Mediterranean Policy of the European Community: A Study of Discrimination in Trade

141 Pages·1986·12.995 MB·English

by  Richard Pomfret (auth.)

MEDITERRANEAN POLICY OF THE EUROPEAN
COMMUNITY
MEDITERRANEAN POLICY
OF THE
EUROPEAN COMMUNITY
A Study of Discrimination in Trade
Richard Pomfret
Palgrave Macmillan
ISBN 978-1-349-07980-3 ISBN 978-1-349-07978-0 (eBook)
DOI 10.1007/978-1-349-07978-0
©Trade Policy Research Centre 1986
Softcover reprint of the hardcover 1st edition 1986
All rights reserved. For information, write:
St. Martin's Press, Inc., 175 Fifth Avenue, New York, NY 10010
Published in the United Kingdom by The Macmillan Press Ltd.
First published in the United States of America in 1986
ISBN 978-0-312-52817-1
Library of Congress Cataloging in Publication Data
Pomfret, Richard W. T.
Mediterranean policy of the European Community.
Bibliography: p.
Includes index.
1. European Economic Community - Mediterranean
Region. 2. European Economic Community countries -
Commerce-Mediteranean Region. 3. Mediterranean
Region - Commerce - European Economic Community
countries. I. Title.
HC241.25.M4P66 1985 382 '.094 '01822 85-11882
ISBN 978-0-312-52817-1
Contents
Trade Policy Research Centre v
List of Figures ix
List of Tables x
Biographical Note XI
Preface xii
Abbreviations xv
1 DISCRIMINATION AND THE GATI 1
Historical background 2
Discrimination and the birth of the GAT I 3
GA TI rules on discrimination 5
Issue of discrimination between 1947 and 1967 6
Proliferation of preferences 9
Issue of discrimination today 11
Outline of the book 12
2 ECONOMIC RELATIONS BETWEEN THE
EUROPEAN COMMUNITY AND MEDITERRANEAN
COUNTRIES 15
Birth of the global Mediterranean policy 16
Perspective of the Mediterranean countries 24
Question to be answered 31
3 ECONOMICS OF PREFERENCES 33
European Community preference for Mediterranean
countries 36
Reverse preferences 39
Preferences and development strategy 40
Preferences and factor flows 41
Do Mediterranean preferences matter? 43
4 EFFECTS OF PREFERENTIAL AGREEMENTS ON
TRADE 46
Greece and Turkey 48
vii
viii Contents
Maghreb countries 52
Other Mediterranean countries 57
Textiles and clothing 59
Summary of the evidence 62
5 EFFECTS OF PREFERENCES ON FOREIGN DIRECT
INVESTMENT 63
Emergence of export-oriented foreign direct investment 64
Mediterranean preferences and foreign investment 65
Case study of Malta 68
Conclusions 74
6 PREFERENCES AND THE TREATMENT OF
'SENSITIVE PRODUCTS' 76
Agriculture 76
Textiles and clothing 84
Conclusions 93
7 EUROPEAN COMMUNITY ENLARGEMENT AND
EROSION OF PREFERENCES 95
Second enlargement 95
Mediterranean countries outside the Community 98
8 SUMMARY AND CONCLUSIONS 101
Notes and References 105
Bibliography 119
Index 124
List of Figures
3.1 Impact of the European Community's preferences on a
Mediterranean country's export good 37
3.2 Impact of removing a tariff 39
ix
List of Tables
2.1 Mediterranean countries having close economic ties
with the European Community: some basic data 17
2.2 Composition of the Mediterranean countries' exports 26
2.3 Ten leading exports as a percentage of total exports,
1977 27
2.4 Share of eleven Mediterranean countries in European
Community imports of selected products, 1977 28
2.5 Source of French imports of fruit, wine and olive oil 30
4.1 European Community's textile and clothing imports
from Mediterranean countries, 1970-76 60
4.2 European Community's imports of textiles and clothing
from Mediterranean countries in relation to various
control groups 60
5.1 Net direct foreign investment in Mediterranean
countries, 1970 and 1980 64
5.2 Malta: five leading exports, 1977 70
6.1 European Community's nominal tariffs and nominal
tariff equivalent of variable levies, 1969 and 1970 80
6.2 Nominal and effective rates of protection from the
European Community's tariffs and variable levies on
selected agricultural products, 1969 and 1970 81
6.3 Distribution of spending by the Commission of the
European Community, 1979 83
6.4 European Community's imports of MFA products by
country, 1977 and 1979 91
X
Biographical Note
Having earned his Ph.D. in economics in 1974, Richard Pomfret was
a research fellow at the Institut fur Weltwirt-schaft at the University
of Kiel, West Germany, until 1976, working first on a comparative
project on trade policies and economic development and then on a
joint project with Tel-Aviv University concerning economic relations
between the European Community and Israel. He then taught in the
economics department of Concordia University in Montreal and as a
visiting fellow at La Trobe University, Melbourne, before moving to
the Bologna Center of the Johns Hopkins University, where he gives
graduate courses in international economics and a seminar in EC
Mediterranean economic relations. He is the author of Trade Policies
and Industrialisation in a Small Country: the Case of Israel and The
Economic Development of Canada, and co-author of Israel and the
European Common Market. He has contributed essays to several
conference volumes and written articles for professional journals
including the Journal of Economic History, World Development and
the Economic Journal.
xi
Preface
Most-favoured-nation (MFN) treatment, embodying the principle of
non-discrimination, means an obligation to treat all trading partners
equally and was, indeed, the cornerstone of the General Agreement
on Tariffs and Trade (GATT), the agreement intended after World
War II to govern the trading policies of the market-oriented econom
ies. The importance of the principle is explained by the bitter experi
ence of the discriminatory protectionism of the 1930s. When rebuilding
the international economic order after World War II, many of those
responsible were determined to avoid a repetition of such economically
costly and politically damaging policies. In consequence, the GAIT
permits a commitment to the radical liberalisation of trade implicit in
customs unions and free trade areas, but it was intended to preclude the
creation of complex hierarchies of the preferred and the victimised.
The European Community itself falls within the GAIT's pro
visions for departures from the principle of non-discrimination to form
free trade areas or customs unions, but its plethora of preferential
trading arrangements with developing countries do not. Among the
most important of these is the Community's global Mediterranean
policy. The countries that receive the preferences obtain economic
benefits, but, for the Community, the objective is political. Trade
policy is the Community's principal instrument of foreign policy. The
aim served by the offer of preferential access to the Community's
markets is the creation of a sphere of influence. These policies are
therefore not merely against the letter of the GATT. They are
against its spirit as well.
Nevertheless, as the author of the present study shows, discrimi
nation has progressed a long way. The Mediterranean policy of the
European Community is only one element of a network of prefer
ences that has left the MFN tariff of the European Community
applicable to only a small handful of suppliers (namely the United
States, Japan, Canada, Australia, New Zealand, South Africa and
Taiwan). While this list does include the two most important econ
omies, it should be remembered that in the case of Japan 'voluntary'
xii