From the vantage of space, say the International Space Station (ISS), the Mediterranean appears as a great lake bordering the Atlantic expanse. The narrow 9-mile wide Strait of Gibraltar that separates Spain from Morocco and North Africa from Europe, all but disappear at that height.
To the West is the Atlantic Ocean and far to the east is Asia and the Middle East, to the north sits Europe and to the south the great African continent. From the beginning of civilizations, the Mediterranean Sea has acted both a barrier and conduit for culture and trade between three continents.
At twenty thousand feet the sea below is crisscrossed with countless wakes of ships plying courses millenniums old, a daily representation of just how active the Mediterranean basin is as a trading region. The Mediterranean trade routes are perhaps the oldest on earth, and many of the basic concepts enabling international commerce were created in the Mediterranean basin. But the political unrest in many places where the Mediterranean’s waves wash ashore marks this as a region in transition.
Part 2: Mediterranean Economic Landscape
Mediterranean Economic Landscape
The nations bordering this inland sea, understandably, have near symbiotic trading relationships that significantly contribute to the regional GDP. Yet as a group, the Mediterranean nations differ widely in their trading regimes for political and cultural reasons.
The EU (European Union) in EU-Mediterranean Partnership [EU-Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Occupied Palestinian Territory, Syria, Tunisia and Turkey] ran a balance of trade surplus of nearly €12 billion in 2009, which ballooned to almost €30 billion in 2011. Since the Arab Spring and Syrian civil war accurate numbers have been hard to come by, but the trade gap has likely widened over the last two years. The avowed “key objective” of the EU-Mediterranean Partnership is to remove barriers to trade and investment between both the EU and Southern Mediterranean countries with the ultimate goal of creating a Euro-Mediterranean Free Trade Zone. Currently, Euro-Mediterranean Association Agreements are in force with most of the partners (with the exception of Syria and Libya). Historically Mediterranean trade runs North-South with most of the North African nations trading more with Europe than among themselves. In 2009 it was estimated that intra-North African trade was around Euro 15 billion compared to Euro 225 billion in trade with Europe for the same period.
The economic, cultural and political diversity makes common ground short in supply between geographic neighbors. There is also a great economic divide between countries that are hydrocarbon exporters, and neighboring nations that are energy poor.
Given all the conditions, is a Euro-Med free Trade zone feasible? Probably not, but the possibility for changes in very basic trade regulations and reductions in tariffs is very achievable as there has been economic growth and considerable potential. Proximity to Europe, the Middle East and Asia is unique, and the raw material wealth and potential employment looks similar in potential to Southeast Asia three decades ago…with similar caveats.
The IMF (International Monetary Fund) in the World Economic Outlook (WEO) 2013 said the 2012 GDP for the Middle East & North African economies grew by 4.6%. WEO is forecasting a rise to 3.8% by 2014. Much of this growth is more with the Middle East oil producers rather than the North African states. For example, in Egypt, the largest of the North African economies, the GDP is forecast to grow 3.1% by 2014. In contrast, Algeria (also an oil producer) is forecast at 4.4%, while Morocco and Tunisia at 3.8 and 3.7 respectively.
Of course the growth of GDP is only part of the story. The average GDP per capita in southern and eastern Mediterranean countries is below the world’s average and in 2010 ranged from a high of nearly $30,000 for Israel to less than $5,000 in Morocco. Many of the southern and eastern Mediterranean nations have high population growth, a younger average age for the population, and high unemployment. The unrest in the region coupled with a byzantine regulatory environment has also frightened DFI (direct foreign investment) from the West, especially since the Arab Spring. The exception is Beijing’s investment profile in the North African region which is rising as Chinese business looks for opportunities to develop energy and raw material interests.
According to recent economic surveys the best business prospects for the Arabic-speaking countries in the Mediterranean basin are Morocco, Algeria and Tunisia. Economists are forecasting major growth in the middle classes buoyed by low cost labor (relative to nearby Europe) and increased industrialization. With improved port and road infrastructure a growth in trade can happen relatively quickly.
Will it happen? At the moment foreign investment has followed politics – there is great interest in Libya, and great trepidation that the transition from Gadhafi to a merit driven economic system is far from complete. Virtually, every nation on the southern Mediterranean comes with an asterisk. Unfortunately, at this time, the collection of asterisks makes the exception the rule.
