THE ASSOCIATION AGREEMENT BETWEEN ANDORRA
AND THE EUROPEAN UNION
THE ASSOCIATION AGREEMENT
In 2015 we engaged in negotiations, together with San Marino and Monaco, for an association agreement with the EU. The aim of this initiative was to define a stable framework of relations with the EU that would allow us to diversify our economy, while accessing an internal market of around 450 million people.
It is an ambitious project that will have a significant impact on the lives of the country’s citizens and businesses.
Through the Agreement, Andorra will be able to participate in the European internal market: its citizens will be able to study, work, do business or retire in Europe under the same conditions as other nationals of the Member States.
The Agreement entails bringing Andorran regulations into line with European ones, while maintaining its own specificities in foreign and fiscal policy. In any case, accession is not foreseen (i.e., Andorra will not become an EU member state).
WHY NEGOTIATE?
Association with the European Union is considered the best option for Andorra to continue to be a prosperous country with a high quality of life, in a sustainable and lasting manner.
The Andorran economy, hitherto centred on trade and tourism, needs to modernise and diversify. Participation in the European Union’s internal market, a market governed by common rules across all the Member States enabling the free movement of goods, people, services and capital, is an opportunity to receive new business proposals and expand current economic activity beyond our borders. All of this, without leaving the traditional sectors behind.
Association with the EU also gives us access to participate in European programmes and various funding mechanisms.
THE IMPLICATIONS
The scope of the Agreement is very broad. On the one hand, it covers the incorporation into the Andorran legal system of the European regulations that allow for the free movement of people, goods, services and capital.
The Agreement also includes horizontal policies governing crosscutting areas such as the environment, consumer protection, social policy, energy, public procurement and corporate law, among others.
Andorra will therefore have to assimilate many European regulations, so the implementation of the Agreement must be supported by a transformation towards an agile and modern administration.
Finally, taxation, i.e., tax regulation, as well as foreign policy and border control are outside the scope of the Association Agreement. As an associated state, Andorra will not have to engage in EU budgets.
The free movement of goods means that products can move freely from one country to another. Buyers and sellers of goods do not have to pay customs duties when trading most products (this also includes the elimination of quantitative restrictions or other measures with an equivalent effect). Furthermore, before the existence of the internal market, each country applied different technical regulations and standards stipulating how products had to be manufactured and tested. Now, the free movement of goods also involves harmonisation of regulations (which establish essential health and safety requirements for products) or mutual recognition between states (of national technical regulations), thus eliminating these trade barriers.
The free movement of persons is one of the fundamental rights guaranteed in the internal market. Indeed, it is the most important for individuals, giving them the right to live, work, set up a business or study throughout the territory, and it groups together the EU Member States and the three countries of the European Economic Area (Iceland, Liechtenstein and Norway). It also includes provisions relating to family members accompanying persons moving.
To complement and support the principle of the free movement of persons, specific rules are included on the recognition of professional qualifications and the coordination of Social Security, both of which are essential for the effective exercise of this freedom.
The free movement of services establishes how an economic activity can be exercised in another state, either on a continuous basis (right of establishment) or temporarily, by maintaining the establishment of the business in the country of origin (freedom to provide services).
This freedom is closely linked to the free movement of persons and the right of establishment. It also plays an important role in many stages of the production of goods. The rules are aimed at removing barriers, whether legal or arising from administrative practice, which are discriminatory or unjustified and that could hinder the exercise of this freedom of movement.
Its transposition entails not only legislative but also practical measures, such as the enactment of the Single Window, the introduction of electronic procedures, administrative cooperation, and administrative simplification in general.
The free movement of capital is essential for the smooth functioning of the movement of goods, services and people. It aims to facilitate the movement of capital without unnecessary delays or transaction costs. It allows the development of any operation abroad, such as opening a bank account, participation in non-domestic companies, investments or the purchase of real estate.
In regards to companies, it allows investing in or owning European companies, as well as taking an active part in their management.
There are some exceptions to the free movement of capital, mainly linked to taxation and public policy considerations.
