of his standing up to the West. At the ARI conference, when a CER panellist defended the EU’s Iranian diplomacy, pointing out that it was not only the ‘West’, but also Russia, India, China, Mohammed el-Baradei and the UNSC who were trying to persuade Iran not to build a bomb, Prince Turki nodded in approval. But nobody else did.

The EU faces few more difficult tasks than balancing its interest in continued close transatlantic relations with a stronger European role in the Middle East.

Charles Grant is director and Tomas Valasek is director of foreign policy & defence at the Centre for European Reform.

Friday, April 20, 2007

Globalisation: business versus politics?
by Katinka Barysch

The CER and Accenture brought together a group of business people, journalists and policy analysts today, to discuss what the world may look like in 2020. What struck me is that there is not one debate about globalisation but several. And they hardly touch.

Business people and bankers tend to take globalisation as a given and ask how governments, businesses and workers can make the most of it. Journalists, think-tankers and politicians are more likely to ask whether globalisation is good or bad. The assumption is that it can be managed.

Two recent publications encapsulate these different approaches. Both extrapolate current trends and naturally conclude that China, India, Brazil, Russia and other emerging markets will be big global players in 2020. Mark Leonard (in his CER essay ‘Divided world: The struggle for supremacy’) then argues that the world will divide along two axis: democracy versus autocracy; and multilateral institutions versus power. Instability could result if the world’s leading states struggle to entice others into their camp.

Accenture’s report on ‘The rise of the multi-polar world’ takes a bottom-up approach. Technology, trade liberalisation and the growing reach of multinational enterprises draw emerging countries into our rules-based global market. This is a world characterised by growing flows of money, people and technology. Multinationals lure Indian programmers to Munich and Palo Alto; new R&D clusters are emerging in China; foreign direct investment last year exceeded $1 trillion.

Both visions are plausible. But are they compatible? Political differences – such as those predicted by Mark Leonard’s – have a tendency to disrupt the kind of economic interdependence that Accenture analyses.

In the scenario of a ‘divided world’, trade and investment could be tools for defending political objectives, and perhaps for spreading ideas. But countries will be less likely to employ economic sanctions to enforce their standards and values abroad. In a globalised world, cutting trade and investment ties simply creates opportunities for others. In its quest for raw materials, China has invested huge sums in African dictatorships shunned by the West. Many African countries now get as much FDI from emerging economies as from the developed world.

In Accenture’s visions, business itself could help to spread practices and underlying values. As Western multinationals move abroad, they bring with them not only money and management but also Western ideas on property rights, social protection and so on. But the flow is no longer one way. Today, 62 of the Fortune 500 companies are from the developing world, and the number is growing fast. Cross-border acquisitions help these companies to enter markets, acquire well-known brands and learn modern management. But the reversal of investment flows makes many Westerners uncomfortable. The debates about Dubai Ports, Aeroflot’s bid for Allitalia or Tata’s acquisition of Corus spring to mind. Russia now insists that European companies can only invest in its oil and gas sector if Gazprom is allowed to buy European downstream assets. Will such demands for ‘reciprocity’ spread? And if so, would the ‘new’ multinationals conform with our local rules or import their own ideas about how to do business or treat workers?

Market forces shape the globalised world, but so do governments. Autocratic countries find it easier to act strategically than democratic ones. If China was a democracy, its voters may well be upset about the costs (as well as the legitimacy) of the government’s Africa policy. Moreover, in democracies the losers from globalisation are making their voices heard. Low-skilled workers who watch imports and immigration erode their wages will vote for politicians promising relief. Protectionism and global leadership do not go together.

These are fascinating questions. There certainly is a need for business and politics to discuss their respective views of globalisation more often.

Katinka Barysch is chief economist at the Centre for European Reform

Monday, April 16, 2007

The EU, the US and Taiwan

by Charles Grant

Taiwanese domestic politics is nasty and messy. The two main political forces – the KMT, which believes in ‘one China’, and the DPP, which leans towards an independent Taiwan – hate each other with venom that is unmatched in most other functioning democracies. But the country is pluralistic, with a free press and fair elections. Since Taiwan’s politics are so much more ‘western’ than those of the People’s Republic of China (PRC), it ought to have many friends in the western democratic world.

But it has few close friends. Both the Americans and the Europeans know that they must be on good terms with China. It is simply too important, economically and strategically, to have as an enemy. Therefore ministers in most western governments are careful not to meet their Taiwanese counterparts on an official basis, lest China get annoyed. And they tolerate the fact that China excludes Taiwan from many international bodies, such as the World Health Organisation. Of course, there are some policy-makers in the West who think that democracies should stand by other democracies. The much-maligned neo-cons, for example, give moral support to Taiwan, as do some idealists of a more liberal persuasion.

American policy on Taiwan is both realist and idealist. The US supports the status quo, meaning that it opposes Taiwanese independence. But the US also promises to defend Taiwan in the event of a Chinese attack. That promise is deliberately couched in ambiguous terms, to discourage the Taiwanese from provoking China, and to dissuade China from taking military action.

Having made no commitment to defend Taiwan, EU policy is much simpler. The EU does not see China as a strategic competitor, since – unlike the US – it is not an Asian power. So it has a clear policy of engagement with China, of supporting the status quo across the Taiwan Straits, and of being friendly towards Taiwan – but not so friendly that China would become annoyed.

The EU and the US agree on the goals of stability and the non-use of force across the Taiwan Straits. But Americans care much more about Taiwan, for the understandable reason that American blood and treasure could be shed in its defence Such emotions explain why the US over-reacted over the EU’s tentative moves towards lifting its arms embargo on China two years ago (there were good reasons why the EU should not have lifted the embargo at that time, but it was hard to have a rational discussion with some Americans over the matter, such was the strength of their feelings; they talked of the Chinese firing French missiles at American troops fighting on the beaches of Taiwan).

European views have shifted somewhat over the past two years, to be slightly more sympathetic to Taiwan. The fact that China passed the Taiwan secession law, which promises the use of force if Taiwan moves towards independence, was good PR for the Taiwanese. And the replacement of Gerhard Schröder by Angela Merkel has made a difference. She is a little more critical than her predecessor of large countries that abuse human rights, and opposes lifting the arms embargo. The departure of Jacques Chirac is also likely to affect EU’s China policy: he has been the leading proponent of lifting the embargo.

In some ways, the status quo is not so bad for Taiwan. The country is rich, successful and free, and many of its people enjoy a good quality of life. The problems for Taiwan are, firstly, its status – it is not allowed to do many of the things that normal countries do; and, secondly, its insecurity – almost a thousand Chinese missiles are pointing at it.

So the US and the EU are right to tell the Taiwanese not to rock the boat. This, along with a sensible US China policy balancing engagement with a promise of a military response to an attack on Taiwan helps safeguard the status quo, probably the best option available to Taiwan at the moment. In time, burgeoning economic ties between Taiwan and the mainland should make each side very wary of taking provocative actions that could threaten the prosperity of both – whatever the nature of the political relationship between the two. Ties between businessmen and politicians in Taiwan and the PRC are growing all the time. China is also democratising, slowly but surely, which increases the odds of peaceful reunification. Perhaps in the long run Taiwan can offer China an example of how prosperity, order and stability can co-exist with liberal democracy.

Charles Grant is director of the Centre for European Reform.