CIAO DATE: 11/04

Liechtenstein in the Process of European Integration and Cooperation

Andrea Willi
Minister for Foreign Affairs of the Principality of Liechtenstein

Occasional Paper Series No. 27

Before the European Union Studies Center
The Graduate School and University Center
City University of New York

September 24th, 1998

European Union Studies Center

Ladies and Gentlemen,

My presence on the occasion of the general debate at the fifty-third session of the General Assembly of the United Nations in New York gives me the welcome opportunity to address you on some of the major interests and guidelines of my country's foreign policy.

Since the early 19th century Liechtenstein has been pursuing an active foreign policy which has been characterized, to a large extent, by the desire to strengthen its sovereignty. In the wake of the industrialization and economic development of the Principality of Liechtenstein, which has continuously been progressing since the 1960s and has resulted in an economic orientation towards European and worldwide markets, Liechtenstein's political presence on the international scene became increasingly necessary and desirable. Since 1960 Liechtenstein has been benefitting from the advantages of free trade, as it could participate in the European Free Trade Association (EFTA) through its customs treaty with Switzerland. Its participation in the Conference on Security and Cooperation in Europe (CSCE) since 1975 and its accession the Council of Europe in 1978 provided Liechtenstein with the opportunity to take part in two important European fora currently gathering representatives of 54 and 40 countries respectively. With its accession to the United Nations in 1990 Liechtenstein has demonstrated its willingness to cooperate actively on the international level as well. In 1991 Liechtenstein became a full member of EFTA. Since 1 May 1991 it has been participating in the European Economic Area (EEA). In 1995 Liechtenstein also became a member of the World Trade Organization (WTO).

Throughout its history, Liechtenstein has formed a part of various integration structures, while at the same time retaining its independence. For example, the Principality belonged to the Holy Roman Empire of the German Nation and later to Napoleon's Confederation of the Rhine and to the German Confederation, and was the only state to emerge unchanged from these unions. Liechtenstein also concluded further integration agreements with its neighboring States. As a result of this 300-year tradition, Liechtenstein is also interested in integration models which on the one hand, in a spirit of solidarity, aim at close cooperation in the exercise of the function of the state and on the other hand, in the consciousness of Europe's diversity, recognize the independence and special situation of the partners. In so doing, Liechtenstein has always been dependent on the understanding of its bigger European partners and it will continue to be so in the future.

The central place in my remarks will be occupied by the most recent big step in Liechtenstein's foreign policy - namely the adhesion to the Agreement on the European Economic Area. I will start with the presentation of the European integration model that has been chosen by Liechtenstein. I will then mention some of the possibilities of cooperation for Liechtenstein not only in this economic framework, but also in other European integration and policy institutions such as the Organization fro Security and Cooperation in Europe and the Council of Europe. Lastly, I will give a brief outline of Liechtenstein's concept of international solidarity.

1. The Liechtenstein Integration Model

The Agreement on the European Economic Area is the outcome of long and intensive negotiations between the EFTA States and the European Community.

The objectives of the EEA Agreement lie primarily in the field of economic and social policy: the main purpose of the European Economic Area is to create relationships between the contracting parties similar to those within the internal market of the European Union. To this end, the Agreement envisages the extensive realization of free movement of goods, persons, services and capital, as well as close cooperation in related policy areas (for example, research and development, environment, education, social policy) on the basis of the Arelevant European Community law - the so-called Acquis Communitaire - that has been taken over into the international legal order of the European Economic Area. The basic principles of the European Union's economic system, particularly the principles of openness of markets, free competition, national treatment, and prohibition of direct and indirect discrimination, are accordingly also among the foundations of the European Economic Area's legal order. They enable Liechtenstein businesses and nationals to move, take up employment or avail themselves of educational opportunities in the territory of all the 18 European Economic Area States.

