Econostrum | Economic News in the Mediterranean

Ceuta and Melilla, barometers of relations between Morocco and Spain

Written by Frédéric Dubessy on Wednesday, December 9th 2020 à 14:57 | Read 3870 times

The two confetti of Ceuta and Melilla represent heavy stakes - economic, social and geopolitical at the same time - on the relations between Morocco and Spain. These former outposts, still free ports, still enjoy privileges threatened by Moroccan wishes.

Ceuta and Melilla, the two Spanish enclaves in Morocco, are economically asphyxiated (map: DR)
Ceuta and Melilla, the two Spanish enclaves in Morocco, are economically asphyxiated (map: DR)
MOROCCO / SPAIN. They deploy the only land borders between Morocco and Spain, and even between Africa and Europe*. Those which Moroccans and Sub-Saharans have been trying to cross en masse since 1995 and the start of illegal immigration in this region. The door to the European Union is on the other side of the double fence in Ceuta (6 metres high and 8 kilometres long) or the triple barbed wire fence (same height for 12 kilometres long) in Melilla. An alternative to the often deadly waves of the Mediterranean Sea, which is not without danger either.

At the end of November 2020, the Spanish Constitutional Court approved the policy of automatic refoulement of migrants who have successfully made this passage (adopted in 2015 with the law on citizen security) by one of the two enclaves, which was nevertheless denounced by pro-migrant NGOs. The number of clandestine migrants opting for Ceuta and Melilla to join the European Union continues to fall. Evaluated by the UNHCR (United Nations Refugee Agency) at around 6,800 in 2018, it is estimated to have decreased by 70% in 2020 compared to 2019. Candidates for exile now prefer to join the Canary Islands (11,400 arrivals in the first ten months of 2020 according to Frontex, the European border and coastguard agency).

The two Spanish autonomous cities (Ciudad autonoma), Ceuta (Sebta in Berber and Arabic) and Melilla (Mlilt in Berber and Mlilya in Moroccan Arabic) have 87,000 and 80,000 inhabitants respectively. The first, with a surface area of 18.5 km², is located opposite Gibraltar. The second, with a surface area of 13.41 km², is located in the Eastern Rif, 150 kilometres from Algeria.

An "atypical" trade

The major trade with the hinterland has been gagged since the end of the Moroccan Protectorate and the independence of this country acquired in 1956 (see box). In 1969, the geopolitical upheaval caused by the closure of the Gibraltar border offered Ceuta and Melilla the opportunity to claim a new market. The two autonomous cities therefore specialised in products imported from Asia, offering them at low prices thanks to their free ports. Then in the mid-1980s, the two autonomous cities added to their stalls the basic necessities that Moroccans from the north of the country came to buy.

"Over the years, the Moroccan population of the surrounding towns has no longer been content to come and sell their fresh produce in Ceuta or Melilla. They have begun to buy manufactured products in the shops of the two cities and then resell them, with a small profit, in the border areas of Morocco. This trade, which is described in Ceuta and Melilla as " atypical ", is in fact smuggling. It enables a large part of the population of the border areas of Ceuta and Melilla to make a living", Yves Zurlo points out. The academic - a qualified Spanish teacher, Doctor of Letters and author of a book on the two cities** - notes that "this small cross-border trade of the beginnings has taken on an almost 'industrial' scale with the installation, a stone's throw from the border, of huge warehouses where Moroccan porters, mainly women, come to load bundles of goods already prepared for transport on foot to Morocco and then resell them". In 2010, a study cited by the academic estimated this cross-border traffic, which has become an essential asset for the two enclaves, at €400 million.

According to the Spanish authorities, goods purchased in the two cities become smuggled goods when they cross the border without paying customs duties. "However, there is no customs office in Ceuta on the Moroccan side because, for Morocco, this would be official recognition of the existence of the Spanish enclave," notes Yves Zurlo. "Even if Morocco regularly complains about smuggling, it is forced to tolerate it. It provides a livelihood for a large part of the population in the economically depressed northern regions. Apart from this 'atypical' trade, official trade relations between the Spanish enclaves and their Moroccan hinterland are practically nil".
From time to time, Morocco unilaterally closes border crossings to eradicate smuggling that creates public disorder.

An eventful history

In 1415, the Portuguese took possession of Ceuta (Abyla in Antiquity). We are now in the midst of the Reconquista, the period of reconquest of the Iberian Peninsula occupied by the Arabs from 711. It will end in 1492 with the liberation of Granada, capital of the last Muslim kingdom of Al Andalus, by the Spaniards.

In order to protect themselves from any attack by barbarian pirates, the Spaniards continued their journey beyond the Mediterranean, taking several cities along the African coast from Morocco to present-day Libya and setting up military posts (fronteras) or strongholds (presides).

The ancient Phoenician, Phoenician, Carthaginian and Roman trading posts thus fell into the hands of the Spanish crown in 1497 for Melilla and 1580 for Ceuta, respectively, as a result of a dynastic coincidence between Portugal and Spain. After the Battle of Alcántara, Philip II of Spain was proclaimed King of Portugal under the name of Philip I and the Portuguese possessions and colonies were incorporated into Spain.

