Select Committee on Foreign Affairs Minutes of Evidence

Examination of Witness (Questions 240-259)

17 NOVEMBER 2004


  Q240 Mr Pope: That is very helpful, but I think there is a danger that we could be in the worst of all possible worlds. When we were in Cyprus last week it seemed to us very clear that the Government of Cyprus is not going to allow at any early stage direct trade with the north and the rest of the European Union. If that is the case, that means that the aid package is also blocked. If there is a linkage between the aid package and the trade package, if the Government of Cyprus is not prepared to allow direct trade, that also has the knock-on effect of meaning that the aid to the north also is blocked; and we are then in a situation where the north, having voted for the plan, now finds itself impoverished. It has got a per capita GDP about a third of that of the Republic of Cyprus and we cannot even get an aid programme there. I find that very worrying?

  Mr Mirel: I think it will be up to the Dutch presidency, at some point, to decide whether the two proposals should be de-linked; and we could go with that proposal at least as an amendment, and, in particular, before the elections in the north, to demonstrate that the European Union is ready to help and do something, even if the trade proposals would not be accepted at the time—that is up to the Dutch presidency—but I think, I very much hope, that after 17 December things will change.

  Q241 Mr Pope: I certainly take your point that it is important to decouple these things ahead of the elections in the north, because I think it could have a very damaging effect?

  Mr Mirel: Indeed, because so far we have not been able to demonstrate that we were supporting the outcome of the referendum in the north.

  Q242 Mr Mackay: I would like to pursue a little further what Mr Pope has been asking you about aid and trade. I would agree with him about the decoupling. It is the first time we have heard about the coupling, which is very interesting. It was put us in other evidence earlier that the real reason the aid package was not going through, despite the fact that it had been agreed by each of the Member States, was that the north comes under the jurisdiction of the Republic of Cyprus, in the eyes of the European Union, and rightly so, and any Member State will only accept the aid when they are satisfied what it is to be used for, and they will be in charge of what it is to be used for. Clearly, the Republic will not be choosing, or deciding, or monitoring, or be responsible for aid that is disbursed in the north; because one presumes that, in conjunction with the EU people at the Commission, it will be the authorities in the north that makes the decisions as to where the aid goes to. Would that be correct?

  Mr Mirel: I must say that, after very lengthy discussions on the proposal, we have now full agreement, including the Republic of Cyprus, whereby this aid package could be used for the north—that would be implemented directly by the European Commission—but actually we would use the European Agency for Reconstruction which we have set up for the Western Balkans, which is a very experienced body to implement this type of programme, and they would open an operational centre in Cyprus. There is full agreement on this idea.

  Q243 Mr Mackay: That is extremely helpful, because a less well-informed person giving us evidence yesterday, inadvertently, I am sure, misled the Committee; and you coming here today has put that right. That is very interesting indeed. Can I now move on to trade?

  Mr Mirel: I am sorry, one additional element. Cyprus has asked the Commission a few days ago—and this is going to be settled, I hope, tomorrow—that this agency for reconstruction would have to be registered in the Republic. We have no problem with that. This is actually the only, let us say, recognised place, country, where we could register the agency. So we have no legal problem whatsoever with that, provided that Cyprus would accept that the agency would have offices in the north; and this is acceptable and accepted.

  Q244 Chairman: On that, has the Republic sought to impose any conditions on the disbursement by the agency of those funds?

  Mr Mirel: We had long discussions on two issues: one is what about the property rights and whether any project could be implemented on soil or on a piece of land which belongs to Greek Cypriot owners. We obviously say, "No", not just in relation to Cyprus, but the Commission has never in any of its external aid programmes actually accepted to finance projects on, let's say, a piece of disputed land or soil where ownership rights are not clear. That happened many times to us in Poland, Hungary and in Central European countries when the companies, etcetera, had not been privatised yet, and we refused to use public funds for developing projects if ownership rights were not clear. We made that very clear to the Republic of Cyprus. They accepted that that was one of the key issues.

