EU Trade Commissioner Peter Mandelson's address to the 5th EUROMED Trade Ministerial Conference

Dear Ministers, dear Friends,

Let me first reiterate my thanks to the Moroccan Government for having organised this ceremony. I am confident that I can speak in the name of all participants if I say that, once again, Morocco has proved that the Mediterranean tradition of hospitality is still very much alive.

Trade is just one part of the wider Barcelona process in which we are all engaged. But it is the very heart of the Barcelona process' ambitions for economic development. Today we will begin the work of putting services at the heart of that trade.

In the European Union, services represent about three quarters of production and about the same of employment. The figures are slightly lower when one looks at the situation in the Southern Mediterranean partners. But even here services count for more than 60% of GDP on average.

Yet trade in those services remains strikingly limited - just a fraction of the trade we share in goods. The EU still invests less than 2% of all its foreign investment in your economies, despite the fact that we are neighbours.

So there is plenty of potential here to tap. And economists are, for once, unanimous in agreeing that the gains from trade liberalisation in services can outpace the benefits of almost any form of market opening.

The reason for this is simple enough. Services activities tend to be the most dynamic and growing sector in any modern economy. This is the sector that draws Foreign Direct Investment, and with that foreign investment, new skills and new strengths.

That is why all of the Association Agreements that the EU has concluded with its Mediterranean partners recognize the objective of liberalising trade in services and the right of establishment. That is why it is a vital part of our vision of a Free Trade Area of the Mediterranean by 2010.

And that is why I think we can honestly say that today we are beginning a process that is both exciting and urgently needed.

I say a process, because this negotiation is likely to a long and sometimes difficult one. We will need to get to know each other better. We will need a strong sense mutual understanding. From that will come respect and trust.

But I think the idea of a process also reinforces the fact that this undertaking will not end with the completion of the negotiations themselves. It will not even end with the creation of the Euro-Mediterranean free trade area in 2010.

Our ultimate ambition has to be to try to give real life to the idea that the Barcelona process can give all our traders a stake in Europe's huge internal market.

The European Neighbourhood and Partnership Instrument, which will come into play in 2007, will give us the means to finance programmes that will modernise and restructure services industries and to make them more competitive. Putting trade and development together like this reminds us that we are setting out to do much more than just agree services liberalisation. We want to build stronger more competitive services industries, rooted in the largest market in the world.

But it also reminds us that our work will continue into an implementation phase and will need to go further than just a commitment to removing trade barriers. The slow but steady work of real integration in our services markets will ask as much of us as the negotiations themselves, both in time and commitment.

Let me now try to outline the way I envisage the negotiations themselves. As set out in our Association Agreements, they will cover both the liberalisation of services and the right of establishment.

On services, our work should be guided in a general way by the Istanbul Framework Protocol. We all know that this is not a binding document and from the very outset I want to reassure those of you who may have difficulties with some specific parts of that Protocol that our negotiations will be genuinely open and will follow the principle of 'nothing is agreed until everything is agreed'. I believe the Framework Protocol can be useful in the sense that it will provide our negotiators with a point of reference and a basis to start from.

When it comes to the right of establishment, however, there is unfortunately no Framework Protocol. We will need to come up with some fresh ideas and proposals, and you can expect the EU to make some of its own.

As I have already implied, the single overarching reason for including the right of establishment in our negotiations is the urgent need to develop the flow of investment into the economies of the Southern Mediterranean. The development of a regulatory framework will improve the business climate and reduce the cost and trouble of trade. But it is only one piece in the picture.

You all have in front of you the draft Ministerial Declaration. From the outset my idea for this document has been that it should not merely declare our negotiations open, but that it should also provide our negotiators with some political guidance as to general principles that they should follow.

I trust that nobody in this room has any difficulty with the notion that our future agreements should be in compliance with multilateral trade rules - this is, after all, Marrakech, the very birthplace of the WTO.

WTO rules on regional agreements are both ambitious and pragmatic. They are ambitious when they call for a high level of liberalisation on trade in services, with substantial sect oral coverage and prohibitions against excluding any mode of supply.

They are however also pragmatic, especially where the needs of developing countries are concerned. In our case these flexibilities can and will of course apply. This will be true of the overall asymmetry of commitments between the EU and each of you. It will also apply to any possible transition periods that could be needed in specific sectors. I make this point as clearly as I can because I know that there already some questions being asked about levels of ambition. Ambition should be something we aspire to, not something we fear.

This flexibility points to another general principle that should guide our negotiations: namely, the importance of development for the region. We should always remember that trade liberalisation is not an end in itself. It is a means to a better life for the people we represent. We can and must tailor each of the future agreements to the specific needs of each individual country.

For this to happen we will need to negotiate separately, individually, the market access commitments that we will mutually seek to obtain from one another. As in the WTO, each participant will have a different list of specific commitments. And this list will reflect only the steps that every participant feels comfortable and ready to take.

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