Two significant trade agreements were signed recently – both are good news for openness, multilateralism and trade.
The first, EU-Mercosur, will open the way for trade on goods and services between the EU and the Mercosur trade bloc, which comprises Brazil, Argentina, Paraguay and Uruguay.
The EU is the biggest foreign investor in Mercosur countries, with an investment value of 381 billion euros in 2017, while Mercosur’s investment stock in the EU totalled 52 billion euros in the same year.
This agreement aims to unlock opportunities for smaller firms to trade, as well as strengthening workers’ rights, environmental protection, food safety standards and responsible corporate behaviour. It also aims to protect the EU’s geographically indicated food and drink products from imitations.
The second trade agreement is even more significant: the African Continental Free Trade Agreement. With it, Africa is set to become the world’s largest free trade area: 55 countries in a single market of 1.2 billion people, forming a $3.4 trillion free trade bloc. The agreement aims to eliminate tariffs on most goods travelling between countries, liberating the spread of goods and services between African economies.
The IMF estimates that this arrangement has the potential to increase trade in the region by 15–25 per cent – conditional on overcoming challenges such as violence, corruption, infrastructure issues and border protection.
The Mediterranean region, which is Europe’s frontline region into Africa, needs its own free trade agreement. This is a region of 500 million people – as large as the EU single market – producing 10 per cent of global GDP, yet it is the only region that is not connected, its potential and connectivity still untapped. Only a third of its trade is intra-regional.
An upcoming World Bank report on global value chains, due to be released in 2020, discusses the merits of global and regional value chains in international trade. It discusses how changes in technology and supply chains are altering trade paradigms and how the regions that are not part of value chains risk staying on the margins of global trade. This is a risk faced by the Mediterranean.
The region’s political leaders would be better focusing on what unites us rather than what divides us. Business leaders could do more to encourage cross-border trade, pushing for access to finance and institutions that allow for intra-regional trade.
The opportunities for growth and jobs are significant in the areas of infrastructure, energy, air and sea travel, tourism, food production and processing – leveraging the ‘Mediterranean diet’ brand; health and wellness; manufacturing; and the service sectors.
There is much to do, in so little time, given the rising pressure of unemployment or underemployment of our youth. But when there is a will, there is a way: trade matters in the Med.