The goal of the paper is to analyse the level of integration among the Middle Eastern and North African countries, in relationship with the European Union.
Background
The so-called “Mediterranean Union” is composed of the European Union (EU) and the Middle East and the North African (MENA) region. The Union is considered as a new phase of the Euro-Mediterranean Partnership. Geographical proximity and economic growth in Mediterranean countries play an important role in promoting integration. Hence, renewed growth in Mediterranean countries will promote greater regional integration, both with European countries and within the Southern Mediterranean. Openness of the Middle East and North Africa with the global economy has been improved. However, the MENA region, compared to other regions, is still less globally and regionally integrated in terms of trade, investment and capital flows – with the exception of oil – to obtain the benefits of the current wave of globalization.
Data/Method
The present study selects 12 countries within the MENA region and the EU as a whole. An augmented gravity model is used. We use a cross-section time-series analysis based on bilateral trade. The dependent variable is exports of each country from MENA region to the EU and within themselves, and independent variables are the traditional gravity variables, Hecksher Ohlin variables and convergence variables. Data on exports are obtained from the UN comtrade database. In addition, data on independent variables are obtained form the World Bank, International Monetary Fund (IMF) and CEPII.
Results
We find that the gravity model does not apply to the region. Trade flows in this region follow a very different pattern mostly driven by political relationships and not so much by the usual gravity equation.