Towards Arab and Euro-Med Regional Integration
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«Development Centre Seminars Towards Arab and Euro-Med Regional Integration INTERNATIONAL DEVELOPMENT Edited by Sébastien Dessus, Julia Devlin, Raed Safadi THE WORLD BANK © OECD, 2001. © Software: 1987-1996, Acrobat is a trademark of ADOBE. All rights reserved. OECD grants you the right to use one copy of this Program for your personal use only. Unauthorised reproduction, lending, hiring, transmission or distribution of any data or software is prohibited. You must treat the Program and associated materials and any elements thereof like any other copyrighted material. All requests should be made to: Head of Publications Service, OECD Publications Service, 2, rue André-Pascal, 75775 Paris Cedex 16, France. Development Centre Seminars Towards Arab and Euro-Med Regional Integration Edited by Sébastien Dessus, Julia Devlin and Raed Safadi DEVELOPMENT CENTRE OF THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ECONOMIC RESEARCH FORUM FOR THE ARAB COUNTRIES, IRAN AND TURKEY THE WORLD BANK ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: – to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; – to contribute to sound economic expansion in Member as well as non-member countries in the process of economic development; and – to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became Members subsequently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996), Korea (12th December 1996) and the Slovak Republic (14th December 2000). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention). The Development Centre of the Organisation for Economic Co-operation and Development was established by decision of the OECD Council on 23rd October 1962 and comprises twenty-three Member countries of the OECD: Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Korea, Luxembourg, Mexico, the Netherlands, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, as well as Argentina and Brazil from March 1994, Chile since November 1998 and India since February 2001. The Commission of the European Communities also takes part in the Centre’s Advisory Board. The purpose of the Centre is to bring together the knowledge and experience available in Member countries of both economic development and the formulation and execution of general economic policies; to adapt such knowledge and experience to the actual needs of countries or regions in the process of development and to put the results at the disposal of the countries by appropriate means. The Centre has a special and autonomous position within the OECD which enables it to enjoy scientific independence in the execution of its task. Nevertheless, the Centre can draw upon the experience and knowledge available in the OECD in the development field. THE OPINIONS EXPRESSED AND ARGUMENTS EMPLOYED IN THIS PUBLICATION ARE THE SOLE RESPONSIBILITY OF THE AUTHORS AND DO NOT NECESSARILY REFLECT THOSE OF THE OECD OR OF THE GOVERNMENTS OF ITS MEMBER COUNTRIES. * ** Publié en français sous le titre : Vers une intégration régionale arabe et euro-méditerranéenne © OECD/ERF/The International Bank for Reconstruction and Development/The World Bank, 2001 Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, tel. (33-1) 44 07 47 70, fax (33-1) 46 34 67 19, for every country except the United States. In the United States permission should be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400, 222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: www.copyright.com. All other applications for permission to reproduce or translate all or part of this book should be made to OECD Publications, 2, rue André-Pascal, 75775 Paris Cedex 16, France. Foreword Today, the primary challenge facing policymakers in the economies of the Middle East and North Africa is improving the region’s growth performance. During the 1990s, real per capita GDP growth was modest at best and growing pressures for employment and improvement in social conditions emanate from a young and rapidly growing labour force. There is a growing awareness among policymakers at large, that openness to the global economy can be an effective policy instrument for accelerating growth performance. Recent empirical studies suggest that increasing the ratio of trade to GDP by one percentage point raises per capita income by between one-half and 2 per cent through the improved use of domestic resources, imports of goods and services at lower costs, enhanced competitiveness of domestic firms and the spread of ideas and technologies. However, rising integration with the global economy entails both opportunities and risks. The transformation of employment relationships, divisions between international trade and social norms and the pressures brought to bear on national governments in maintaining domestic cohesion will be inevitable. These emerging realities, together with traditional investor perceptions, place a premium on maintaining a “good” regional neighbourhood characterised by policymaking dynamic that is complementary and forward-looking as well-integrated goods and factor markets. Governments can and should collaborate in designing flexible policies to anticipate these pressures through synergies in policy goals combined with region-wide physical and human capital networks and partnerships for action. One promising trend in the direction of creating dynamic regional partnerships is due to the proliferation of free trade agreements between states in the Middle East and North Africa and the European Union since 1993, together with renewed efforts to liberalise trade at the intra-regional level through the Greater Arab Free Trade Area initiated in 1997. These agreements represent an important first step towards enhancing integration with the global economy while maximising regional interconnectedness in physical and institutional infrastructure and complementarities in energy, agriculture, manufacturing and human capital. 3 To improve the understanding of and potential achievement of dynamic gains from these regional trade initiatives, the World Bank, the Economic Research Forum for the Arab Countries, Iran and Turkey (ERF), and the OECD Development Centre jointly sponsored a conference on the dynamic aspects of the Euro Med and Arab regional trade initiatives in Cairo, February 1999. This volume summarises analysis and conclusions presented at the conference from academics, policymakers and practitioners both from within and outside the region. As such, it makes an important contribution to enriching the policy debate on the dynamic benefits of regionalism among developing countries and emerging markets. It is our fervent hope that prosperity and a better quality of life become pervasive in a region of the world which is integral to our global cultural heritage and human development. This volume represents our continuing efforts to promote policy dialogue and to build local research capacity on issues of vital importance to the future of the economies in the Middle East and North Africa region. Our sincerest thanks to all who participated in this successful effort. Kemal Dervis Jorge Braga de Macedo Heba Handoussa Former Vice President President Managing Director Middle East and North OECD Development Centre Economic Research Forum Africa Region for the Arab Countries, World Bank Iran and Turkey 4 Table of Contents Foreword Kemal Dervis, Jorge Braga de Macedo and Heba Handoussa ................. 3 Acknowledgements ......................................................................................................... 7 Preface Jorge Braga de Macedo ............................................................................. 9 Chapter 1 Introduction and Overview Sébastien Dessus, Julia Devlin and Raed Safadi .................................... 11 PART ONE THE DYNAMICS OF OPEN REGIONALISM IN THE MIDDLE EAST AND NORTH AFRICA (MENA) Chapter 2 Dynamic Aspects of Euro-Mediterranean Agreements for the Middle East and North African Economies Robert M. Stern ............................................................................................ 31 Chapter 3 The Nature of Euro-Mediterranean Trade and the Prospects for Regional Integration Agnès Chevallier and Michael Freudenberg ........................................... 55 PART Two EXPANDING DOMESTIC MARKETS