Title: Bridging the gap: the role of trade and FDI in the Mediterranean Discussion of - Export catching up in the Mediterranean countries: long term trends and prospects by J.R. Chaponni
1Bridging the gap the role of trade and FDI in
the MediterraneanDiscussion of - Export
catching up in the Mediterranean countries long
term trends and prospectsby J.R. Chaponnière and
M. Lautier- Do Euro-med agreements improve
democracy and the quality of institutions in EU
partner countries?by C. Duc and E. Lavallee-
In search of development along the Southern
border The economic models behind the
Euro-Mediterranean Partenership and the European
Neighbouring Policyby I. Martin Discussant
Sergio de Nardis
- Naples Castel dellOvo June 8-9, 2006
2Three papers on Med countries different (though
related) questions, different approaches, but
conclusions share a common (negative) flavour
- Different questions addressed in the 3 papers
- 1. C-L paper have the (Southern) Med countries
upgraded the quality of their export baskets
(converging towards those of the industrialized
economies) during the last 35 years (a period
which includes the EU-Med agreements)? - 2. D-L paper have the EU-Med agreements
improved the quality of economic governance and
institutions in the Med countries? - 3. Martin paper has the model underlying the
Euro-Med Partenership (just let the market
forces work freely trade liberalizationstructura
l reforms) proved adequate, delivering tangible
results in the Med economies? - But conclusions have much in common unfavourable
average performance (with some exceptions) of the
Med countries and negative evaluation of the
economic and political achievements after the
Barcellona Declaration and the subsequent
bilateral trade agreements(mildly negative in
D-L, strongly negative in Martin).
3C-L paper main findings wrong product
specialization in the Med countries?
- On the grounds of an indicator of the level of
quality/productivity of the export basket of the
Med economies (similar to the one used by
Hausmann-Rodrick, 2003) C-L find - Contrary to what observed in other emerging
countries (East-Asia, Latin America, Nic-1,
Nic-2), the quality/productivity level of the
export baskets of the (8) Med countries didnt
improve during the period 1967-2003 quality
indicators were worse in 2003 than in 1967
exceptions were Israel and, to a lesser extent,
Turkey and Egypt. - Contrary to what observed in other emerging
economies, increase in propensity to export
manufactures (X/GDP) has been accompanied by no
clear trend of quality upgrading in the Med
countries (actually in Tunisia and Morocco
quality fell). - Not considering primary products based industries
and textile-clothing, no export diversification
in the manufacturing industry was observed (with
the exception of Turkey and Israel). - Since 1994, in the period EU-Med agreements came
into force, export niches were concentrated in
products for which EU demand has been growing
less than the average.
4Some observations on C-L paper
-
- The Chaponnière-Lautier/Hausmann-Rodrick
indicator is interesting. A doubt on the capacity
to disentangle properly quality differences. Is
it a too raw measure? Example footwear in
considered a low quality/productivity product
(this industry is large in low productivity
countries), but there are high and low quality
footwear industries, with the former located in
industrial (high productivity) countries. - When constructing the export niches, primary
products intensive industries and
textile-clothing are excluded not clear why,
since Med countries have important comparative
advantages in these sectors how would the
picture be considering also these products? - These observations do not impugn the general
conclusion findings of no appreciable quality
upgrading and of no product diversification in
the period 1967-2003 are clear.
5D-L paper main findings Instituion building
was hardly affected by EU-Med agreements
- On the grounds of econometric estimates (within
sample comparisons and difference-in-differences
), D-L test the influence of bilateral
agreements between EU and Med countries on
democracy (political rights and civil liberties)
and governance (corruption, red-tapes, law and
order) they find - Uncertain (unclear) effects of the agreements on
general governance, but positive influence on the
component of governance represented by judicial
systems. - No effect at all of the EU-Med agreements on the
indicator of democratic principles and
institutions.
6Some observations on D-L paper
-
- The period of EU-Med agreements is too short
(just Tunisia and Israel signed in 1995, Syria
signed in 2004) and the implementation too slow
to be able to detect some effect on democratic
variables that show very small time variability.
- The authors recognise this potential problem and
propose difference-in-differences estimation,
based on the testing of a treatment effect
(EU-Med agreements) controllling for a
non-treated group they rely their conclusions
mostly on these estimates. - Yet, the experimental group (the Med economies)
and the control group are heterogeneous a
problem not eliminated by introducing extra
independent variables. In the control group there
are Mexico, the accessing Eastern countries,
Asian economies, Latin American countries all
very different from the Med ones morevoer they
are affectd by free-trade agreements with
economies other than the EU (e.g. Nafta,
Mercosur) or by different (deeper) forms of
agreements with the EU (Eastern countries). - Presumption on the grounds of these
observations, one could deem questionable the
positive significant effect on law and order,
detected for the treatment EU-Med agreements.