Part 3: Talking Turkey
Unlike the North African nations, Turkey has a mid-range emerging economy and might be considered the linchpin to the entire region. The $794 billion GDP makes Turkey the seventeenth largest economy in the world. The country has per capita GDP of $10,666, and the GDP is forecast to grow 3.8 in 2013 (GDP growth in 2010, 2011 was 9.2% and 8.5% respectively) with unemployment just over 9%. FDI (foreign direct investment) was $8.3 billion in 2012 and expected to rise to $15 billion this year.
Part of the attraction for FDI is Turkey’s unusual geography being both in Europe and Asia with access to the Middle East, Israel and Russia. The central location makes it an ideal staging area, particularly for oil & gas related investments.
Turkey’s number one trade partner is the EU. In 2012 Turkey exported Euro 47.8 billion and imported Euro 75.2 billion. Turkey’s exports to the EU are mostly machinery and transport equipment followed by manufactured goods.
The US has a positive trade balance with Turkey. In 2012 Turkey exported to the US around $5.6 billion worth of goods and imported $14.6 billion. Most of the exports to the US were vehicles, machinery and iron and steel. The US main exports were aircraft, iron and steel and agricultural products. Cotton was by far the largest export category totaling $1.2 billion with wheat at $238 million next.
The rapid growth of trade between the US and Turkey and the recent round of talks for Transatlantic Trade and Investment Partnership (TTIP) has prompted calls for a Turkey-US Free Trade Agreement (TURUS FTA). Turkey wants a seat at the table on the TTIP, although it is not a member of the EU but has maintained a customs union with the EU for two decades.
Given the current political climate in the Middle East, particularly the Syrian conflict right on Turkey’s doorstep, and the malaise in Washington, the TURUS FTA is on the back burner, but there are many geo-political and economic reasons to get a deal done. The most encouraging factor is both Washington and Ankara want a FTA along the lines of the recent US-South Korean FTA. Turkey has the incentive to get a deal done as to join the TTIP would require the consent of every EU member. This is unlikely, and Turkey doesn’t want to be on the outside looking in should the TTIP deal get done. The US would also like the deal to get done to secure relations with Turkey and a trading foothold of sorts in the Eastern Mediterranean.
Part 4: Mediterranean Ports
But what separates the “modern” trade patterns from antiquity is the great current of trade that flows to and fro between the Straits of Gibraltar and the Suez Canal.
The Strait of Gibraltar is one of the world’ busiest waterways with averaging over two hundred merchant ships a day. At the other end, the Suez Canal handles in excess of 17,000-ships a year, with containerships accounting for over 6000 of that total.
In a larger sense, it is a North-South trade with (Southern) European nations, Spain, Italy, France, (and to a lesser extent Greece) being the more industrialized side of the economic equation. It’s not surprising that of the fourteen Mediterranean containers ports with over a million teus in annual throughput, eight are on the European side of the sea.
However, a number of ports are hubs through which trade is directed. Malta’s Marsaxlokk, which annually posts 2.4 million teus, acts as a mid-Mediterranean hub for services. Back in July the port handled the 16,000 teu CMA CGM Jules Verne on the FAL1 service connecting Asia to Europe. Gioro Tauro (handling over 2.7 million teus ) in Southern Italy also is a hub for goods heading into Italy and onward to Europe. The Egyptian ports of Port Said (which is setup to handle Triple E sized ships) and Alexandria have established themselves as first and last ports of call on the Mediterranean side of the Suez Canal. Algeciras, in Spain, plays a similar role as the port of entrance or exit to the Mediterranean from the Atlantic. In 2012 the port posted 4.1 million teus, and with the larger containerships (Maersk Lines’ Triple E calls,) this number is likely to rise.
Overall, most of the boxports in the Mediterranean have increased throughput over the last three years. Nearly all the major ports have expansion plans in the works. However, all depends on the Suez Canal traffic and any significant stoppage would be a major blow to containerports in the Mediterranean Sea. There was a failed attempt to attack the passing Cosco Asia in September, a stoppage on the canal would immediately effect exports from Asia to Europe and the US.