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Andorra European Union ANDORRA AND THE EUROPEAN UNION ANDORRA AND THE EUROPEAN UNION MICHAEL EMERSON CENTRE FOR EUROPEAN POLICY STUDIES (CEPS) BRUSSELS The Centre for European Policy Studies (CEPS) is an independent policy research institute based in Brussels. Its mission is to produce sound analytical research leading to constructive solutions to the challenges facing Europe today. The views expressed in this report are those of the author writing in a personal capacity and do not necessarily reflect those of CEPS or any other institution with which he is associated. Michael Emerson is Associate Senior Fellow at CEPS, where he heads the EU Neighbourhood, Foreign and Security Policy research programme. He gratefully acknowledges the valuable research assistance of Chiara Faini. Cover photo: Church of Sant Esteve at Juberri in Andorra’s southern-most parish of Sant Julià de Lòria. Photo credit: © Jaume Riba Sabaté ISBN 978-92-9079-733-3 © Copyright 2007, Centre for European Policy Studies. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the Centre for European Policy Studies. Centre for European Policy Studies Place du Congrès 1, B-1000 Brussels Tel: 32 (0) 2 229.39.11 Fax: 32 (0) 2 219.41.51 E-mail: [email protected] Internet: http://www.ceps.eu TABLE OF CONTENTS Executive Summary................................................................................................i Part A. The Future of Andorran-EU Relations.................................................1 1. The condition of the Andorran economy........................................................1 2. New needs and opportunities .........................................................................1 3. The present state of Andorran-EU relations...................................................2 4. Core components of a deep Andorran-EU relationship .............................4 5. Complementary components of a deep integration with the EU................6 6. Sequencing and structuring the relationship ...............................................10 6.1 Unilateral and preparatory steps ............................................................11 6.2 Sector-specific agreements .......................................................................13 6.3 Comprehensive treaty...............................................................................15 6.4 Virtual membership ..................................................................................19 7. The possible and the necessary.......................................................................23 Part B. Background Study..................................................................................28 8. The three ages of Andorra...............................................................................28 8.1 A millennium of Malthusian subsistence ..............................................28 8.2 A half-century of vertical take-off...........................................................31 8.2.1 The population.....................................................................................31 8.2.2 The economy........................................................................................34 8.2.3 The constitution...................................................................................37 8.2.4 International relations.........................................................................39 8.3 A new century of sustainable development?.......................................42 9. Andorra’s relationship with the EU so far ...................................................48 9.1 Customs Union Agreement, 1990 ...........................................................48 9.2 Agreement on taxation of savings, 2004 ................................................50 9.3 Cooperation Agreement, 2004 ................................................................53 9.4 Towards an Andorran euro .....................................................................56 9.5 Schengen cooperation...............................................................................58 9.6 Political dialogue .......................................................................................60 10. How exceptional is Andorra? .......................................................................61 10.1 Taxation and budget ...............................................................................62 10.2 Financial markets.....................................................................................67 10.3 Capital movements..................................................................................72 10.4 Labour market, residence and citizenship ...........................................74 11. Perspectives on EU relations with its neighbours......................................76 11.1 Forms of agreement between the EU and its neighbourhood ..........77 11.1.1 European Economic Area (EEA) .....................................................77 11.1.2 The case of Liechtenstein in the EEA..............................................80 11.1.3 Switzerland as an alternative model...............................................81 11.1.4 EU’s agreements with its wider neighbourhood ..........................85 11.1.5 Participation in EU agencies and programmes.............................88 11.2 Relationships with small European states and autonomies..............89 11.2.1 Sovereign states .................................................................................90 11.2.2 The non-state autonomous entities.................................................92 References .............................................................................................................96 Annexes A. Customs Union Agreement, 28 June 1990....................................................99 B. Cooperation Agreement, 15 November 2004 .............................................107 C. Taxation of Savings Agreement, 15 November 2004................................113 D. Memorandum of Understanding, 15 November 2004 ............................127 E. Allocution de M. Jacques Chirac, 26 April 2007 ........................................129 F. Assessment of Andorra’s Financial Sector by the IMF .............................130 G. OECD Tax Model principles of transparency and information exchange.................................................................................133 H. Chapter headings used in EU accession negotiations..............................134 I. Stabilisation and Association Agreement between the EU and Croatia, 2005 ..................................................................136 J. Chapter headings in EU-Ukraine Action Plan, 2004 .................................138 Maps 1. Andorra..............................................................................................................28 2. Andorra and Pyrenean regions of France and Spain ..................................56 Tables 1. Population by nationalities, 2006 ...................................................................32 2. Evolution of population by nationality .........................................................32 3. School population by system of education ...................................................33 4. University population by country of study..................................................34 5. Andorra and EU-15, comparative data .........................................................35 6. Visitors entering Andorra by season, 2006 ...................................................36 7. Number of visitors, 2004-2006 ........................................................................36 8. General government tax revenues as % of GDP ..........................................62 9. OECD criteria regarding transparency and information exchange in tax matters.....................................................................................................66 10. Andorra: banking system and ownership structure, December 2005.....68 11. Bank deposits per capita in Andorra and six other jurisdictions ............69 12. The scope of the European Economic Area ................................................78 13. Europe’s smallest states and non-state entities ..........................................90 Figures 1. Evolution of the population of Andorra .......................................................31 2. Growth of imports and exports, 1991-2005...................................................37 3. Industry confidence indicator.........................................................................43 4. Expected trend of business turnover for the next year ...............................43 5. Hotel sector: employment level compared to the previous year...............44 6. Economic sentiment indicator: European Union, France and Spain.........44 Boxes 1. Extract from the ‘Treaty establishing a Constitution for Europe’.................. 2. Andorra’s participation in international organisations and agencies.......40 3. The ‘Andorra 2020’ programme.....................................................................46 4. Tax free allowances for individual travellers entering the EU from Andorra ....................................................................................................49 5. Communauté de Travail des Pyrénées (CTP) ..............................................55 6. Agreements
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