Liechtenstein's participation in the EFA Agreement is to be clearly distinguished from membership in the European Union. In the first place, the Agreement does not create any supranational community to which, as in the case of the European Union, sovereign rights, particularly legislative powers, are to be handed over. In its institutional rules, the EEA Agreement does not establish an international organization with its own legal personality. Rather, it is essentially an international trading system. A main function is to make possible the substantively and chronologically most parallel possible development and implementation of the common EEA Agreement legal order modeled on the relevant European Union Law.

The Agreement enables those EFTA countries that are members to participate in the European Union internal market on terms which are similar to those for EU member States. The provisions of the Acquis relating to customs union and common trade policy of the EU are not covered under the Agreement. Those provisions of the Acquis which pertain to relations between the EU and third States are so adapted as to maintain the contractual autonomy of the EFTA States. In addition, agricultural policy, tax harmonization and the objective of total dismantling of border controls are not included in the Agreement. This applies also to developments in the EU which extend beyond the sphere of the internal market and its flanking policies, i.e. the economic and monetary union and the political union.

At this point, reference should also be made to the dynamic element of this Agreement. The EEA Agreement comprises not only the Acquis Communitaire that is in force, but also the objective of developing this Acquis further under precisely specified conditions. This is also an indication that the EEA Agreement is by nature more than a transitional solution and can definitely serve for a considerable time as an adequate model for participation in European integration. In view of the exceptional scope and dynamism of European legislation, the idea of a static treaty which would reflect only the current status quo did not seem appropriate, and yet it is necessary for all participants to be able to attain the objectives of the Agreement at any time. Mention may also be made of the connection between the Agreement and the other multilateral objectives in the field of foreign economic policy. In this field, the EEA Agreement pursues similar objectives to those of the former Uruguay Round of GATT that are now incorporated in the rules of the World Trade Organization (WTO). The EEA Agreement and the rules of WTO are thus not to be seen as alternatives, but rather as supplementing one another.

I come now to the effects and consequences for Liechtenstein. Entry into the European Economic Area was advantageous for Liechtenstein in terms of political and economic definition and positioning.

Liechtenstein has an extremely limited domestic market of its own. Manufacturing industry in Liechtenstein is exceptionally export-oriented, and accordingly dependent on free access to markets. Through the customs treaty with Switzerland, through its inclusion in the 1972 free trade agreement with the EU and through the applicability of the relevant WTO rules, Liechtenstein already enjoys good market access. But the requirements for an extensive domestic market in various areas are not met without the application of the EEA Agreement.

For the Liechtenstein export economy as a whole, the freest and most unrestricted possible market access is the most important prerequisite for economic existence in Liechtenstein, and hence one of the most significant location-related factors. Moreover, this applies not only to export industry, but also to a good part of the manufacturing concerns that are already active in the entire region and internationally. 45.7 percent of all employees work in industry and manufacturing.

Liechtenstein's legislation for financial services, and the associated sector, which is of great importance both to national income and to the entire economy, meets with the criteria of the EEA Agreement. Tax harmonization is not covered under the AAcquis forming part of the EEA Agreement. The same applies to any modification of banking secrecy. With reference to admission to certain professions, the EEA Agreement has led and will lead in future to changes. However, it is precisely Liechtenstein's financial services that constitute an economic sector with explicit European and world-wide connections, so that it too is vitally dependent on access to foreign markets.

An assessment of the EEA Agreement from the standpoint of the economy as a whole is on balance very positive, in that the Agreement not only makes a reality the principle of market access that is vital to a small highly developed State and its economy, but also offers a possibility of access to European integration.

Because of its special situation, Liechtenstein has always needed a great deal of understanding on the part of European partners. Agreed solutions with respect to the free movement of persons are of significance to Liechtenstein. Its special geographical situation is taken into account. The European partners expressly recognize that Liechtenstein has a very restricted inhabitable area of rural character.

