EUROPEAN COMMISSION DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS The EU-MED trade of goods under the influence of the Barcelona Process Arno Bäcker CNR – Institute of Mediterranean Societies International Conference: Bridging the gap: the role of trade and FDI in the Mediterranean Napoli, 8-9 June 2006
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EUROPEAN COMMISSION DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS The EU-MED trade of goods under the influence of the Barcelona Process Arno Bäcker.
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EUROPEAN COMMISSIONDIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS
The EU-MED trade of goods under the influence of the Barcelona Process
Arno Bäcker
CNR – Institute of Mediterranean Societies
International Conference:Bridging the gap: the role of trade and FDI in the
MediterraneanNapoli, 8-9 June 2006
DisclaimerThe opinions expressed here are those of the
speaker and do not necessarily reflect those of the European Commission.
Barcelona Declaration (1995)
o Building on long standing (trade) relations between EU and MED countries and preferential treatment of MED products, particularly since the end-1970s
o Euro-Mediterranean FTA is a core objective …o … and seen as key instrument to increase growth and
improve living conditionso Gradual realisation through bilateral Association
Agreements (AA) and, in addition, free trade agreements between the MED partners
o AAs have prompted progressive asymmetric tariff dismantling in industrial trade, and agricultural preferences for the MED
o ENP offers a “stake in the internal market”o Where do we stand?
Framework developments Nov. 2005 Barcelona meeting: 5-year roadmap for tariff
dismantling, market access, trade-related policies Oct. 2005 “Pan-Euro MED Protocol of Origin” adopted by
Egypt, Israel and Morocco Approximation of standards, technical regulations and
conformity assessments for industrial products March 2005 Marrakech meeting launched negotiations on
services and investment (including right of establish-ment) based on AAs and GATS Art. V (without ALG, SYR) -> July Brx -> text mid -2007
Negotiations have already started with some countries on a progressive and asymmetrical agricultural liberalisation “with a possible selected number of exceptions”.
Negotiations on an efficient dispute settlement mechanism. -> July Brx -> bilateral protocols by end of 2007
Questions
1. Implementation progress
2. Reduction of tariff and non-tariff barriers
3. Actual trade creation
4. [Is tariff reduction sufficient for expected welfare improvements?]
ad 1) EU-Mediterranean cooperation
Association Agreement
Cooperation Agreement
signedtrade provisions into force earlier
into force
Algeria 1 November 1978 22 April 2002 - 1 Sept. 2005 -Egypt 1 November 1978 25 June 2001 1 January 2004 1 June 2004 -Israel 1975 20 November 1995 1 January 1996 1 June 2000 xJordan 1 November 1978 24 November 1997 - 1 May 2002 xLebanon 1 November 1978 17 June 2002 1 February 2003 1 March 2003a -
Morocco 1 November 1978 26 February 1996 - 1 March 2000 x
Palestinian Authority - 24 February 1997 - 1 July 1997b x
Syria 1 November 1978 initialled Oct. 2004 - - -Tunisia 1 November 1978 17 July 1995 - 1 March 1998c x
Cyprusd 1 June 1973
Maltad 1 April 1971
Turkeye 1 December 1964Source: European Commission.a Interim Agreement.b Interim Agreement not recognised by Israel.c Tunisia has unilaterally anticipated the implementation for industrial products from 1 January 1996.d A customs union was one of the long-term objectives of the Association Agreement but did not enter into force before the country became an EU Member State on 1 May 2004. e A customs union between the EU and Turkey entered into force on 1 January 1996. Turkey is a recognised candidate for EU Membership since 1999.
Basic agreements between the EU and MPCEuro-Mediterranean Association Agreement
into force
ENP Action Plan
ad 2) Lags of import-tariff reductions
95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18AlgeriaEgyptIsraelJordanLebanonMoroccoPalestinian AuthoritySyriaTunisiaSource: Data from European Commission.Notes: red - no Association Agreement (AA), yellow - gradual liberalisation, green - full liberalisation.
Sources: European Commission, White House, World Bank, WTO.a Since 1998 Egypt is also a member of the Common Market for Eastern and Southern Africa (COMESA).
c US-Mediterranean Free Trade Area suggested by President Bush in 2003.
b Greater Arab Free Trade Area. Other members: Bahrein, Iraq, Kuweit, Libya, Oman, Saudi Arabia, Sudan, Qatar, UAE, Yemen. Except ALG GAFTA became effective on 1 January 2005 with a transitional system of rules of origin demanding a 40% ratio of Arab content.
Model IDependent Variable: LMM? Method: Pooled Least Squares Date: 06/15/05 Time: 00:42 Sample(adjusted): 1991 2003 Included observations: 13 Excluded observations: 1 after adjusting endpoints Total panel (balanced) observations 60 Convergence achieved after 9 iteration(s)
R-squared 0.989714 Mean dependent var 15.33114 Adjusted R-squared 0.987357 S.D. dependent var 0.730859 S.E. of regression 0.082178 Sum squared resid 0.324157 Log likelihood 80.67947 F-statistic 769.7743 Durbin-Watson stat 2.035739 Prob(F-statistic) 0.000000
Conclusions (1)
EU-MED bilateral trade liberalisation until today has mainly concerned industrial goods.
The EU opened its markets for these products already at the end of the 1970s. Most MED countries have started liberalising imports from the EU only recently.
Conclusion after accounting for other factors: the tariff reduction prompted by the AAs has already increased MED imports from the EU significantly. This is also a catalyst for MED exports and the technology transfer.
Nevertheless, the overall picture of (EU-) MED trade is unsatisfying. Trade volume is probably to low to make sufficient welfare progress within a satisfactory time horizon. This is due to low regional integration, slow liberalisation and structural problems…
Conclusions (2) … EU-MED trade liberalisation is incomplete (in particular
services trade). However, since the beginning of 2006 complementary measures are being discussed or entering into force.
Regional trade liberalisation is progressing only slowly and hampered by political conflict. It is also held back by transport and other transaction costs in the MED countries. ~> Agadir FTA, productive infrastructure investment and trade facilitation
The MED countries need to strengthen the private sector, business and investment climate (competitiveness!). This is also necessary to prepare for the “stake in the Internal Market”. (~> European Commission, DG ECFIN (ed.), Occasional Papers No. 17 and 25)
The European Neighbourhood Policy helps to support the necessary reform process, for instance with guidance through ENP Action Plans.