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Sotiris Petropoulos University of the Peloponnese Regional Integration Schemes in the Mediterranean Contents Measuring Economic Development Regional integration Agadir Agreement Maghreb Union EU Is economic growth even? Why do we care about economic growth? Economic Growth is connected to well being Correlation between GDP per capita and life expectancy and literacy Why do we care about economic growth? GDP, Life Expectancy, and Literacy Purchasing Power Parity If exchange rates are used to compare the size if these countries to developed countries will make them seem smaller than the really are. Should use PPP to compare size of economies across countries Calculated by taking a basket of goods and finding how much it costs in different countries Human Development Index Initiated in 1990 and undertaken by UNDP in its annual series of HDRs. HDI is based on 3 goals: Longevity Knowledge Standard HDI= of living 1/3(Income index)+1/3(Life expectancy index)+1/3(education index) Human Development Index Ranks 175 countries into 3 groups Low human development = 0.00-0.099 Medium human development = 0.5-0.799 High human development = 0.80-1.00 Country HDI GDP rank-HDI rank Low HD: Tanzania 0.436 +21 Medium HD: Turkey 0.735 -21 High HD: Canada 0.936 +3 International Trade Continuous increase of trade volumes Gradual decrease of tariff levels (rounds of trade negotiations) Creation Increase of WTO in the number and size of Regional Trade Agreements (RTAs) Billions $ Source: WTO, 2013 Global Trade 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: WTO, 2013 50% 1,700 1,600 45% 1,500 1,400 40% 1,200 1,100 30% 1,000 900 25% 800 700 20% 600 15% 500 400 10% 300 200 5% 100 1997 1995 1993 1987 Post-Tokyo Round 1991 1989 1987 1985 1983 1981 1979 1972 Post-Kennedy Round 1977 1975 1973 1971 1969 1962 Pre-Kennedy Round 1967 1965 1963 1961 1959 1957 1955 1953 1947 GATT's establishement 1951 1949 0 1947 0% 1945 Average tariff level 35% 1994 Post-Uruguay Round Trade volume indices 1,300 Source: WTO, 2013 Definitions Regional Integration: the integration of independent economic areas in larger economic entities (R. Gilpin) International Area: Limited number of states geographically connected with a certain level of mutual interdependence (Joseph Nye) Main characteristics: √ geographical proximity √ Increased level of exchanges Theoretical Approaches International Trade Theories: attempts to gain from free trade Neo-institutionalism: created to deal with market imperfections and enhance economic cooperation Basic motive: welfare New Political Economy: emphasis on interest groups and in distributive consequences of regional integration. Marxism: attempt by capitalists to increase the level of capital accumulation. Systemic Theories Realism and Neo-realism State interests No-discrimination between politics and markets Basic motive: power Hegemonic Theory (Kenneth Waltz) Responses to globalization Regional Level and Interdependence Functionalism (Mitrany) Political integration follows economic cooperation Global leaders opt at creating international institutions Neo-functionalism (Haas) Self-empowered processes towards integration Spill-over effect Internal Politics State power Democratization Consolidation of domestic interests Eclectic Approach No general theory is enough Political motive are present Main drivers: Lack of international leadership Emerging powers / intensification of international competition / technological advances Economic security dilemmas Increased importance of economies of scale Levels of integration Characteristics No tariff barriers vis-à-vis members Common external tariff Free movement of production factors Harmonization of monetary and fiscal politics Transnational decisions beyond economic issues FTA Customs Union Common Economic Market Integration √ (NAFTA) √ √ (EEC) √ √ √ √ √ √ √ (EU) √ √ (EU) √ √ Trade consequences Creation of trade ….among ….trade diversion …towards Issue member-states third parties of rules of origin Importance 1ο «wave» 2ο «wave» After WW II (EEC) Early 1990s Creation of new / further integration of existing ones Significant increase of importance Importance Most advanced example – the EU Global Phenomenon (ASEAN, NAFTA, SADC, MERCOSUR, SAARC etc) Key: USA EU NAFTA ASEAN + 3 ASEAN SADC MERCOSUR EU NAFTA FTAA MERCOSUR ASEM Agadir Agreement Egypt, Jordan, Morocco and Tunisia Initially signed on 8 May 2001 Finally signed on 25 February, 2004 Entered into force: 6th of July 2006 Implementation: 27th of March 2007 Creates: 120 million market, combined GDP of € 200 billion. Aim: Creation of an FTA The initial agreement gives emphasis to: Arab brotherhood Charter of the Arab League, recognizing the importance of supporting joint Arab economic co-operation Agadir Agreement A Free Trade Area gradually during a transitional period to be completed at the latest by 1 January 2005 Directly links the Association Agreements between Med. Countries and EU Zero tariffs on most industrial & agricultural products No deal in services Issues of non-tariff trade barriers Clause of “substantial damage” to local industries Open to “Any Arab state member of the Arab League and the Greater Arab Free Trade area, linked to the EU through an Association Agreement or a free trade agreement” Wippel 2005 Wippel 2005 Wippel 2005 Agadir Agreement website Agadir Agreement website Agadir Agreement website Agadir Agreement website Agadir Agreement Why? Benefits? Maghreb Union Algeria, Libya, Mauritania, Morocco and Tunisia 1st Maghreb Summit (1988) Treaty of Maghreb Union (17 February 1989) 88 million people, +500 billion combined GDP Aims: The consolidation of fraternal relations The progressive realization of the free movement of persons, services, goods and capital The adoption of a common policy in all areas Maghreb Union 1991 - adopt unified tariffs on imports 1995 - full customs union It is a step away from political tensions and towards economic gains 1st Maghreb Summit (1988) Treaty of Maghreb Union (17 February 1989) 88 million people, +500 billion combined GDP Aims: The consolidation of fraternal relations The progressive realization of the free movement of persons, services, goods and capital The adoption of a common policy in all areas Maghreb Union Why? Benefits?