1 Agricultural trade and the Barcelona process. Is full liberalisation possible? Slides for Seminar Course in Trade and DOmestic Policies in an Open Economic Settting Prof. Jose-Maria Garcia-Alvarez-Coque 22 September 2002

2 The Euro-Mediterranean trade relations A key word: assymetry. GDP per capita ratios : – France/Morocco = 18 – Italy/Egypt =15 – Spain/Algeria = 9 – EU average/Syria = 18 8 Arab countries in the region have a total GDP = 1/2 Spain’s GDP.

3 Assymetries in agricultural trade EU accounts for about 50 % of SPs’ agricultural exports. SPs account for about 5% of EU agricultural imports. Intra-regional trade: too little: intra-regional exports among SPs are 7 times lower relative to exports to the EU. Situation is not the same accross the region: Share of Arab countries in total Syrian exports is 20 percent. EU surplus: > 1billion Euro. Marked inter-industrial specialisation

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5 The Barcelona process Aims: “sustainable and balanced economic development with the view of creating an area of shared prosperity” (Barcelona Declaration, 1995). Instrument : The Association Agreements (AA) Structure of the AAs: – FTA (with a negotiated schedule) – Political provisions – Harmonisation of standards – Financial cooperation – Social and cultural cooperation

6 Status of the AAs

7 Why agriculture is important in this context? Assymetric reciprocity: the FTA involves reciprocal concessions in industrial trade. But, agricultural exports keep constrained to “traditional flows” (use of TRQs and VERs. So, this FTA is not fully consistent with the “comparative advantage” principle.

8 What we know... Agricultural trade in the Mediterranean region is not free: “Pre-Uruguay Round” trade measures. – Multilateral liberalisation: a serious option. The end of the “agricultural exception”: not dramatic for European agriculture. Import liberalisation without reciprocal concessions reduces benefits for SPs. Foreign Direct Investment in the region is constrained by the “hub and spoke" system. – Lack of South-South integration

9 Welfare balance for a partner...

10 Is a co-operative solution possible? In the South: uncertain benefits for SPs from long-term and painful economic reforms. In the North: fears of competition: appeals to “fair” trade.

11 Narrowing opposing positions EU enlargement. – Boost of EU horticultural exports to CEECs. – Enlarged market for Mediterranean products Substantial CAP reform towards rural development. Intra-industrial trade – European experience – Possible push through South-South integration Liberalisation of services. – What about the whole agri-food system, including distribution, logistics and transport?