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The Euro-Med Free Trade Area: An Empirical Assessment of the main Trade Agreements' Effects

Elmallah, Mariam (2014): The Euro-Med Free Trade Area: An Empirical Assessment of the main Trade Agreements' Effects.

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This paper provides an assessment of the effects of the main trade agreements implemented in the Euro-Mediterranean region. The empirical analysis in this paper is based on a gravity model for a panel of 14 countries (7 South Mediterranean, 4 EU member states in addition to USA and Japan) for the time span 1991 till 2012. The trade agreements of interest are the Pan-Arab Free Trade Agreement (PAFTA), the Agadir Agreement and the Association Agreements (AAs) signed between the EU and the South Mediterranean countries (SMCs) and are considered the main building blocks for the Euro-Med Free Trade Area. Results show a positive and significant effect of both the PAFTA and the Agadir Agreement on the exports of their signatories. Differently, signing the AAs seems to have no significant impact on the exports of the countries on average as well as the exports of the majority of the SMCs in specific. However, there is a positive and significant impact of the AAs on the exports of the EU member states. When analyzing the behavior of the single countries, emerges a positive impact of PAFTA on the exports of Egypt and Morocco, a negative impact on Tunisia and insignificant impact on Algeria and Jordan. The Agadir Agreement benefited both Egypt and Morocco, leaving no significant effects on both Tunisia and Jordan. Finally, signing the AAs had a positive impact on Egypt, Morocco and Turkey, a negative impact on Algeria and Jordan, and insignificant impact on the exports of both Israel and Tunisia. These results imply the success of the intra-regional integration efforts, unlike the outcome of the inter-regional AAs. The current design of the AAs seems to have asymmetric outcome on its signatories. The persistence of this problem can hinder the path towards a mutually beneficial and fully fledged Euro-Med Free Trade Area.

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