[Congressional Record (Bound Edition), Volume 154 (2008), Part 17]
[Extensions of Remarks]
[Page 23391]
[From the U.S. Government Publishing Office, www.gpo.gov]




                  ECONOMIC INTEGRATION OF THE MAGHREB

                                 ______
                                 

                           HON. BRAD SHERMAN

                             of california

                    in the house of representatives

                       Monday, September 29, 2008

  Mr. SHERMAN. Madam Speaker, I am placing in the record today the 
summary of an exceptionally important study on improving the global and 
regional economic immigration of the Maghreb.
  This study was a collaborative effort of Ambassador Start Eizenstat 
and Dr. Cary Clyde Hufbauer. It highlights the critical importance of 
U.S. involvement in building a prosperous and stable Maghreb.
  A draft of the full report is posted on-line by the Peterson 
Institute for International Economics at www.iie.com.

 Prospects for Greater Global and Regional Integration in the Maghreb: 
     Recommendations from the Peterson Institute, IFPRI, and IEMED

       On May 29, 2008, the Peterson Institute for International 
     Economics held an event to announce the results of a number 
     of studies that examine, from both a macroeconomic and 
     sectoral perspective, the barriers to and potential benefits 
     of economic integration among the countries of the Maghreb, 
     as well as between the region and the broader world economy. 
     The two macroeconomic studies were performed by the Peterson 
     Institute and the International Food Policy Research 
     Institute (``IFPRI''). The sectoral studies were performed by 
     the European Institute for the Mediterranean (``IEMED''). A 
     final Report will be published in October 2008.
       The studies generally show that integration among the 
     countries of the region would yield increased trade and 
     investment. Greater increases in trade and investment, 
     however, would come from such regional integration combined 
     with stronger links between the region and the global 
     economy. The studies also demonstrate the importance of 
     reducing non-tariff barriers to trade and investment, as well 
     as the pursuit of regulatory harmonization to create a more 
     positive investment climate. Finally, the experts from the 
     three institutes who presented their findings offered 
     specific policy recommendations for the United States and 
     European Union, as well as sector-specific recommendations 
     for the regional economy.


      Recommendations for the United States and the European Union

       The core objective of closer ties between the United 
     States, European Union, and the Maghreb is to transform the 
     Maghreb economies, including by encouraging new industries 
     and services, new jobs, and increased rates of growth. The 
     United States and European Union should work with the Maghreb 
     countries to enhance integration through bilateral trade or 
     investment agreements or in companion agreements.
       Aid for Technical Assistance and Capacity Building: The 
     United States and European Union can help improve the 
     business climate in the Maghreb by assisting with the 
     acceleration of reforms. Such aid could encourage the 
     harmonization of investment and regulatory regimes throughout 
     the region to the highest standards provided for in bilateral 
     trade agreements, promote sector-specific investment and 
     regulatory reforms, assist in the development of 
     transnational networks for transportation and energy 
     infrastructure, and provide the best technology for ensuring 
     that cross-border shipments can be processed efficiently and 
     securely.
       Tariffs: The United States and European Union could work 
     with their Maghreb partners to negotiate lower tariffs, or no 
     tariffs, on selected products imported from other Maghreb 
     countries.
       Rules of Origin: In the European Union's Euro-Med 
     Partnership, Algeria, Morocco, and Tunisia apply full 
     cumulation between themselves and diagonal cumulation with 
     the other pan-European countries. This approach could be 
     extended to Libya and Mauritania. The United States and its 
     Maghreb partners, building on the U.S.-Morocco free trade 
     agreement, could negotiate agreements similar to the 
     Qualified Industrial Zone (``QIZ'') program with Jordan and 
     Egypt or allow for the cumulation of inputs across the 
     Maghreb.
       Encouraging Sectoral Cooperation: The United States and the 
     European Union could focus on how they can best stimulate 
     regional cooperation at the sectoral level. Possible areas 
     for collaboration with the countries of the Maghreb are 
     highlighted below.


                        Sectoral Recommendations

       The countries of the region, with the support of the United 
     States and European Union, should work together to increase 
     intraregional integration in the major sectors of the 
     regional economy, which include energy, banking, 
     transportation, and agriculture and food.
       Energy: It is not clear whether each Maghreb country will 
     be able to mobilize, on its own, the necessary means to meet 
     increased energy demands that will accompany increased 
     regional population and economic growth. Consequently, a 
     regional response is necessary. First, the flow of energy 
     through the region is critical. For example, electricity 
     constraints could be dealt with by optimizing the 
     exploitation of electric interconnections that already exist 
     between countries. Second, sustainable development should be 
     favored to limit environmental constraints and to strengthen 
     energy supply, for example by implementing renewable energy 
     industries such as wind and solar. Finally, a global action 
     plan could seek collaborative efforts on power generation, 
     refining, transportation and distribution, and chemical 
     manufacturing by creating global companies to gain access to 
     European, U.S., and other markets.
       Banking: The regional banking sector presents notable 
     contrasts, with some countries possessing modern banking 
     systems, while those of others have regressed since the 
     1960s. Regional banks are not necessarily relied upon to 
     properly manage assets, which results in a loss of capital 
     from the region. Banks are over-liquid, and credit is not 
     readily available. In short, capital is not mobilized for 
     development. A regional financial institution could transform 
     unused liquidity into long-term financial instruments for 
     saving and investment. Such an institution could build upon 
     the future privatization of the Algerian banking system to 
     create two regional banks with shareholding in all countries 
     of the region, a mandate to encourage intraregional 
     transactions, and a mandate to ensure currency 
     convertibility.
       Transportation: The countries of the region inherited an 
     institutional framework that regulated transportation 
     infrastructure based on the French model that de-emphasized 
     competition. The failures of that model became apparent in 
     the 1980s. Although Maghreb countries were slow to treat 
     logistics as a strategic means of competitive leverage, 
     monopolies have now been dismantled, and competition 
     prevails. Morocco has an open skies agreement with Europe, 
     and Royal Air Moroc has a strong network in West Africa. The 
     first harbor ready to receive ultra-large carriers opened in 
     Tangiers in 2007. Because the value of transportation 
     infrastructure, including these projects, depends on the 
     extent of the network, the Morocco-Algeria border desperately 
     needs to be reopened. National networks currently end in cul 
     de sacs, and duplicate infrastructure--for example the ports 
     of Nador and Ghazaouet on either side of the border Morocco-
     Algeria border--has been developed. Both are examples of 
     substantial inefficiency.
       Agriculture and Food: The countries of the Maghreb are 
     close in distance, are close in agricultural production, 
     share similar patterns of consumption, and share problems 
     including aridity, water scarcity, and volatility in 
     agricultural GDP. Despite these similarities, there are 
     substantial differences among the countries in agricultural 
     and food policies, in terms of subsidies, norms, and 
     enforcement.. Regional similarities in this sector allow for 
     economies of scale, the potential for vertical integration, 
     risk-sharing for ``discovering'' new markets and new 
     products, regulatory harmonization to increase quality and 
     decrease smuggling, and collective responses to the need for 
     resource conservation.

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