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  The word «trade» has historically been associated with the word «Mediterranean». This was the bridge through which, for centuries, the world's leading economic powers exchanged all kinds of goods. Today, the word «trade» is associated with China, Japan, Germany, Brazil, Asia and Eastern Europe but is rarely associated with the Mediterranean Sea. In fact, only 2% of the world's trade takes place between the countries of the European Union and those of the southern coast of the Mare Nostrum. The Mediterranean sometimes seems to be a boundary dividing the rich countries of the European Union from the developing countries located on its southern shores. But is this true?

  The socio-economic situation of the EU countries is well-known but that of their neighbours is perhaps not so familiar.(1) A brief review of the main macroeconomic figures helps us to position these countries with respect to the main developing economic areas. As can be seen in the table below, the population of the developing Mediterranean countries totals 201 million. Quite a significant size; similar to that of all the countries in Eastern Europe. Their GDP per capita, 7,532 dollars per inhabitant, is slightly higher than that of the emerging Asian countries, although notably lower than in Latin America and Eastern Europe. One of the surprising aspects is that their growth has not been much lower than that of the other large emerging areas. In fact, it's slightly higher than that of Latin America and Eastern Europe. However, the IMF believes that their growth potential in the medium/long term is somewhat lower.

  Given these figures, one might think that there should be substantial capacity for growth in trade between the different countries around the Mediterranean. Numerous projects and programmes have shaped relations between the developed countries of the northern coast of the Mediterranean with their neighbours to the south. In this respect, the 1995 Barcelona Conference, bringing together Foreign Office ministers from the EU countries and the rest of the countries around the Mediterranean, was a turning point. All expressed their readiness to create an area of common prosperity in the Mediterranean and acknowledged that this would require a greater degree of integration and cooperation. One of the key policies agreed in the Barcelona Declaration was the gradual creation of a free trade area between all signatory countries.

  (1) The following are considered to be developing Mediterranean countries: Morocco, Algeria, Tunisia, Libya, Egypt, Israel, Palestine, Lebanon, Jordan and Syria.

  The process has been slow but, today, all developing Mediterranean countries have now signed bilateral trade agreements with the European Union. But realizing that the economic and governance reforms had not been enough to attract the private investment required to improve the region's standard of living, in 2008 the Secretariat of the Union for the Mediterranean was set up. In addition to furthering free trade agreements, this initiative also aims to identify, coordinate and promote regional and transnational projects in areas such as energy, the environment and education.

  In spite of such institutional efforts, the growth capacity of Mediterranean trade has yet to get going. In fact, a Report by the Center for Social and Economic Research that analyzes different studies on the growth capacity for this region's trade concludes that, at present, this is quite limited.(2) An article by Juan M. Ruiz and Josep M. Vilarrubia goes further and offers a surprising result.(3) According to the authors, while the developing Mediterranean countries' level of exports to EU countries is close to its potential or, in some cases, slightly over-exploited, the margin for these countries to increase their exports to the United States is wide.

  For a better insight into the factors that are still eroding growth potential among Mediterranean countries, an extensive survey was developed for firms trading with these countries. This survey shows that, in spite of the efforts made to further free trade agreements, most companies in the European Union were not aware of them and also believed they could not benefit from them. On the other hand, entrepreneurs in developing countries are aware of these agreements. In any case, most believe that the European Union could do more to promote economic integration in the Mediterranean region. To this end, they believe that the process of trade liberalization needs to be completed, getting rid of other, non-duty barriers to trade and improving legal security and the ease of doing business in the region.

  The conclusions of the Mediterranean Week of Economic Leaders last year, one of the main events to reflect on and integrate the different Mediterranean countries, also highlight the main issues in which the region's economic policy must make progress. Of note is the encouragement of public-private cooperation in projects promoted by the Secretariat of the Union for the Mediterranean, the creation of a Mediterranean development bank and of a Mediterranean transport agency. In this respect, at this year's summit, to be held in November in Barcelona, Brussels' support of the Mediterranean railway corridor will surely be valued positively.

  The list of aspects that crucially need to be improved is long and unlikely to be completed within a short period of time. However, now more than ever, the countries of the European Union must get involved as much as possible. The regime changes occurring over the last few months in many of the countries on the shores of the Mediterranean have opened the door to economic and social changes that had been unthinkable until very recently. The European Union cannot let such an opportunity pass.

  (2) Economic Integration in the Euro-Mediterranean Region, Center for Social and Economic Research.

  (3) The wise use of gravity models: export potentials in the euromed region. Juan M. Ruiz and Josep M. Vilarrubia. Working Paper 720 of the Bank of Spain.

  This box was prepared by Oriol Aspachs Bracons

  European Unit, Research Department, "la Caixa"

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