The agreement is a sound potential basis for Liechtenstein's adequate positioning in the future Europe. It ensures the access of the economy to the most important markets and in addition leaves sufficient national room for manoeuver to guarantee and to adapt to Liechtenstein's major basic requirements in the future as well. It ensures the further close partnership with Switzerland, and leaves the necessary options open for the future. It has been possible to arrive at bilateral solutions that allow Liechtenstein, under the customs treaty, to remain within the Swiss customs area and, at the same time, to be a member of the EEA Agreement.

For Liechtenstein, the experience gained during the preparations for this membership as well as afterwards in the implementation of the Agreement are very positive. These positive effects continue to be experienced. It has been and still is a learning process not only for the Liechtenstein state administration itself, but also for Liechtenstein's citizens and inhabitants. A Thinking European, not only in the context of economic and business terms, is finding its way into daily life. When we had the two popular votes on the Agreement, the industrial and banking sector was very much in favor of a yes by our population. Today we can certainly say that a large majority of Liechtensteiners are very positive about the Agreement itself and about Liechtenstein's membership. As we see it, the Agreement is functioning well. It is important to strengthen continuously the established institutional meetings, including the political dialogue.

In the present second half year of 1998, Liechtenstein is the Chair of the European Economic Area and is working very hard on various topics such as the consolidation and further improvement of procedures, including participation in the decision shaping and decision taking, and the monitoring of the enlargement process and implementation of information procedures between the EU and the EFTA/EEA States.

Two challenges of high political importance are to be dealt with: first the enlargement of the European Union and its impact on the European Economic Area and, second, the Treaty of Amsterdam which provides for institutional reforms within the EU that are likely to have a bearing on the EEA.

The future of the EU is also of importance for my country, which has continuously expressed its solidarity in general, and particularly in the framework of European integration. We are therefore also interested in following as closely as possible, together with the other EFTA countries, the developments in this respect.

In general, the elements of solidarity and transparency in all those discussions are very important, solidarity in the sense that all States in Europe should contribute their part to stability and peace; transparence in the sense that small states like Liechtenstein will have, in general and in the institutional framework, the possibility of participating and hence making sure that they are included in the European process of common policy, economy and security.

2. Liechtenstein and other European institutions and organizations

Organization for Security and Cooperation in Europe (OSCE)

Liechtenstein has always paid particular attention to the Organization for Security and Cooperation in Europe, from the very beginning of the preparations for the founding of this security process in the 1970s to the signing of the Final Act in Helsinki in 1975 and to the current discussions concerning the Organization's tasks and institutions. As an active participating State, Liechtenstein has worked especially in the areas of human rights and freedoms. The OSCE of today is confronted with new challenges that could not have been foreseen some years ago. In this context, the institutional rules as well have to be adapted to the needs of today, and Liechtenstein is very much interested, in the sense of the transparency that I have mentioned earlier, in small States being able to maintain their role.

We must not ignore what is happening in the regions in crisis. Measures to strengthen stability, to improve the human rights situation in all the crisis regions and in regions that might become critical, are very urgent. We need preventive diplomacy, in the Balkans and in the Caucasus as well as in Belarus and elsewhere. The OSCE could play, in this context, a major role, not especially by becoming an implementation mechanism but rather by becoming the body where mandates are discussed and decided upon. For the end of this year, the adoption of the framework of a Security Charter is envisaged. This Charter will be of special importance, since it aims at laying the foundation for the future cooperation between the organizations which deal with security issues in Europe.

Council of Europe

The Council of Europe was the first European political organization to be created - in 1949 - after the Second World War. AT the beginning and for many years until the end of the ACold War, the Council of Europe was an organization of the countries of Western Europe. Now it has become an organization that includes almost all European States. The organization has always been and still is the organization in Europe dealing with human rights and cooperation in the legal field.

This year, Liechtenstein celebrates the twentieth anniversary of its accession to the Council of Europe, and on this occasion I can state very clearly that the arguments of the Liechtenstein Government for membership in 1978 have been proved right over the past twenty years. On the one hand, Liechtenstein has become, through its active cooperation in the most important areas of the organization's activities, a respected partner, thus also demonstrating that small States, too, can make their positive contribution to European and international cooperation. On the other hand, membership has also had and still has its impact on many internal developments in Liechtenstein.

