Trade Strategies for the Southern Mediterranean

Abstract

The lagging economic performance of the Southern Mediterranean (SOM) region over the past decade is often attributed to the region's relative lack of openness to international trade.The closer analysis of the region's trade patterns undertaken in this study suggest a more complex picture.These findings show that except for Syria and to a lesser extent Morocco, the region's overall trade flows are above international norms, that is, levels predicted given the country economic characteristics.Moreover, they also suggest that intra-regional trade, with some qualifications, is relatively high given the region's economic characteristics.Nevertheless, trade relationships in the Southern Mediterranean appear to lack the vitality of those in East Asia and even Eastern Europe.The Southern Mediterranean's trade is expanding relatively slowly, exports are concentrated in relatively slow-growing sectors, and the region does not figure prominently in the multinational production strategies of global firms.There appears to be a "quality gap", if not a "quantity gap", in the trade of the Middle East when compared to more dynamic developing regions.This paper examines possible causes of this gap and the policy options that might help to close it.Although the SOM countries are confronting the demand of globalisation under difficult internal and intra-regional circumstances, the region is clearly turning the corner.Growth rates have recovered from the lows of the late 1980s; market-oriented policies are gaining ground; and several countries are negotiating or have signed major market-opening agreements with foreign partners.This is an opportune time to deepen and extend trade-oriented reforms, and this paper suggests a range of policy initiatives to address the weaknesses in the structure of the Southern Mediterranean's trade and, thus, help invigorate the region's economy:-domestic policy measures that increase savings and shift resources from the public to private enterprise could help to invigorate smallerscale, labour-intensive industries that fit the region's comparative advantage;-policies that stimulate foreign capital inflows could help to create technological and marketing partnerships for upgrading the region's trade structure; PREFACEDuring the 1990s many developing countries have embraced a regional approach to trade and investment liberalisation alongside their unilateral and multilateral efforts.This policy trend reflects the belief that regional policy initiatives can facilitate developing countries' domestic reforms.Whether these regional initiatives will indeed bring about such an outcome remains to be proved, however; the crucial factor is the scope and depth of such commitments.In this respect, the experience of several Southern Mediterranean countries, in the context of the European Union's New Mediterranean Policy, will provide useful lessons for policy-makers in both OECD and non-OECD countries.Following the Europe-Mediterranean Conference held in Barcelona in 1995, three Europe-Mediterranean Agreements have already been signed -with Tunisia, Israel and Morocco.Negotiations are underway with several other countries in the region.The establishment of new agreements helps the partnership countries to enhance policy credibility and business confidence, though they still need to clear many hurdles to meet the goals set by these agreements.This is why the Development Centre has undertaken in-depth research on this region -under the theme of "Regional Co-operation and Integration" -as part of its 1996-98 work programme.This paper is the first in a series with respect to the Southern Mediterranean region.It aims to identify a range of policy initiatives to tackle the weaknesses in the region's trade structure.This series will make an important contribution to the policy making of both the OECD and the non-OECD countries concerned.

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