The universal language of trade, Part II

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Regional integration in the Maghreb, as a step toward global integration, starts with a plan, and a program to implement it.

Link to Part 1

The last few years have been sobering for the Maghreb.  The sudden drop off in demand from the European Union, as a result of the financial crisis, was a stark lesson in the perils of over reliance on a single trading partner, no matter how large. It also revealed how the lack of integration left the region fully exposed to external shocks. The rise of youth unemployment, and the manifestation of popular discontent in the ‘Arab Spring,’ has also made economic growth a priority, as the only way to satisfy the demand for more and better opportunities. 

There is renewed interest in an idea that has been around for some time, regional integration, as a strategy for tackling these issues.  The benefits of integration, which would put the Maghreb in a better position to take advantage of a wider range of opportunities available in the global economy, were made abundantly clear at a ministerial workshop on regional trade held in the Moroccan capital, Rabat. Hosted jointly by the World Bank, the Moroccan ministry of transport and equipment, and the Arab Maghreb Union, the workshop featured a number of international examples of how integration had helped regions develop and grow. It was shown to be not only a source for increased internal trade, but also as a vital step toward a more competitive engagement with the global economy. Mona Haddad, World Bank Sector Manager for International Trade pointed out that the global economy is now dominated by complex production chains. While Morocco and Tunisia have made individual efforts to integrate into European production chains, a vision emerged at the workshop of a regional production chain with the Maghreb as a logistics center for the Arab World. This goal could only be achieved with closer integration.

The event in Morocco was the final stage of two year process of extensive research and consultations, including two similar workshops last year in Algeria and Tunisia. It culminated in a new World Bank report which translates the renewed regional motivation toward economic integration into a detailed, six-part action plan. The plan calls for measures to facilitate trade that would ultimately require closer regional integration. It focuses on eliminating the region’s many, non-tariff barriers, establishing common regulations and procedures, and building up the needed infrastructure and capacities. The idea is to create an environment that promotes trade, with rules that are easy to follow and predictable governing trade routes that link the entire region. Once linked together by common physical infrastructure and shared regulations, the Maghreb would be in a position to realize wider regional ambitions, such as a transport hub for the Middle East, and develop the sort of supply chains that would allow it to produce goods efficiently and at competitive costs, for export to a greater number of potential global trading partners. It would also make the region an attractive destination for foreign direct investment. The proposed action plan includes short, medium and long term measures, and identifies the actions needed at both a country and regional level, to lay the groundwork for the achievement of these longer range goals.

All the elements for significant forward momentum were present at the workshop: Clear motivation; a concrete plan to channel it into and the presence of various development agencies with experience helping other regions through similar processes, ready to share their knowledge and lend their support. A detailed program for implementing the plan, which had been further refined during the consultation process for the report itself, was also discussed.  It maps out a concrete path toward better integration, including steps such as the immediate need for coordination among customs authorities, to be followed by the regional adoption and implementation of international conventions on the shipping and handling of goods, with the eventual goal of devolving some customs processes to authorized operators involved in regional trade. The program was met with enthusiasm by workshop participants, along with a universal acknowledgement that the Arab Maghreb Union, a long standing institution that was the product of earlier efforts at integration, should coordinate its implementation.

Yet despite the commitment and the momentum, there is no underestimating the challenges. To name a few:  Algeria would have to reorient and diversify its economy, currently heavily focused on oil, which the Algerian minister of trade, Mustapha Bendada claimed was already a central part of their latest development plans, while Mauritania would have to build the institutional capacities to match its more developed neighbors. Integration will, of course, help both these processes, allowing for the sharing of technology and expertise between neighbors of differing development levels. Regardless of the challenges, the essential ingredients for all efforts at facilitating trade and boosting integration will be coherence and coordination. As Abdemoula Ghzala, World Bank Lead Infrastructure Specialist and leader of the team that produced the report, said: “A chain is only as strong as its weakest link.”  

With a summit of Maghreb heads of state scheduled for October, the first in almost two decades, the goal of closer regional integration may pick up further steam.  As with any reform process, there will be immediate steps coupled with the need for deeper, structural changes, which play out over a longer timeframe. It will not be an instant solution for job creation, but as other parts of the world have shown, the ultimate benefits of increased growth and better integration with the global economy are worth a long term commitment. The long range goals will be worth keeping in mind as the countries of the Maghreb review the action plan, with the aim of coming to an agreement on a coordinated launch of the implementation program.

“There is now an economic motivation for integration which may not have been so clear in the past,” said Jonathan Walters, Regional Director for Programs and Partnerships at the World Bank. “It is the path toward better integration into the global economy, with the dual advantage of increased regional and international trade. The Maghreb has an opportunity; it is time to seize it.”

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