Observatory of the Brand Andorra: The cost of accessing European Union programs

“We are facing a very clear opportunity for Andorra to choose those programs that are interesting and at the same time viable from the perspective of the economic contribution that has to be negotiated with the EU.”

As we have indicated in previous articles, the future Association Agreement of Andorra with the EU involves the incorporation of our country into the European Single Market and potential access to European Programs, those that we decide, of course. As we have explained, once the reference agreement comes into force (after the referendum and ratification by the General Council), we will have the option to participate in those EU programs that our Government decides are strategic and a priority for our country, our businesses, and our citizens. But what does this option consist of, and how is it exercised?

What is clear is that associated third countries have the right to participate in the European programs that most interest them in exchange for an economic contribution, which must be proportional to the economic size of that country. It is also clear that these contributions, in most cases, become part of the European Union’s budget, and with that contribution, the right is acquired for institutions, businesses, or citizens of the country in question to participate in the grants to which being a member of the chosen program entitles.

In fact, out of the total EU budget, which is roughly around 175 billion euros, approximately 1% is contributed by non-member but associated countries under various modalities. In total, there are about 18 countries, and each year they contribute about 1.75 billion euros, in addition to the more than 500 million that the countries of the European Free Trade Association (Iceland, Norway, Liechtenstein, and Switzerland) contribute directly to other member states, without going through the EU.

This question goes directly to the skeptics and deniers: why do you think these 18 countries voluntarily contribute such an amount of money to the EU budget simply to participate in these European programs?

The variety of countries and types of connection with the EU is very diverse: candidate countries to become members of the EU (Turkey, Macedonia, Serbia, Albania, Montenegro, Moldova, and Ukraine), potential candidate countries (Bosnia-Herzegovina, Kosovo), countries participating in the European neighborhood policy (Georgia, Tunisia, Israel, Armenia, and the Faroe Islands), and the already indicated members of the EFTA. And all of them make a contribution proportional to their resources to participate for example in the Horizon or Erasmus + programs, and they do so because it undoubtedly interests them or they have verified that it represents a specific benefit for their businesses and their citizens.

Andorra and San Marino will undoubtedly become part of this group of countries if they so decide and of course, the next question is: how much will we have to contribute in order to participate in these selected European programs? In this sense, there are 3 types of calculation systems: the EU Formula, which consists of the percentage determined by dividing the contributing state’s GDP by the EU’s GDP, the second is the EEA Formula – European Economic Area – which equally divides the state GDP by the sum of the EU GDP + third state GDP, and finally, there is the Formula C, which divides the State GDP by the sum of the GDP of the countries participating in that specific program.

We do not know which of these formulas will be applied to Andorra and if something has been planned in this regard in the text of the association agreement that we still do not know, but in any case, the rule of proportionality makes perfectly viable the participation in those programs that may be of greater interest to the country.

If we look at the case of Liechtenstein, for example, a country in which we have reflected at various moments of the negotiation, with an annual budget of 6 billion Euros, its contribution to participating in 11 programs is approximately 1.5 million Euros. So let’s do the numbers regarding Andorra then, with a budget half that, what it could represent. Much or little depending on how it is used, of course, but to say that Liechtenstein allocates 80% of its contribution to Erasmus +, which suggests the importance that this program may have for its students, for example.

We will certainly have the opportunity to delve into the details of this topic, as it becomes of vital importance for the real profitability for our citizens of this controversial agreement, a controversy that arises more from ignorance and lack of information than from the clear advantage it represents for Andorra and its people in terms of the future. But this ignorance or at least an inadequate assessment of the positive effects that such programs bring to a given country is not exclusive to Andorra. We see several quite significant examples such as the cases of the United Kingdom and Switzerland, whose economies are obviously not small.

In the case of the United Kingdom, outside the EU because of Brexit, it has recently requested to rejoin the European programs, especially Horizon, in the face of the clamor of the country’s researchers, lacking the research resources that this program provided them when they were members of the EU and the consequent brain drain it has caused. In fact, as a result of this concern, an important bilateral agreement between the UK and the EU has been closed to ensure the continuity of the Horizon program in the interest of the United Kingdom but also of the European Union, which considers this country strategic in all respects, despite Brexit.

If we move on to the case of Switzerland, it is even more paradigmatic, since historically it had been very skilled in negotiating with the EU through bilateral agreements, specifically more than a hundred, and now finds itself, especially after the bad experience of Brexit, that the EU only accepts broad framework agreements and not bilateral and sectoral ones. The discussion and conflict are served between the EU and Switzerland and we will see how it ends and this also affects Switzerland’s participation in the European programs.

In conclusion, if the association agreement comes into force, we are facing a very clear opportunity for Andorra to be able to choose those programs that are interesting and at the same time viable from the perspective of the economic contribution that has to be negotiated with the EU.

We will delve as much as possible in the upcoming articles on how Andorra’s participation in the EU programs is organized and implemented, but it is evident that, beyond the criticisms for all the negative, for the renunciation that according to some may imply the agreement, if this agreement is approved and well exploited, the opportunities for our businesses and our citizens will multiply. We will therefore continue working on it, with the aim that as many citizens as possible know the benefits that can derive from an agreement already closed and that now must be detailed in the interest of all!

By Pere Augé, CEO and Founding Partner of Augé Holding Group

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