Book Reviews

Ahmed Galal and Bernard Hoekman (eds.). Regional Partners in Global Markets: Limits and Possibilities of the Euro-Med Agreements. London: CEPR/ECES, 1997. Pp. 317.

This very well edited book is made up of contributions presented at a conference organized in Cairo by the Egyptian Center for Economic Studies (ECES) in mid-1996. At that time negotiations between the EU and Egypt on a new association agreement under the umbrella of the new Euro-Mediterranean Partnership had just started. More than two years later these negotiations have not yet been concluded, basically because Egypt has found that the deal proposed by the EU is not such a good one. The latter is not offering any new real concessions in terms of market access for Egyptian agriculture. Tariff-free access for Egyptian industrial products was already guaranteed in the 1976 EC-Egypt cooperation agreement. Meanwhile, the EU expects Egypt to eliminate tariffs on industrial imports originating in the EU `to comply with the WTO rules on FTAs'. The various authors of the papers for the ECES conference, particularly the non-Egyptian ones, stress that this would be good for the Egyptian economy (see e.g. the articles by Lawrence, Page and Underwood). It would help to `anchor' trade and other economic reforms engaged by the Egyptian government in the last decade, it would push it to make more reforms and it would `shake' the economy, provided that association implies so-called deep integration and not only tariff elimination. Not only that. Deep integration, we are told, means that foreign investors will have many good new reasons to put their money in Egypt. The reader, however, gets the impression that, following the EU agreements with Tunisia and Morocco, there will not be deep integration because none of the partners is prepared for it. In particular, the EU is not proposing the kind of treatment offered to the CEECs (which will ultimately lead to membership) nor is there the kind of situation offered by the US to Mexico in the context of NAFTA. This is why a comparison with the latter case, as is undertaken by Francois in his paper, seems inappropriate. Neither can an analysis of the ASEAN and AFTA records presented by Dean De Rosa be of much help because the latter are agreements between developing countries, not of the North-South type. And, so, the only `real' effects of all the new Euro-Med agreements might be confined to the neo-classic short-run static effects. In welfare terms, these might affect North African economies negatively or leave welfare pretty unaffected because, according to some of the authors in this volume, trade diversion effects might be non-negligible (see articles by Brown, Deardorff and Stern on Tunisia; and by Konan and Maskus). This is actually why the Egyptian government seems right in insisting that agriculture must be included in the free trade deal. It would be highly export-expanding for Egypt and trade-creating for the EU. But this implies that the EU must also `shake' itself which, quite ironically, is a non-starter.

The last part of the book focuses on some specific Egyptian issues and economic sectors, such as its pharmaceutical industry or the financial service sector. Because of the limitations of the still unsigned agreement, the respective authors reach the conclusion that it is in fact not the new association agreement but other events, such as the application of the TRIPs agreement of the WTO, that will have an overriding effect on the economy. On the other hand, the very comprehensive overview of the textile case leaves some hope that the agreement might actually make a (positive) difference, although the authors (Kheir-El-Din and El-Sayed) assume that the EU will accept the cumulating effect of origin rules in order to reach that conclusion. A very interesting chapter by Diwan deals with expected changes in Egypt's income distribution deriving from the application of the EU-Egypt agreement. Linking these two things is a rather unusual, and thus refreshing, exercise. But as happens in other contributions, Diwan tends to forget in his projections that market access to the EU is not going to change much.

To sum up, we have here a volume which includes very solid, competent and serious research, in many cases using up-to-date quantitative techniques. To be commended in particular is both the overview and the concluding chapter written by Galal and Hoekman, which assist the reader very effectively in reaping the greatest benefit of the exercise. This volume shows that the new Euro-Med Agreements are not a panacea, but an opportunity for North African governments to take other steps that they should and would have to do anyway.

Alfred Tovias
The Hebrew University

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