1. Regional Integration, Trade and Investment in the Maghreb
May 2005
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2. Background
Trade and investment are the driving force for growth and employment generation
Unilateral, regional and multilateral initiatives offer opportunities to stimulate trade and investment
Policy consistency, sequencing and appropriate support can maximize gains and smooth adjustment costs
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3. MENA is poorly integrated in the global economy
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4. Maghreb countries have the lowest intra-regional trade…
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5. …..and lack integration into global production chains
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6. Key Domestic Constraints to Integration
Tariffs and NTBs remain amongst the highest in the world
Inefficient and under-developed services
Business environment is improving but still fails to attract significant levels of investment
Lack of quality control and certification limits ability to sell manufactures
Lack of effective regional cooperation (in trade, services, infrastructures) discourages FDI inflows and access to production networks
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7. Example: number of firms with quality management standards is very low in the Maghreb
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8. Example: Eastern European countries trade with each other products they sell in EU: Maghreb countries do not
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9. Complexity of regional agreements has not helped economic integration
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10. Poor design and weak implementation have also contributed to poor outcomes
Lack of results from RTAs because:
Severe lack of transparency
Too many product exemptions
Poor sectoral coverage – services excluded
Trade limited by licensing requirements
Varying and restrictive rules of origin,
And
Lack of political will
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11. What can be done? Leverage trade policies to support trade, investment and growth
Design unilateral, regional and multilateral trade policies to
be consistent and mutually supportive
Use the WTO process to reinforce domestic reforms and achieve reciprocity when reducing own barriers
Aggressively integrate into European neighborhood and Single Market
Invigorate regional agreements
Facilitate adjustment
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12. Integrating into the European Neighborhood
Exploit opportunities to improve market access and support domestic reform:
Mutually liberalize all tariffs on agriculture
Adopt and implement key New Approach regulations
Liberalize key services sectors – financial, transport, business services
Move towards EU disciplines on competition and state aids
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13. Invigorate regional agreements
Make Regional and EU Agreements mutually supportive:
Reduce external protection
Ensure transparency and simple administrative
procedures
Avoid overlapping agreements
Ensure level playing field for firms with effective disciplines on monopolies and state aids
Open up services sectors
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14. Successful integration is associated with competition in services
Why is services reform so important?
Important productivity effects on other sectors
Efficient services are crucial in attracting foreign investment
Service liberalization has been associated with employment generation – which in turn limits adjustment costs in goods sectors
Well functioning financial markets enhance growth
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15. Example : Services Liberalization generated employment in Eastern Europe
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16. Limit social impact of liberalization
Improve flexibility of labor markets – economies with sluggish labor markets gain least from trade liberalization
Improve efficiency of services, especially financial services – crucial to allow exploitation of new opportunities
Support labor adjustment (unemployment insurance, retraining programmers, health) – direct policies to less-educated and low income
Aggressively pursue improved market access in overseas markets – enlarge export opportunities
Ensure effective competition policy and discipline on state aids – level playing field
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