Regional Integration Schemes in the Mediterranean Sotiris Petropoulos University of the Peloponnese

Contents Measuring Economic Development Regional integration Agadir Agreement Maghreb Union EU

Is economic growth even?

Why do we care about economic growth? Economic Growth is connected to well being Correlation between GDP per capita and life expectancy and literacy

GDP, Life Expectancy, and Literacy Why do we care about economic growth? GDP, Life Expectancy, and Literacy

Purchasing Power Parity If exchange rates are used to compare the size if these countries to developed countries will make them seem smaller than the really are. Should use PPP to compare size of economies across countries Calculated by taking a basket of goods and finding how much it costs in different countries

Human Development Index Initiated in 1990 and undertaken by UNDP in its annual series of HDRs. HDI is based on 3 goals: Longevity Knowledge Standard of living HDI= 1/3(Income index)+1/3(Life expectancy index)+1/3(education index)

Human Development Index Ranks 175 countries into 3 groups Low human development = 0.00-0.099 Medium human development = 0.5-0.799 High human development = 0.80-1.00 Country HDI GDP rank-HDI rank Low HD: Tanzania 0.436 +21 Medium HD: Turkey 0.735 -21 High HD: Canada 0.936 +3

Continuous increase of trade volumes International Trade Continuous increase of trade volumes Gradual decrease of tariff levels (rounds of trade negotiations) Creation of WTO Increase in the number and size of Regional Trade Agreements (RTAs)

Source: WTO, 2013

Source: WTO, 2013

Source: WTO, 2013

Definitions Regional Integration: the integration of independent economic areas in larger economic entities (R. Gilpin) International Area: Limited number of states geographically connected with a certain level of mutual interdependence (Joseph Nye) Main characteristics: √ geographical proximity √ Increased level of exchanges

Theoretical Approaches International Trade Theories: attempts to gain from free trade Neo-institutionalism: created to deal with market imperfections and enhance economic cooperation Basic motive: welfare New Political Economy: emphasis on interest groups and in distributive consequences of regional integration. Marxism: attempt by capitalists to increase the level of capital accumulation.

Realism and Neo-realism Systemic Theories Realism and Neo-realism State interests No-discrimination between politics and markets Basic motive: power Hegemonic Theory (Kenneth Waltz) Responses to globalization

Functionalism (Mitrany) Regional Level and Interdependence Functionalism (Mitrany) Political integration follows economic cooperation Global leaders opt at creating international institutions Neo-functionalism (Haas) Self-empowered processes towards integration Spill-over effect

Consolidation of domestic interests Internal Politics State power Democratization Consolidation of domestic interests

No general theory is enough Political motive are present Main drivers: Eclectic Approach No general theory is enough Political motive are present Main drivers: Lack of international leadership Emerging powers / intensification of international competition / technological advances Economic security dilemmas Increased importance of economies of scale

Levels of integration Characteristics FTA Customs Union Common Market Economic Integration No tariff barriers vis-à-vis members √  (NAFTA)   Common external tariff (EEC) Free movement of production factors (EU) Harmonization of monetary and fiscal politics Transnational decisions beyond economic issues

Issue of rules of origin Trade consequences Creation of trade ….among member-states ….trade diversion …towards third parties Issue of rules of origin

1ο «wave» After WW II (EEC) 2ο «wave» Early 1990s Importance 1ο «wave» After WW II (EEC) 2ο «wave» Early 1990s Creation of new / further integration of existing ones Significant increase of importance

Most advanced example – the EU Importance Most advanced example – the EU Global Phenomenon (ASEAN, NAFTA, SADC, MERCOSUR, SAARC etc) Key: USA

NAFTA EU ASEAN + 3 ASEAN MERCOSUR SADC

APEC

FTAA NAFTA EU-Mercosur EU MERCOSUR

APEC ASEM

Egypt, Jordan, Morocco and Tunisia Initially signed on 8 May 2001 Agadir Agreement Egypt, Jordan, Morocco and Tunisia Initially signed on 8 May 2001 Finally signed on 25 February, 2004 Entered into force: 6th of July 2006 Implementation: 27th of March 2007 Creates: 120 million market, combined GDP of € 200 billion. Aim: Creation of an FTA The initial agreement gives emphasis to: Arab brotherhood Charter of the Arab League, recognizing the importance of supporting joint Arab economic co-operation

Zero tariffs on most industrial & agricultural products Agadir Agreement A Free Trade Area gradually during a transitional period to be completed at the latest by 1 January 2005 Directly links the Association Agreements between Med. Countries and EU Zero tariffs on most industrial & agricultural products No deal in services Issues of non-tariff trade barriers Clause of “substantial damage” to local industries Open to “Any Arab state member of the Arab League and the Greater Arab Free Trade area, linked to the EU through an Association Agreement or a free trade agreement”

Wippel 2005

Wippel 2005

Wippel 2005

Agadir Agreement website

Agadir Agreement website

Agadir Agreement website

Agadir Agreement website

Agadir Agreement Why? Benefits?

Algeria, Libya, Mauritania, Morocco and Tunisia Maghreb Union Algeria, Libya, Mauritania, Morocco and Tunisia 1st Maghreb Summit (1988) Treaty of Maghreb Union (17 February 1989) 88 million people, +500 billion combined GDP Aims: The consolidation of fraternal relations The progressive realization of the free movement of persons, services, goods and capital The adoption of a common policy in all areas

1991 - adopt unified tariffs on imports 1995 - full customs union Maghreb Union 1991 - adopt unified tariffs on imports 1995 - full customs union It is a step away from political tensions and towards economic gains 1st Maghreb Summit (1988) Treaty of Maghreb Union (17 February 1989) 88 million people, +500 billion combined GDP Aims: The consolidation of fraternal relations The progressive realization of the free movement of persons, services, goods and capital The adoption of a common policy in all areas

Maghreb Union Why? Benefits?