Trade Across the Mediterranean: An exploratory investigation

Abstract

This paper examines trade across the Mediterranean against the background of the efforts to foster both North-South and intra-South trade flows as engines of growth. We first consider the shares of these regions (and of the countries constituting them) in the trade of each other as indicators of trade importance; and relative trade intensity indices – the ratio of these shares to the corresponding ones in the trade of the rest of the world – as measures of trade affinity and as means of identifying 'natural' trade partners. Because of the sheer size disparity, trade with the North-Med is more important to the South-Med than the other way round. But both regions display trade affinities with each other, making them natural trading partners, though there are wide disparities between individual countries within each region. Insofar as being natural trading partners forms a criterion for economic integration, there are promising prospects for some form of integration between the countries on the North and the South littorals of the Mediterranean. Contrary to the popular view of Arab South-Med trade being dominated by cultural, religious and linguistic commonalities, our findings show that geography still matters: the Arab South-Med affinity with the group of EU countries not lying on the Mediterranean littoral is much lower than with those that do. Arab commonality also seems to be more important in the trade of the Levant than in that of the Maghreb, whose trade affinities with its former colonial powers suggest the colonial heritage there to be still of importance. More generally, the differences observed here between the Maghreb and the Arab Levant have relevance to the EU's Barcelona Process policy, which encourages the formation of a South Mediterranean Free Trade Area. The findings of our study suggest that though the Arab Levant constitutes indeed a natural trading area, this is not as true for the region as a whole.