7Martins paper main findings Failure of the
model underlying EU-Med partnership as to both
economic and political targets
- Ivàn Martìns critical assessment of the
EU-Mediterranean partnership experience hinges on
poor achievements in terms of economic growth
and civil rights in Med countries. Main causes of
the failure are - Agriculture excluded from FT agreements.
- FT agreements substituted former preferential
agreements, in force since the mid 70s no value
added, on the contrary value subtracted since
the vanishing of the Multifiber agreement
suppressed preference for Med countries textile
products. - No significant FDI flows in the Med economies (no
South-South integration, not reduced political
prejudice, governance uncertainty). - Insufficient unilateral funds (MEDA about 3 euro
per person and per year in the receiving country
in 1995-2002). - Asymmetry of the FT agreements since they
regarded mainly the opening of the Med countries
to EU industrial products, while agricultural
goods were still excluded and Meds industrial
goods had already granted free access in the EU
market under previous provisions no reallocation
of Meds resources to new sectors likely short
run harm, with benefits (if any) only in the very
long run.
8Martins paper main findings not much more
than this can be expected from the European
Neighbourhood Policy (ENP)?
- The ENP approach (based on the EU accession
model) is - Promising on paper
- ENP replicates the accession process approach
that proved effective in the case of
Central-Eastern countries pre-defined results
(adoption of the EU legislation for the internal
market) whose gradual realization is monitored by
the EC that plays a technical role in supervising
and assessing advancements. - In principle, full access to the EU markets for
all products (even agricultural products) and
free movement of people. - Participation in the EU Regional policy (cohesion
funds). - quite uncertain in practice
- Adoption of the EU legal framework is partial,
free flow of workers removed from Action Plans,
full access of agricultural goods subject to
negotiation, increase of funds only marginal
w.r.t. current MEDA. - Incentives to reform are not comparable with
those of the Central-Eastern economies that, in
exchange of the sovereignity loss, had/have the
prospect of a real accessing in the EU (and the
single market benefits) it is not the same for
Med countries.
9Summing up what can be learned from these
useful papers
- Substantially confirmed evidence coming from
other authors (e.g. Ferragina, Giovannetti,
Pastore, 2005) about the existence of large gaps
between potential and actual trade of Meds
vis-à-vis EU despite post-Barcellona FT
agreements, persistent and increasing potential
of unexploited trade integration between Med and
EU didnt accelerate, quite the opposite it
slowed down. - These agreements are not only young, they are
also being implemented extremely slowly only
Tunisia will be able to abate tariffs by 2010
difficult to detect trade creation effects (if
any) with such a slow pace trade liberalization
is much late w.r.t. Barcellona schedules - Generally, it is unwise to expect much from this
kind of agreements, particularly in terms of
institution building and governance upgrading
barring the euro rethoric of solemn declarations,
there are no enforcement and no incentives to
make changes that are awkward as those involving
institutions and governance. -
10and what opinion I formed from reading
- Unfairness. Med FTAs are umbalanced agreements
exclusion of agricultural products, where Meds
have comparative advantagesl. NOTE oppostion to
liberalization is not from the rich farmers of
North Europe (usually the fiercer opponent to
changes of CAP), but from the olive belt of the
EU, i.e. the countries that are mostly interested
in deepening North-South trade, whose
agricultural products are in direct competition
with those of the Med economies. -
- Hub-and-spoke. The form of bilateral agreements
discourages intra-Meds integration, particularly
in manufacturing (since the main suppliers of
these goods are the EU countries) at best these
agreements may lead to a hub-and-spoke system, in
which Meds remain isolated trading partners not
much to gain for a peripheric country in this
perspective weak capacity to attract Fdi. - Crucial, the global environment. Unfavourable
environment. Eastward enlargement in the 2nd half
of 90s was a too important process for the
countries involved. Effective institutional
changes and strong commitment to reform (due to
the actual working of Europe Agreements
perspective of joining EU made rapid adoption of
Acquis Communitaire possible) attracted resources
and trade, with diversion effects elsewhere
(crowding out Med goods and territory) no
surprise that any other trade integration
process, involving EU, was negatively affected by
enlargement. - Bottom line start again the experiment of Med
integration from scratch, bearing the Europe
Agreements experience in mind. But the point is
how feasible is to mimic that experience without
the real perspective of EU accession? -