The Role of EU in Distortion of Trade in the Southern Shores of the Mediterranean Sea

Despite EU's engagement with the Mediterranean region and its active support for intra-regional integration initiatives, the data shows an impressive underperformance of Southern and Eastern Mediterranean Countries (SEMCs) in regional trade. Ideally, an energy rich North Africa and energy deficient neighbors in the South would unlock considerable opportunities for regional trade. Therefore, the following question looms large: How has EU's trade policy contributed to the low market integration among the SEMCs? To answer this question, under the Market Power Europe and qualitative methodology, it is hypothesized that EU's externalization of policies through different embedded tools such as rules of origin and outward processing schemes (OPS) has contributed to the divergence, instead of convergence, of trade among SEMCs. Research findings point to a distortion of competition between EU enterprises and African and third party enterprises in the benefit of European interests. Further, the results reveal that despite the higher complementarity between some of the SEMCs, still the predominant direction of trade is north-south, thanks to EU's trade policy in the Mediterranean region.