Free trade is vital for development in the EU’s southern neighbourhood

Op-ed written by Tom Parker President of the British Chamber of Commerce EU & Belgium

In a ruling on the 15th of March, the High Court of New Zealand held that the New Zealand Superannuation Fund (NZSF) complied with the relevant local and international law in its decisions to invest in the Moroccan state-owned OCP company that is engaged in phosphate extraction in Western Sahara. This is excellent news for the economic development of the Southern neighbourhood, as it can inspire further investment, which is essential to create jobs in the Sahara region. 

Western Sahara is a disputed territory in Northern Africa between the Kingdom of Morocco and the Polisario, the Algerian-backed separatist movement. Not only has the movement resorted to armed conflict, most recently by violating its ceasefire with Rabat, the Polisario has often attacked trade between the region governed by Morocco and the European Union (EU), attempting through “lawfare” to weaken the trade relationships built by Rabat. However, with a population of roughly 600,000 people and a limited number of industries, export trade is vital for this region. It is also geopolitically crucial for the stability of the Southern neighbourhood. To date, the Sahara region’s economy is based on fishing and processing of fishery products, phosphate mining, agriculture and, to some extent, trade and craft industries. A recent report by the European Commission found that preferential agricultural trade tariffs on the region’s exports to the EU help to sustain local employment in the agricultural and fisheries sector. Around 14,000 direct jobs are dependent on agricultural exports to the EU and more than 45,000 jobs in the fishing sector depend directly or indirectly on trade with the EU. The report thus confirms that trading with the EU delivers clear benefits for Western Sahara and its population in terms of exports, economic activity and employment. 

As such the ruling by New Zealand’s High Court provides a positive signal for free trade in the region. The Court ruled it is not within its jurisdiction to intervene or interfere with the political dispute, the matter belonging to the United Nations. This resembles similar rulings of the European Court of Justice on the issue, according to which the Court cannot arbitrate this matter of international law. In other words, finding a political solution belongs to the parties concerned and the wider international community. However, until a resolution is found, the local population should still be able to trade with the wider world. This is vital for the region’s economic development.

Of note, the Court also looked into whether the NZSF complied with its own governing act, namely that the fund actions must avoid “prejudice to New Zealand’s reputation as a responsible member of the world community”. The Court accepted that the fund’s actions were based on “widely accepted international standards”, including the UN Principles for Responsible Investment and the UN Global Compact. Despite the issue’s political saliency, the Court did not see any issues with the NZSF investing in assets connected to the region.  

The Court’s ruling also mentioned that New Zealand’s Ministry of Foreign Affairs and Trade provided informal advice to the fund on this matter, namely that “to its knowledge OCP’s operations in Western Sahara comply with the wishes of the community and do benefit the community, as required by UN Charter obligations”. This bears resemblance to the 2016 ruling of the European Court of Justice in a crucial case where the Polisario seeked the annulment of EU agreements with Morocco concerning reciprocal liberalisation measures on agri-food and fishery products. The Court then decided that tariff preferences under the agreement can only apply to Western Sahara if they benefit the local population. The European Parliament, the European Commission and the Council then all agreed that trading with the EU has clear benefits for the people living in the Sahara regions, paving the way for the agreements’ ratification.

The decision of the New Zealand High Court can only be welcomed for free trade and the development of the region. As a ruling from the court of one of the most democratic countries, it puts to bed once again the claims against companies and institutions doing business with Morocco in the region. This can encourage further business activity there, which will boost economic growth, create jobs locally and thus promote stability in the EU’s southern neighbourhood.