Economic Research Forum (ERF)

Prospects for a closely integrated Euro-Arab Mediterranean region

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The Euro-Med partnership of over 40 countries aims for closer integration of the region, fostering the development and stability of the southern and eastern members, and narrowing economic and political gaps between North and South. This column explores its prospects, concluding that the rationale for a politically integrated Euro-Arab Med region does not seem to have been adequately thought out: it is a matter that deserves deep study.

In a nutshell

Among the countries of the Euro-Arab Med region, there are clearly enormous differences in the extent of the public sector’s role in the economy, the level of their socio-economic development and the political regimes in place.

Any meaningful process of closer integration of the Euro-Arab Med area would need to address all these differences in order to lay out a realistic plan for promoting integration and harmonisation.

The case for Euro-Arab Med integration at the economic level is easier to visualise and implement than at the political level.

The Union for the Mediterranean brings together all 28 countries of the European Union (EU) and 15 countries of the southern and eastern Mediterranean. The declared objective of this Euro-Med partnership is to work for shared prosperity through a process that aims to bring about a close integration of the region, thereby fostering the development and stability mainly of the southern Med countries, and narrowing economic and political gaps between North and South.

But realisation of this objective faces important hurdles as the Med region is made up of varying politico-economic spheres that will not necessarily converge along this path. What seems to stand in the way of developing such a partnership (and specifically of a Euro-Arab Med partnership) is not so much economic inequalities or varying stages of development, as the gap that separates political governance in the North and Arab South, and the environment of conflict that prevails in the Middle East.

Looking at economic inequalities, it would seem that generally they are less severe in the northern Med countries than in the southern Arab Med region. While research on the relationship between income inequality and growth does not point to universally agreed findings, they tend to assert first, that inequality is harmful to growth; second, that inter-country inequality seems to have been declining since 2000; and third, that inequality is mainly attributable to different economic conditions among countries.

Pending further verification, the implication of these findings is that should a move towards greater Med integration succeed and bring in its wake closer economic harmonisation, then this would result in beneficial growth to the region and especially the Arab Med countries. Here, a number of questions would remain to be addressed though not taken up here, for example:

  • What sectors constitute the drivers of future growth in the Arab South: industrial innovation and/or reliance on energy exports and tourism among others?
  • To what extent will the Arab Med (and other) developing economies be able to provide work opportunities for their ever expanding educated class concurrent with widening domains of specialisation?
  • How do we identify the determinants of the different economic conditions among countries that affect within-country inequality and what about other non-economic conditions that may be equally relevant?

Whatever the answers to these questions, the issue of political harmonisation matters crucially. This indeed is a major lesson of the success of the EU itself. In contrast, the inability of the Arab Med countries and the Arab countries more generally to come closer politically is a major explanation for why past Arab integration efforts have not been successful.

Taking Polity IV, a widely used measure of political governance, we observe that despite limited improvement in the scores of the Arab Med countries in the past decade, as of 2017, the majority remains classified as autocracies or anocracies with only Lebanon and Tunisia considered to be democracies.

As for the northern Med countries, except for Albania (and Turkey), they all are classified as democracies. In short, a broad disparity in political governance continues to separate the northern and southern Arab Med regions. This is a matter that deserves close examination for several reasons.

To begin with, political governance and accountability are central to the question of any meaningful integration in the Euro-Arab Med region, especially given that the nexus between political and economic institutions appears to be strong. In other words, inclusive political institutions lead to inclusive economic institutions that are better situated (than exclusive institutions) to create the incentives for robust and equitable development (FEMISE, 2013.)

But whatever impact political institutions have on social and economic development, it is generally agreed that democracy and freedom are essential ingredients of human wellbeing that go beyond objective material measurements of inequality. Research on the causes of the Arab uprisings indicates that civil and political freedoms, emancipation from oppression and fighting corruption matter to the population as much as social and economic justice, and other socio-economic questions (World Bank, 2015).