Since then, the Spanish flag still flies over Ceuta and Melilla, unlike almost all the other cities taken over by the sultans of Morocco.

In 1863, the presidencies of Ceuta and Melilla became free ports. This was the beginning of the golden age of these two territories, which embarked on an economic activity with Morocco after having until then only had a military and prison function. Ceuta metamorphoses into one of the main Spanish ports and Melilla leans its development on the iron mines of the Rif.

The end of the Franco-Spanish Protectorate of Morocco, established in 1912 after the Algeciras conference of 1906, and the independence of Morocco in 1956 gradually changed the situation.

In 1961, Morocco officially announced its claim to the UN General Assembly for the two cities, which remained Spanish because they were already Spanish before the Protectorate.

The Spanish constitution of 1978 states that Ceuta and Melilla are an integral part of Spanish territory. On 14 March 1995, they were granted the status of autonomous cities (Ciudad autonoma). Before Melilla was administered by the Province of Malaga and Ceuta by the Province of Cadiz.

Two highly dependent cities

The future signing of a deep and comprehensive free trade agreement between the EU and Morocco could change this. It was due to come into force in 2010 but has been postponed. Morocco has already enjoyed advanced status with the EU since 2008. "This new agreement should reduce the advantage for Moroccans of buying products from Spanish enclaves," notes Yves Zurlo.

Meanwhile, the two autonomous cities are trying to make ends meet. "They are very dependent on the small size of the territories, the lack of available natural resources and therefore on supplies from outside," explains Yves Zurlo. He points out that "the primary sector employs 0.7% of the working population, industry 3.5% and construction 6.6%. It is the tertiary sector that represents the bulk of jobs with 89.2% of the working population, mainly in public administration, commerce and transport. It should be noted that the army, which was predominant in terms of jobs and even in the management of the city until the early 1980s, has lost much of its importance today".

A special and advantageous fiscal status

Their economic survival was only hanging by a thread, woven by the status of free port acquired in 1863. At that time, the Spanish state had granted total exemption from taxes on goods entering or leaving their ports. This was confirmed in 1986 when Spain joined the EU with a special status for the two enclaves.
As a result, they are excluded from the Customs Union and the Common Agricultural Policy (CAP) and are not subject to the common fiscal policy. On the other hand, both enclaves are eligible for EU funds such as the ERDF (European Regional Development Fund), the ESF (European Social Fund), the EAGGF (European Agricultural Guarantee Fund) and the EAFRD (European Agricultural Fund for Rural Development). In 2001, new standards (Reglas de Origen), clarifying the processing required for a product made in Ceuta or Melilla to be freely exported to the EU as a fully-fledged Community product, even opened the way for industrialisation.

Since 1955, the IPSI (Impuesto sobre la Producción, los Servicios y las Importaciones - Tax on Production, Services and Imports) has provided almost all the financial resources to the cities. This indirect regional tax specific to the inhabitants of Ceuta and Melilla is based on rates ranging from 0.5 to 10% compared to 21% for the Spanish basic VAT rate (IVA).

Ceutians and Melillians do not pay VAT on tobacco, fuel and combustibles. It is replaced by a complementary IPSI. All State taxes (corporate tax, personal income tax, transfer tax, inheritance tax, etc.) are reduced by 50% compared to the rates in force on the other side of the Mediterranean. Associations of temporary companies (UTE - Uniones Temporales de Empresas) and economic interest groups (AIE - Agrupaciones de interés Económico) as well as member companies enjoy a 99% tax reduction on their activities.

The Schengen agreements, which came into force in 1995, integrate the two Spanish African territories into the eponymous area. "A special arrangement allows Moroccan citizens living in the border regions of Tetouan (near Ceuta) and Nador to benefit from a tax reduction of up to 99%.
(near Melilla) not to need visas to enter Ceuta or Melilla on a daily basis in order not to disrupt local border traffic", adds Yves Zurlo.

Two enclaves coveted by Morocco

In recent years, Melilla has been seeking to diversify its economy towards business services, small industry and tourism. Its governance has therefore launched in 2018 a series of grants (up to €21,000 per new job created) and subsidies (up to 40% of the investment). At the beginning of December 2020, a "Melilla 2029 Strategy Plan" meeting, bringing together university researchers, business leaders and local authorities, had as its menu the integration of the European customs area (with the corollary loss of specific tax status) and its consequences on neighbourhood relations with Morocco. All the speakers agreed on the fact that the city should preserve its economic and commercial relations with the Cherifian kingdom. "If the ambition of the Moroccan authorities is to develop this eastern region, any change in the customs status of the enclave would be a source of tension with the Moroccan authorities", emphasised Maria Dolores Rodriguez Mejias, consultant to the Canary Islands, in charge of exporting companies.

Since 1 August 2018 and Morocco's unilateral decision to close the commercial borders with the two free ports, Ceuta and Melilla have been looking for a new breath of fresh air. But asphyxiation is not far away. Rabat says it is ready to revive the two cities if they integrate the Moroccan territory. A perspective firmly rejected by Madrid, for whom the two cities are an integral part of Spain.