  Q245 Chairman: Any other conditions?

  Mr Mirel: No. The only condition is that whenever we would be ready to consider any project outline, or whatever, the first thing we would do would be to look at the ownership rights and whether the project would be based on land which is clear, where ownership rights are not disputed. That is the only condition.

  Q246 Chairman: Are there any means of consulting the Republic in advance?

  Mr Mirel: No, there are not, Chairman, but we would be ready and willing to consult, in particular, when projects would have, let's say, a wider dimension, such as water treatment, energy grids, or whatever. It is clear that we are not going to finance something in the north, which is, after all, a small part of the whole island, without looking at the whole island's interests.

  Q247 Mr Mackay: Obviously if a settlement is going to work, there has to be a closer link between the two economies, and the north must improve considerably. The aid package that you and Mr Pope have mentioned will help, but it is the trade that will really work. Can I move you on to the difficulties there. What it is blocked at the Commission, or within the European Union, is the opening up of the ports of, say, Kyrenia and Famagusta. Is it just the Chicago agreement which is stopping direct flights from EU Member States going directly to Ercan, or anywhere else, for that matter, in the north?

  Mr Mirel: The trade proposal is blocked basically for three reasons. The first reason is that the Republic of Cyprus is arguing that the legal base for the proposal is not the right one. We have proposed a regulation on the basis of Article 133 of the Treaty, which relates to trade measures. The Republic of Cyprus is saying that this is the wrong legal basis: it should be based on Protocol 10 of the Accession Treaty. On this very important point our legal service argued in saying that there is no other legal basis than Article 133. Why? Because the northern part of Cyprus, although it belongs to the EU since 1 May, does not belong, is not part of, the European Community Customs' territory. The EU legislation is not implemented and not implementable in that part of Cyprus. Therefore, that territory, although not formally a third country—it is a sort of sui generis situation—has to be considered as any third country; and we have other examples: Ceuta and Melilla, enclaves in Morocco. We are dealing in trade matters on the basis of that Article, therefore, we have proposed trade measures on the basis of this Article and I think that if we had to go before the court, I am sure we would win, but there is no alternative. That is the key point.

  Q248 Mr Mackay: You illustrate graphically the trade measures are stalled. You have just said at the very end that you think the way forward is through the courts. If the courts came down in favour of the Commission proposals—

  Mr Mirel: And I am sure they would.

  Q249 Mr Mackay: I hope I share your optimism. If they do, which would be good news for Cyprus, in my view, then there would be no other stumbling block. The Republic would have no veto?

  Mr Mirel: The other stumbling block is the question of ports and airports. Cyprus is saying that by allowing direct trade we actually violate international law, because ports and airports are under the control of the Republic and they do not have the means to control what is happening. What we are saying is that our proposal does not say anything on ports and airports. It is without any prejudice to requirements which have to be fulfilled in terms of security and safety and that any importing Member States would require. More importantly, we, and, indeed, the Council, accepted what we call "Green Line regulation" under which trade between the north and the south can use also ports and airports in the North.

  Chairman: Mr Mirel, can I explain. That is a vote. We will suspend for up to a quarter of an hour. If we are back earlier we shall resume. The bad news is that there is another vote at 4 o'clock. It may be ten minutes; it may be longer.

  The Committee suspended from 3.32 p.m. to 3.42 p.m. for a Division in the House   Chairman: Can I ask Mr Mackay to continue his questioning.

  Q250 Mr Mackay: I will be brief, but can I just say that the information which you are giving us is extremely useful to the Committee and has been some of the most significant evidence that we have had. It is just a pity that we are interrupted by the democratic process, which is always extremely unhelpful. I asked you what was blocking the trade deal, and you said there were three reasons. You answered one very fully, and I added a supplementary. The second you were answering, but you were competing against the bell. I think you were talking about the airports. Would you very briefly repeat that. If there is a third one, I would like to hear that before I pass over to colleagues?

