Tunisia pursues quiet force of economic diplomacy

There are signs Tunisia is inching its way out of its economic crisis.
Sunday 05/08/2018
Containers are seen at a port terminal in Bizerte. (Reuters)
Shifting policies. Containers are seen at a port terminal in Bizerte. (Reuters)

A sort of cold war involving a series of complex issues has been going on the last few weeks in Tunisia between the presidency of the republic and the presidency of the government regarding preparations for the 2019 general elections.

The winner emerging from that shadowy conflict is Tunisia’s economic diplomacy, the only quiet force in the country.

There are signs Tunisia is inching its way out of its economic crisis and Tunisians have their country’s economic diplomacy to thank for that. Everything that could be done diplomatically to save Tunisia’s exhausted economy has been done.

Tunisia’s diplomats have focused on finding new markets for the country’s products, attracting foreign investors and selling Tunisia as one of the best tourist destinations in the Mediterranean. They’ve done this despite sensitive security and diplomatic issues, particularly related to the situation in neighbouring Libya. Tunisians are hopeful that once the dust settles in Libya, Tunisia’s economy will boom again.

The flurry of diplomatic activity began with Prime Minister Youssef Chahed’s government. Chahed’s team won over many strategic partnerships that officials and economic experts deemed crucial to alleviate the country’s economic woes. The success of Tunisian diplomacy must be credited to the stability and energy inside the Tunisian Ministry of Foreign Affairs under the leadership of Khemaies Jhinaoui, who took office in 2016.

The Ministry of Foreign Affairs collaborated with 14 other ministries and government agencies. In addition to partnerships with traditional trade allies, many hopes are pinned to two new major strategic alliances that promise to drive an imminent economic boom. Many trade and investment deals have been signed within the framework of the partnerships.

Two-and-a-half years of negotiations with China culminated with the signing of an agreement within the framework of China’s Belt and Road Initiative. Tunisia considers this partnership one of its most important strategic partnerships and anticipates welcoming huge Chinese investments in developing Tunisia’s roads, trade ports and free-trade zones. Trade relations and tourism with China are expected to increase.

To its credit, China did not look at its Tunisian partner as an economic midget to be exploited and taken advantage of. The Chinese saw Tunisia as one link in a long line of similar links in more than 65 countries in China’s ambitious trade project.

This attitude is quite different from Turkey’s or the European Union’s. Tunisia’s 2004 free trade agreement with Ankara was a one-way street in favour of Turkey. The European Union has, for some time, been pressuring Tunisian authorities to make further concessions in its negotiations within the framework of the controversial Deep and Comprehensive Free Trade Agreement (ALECA).

Tunisia had taken a lot of time to understand that the solution to Turkey’s and the European Union’s blood-sucking policies was to diversify its economic partners and strike new strategic economic alliances. So it turned its eyes towards Africa, a continent rich with promises. It took Tunisia more than two years of tough negotiations to be accepted into the Common Market for Eastern and Southern Africa (COMESA) group starting next year.

COMESA represents a market of about 500 million consumers in 19 countries with a combined gross domestic product of as much as $800 billion. The yearly volume of trade between COMESA members is about $250 billion. Obviously, such potential is attractive to Tunisian exports in addition to attracting African investments to Tunisia.

Tunisian authorities are convinced that exports are vital for the country’s economy. It is essential for Tunisia to boost exports because of the country’s dependence on foreign currency. The Tunisian Central Bank’s reserves of hard currency have fallen dramatically since January 2011. Recent statistics place them at $4.4 billion.

There is a consensus in Tunisian economic circles, and even among the political opposition, that the 1995 partnership agreement with the European Union was catastrophic for the industrial sector in Tunisia. There are fears that ALECA, which is being negotiated, will ruin other vital economic sectors, especially farming, because Tunisia’s agricultural products cannot compete with their European counterparts.

Tunisia’s trade agreement with Turkey required a major overhaul through Tunisia’s economic diplomacy. Tunisian markets have been flooded with Turkish imports and the trade deficit with Turkey stands at a historic high of $6 billion. To reverse the trend, the Tunisian parliament voted to double import taxes on products from Turkey.

Tunisia’s economic diplomacy convinced Ankara that the Tunisian market is too small for its imports. The real test for this soft diplomacy is going to be to convince Tunisia’s European partners that economic fairness is key to the future of Tunisian-European cooperation.

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