Arab Maghreb Union: Overcoming Competition in Favor of Cooperation (Part I)

[This article is the first in a two-part series on the Arab Maghreb Union.]

In his book Making Globalization Work, Joseph Stiglitz said, “As countries of the world become more closely integrated, they become more interdependent. Greater interdependence gives rise to a greater need for collective action to solve common problems.” The need for cooperation and interdependence could not be more obvious than in the North African countries of the Maghreb–namely, