The trade effects of the Euro-Mediterranean partnership: what are the lessons for ASEAN countries?

In the past three decades, Mediterranean countries have been experiencing a far-reaching regional integration process with the European Union (EU). By contrast, ASEAN countries negotiated only very recently regional agreements with Northern countries, especially Japan and the United States. This paper provides a quantitative assessment of the EU-Mediterranean partnership and discusses its implications for the ASEAN countries' new regional policy. The model proposed here combines the new trade theory with recent developments related to trade costs. Several static and dynamic econometric specifications are estimated in order to calculate the gross trade creation due to the EU-Mediterranean agreements. The main result indicates that these agreements increased Mediterranean countries' exports to the EU by 20-27% depending on the model's specification. This result suggests that the ASEAN emerging regional policy with Northern countries may also offer interesting trade prospects.