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EUROPEAN COMMISSION DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS

EUROPEAN COMMISSION DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS. 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

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  1. EUROPEAN COMMISSION DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS CNR – Institute of Mediterranean Societies International Conference: Bridging the gap: the role of trade and FDI in the Mediterranean Napoli, 8-9 June 2006 The EU-MED trade of goods under the influence of the Barcelona Process Arno Bäcker

  2. Disclaimer The opinions expressed here are those of the speaker and do not necessarily reflect those of the European Commission.

  3. Barcelona Declaration (1995) • Building on long standing (trade) relations between EU and MED countries and preferential treatment of MED products, particularly since the end-1970s • Euro-Mediterranean FTA is a core objective … • … and seen as key instrument to increase growth and improve living conditions • Gradual realisation through bilateral Association Agreements (AA) and, in addition, free trade agreements between the MED partners • AAs have prompted progressive asymmetric tariff dismantling in industrial trade, and agricultural preferences for the MED • ENP offers a “stake in the internal market” • Where do we stand?

  4. 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

  5. Questions • Implementation progress • Reduction of tariff and non-tariff barriers • Actual trade creation • [Is tariff reduction sufficient for expected welfare improvements?]

  6. ad 1) EU-Mediterranean cooperation

  7. ad 2) Lags of import-tariff reductions

  8. ad 3) Trade between EU and MED countries Source: European Commission (data for 2004).

  9. Trade openness

  10. Trade between EU and MED countries Based on EUR values

  11. Trade between EU and MED countries

  12. Trade between EU and MED countries

  13. Trade between EU and MED countries

  14. Source: European Commission (Mio EUR).

  15. Issues • No direct measure of aggregate EU-MED tariff reduction -> measure trade creation • Trade data “polluted” by other factors • Methods to isolate the EU-MED FTA effect • Gravity models T vs T’=T’(Y,Y*,P,P*,D,Ś) • Export/import functions, e.g. M=M(Y,e,Ś)

  16. Determine AA impact • Import function M=M(Y, e, …) • AA dummy variable • other dummy variables to control for conflicts (ALG, ISR, …) • N=5 (ALG, ISR, JOR, MOR, TUN) • T=13 (1991-2003) • Data: Eurostat COMEXT, IMF

  17. Model I

  18. 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 alreadyincreased 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…

  19. 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.

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