In 1997 the second summit of the Council of Europe brought together the Heads of State and Government of the forty member States and four special guest countries, representing nearly the whole of Europe. This summit was a sign that the European continent had found its way back to a single, shared destiny on the basis of shared values, such as protection of human rights, the rule of law and pluralistic democracy. By adopting a final declaration and an action plan, the political leaders set the future tasks of the Council of Europe, which involve not only the strengthening of its legal instruments for human rights protection in such fields as bioethics, information technologies and criminal law, but also helping to consolidate the new democracies. At the same time, all member countries reiterated their determination to ensure compliance with their obligations and commitments towards the Council.

3. Committed to international solidarity and humanitarian assistance

On 30 April 1945, the Liechtenstein Red Cross was founded on the initiative of H.S.H. Princess Gina von Liechtenstein. Thousands of refugees which had crossed the border during the last days of war were provided with food and shelter after an appeal made by the Princess to the population. Liechtenstein's accession to the Geneva Conventions on the Protection of War Victims in 1950 laid the foundation for cooperation with the International Committee of the Red Cross (ICRC). Since 1950, Liechtenstein has been supporting the efforts of this organization through a yearly financial contribution. In the context of development cooperation Liechtenstein supports projects aimed at furthering spiritual, cultural, social and economic cooperation in developing countries, as well as projects designed to alleviate the impact of armed conflicts and natural disasters. Since 1980 Liechtenstein has been a member of the Social Development Fund of the Council of Europe, which aims at ensuring the economic and social reintegration of refugees in their home countries and at the economic development, in particular, of Central and Eastern European countries. Since its accession to the United Nations, Liechtenstein has also been intensifying its cooperation with the High Commissioner for Refugees and with the Department for Humanitarian Assistance. As a member of the European Bank for Reconstruction and Development, Liechtenstein contributes to financial and economic assistance to the States of Central and Eastern Europe on a bilateral basis. In addition, through its contributions to the cohesion fund of the EFTA/EEA States, Liechtenstein participates in the efforts of the European Union to reduce the economic and social backlog in poorer EU regions.

The number of asylum-seekers, refugees and persons immigrating illegally to Liechtenstein has increased considerably over the past few years. Over 450 persons i.e. far more than one percent of Liechtenstein's total population, were refugees from the former Yugoslavia. A large part of these refugees has now returned. To facilitate the repatriation of the refugees, financial and psychological assistance has and is been provided for the Liechtenstein State.

By acceding to the Geneva Convention on the Status of Refugees and the European Convention on the Protection of Human Rights and Fundamental Freedoms, Liechtenstein has undertaken to ensure the necessary protection of refugees and asylum-seekers. The legal basis for this protection has been established through the enactment of a law on the granting of asylum and the protection of refugees.

Europe is facing today new challenges from which Liechtenstein is not exempt. The desire of the European Union to deepen European integration and the desire and necessity to complete Europe by including the Easter European countries as well concerns us all. Liechtenstein will follow closely the developments within the European Union and the realization of new relations wit the countries of Central and Eastern Europe. It will continue to be important for us to find adequate ways of including our legitimate political and economic interests in a mutually reinforcing future system of cooperation and safety throughout Europe. Liechtenstein will continue to strive to be a useful, respected and reliable partner. One area of cooperation in this respect will be international humanitarian assistance and the protection of human rights. Liechtenstein will continue to help provide relief and to share its wealth.

The initiative of H.S.H. the ruling Prince Hans Adam II von und zu Liechtenstein regarding the right to self-determination could become a valuable contribution in the field of human rights and peacekeeping, as it aims to define a framework in which minority problems within States could be defused before escalating into armed conflicts. This initiative, if realized, could be understood as a contribution and a sign of gratitude to the international community for having respected, for almost 300 years, Liechtenstein's right to self-determination, which has been possible to safeguard thanks to our neighbors, Switzerland and Austria and our European partners.