The Dynamics of Overlapping 'Shallow' and 'Deep' Economic Integration : Greater Arab Free Trade Area and European Neighborhood Policy in the Mediterranean

In the Mediterranean Basin two projects of economic integration overlap, namely the project of a Greater Arab Free Trade Area (GAFTA) and a process of economic integration of the European Union (EU), which neighbors into EU's Internal Market; the EU endeavors to strengthen cooperation with the neighbors practically on all fields. For decades, in spite of high-pitch rhetoric about Pan-Arabism, practical Arab integration was very limited. Hardly any other region was so divided politically. Furthermore, almost all Arab countries followed inward-oriented development strategies with high protectionist tariffs. These severely constrained economic transactions among the Arab countries. Thereby the Arab world became one of the most fragmented areas in the world. Spillover effects from economic to political integration, which played an important role in European integration could not take place. From the 1970s onwards a slow and often inconsistent transition to open marked economies began. It improved the conditions for Arab economic cooperation considerably, and in 1997 the GAFTA project was launched. It generated indeed increased trade. However, so far it remained ‘shallow' integration, implying tariff reductions at the border, but not ‘deep' integration with changes behind the border, such as common competition rules or common products standards. Therefore, numerous non-tariff barriers still exist, and competition remains distorted. Arab voices demand ‘deep integration', but this requires political decision-making and dispute settlements which would restrict state sovereignty. Currently not many indicators point at such a transition in the Arab world. On the other hand, ‘deep' integration has made considerable progress among the EU and some neighboring countries, notably Tunisia and Morocco. The impacts have been far reaching, also in the political sphere. This process is likely to impact some Arab countries much more than Arab integration. Theoretically it can be explained in terms of neofunctional theory