The European Neighborhood policy: towards a new EU-MED partnership?

Pierluigi Montalbano

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of the present work is to test empirically the feasibility of the broad expectations regarding the effects of ENP on the EU-MED economic partnership. More specifically, it presents firstly a gravity analysis of the patterns of trade in the EU-MED area to test the actual dimension of unexploited trade as well as the level of trade potentials after the ENP and the EU-MED FTA will take place. Secondly, it analyzes the relative degree of macroeconomic instability in the region by checking the patterns of volatility of per capita consumption in the EU-MED partner countries. The gravity estimates show the existence of a large amount of unexploited trade in the context of the EU-MED partnership but a slow pace of exports’ growth performance driven by ENP and EU-MED FTA project, even in the most “optimistic” scenario. The analysis of volatility highlights the MPs low ability to maintain a stable path of consumption. Thus, MPs remain more exposed to the occurrence of the external negative covariate shocks, associated with trade liberalization, with a strong probability of long term negative effects in aggregate welfare, even in a context of positive growth. According to these first results, ENP seems to be unfit to promote further integration and liberalization in the area as well as the “stake in the internal market” for MPs. It undermines a number of key issues and collateral policies which remain fundamental for the success of the EU-MED integration process, such as the role of regional South-South integration and the adoption of early warning mechanisms and preventive policies to reduce the probability of negative shocks induced by trade liberalization.

Keywords: European Neighborhood Policy; EU MED Partnership; Gravity Model; International Trade; Macro Volatility (search for similar items in EconPapers)
JEL-codes: E00 F10 F17 (search for similar items in EconPapers)
Date: 2006-12
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