This publication examines the importance of trade in services for the integration of non-EU members into the European Single Market. Further liberalisation is found to be a critical factor to deeper integration with the enlarged EU, which accounts for a quarter of global GDP and foreign direct investment. The planned Euro-Mediterranean free trade area for goods is judged as a positive first step, but additional measures are needed for deeper integration, including liberalisation of services trade. The study gives a detailed assessment of individual sectors, including core services relating to transport, telecommunication, financial markets and electricity, as well other markets such as tourism, IT and distribution services.

Abstract: May 1999 - Preferential trade agreements that are limited to the elimination of tariffs for merchandise trade flows are of limited value at best and may be as easily welfare-reducing as welfare-enhancing. It is important that preferential trade agreements go beyond eliminating tariffs and quotas to eliminating regulatory and red tape costs and opening up service markets to foreign competition. Deep integration-explicit government actions to reduce the market-segmenting effect of domestic regulatory policies through coordination and cooperation-is becoming a major dimension of some regional integration agreements, led by the European Union. Health and safety regulations, competition laws, licensing and certification regimes, and administrative procedures such as customs clearance can affect trade (in ways analogous to nontariff barriers) even though their underlying intent may not be to discriminate against foreign suppliers of goods and services. Whether preferential trade agreements (PTAs) can be justified in a multilateral trading system depends on the extent to which formal intergovernmental agreements are technically necessary to achieve the deep integration needed to make markets more contestable. The more need for formal cooperation, the stronger the case for regional integration. Whether PTAs are justified regionally also depends on whether efforts to reduce market segmentation are applied on a nondiscriminatory basis. If innovations to reduce transaction or market access costs extend to both members and nonmembers of a PTA, regionalism as an instrument of trade and investment becomes more attractive. Using a standard competitive general equilibrium model of the Egyptian economy, Hoekman and Konan find that the static welfare impact of a deep free trade agreement is far greater than the impact that can be expected from a classic shallow agreement. Under some scenarios, welfare may increase by more than 10 percent of GDP, compared with close to zero under a shallow agreement. Given Egypt's highly diversified trading patterns, a shallow PTA with the European Union could be merely diversionary, leading to a small decline in welfare. Egypt already has duty-free access to the European Union for manufactures, so the loss in tariff revenues incurred would outweigh any new trade created. Large gains in welfare from the PTA are conditional on eliminating regulatory barriers and red tape-in which case welfare gains may be substantial: 4 to 20 percent growth in real GNP. This paper-a product of the Development Research Group-is part of a larger effort in the group to analyze regional integration agreements. The authors may be contacted at bhoekman@@worldbank.org or konan@@hawaii.edu.

By establishing free trade for industrial products in 12 years, the European Union’s Association Agreements with countries in the Mediterranean region seek to promote accelerated economic growth. This paper reviews the literature and evaluates the economic benefits and costs for Tunisia, Morocco, Lebanon, Egypt, and Jordan. It concludes that the benefits could be substantial, but only if accompanied by deep supplementary reforms, including extending trade liberalization to services and agriculture and on a multilateral basis, improving the environment for foreign direct investment, ensuring an adequate fiscal and exchange rate policy response, and strengthening European Union assistance.

The economy of the Mediterranean region countries - which in the present study include Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia, as well as Israel and Turkey - experienced a period of strong and dynamic economic development in the late 1970s and early 1980s. But since the 1980s these economies have experienced a much less dynamic evolution and tended toward stagnation. This paper by Oleh Havrylyshyn, presents an assessment of the experience of these economies in a framework of a broad trade strategy perspective for Mediterranean countries, and examines prospects for the future.

With the creation of the Mediterranean partnership and the recent move towards the creation of the Union for the Mediterranean in 2008, a new emphasis is placed on the Mediterranean in the study of European Integration. This book brings together a collection of experts to address this important new area of study and discuss issues such as development, aid, labour, markets, human capital investment, Europeanization and institutional reform.

The Euro-Mediterranean Partnership Initiative, launched by the Barcelona Conference in 1995, is the most ambitious project to date directed at comprehensive prosperity and security in the Mediterranean region. Yet the assumptions on which it is based are untried and untested. This study seeks to analyse what they are and to draw some conclusions as to the potential of the Initiative for success by comparing it with other experiences of regional develoment.