Mediterranean Basin: An Assessment of Economic Cooperation

Although the Mediterranean Basin is home to countries of three continents, and was the world’s center for many centuries, Southern and Eastern Mediterranean countries (SEMCs) often complain that the only way to attract the attention of policymakers in Washington is via security issues. Apart from seeing the Mediterranean as part of European security, these countries reiterate the need to see the importance and the necessity of economic development and cooperation in the Mediterranean.

In fact, there were initiatives launched in the pre-Arab Spring era with the aim to develop economic relations between the countries of the Mediterranean, the US and EU member states. For instance, in 2003, the US launched MEFTA, with the aim of establishing a U.S.-Middle East Free Trade Area by 2013. When MEFTA was launched, Israel (in 1985) and Jordan (in 2000) had already established Free Trade Agreements (FTAs) with the US. Washington’s close bilateral relationship with Morocco was reinforced by an FTA signed in 2004. Algeria established a substantial bilateral cooperation with the US in the energy sector, and by 2013 signed a Trade and Investment Framework Agreement (TIFA), a preliminary step towards a US FTA.

Europe’s history of aligning itself with the Mediterranean region goes back to 1969, when the EEC signed preferential agreements with the Maghreb countries (Morocco, Algeria, Tunisia). This was followed by the Global Mediterranean Policy formulated in 1972, the enlargement of the 1981 that made Greece part of the EC, the Iberian enlargement in 1986, and bilateral trade and co-operation agreements with SEMC. The Euro-Mediterranean Partnership, also known as the Barcelona Process, was established between the EU and the SEMCs in 1995 as a framework for the creation of a Mediterranean region of peace, security and shared prosperity. As a part of the Barcelona Process, the Euro-Med countries approved the principle of creating a Euro-Mediterranean free-trade economic zone until 2010. With a population of 800 million, this area would be twice the size of NAFTA (North American Free Trade Agreement).

The lack of co-ownership, weak visibility and institutional weaknesses of this initiative led to the creation of the Union for the Mediterranean (UfM), in 2008, with six strategic priorities: business development, social and civil affairs, higher education and research, transport and urban development, water and environment and energy and climate action, offering concrete projects that made it more visible in the daily lives of people living in the Mediterranean.

These initiatives are also supported by additional programs aiming to create economic opportunities and jobs to reduce high unemployment rates. In 2015, the EU assigned over 209 million Euros to the ENI CBC Mediterranean Sea Basin Program for the period 2014-2020, making it the largest out of 16 other programs to be implemented to the East and South of EU’s external borders.

Other organizations in the Mediterranean were established between EU member states and SEMCs, such as the 5+5 Dialogue (Algeria, Libya, Mauritania, Morocco and Tunisia + France, Italy, Malta, Portugal and Spain) created in 1990 in Rome, and considered the oldest forum for countries of the Mediterranean basin. This initiative focuses on infrastructure projects for the region, with a series of 58 projects dedicated to water strategy in the Western Mediterranean adopted in June 2016. Of those, 48 projects with a value of 132 million Euros are in the category of service actions, and 10 projects with a value of 304 million Euros, are under the infrastructure actions category.

There are also many projects initiated to develop economic relations among the countries of the Mediterranean. These initiatives are supported by the EU, as deepening south-south relations is one of the major components of the EU’s policy towards the region. For instance, the Agadir Agreement of 2004 (FTA between Jordan, Tunisia, Morocco, Egypt) which has been seen as its first building block, entered into force in 2007. This agreement aimed to create FTAs between each of the partners and other countries, and remains open to other Arab Mediterranean countries. After this stage is completed, the objective is to form a single free trade area, including the European Union.

The other initiative taken with the similar goal that was the Arab League’s initiative aimed to create Greater Arab Free Trade Area (GAFTA) by 2008. It would be achieved through an annual 10% reduction in customs fees, and the gradual elimination of trade barriers. Eighteen of the 22 Arab League states signed on to this agreement, which came into force on 1 January 1998.

Aside from these, FTAs have been signed between Mediterranean countries to further develop relations among the countries in the region. Israel and Jordan have signed a FTA, and Turkey has signed bilateral agreements with Egypt, Israel, Jordan, Lebanon, Morocco, the Palestinian Territories, Syria and Tunisia. Turkey has significantly increased its involvement in the Maghreb. In 2016, 75 Turkish companies were working in Tunisia, with investment levels topping 1 billion dollars, and a goal of settling 100 companies by 2018. All things considered, Turkey has invested far more in Algeria than neighboring Tunisia and Morocco. In 2015, combining steel, textile, and construction, the total trade volume topped 2.5 billion dollars. Negotiations are underway between other Mediterranean countries to establish similar agreements.

The Southern Mediterranean countries have been able to attract FDI, and in some cases, even managed to maintain growth rates of around 3% at the height of the economic crisis. Nevertheless, they are considered to be among the countries most in need of investment, in particular in terms of infrastructure and funding of Small and Medium-sized Enterprises. (SMEs). These needs have been exacerbated, particularly in certain countries (Tunisia and Egypt) by the 2011 revolutions and the on-going transitions. Each year between 2008 and 2012, the Mediterranean region received a total of around 10 billion dollars public aid for development projects, experiencing a sharp rise since. For example, in 2016, Egypt alone received 12 billion dollars from the IMF. Trade in the Mediterranean is oriented mainly towards Europe, whereas inflows of FDI to the Southern Neighborhood region decreased by almost half between 2008 and 2015. Despite the efforts of countries of the region to create a Free Trade Area and the EU’s support to foster regional economic cooperation between SEMCs, it is still limited: intra-regional trade is a small fraction (5.9% in exports, 5.1% in imports) of the countries’ total trade, one of the lowest levels of regional economic integration in the world.

Slow economic integration and a significant decrease in FDI since 2011, migration crises, terror threats, energy and environmental challenges, are alarming not only for the countries surrounding the Mediterranean, but also beyond. Economic integration, trade partnerships, and transatlantic cooperation are vital for the prosperity and stability of the Mediterranean region.

Some Mediterranean countries are members of the EU, the Western Balkans is on a slow EU accession journey, and Turkey while on and off in EU accession process, has a customs union with the EU that needs to be upgraded. Hence, one of the key and less-addressed issues is a need to create an economic union of North African nations. To achieve stability in the region, an economic union to enhance economic competitiveness within the entire Mediterranean basin should be on a high political agenda in the coming period.

When it comes to the Western Balkans countries, a successful accession to the EU would significantly contribute to stability for the entire region. Solely for the period of 2008-2010, EU assistance accounted for 2.8 billion Euro, almost doubling from the 2005-2007 period. Only Croatia has so far become an EU member, while the other countries are still years, if not decades away from fulfilling EU accession requirements. Clearly, the US, which brought peace to the war-torn region in the 1990s, should engage more to finish the task set out – to bring these countries into the EU family.

Four years ago, realizing the importance of the problems and stakes at hand, but also realizing the opportunities for a stable, peaceful, and prosperous Mediterranean, the Johns Hopkins University Paul H. Nitze School of Advanced International Studies SAIS Center for Transatlantic Relations launched the “Mediterranean Basin Initiative” , in an effort to provide further support for transatlantic cooperation with the countries of the larger Mediterranean. This is yet another testament of the region’s importance in Washington D.C.


Co-authored by Samy Boukaila, Visiting Scholar, Center for Transatlantic Relations SAIS and one of the Founders and Treasurer of CARE, Algeria, Tea Ivanovic, Visiting Fellow, Center for Transatlantic Relations SAIS

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