The European Council meeting in Luxembourg on December 12 and 13 1997 developed a specific pre-accession strategy for Cyprus. The conclusions note the accession process formally begins on March 30 1998 when the Ministers of Foreign Affairs of the 15 member states meet their opposite numbers from Cyprus and the 10 central and eastern European applicant states. The European Council decided to convene bilateral inter-governmental conferences with Cyprus, the Czech Republic, Estonia, Hungary, Poland and Slovenia to negotiate the conditions of their entry into the EU and the necessary Treaty adjustments. In addition to the establishment of an accession partnership and an increase in pre-accession aid available to all applicants, the specific pre-accession strategy for Cyprus will be based on the following:
- Cyprus' participation in certain targeted projects with a view to boosting its judicial and administrative capacity especially in the third pillar areas of justice and home affairs;
- Cyprus' inclusion in certain EU programmes and agencies, such as the training and education programmes Leonardo and Socrates, the fourth Framework Programme for Research and Technical Development, and the customs programme, Mattheus;
- the increased use of technical assistance to align itself as far as possible with the EU's internal market and policies provided by the EU's Technical Assistance Information Exchange Office.
These decisions come at a time when business people and the expatriate community in Cyprus are vigorously urging the Cypriot government to safeguard the island's flourishing offshore sector in the wake of Cyprus' accession to the EU. As a result, Cypriot officials have renewed the government's commitment to press for special offshore tax concessions during the membership negotiations. The concessions are expected to take the form of EC Treaty adjustments or derogations from the acquis communautaire for key elements of the offshore regime, coupled with special transitional periods regarding the status of offshore enterprises on the island.
In the meantime the implementation of the first phase of Cyprus' customs union agreement with the EU has been completed. The first phase, which ended on December 31 1997, provided for:
- the reduction of customs duties and quantitative restrictions on industrial products and 43 agricultural products, with the exception of petroleum products, and 15 product categories deemed sensitive;
- the adoption of the Union's Common External Tariff;
- the implementation of accompanying policies on competition, state aids, taxation and the approximation of laws designed to align Cyprus with the EU acquis. In view of the latter objective 23 expert working groups were established in the relevant ministries who, having studied the acquis communautaire and compared it with the existing body of law, made specific recommendations, some of which have already been adopted.
The second phase of the customs union agreement, which started on January 1 1998 and is due to extend to 2002 or 2003, aims to:
- establish the free and unrestricted movement of industrial and agricultural products by reducing customs duties to zero and abolishing quantitative restrictions; and
- adopt the remaining accompanying policies required to complete the customs union.
The advent of a full customs union between Cyprus and the EU therefore seems certain, regardless of future EU membership. The latest customized pre-accession strategy should however ensure that Cyprus' membership application is not unduly held up.