| Abstract: |
The paper aims at assessing the specific impact of shallow versus deep
integration between Mediterranean (MED) countries1 and their partners in the
European Union (EU) as well as between the MED countries themselves. It relies
on dataset developed for this project concerning tariffs (as a proxy for
shallow integration) and Non Tariff Measures (NTMs)2 (as a proxy for deep
integration). Additional data are also included in order to take into account
other trade costs, especially transport costs and logistics costs. In this
regard, an original dataset of maritime freight cost (Maersk, 2007) is
introduced as well as the trade logistics performance (TLP) index produced by
the World Bank. Such datasets are useful for providing additional insight into
deep integration. The paper starts by calculating the magnitude of NTMs in
terms of ad valorem tariff equivalent (AVEs). The estimation of NTMs through
ad valorem equivalents (AVEs) shows that Algeria and Jordan have the highest
value of AVEs, whereas Tunisia, Morocco, and Egypt have the lowest value. A
gravity model is then estimated with special emphasis on trade costs which are
the crucial point in our research study. Given the limitation of data on NTMs,
the gravity model is estimated for only one year (2001), and for each MED
country. Trade costs are represented by tariffs, AVEs of NTMs, and transport
and logistics costs. The idea is to test which of the three elements of trade
costs are the most impeding to bilateral trade between MED countries and EU
countries as well as amongst MED countries. The model shows that tariffs,
NTMs, and trade and logistics costs have a significant impact on trade, but is
highly vivid in countries suffering from high tariff rates, prevalence of
NTMs, and trade costs. A number of simulations are carried out trying to
differentiate between the impact of partial liberalization and full
liberalization on trade creation. The results obtained show that full
liberalization has a significant effect whether it is only related to shallow
integration (tariff removal) or deep integration (NTMs and trade and
logistics). The effect is higher if trade costs and logistics are improved.
The results are far less if only partial liberalization takes place and in
several countries is insignificant implying that marginal reductions in NTMs
or tariffs cannot always help to create trade. Finally the study shows that
there is a huge potential for enhancing trade amongst MED countries if trade
costs are lowered, logistics is improved, and NTMs are abolished. |