Hassan II was convinced that the fate of Gibraltar would command that of Ceuta and Melilla. In November 1975, in a speech, the King of Morocco stated "As soon as the Spaniards obtain Gibraltar, immediately, automatically, we will obtain Ceuta and Melilla. No power will be able to allow Spain to possess the two keys to the same strait". In 2002, his son and successor Mohammed VIil relayed, with no more success than his father (who did it twice, in 1987 and 1994), an initiative to set up a joint committee of Spanish and Moroccan experts to set up co-development projects. Spain continues to turn a deaf ear.

"Ceuta and Melilla are two European border cities from an economic and political point of view. But they are backed by a country whose per capita income is ten times lower than that of Spain. Moreover, the northern region of Morocco that surrounds them is the most underdeveloped area of the country. They have therefore functioned as economic centres of attraction, benefiting from a large and cheap labour force and a supply of fresh, basic necessities that are also inexpensive", explains Yves Zurlo.

Two presidents united in facing the destiny of Ceuta and Melilla

The two respective presidents of Ceuta (Juan Jesús Vivas on the left) and Melilla (on the right Eduardo Castro Gonzales) unite on their common issues vis-à-vis Morocco (photo: DR)
The two respective presidents of Ceuta (Juan Jesús Vivas on the left) and Melilla (on the right Eduardo Castro Gonzales) unite on their common issues vis-à-vis Morocco (photo: DR)
In January 2020, Juan Jesús Vivas, President of Ceuta, and Eduardo de Castro González, his counterpart from Melilla, took advantage of their presence at the Madrid Tourism Fair (Fitur) to exchange views on their common problems. They hold the positions of president of the government council, mayor and president of the parliamentary assembly of the two autonomous cities. Elected by the assembly, they are appointed by the king.

While castigating "the attitude of the neighbouring country, which is hardly positive for the two cities and which shows clear symptoms of attempted economic isolation and asphyxiation", Juan Jesús Vivas was confident. "We will succeed because we have a great nation like Spain behind us".

The case is all the more sensitive because around 700,000 Moroccans live in Spain. This community is the first non-EU community in the country. In addition, Spain is Morocco's leading customer and supplier, accounting for 23.7% of its exports and 16.9% of its imports respectively. In 2019, trade between Morocco and Spain totalled 114.4 billion dirhams (€13.25 billion), against 120.9 billion dirhams (€11.09 billion) for France.

Spain is also the second source of tourism receipts in Morocco and the second country of origin of transfers from Moroccans residing abroad.

Cancellation of Felipe VI's visit

In September 2020, the Foreign Affairs Committee of the Spanish Chamber of Deputies was studying a request from the Popular Party (EP - Liberal-Conservative). It called on the government to "express its view on the measures adopted unilaterally by Morocco" and asked for "measures to guarantee the sustainability of life in both cities". More specifically, the EP, supported by Vox (far right) and Ciudadanos (centre right), wants the creation of an inter-ministerial commission under the direction of the Ministry of Foreign Affairs (with Finance, Interior, Industry, Education and Vocational Training, Trade, Tourism, Health). "There is no trade flow, no tourism, no labour or materials. It's a real disaster, the government hasn't done its job," denounced Ciudadanos deputy Marta Martin. The text was rejected in plenary. For the members of the PSOE (Spanish Socialist Workers' Party), the governing party, "we believe that the problem comes from the negligence of the governments of Ceuta and Melilla". Two executives led by the PP. And this is part of the current political problem. Both cities are in opposition.

The statements of Nabyl Lakhdar, Director General of the Moroccan Customs, invited themselves to the debate. According to him, Ceuta and Melilla "are not borders (...) they are not and have never been commercial crossings, but passenger crossings".
Vox wants to go further by calling for the Ministry of Defence to be associated with this commission. "In order to benefit from a global vision of the problems that Morocco's actions imply," stresses Alberto Asarta, deputy of Vox. Rejecting what he considers to be warmongering, Joan Josep Nuet, deputy of the ERC (Republican Left), says that "we must protect the citizens of Ceuta and Melilla, but let's be careful in our actions. We are facing a neo-colonial conflict that at least one of the parties has not taken into account".

In 2007, Juan Carlos, was the first Spanish king, since Moroccan independence, to make a state visit to Ceuta and Melilla. Precisely to show that they belonged to the national territory and would be defended, even at the cost of military intervention. In July 2002, a precedent was set with the capture by some Moroccan soldiers of El Perejil, a small uninhabited rock near Ceuta. They were chased away within a week by Spanish special forces (Operation Romeo-Sierra). Rabat probably wanted to test Madrid's reaction.

* Not to mention the two "rocks": Peñón de Vélez de la Gomera or Badis, a peninsula, Spanish 1.9 hectare since 1564, separated by a sandbank from the Cherifian Kingdom and Alhucemas. As well as the small islands Chafarines (Zaffarines).

** "Ceuta and Melilla: history, representation and future of two Spanish enclaves" - L'Harmattan (2005)


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