Working Paper: CEPR ID: DP1300
Authors: Bernard Hoekman; Simeon Djankov
Abstract: This paper discusses the potential role of a Euro-Mediterranean Agreement (EMA) in helping Middle East and North African governments implement structural economic reforms. The arguments for and against preferential liberalization are summarized, identifying a number of necessary conditions for an EMA to benefit a Mediterranean country. The recently negotiated EMA between Tunisia and the EU is evaluated, using these conditions as criteria. Some doubts are expressed whether an EMA, by itself, will be enough to help countries in the region 'catch up'. Significant supporting and complementary actions are likely to be needed. Key issues in this connection are the regulatory regimes applying to inward foreign direct investment (FDI) and the service sector; a reduction in tariffs applied to the rest of the world; and the imposition of hard budget constraints on state-owned enterprises. These aspects are not subject to disciplines under the EMA.
Keywords: trade liberalization; restructuring; economic adjustment
JEL Codes: F14; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| euromediterranean agreement (ema) (F15) | economic reforms in the MENA region (E69) |
| euromediterranean agreement (ema) (F15) | credibility enhancement (D83) |
| credibility enhancement (D83) | increased investment (E22) |
| increased investment (E22) | economic growth (O49) |
| euromediterranean agreement (ema) (F15) | overcoming internal political resistance to liberalization (P26) |
| euromediterranean agreement (ema) (F15) | need for further reforms and supporting actions (E69) |