To ensure the proper functioning of the Union’s internal market, both the European treaties and the Association Agreement provide for a number of relevant horizontal policies to ensure the viability of the internal market and which cover the following areas: competition, state aid, public procurement, social policy, consumer protection, environment, statistics and company law.
Outside the four freedoms, the draft Association Agreement incorporates a specific section on cooperation with the EU in the flanking areas not covered by the Agreement. This cooperation takes the form of joint activities ranging from dialogue and the promotion of events to participation in European programs. The Agreement will anticipate how participation in programs will be activated and how this access will be calculated financially. Since it has a financial cost, it will necessarily be strategic in determining which programmes Andorra takes part in, but this is, without doubt, one of the aspects of the Agreement that offers the most opportunities.
THE NEGOTIATIONS
2015 – 2018: Phase one
2018 – present: Phase two
Phase one involved plurilateral negotiations between the European Union and Andorra, Monaco and San Marino jointly. During these years, progress was made in drafting the institutional framework and the provisions common to the three countries that define the “rules of the game” of the Agreement.
Bilateral negotiations: the European Union meets with Andorra, Monaco and San Marino separately. All the rules (acquis communautaire) and the adaptations each country has to incorporate in order to join the internal market are negotiated. The acquis communautaire includes everything relating to the four freedoms of movement and other accompanying policies and is divided into 25 annexes.
2015 – 2018: Phase one
Phase one involved plurilateral negotiations between the European Union and Andorra, Monaco and San Marino jointly. During these years, progress was made in drafting the institutional framework and the provisions common to the three countries that define the “rules of the game” of the Agreement.
2018 – present: Phase two
Bilateral negotiations: the European Union meets with Andorra, Monaco and San Marino separately. All the rules (acquis communautaire) and the adaptations each country has to incorporate in order to join the internal market are negotiated. The acquis communautaire includes everything relating to the four freedoms of movement and other accompanying policies and is divided into 25 annexes.
PROJECT PROGRESS STATUS
Institutional framework provisions: 80% of text agreed. Plurilateral negotiations will resume when significant progress has been made on bilateral issues, i.e., the negotiation of annexes.
Free movement of goods: text agreed. Only some technical elements of the 1990 Trade Agreement remain to be transferred. The analysis of the annexes is ongoing.
Free movement of persons: text partially agreed. Position paper sent in March 2020. The start of negotiation has been postponed until the resumption of face-to-face sessions in the first half of 2022.
Free movement of services: text partially agreed. The position is in the process of being defined. Public operators: agreement in principle with FEDA and negotiations started with Andorra Telecom.
Free movement of capital: the text on general provisions in the Framework Agreement has been partially agreed. Negotiations on the rules have not yet started.
Cooperation outside the four freedoms: text partially agreed (resumption of the 2004 Cooperation Agreement). It is not expected to address this chapter until the content of the four freedoms has been negotiated.
Background
Andorra saw the need to establish a framework for relations with the European institutions when it became totally surrounded by European territory. This happened when Spain joined the European Economic Community (1986). At that time, Andorra began a dialogue which culminated in the signing of the 1990 Trade Agreement.
Since then, different governments, whatever their political orientation, have moved towards a greater rapprochement with Europe. Seven sectoral agreements have been signed in the past 30 years.
The severe crisis of 2007 highlighted the need to rethink Andorra’s economic model and saw the implementation of widespread reforms both internally (with the tax reform and the process of opening up the economy) and externally (with the desire to project Andorra internationally through a rapprochement with Europe).
In 2007, a declaration was included in the Treaty on European Union, signed in Lisbon, stating that the European Union will take into account the particular situation of small countries with which it has specific relations of proximity. It was this declaration that Andorra, Monaco and San Marino used to ask the European institutions for a closer relationship that would allow them to participate in the internal market.
Between 2009 and 2014, a series of exchanges took place between Andorra and the EU to study and decide on the best relationship model. The two parties concluded that an association agreement was the most viable option.
Negotiations began in March 2015.
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