Econostrum | Economic News in the Mediterranean

What growth potential exists for trade between the EU and its Mediterranean partners?

Written by Christiane Navas on Tuesday, October 16th 2012 à 14:35 | Read 376 times

Removing trade barriers is not enough to develop trade between the European Union and its partners in the Southern Mediterranean. Other parameters such as the quality of the logistics system, non-tariff barriers, innovation, openness to foreign investment and even good governance are all factors to consider.

Bosphore, Istanbul
Bosphore, Istanbul
Statistics show that Southern Mediterranean countries only slightly contribute to world exports, despite a slight increase over the decade 2000-2009, rising from 1.8 to 2.9%.  In this same period, exports from these countries to the EU rose from 2.7% to 3.5%, which is better, but still low. 

If gradually phasing out trade barriers contributes to developing trade between the EU and its Mediterranean partners, is there scope for increased trade?

 It’s not because the level of trade is low, that potential for development is significant”, warns Nicolas Péridy.  As Director of the “Laboratory for Applied Economics for Development” at the University of South Toulon-Var, he has coordinated the work of FEMISE  on this much-debated issue. 

Most traditional analysis conducted to date has found a real potential for growth in trade between the EU and its partners in the Southern Mediterranean, believing that exports from these countries to Europe are on average 10 to 20% below what they could be, depending on the country.  “That is not our conclusion”, says Nicolas Péridy.  “We work differently by expanding our field of study to take into account variables other than just tariff barriers which helps explain this trade. It shows that growth potential, at this stage, is limited but can be developed if we act to change these other variables”.

Governance is critical

What are these variables?  First, the quality of infrastructure and logistics. Countries in the Southern Mediterranean are less efficient logistically than other emerging countries, which is a real handicap. Their efforts must therefore be aimed at moving closer to international standards. Innovation is another problem. 

It is underdeveloped in the Southern Mediterranean region, unlike other integrated areas such as the ASEAN (Association of Southeast Asian Nations), it limits exports to certain product categories such as oil and manufactured goods with low added value.

The work of FEMISE economists also show that migration between countries in the Southern Mediterranean and the EU are also factors in trade growth, as is the level of direct foreign investment, which if encouraged, can help change this.

Finally, governance is critical. Corruption and impediments to democracy, which are rampant in the Southern Mediterranean, are all obstacles that limit the scope for trade.  In this regard, the Arab Spring has created new opportunities.

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