  Mr Mirel: Sure. It is a pleasure. The second one is this question of ports and airports. Our proposal does not say anything on ports and airports. You may say this is playing with words. How can you have trade if you cannot use ports and airports to export your products? But what we are saying is that this proposal is without any prejudice to requirements which in foreign countries they ask in terms of security, or safety in the port. More importantly, when the line regulation was adopted to allow trade between the north and the south, that Green Line regulation allows products produced in the north to be (in inverted commas) "exported" to the south, not just products wholly produced in the north but also transformed in the north. Transformed from what? From raw materials imported. Imported how? Through ports and airports. If ports and airports have been accepted for importing raw materials transformed in the north and then allowed to be, let's say, traded in the south, why not accept also that ports and airports would be used to allow trade directly from the north to the Member States? I think that is the key point.

  Q251 Mr Mackay: Have we covered the third point? That covers all three now?

  Mr Mirel: Yes.

  Chairman: What I propose is this, Mr Mirel. There will be another division at 4 o'clock, possibly two divisions. It would make it absurd for you to have to wait, so I am going to ask my next two colleagues, Sir John and Mr Mackinlay, if they would take up most of the remaining time, and then the Committee will be able to address written questions to you and any matters that I very much regret will be truncated because of time.

  Q252 Sir John Stanley: Does the EU accept that the only international body that can provide both a sudden proposal and one that needs to endorse it is the UN?

  Mr Mirel: This is what the Council are saying. We do not see any alternative. The whole process has been based on UN resolutions but it is clear that after 17 December there would be a new momentum, a new situation, if the European Council on 17 December decides to actually open the access negotiations to Turkey. I am not saying then the accession process should go back to the Union or under the Union responsibilities, but certainly a new momentum would be there to facilitate a re-launch of the process under the UN umbrella, providing the Republic of Cyprus would then accept to re-launch such a process.

  Q253 Sir John Stanley: Is the EU likely, after December, to take any initiative directly with the UN to try to persuade the Secretary-General that it is worthwhile endeavouring to restart the settlement process, or is the EU's position that a breathing space, possibly of a considerable period, is now necessary?

  Mr Mirel: It is difficult for me to tell what the Dutch presidency or the next presidencies would do.

  Q254 Sir John Stanley: What is the Commission's position?

  Mr Mirel: I do not think that the Commission, on such an issue where the Commission has actually no competence, no direct competence, would actually propose it?

  Q255 Andrew Mackinlay: The European Commission has a port services directive in draft. Do you know, would that be applied if the ports were opened in the North to supply the whole island? How would it be regulated? How would it be policed?

  Mr Mirel: I am sorry?

  Q256 Andrew Mackinlay: The European Commission has a port services directive which relates to the whole market with imports, the labour market with imports, ownership, who does what, and it is causing a great deal of consternation in ports throughout the European Union, particularly people like myself—that is also how I know about it—but I also want to know whether or not that would be applied in a northern port: because it would be unfair competition, would it not, if that did not apply in the north but applied in the Republic?

  Mr Mirel: As far as I am aware, we do not have any such directives.

  Q257 Andrew Mackinlay: The Commission has got one. It is actually consulting Member States now?

  Mr Mirel: It is not in place yet, is it?

  Q258 Andrew Mackinlay: It is not in place yet.

  Mr Mirel: We are going on the basis of the existing EU legislation. What we are saying is that we should allow direct exports from the north to the new Member States, and it is up to the importing Member States to make sure that any safety, any security requirements would be fulfilled.

  Q259 Andrew Mackinlay: But, uniquely, you would be allowing a port—and you have found the formula of words—which is not an EU port to be the access and egress of trade for the European Union?

  Mr Mirel: Sure. As we do with any imports from Africa or any other countries in the world, third countries.

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