Hence, unless the Arab Med countries move in the direction of more liberal and democratic governance (implying closer political harmonisation with the North), the process of integration would face major obstacles if not altogether fail to reach its intended objectives, including the desired development model.

This is especially the case when it is recognised that the Euro-Arab Med region comprises varying sub-regions with different politico-economic contexts:

  • The northern European part includes two sets of countries: those that have been at the core of the EU; and the East European countries, which following the fall of the Soviet Union in 1990, are yet to join this Union fully, Slovenia apart.
  • The southern Arab part has commonalities among its various countries but also differences: North Africa is closer to Western Europe and more distant from the major conflicts afflicting the Middle East, let alone the inability of the Arab states to integrate.

These differing contexts matter in that they have their own separate but determining influences on any process of closer integration in the Euro-Arab Med region. Clearly, the conditions and consequences of any potential agreement on closer economic relationships would be influenced by the bargaining powers of the negotiating parties.

In turn, this would depend on whether the Arab countries could negotiate as an effective counter Med bloc or only individually, whereby the Euro-Arab Med partnership would simply amount to an enlarged EU that incorporates its southern neighbours. The nature of such agreements would be similarly influenced by the extent of the public sector’s role in the national economy of individual countries, the level of their socio-economic development and the political regimes in place.

Any meaningful process of closer integration of the Euro-Arab Med area would need to address all these differences in order to lay out a realistic plan for promoting integration and harmonisation intended to advance various economic, political and other benefits to the countries of the region that otherwise would not accrue to them.

Whatever pre-requisites need to be met to achieve this objective, it remains true that the case for Euro-Arab Med integration at the economic level is easier to visualise and implement than at the political level.

But whereas the pre-requisites for and benefits of economic integration have been extensively debated and explained, the political side of the equation remains greatly understudied. This is not surprising, especially since the Arab region, and in particular the southern Med countries within it, continue to face major unresolved conflicts.

The rationale for a politically integrated Euro Arab-Med region does not seem to have been adequately thought out. It is a matter that deserves deep study.

Further reading

Amendola, Adalgiso, and Roberto Dell’Anno (2014) ‘Income Inequality and Economic Growth: An Empirical Investigation in Mediterranean Countries’, Rivista Italiana di Economia Demografia e Statistica 68(2).

Ansani, Andrea, and Daniele Vittorio (2012) ‘About a Revolution: The Economic Motivations of the Arab Spring’, International Journal of Development and Conflict 5(3).

Bibi, Sami, and Mustapha Nabli (2010) ‘Equity and Inequality in the Arab Region’, ERF Policy Research Report No. 23.

Boushey, Heather, and Carter Price (2014) How are Economic Inequality and Growth Connected, Washington Center for Equitable Growth.

Dabla-Norris, Era, Kalpana Kochhar, Frantisek Ricka, Nujin Suphaphiphat and Evridiki Tsounta (2015) Causes and Consequence of Income Inequality: A Global Perspective, IMF.

Dang, Hai-Anh, and Elena Ianchovichina (2016) ‘Welfare Dynamics with Synthetic Panels: The Case of the Arab World in Transition’, World Bank Policy Research Working Paper No. 7595.

Devarajan, Shantayanan, and Elena Ianchovichina (2017) ‘A Broken Social Contract, Not High Inequality, Led to the Arab Spring’, Review of Income and Wealth.

Elbadawi, Ibrahim, and Samir Makdisi (2017) Democratic Transitions in the Arab World (eds), Cambridge University Press.

FEMISE (2013) Report on the Euro-Mediterranean Partnership: Towards a New
Dynamic to Sustain the Economic and Social Balances.

Hakimian, Hassan, et al (2013) Inclusive Growth in MENA: Employment and Poverty Dimensions in a Comparative Context, FEMISE Research Report No. 35-16

Naguib, Costanza (2015) ‘The Relationship Between Inequality and GDP Growth: An Empirical Approach’, LIS Working Paper Series No. 631.

World Bank (2015) Inequality, Uprisings, and Conflict in the Arab World.

 

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