Euro-Mediterranean Economic Integration: An Empirical Investigation of Trade Flows.

Abstract

Greater trade and financial integration are implicitly identified by the Barcelona Conference as the mechanism to promote “peace and shared prosperity†and “sustainable and balanced economic and social development†in the Euro-Mediterranean Area. Indeed, the Conference has identified the establishment of the Euro-Mediterranean Free Trade Area (FTA) as the essential element to build the Euro-Mediterranean partnership. The main objective of this paper is to verify the extent of economic integration between the countries that will form the FTA and assess the impact of European integration and enlargement on the process of Mediterranean economic integration. In particular, the use of a gravity model specification seems particularly well suited in order to compare actual and potential integration between the Euro-Mediterranean countries and estimate the integrating/disintegrating effect of EU integration and enlargement before the establishment of the Euro-Mediterranean FTA.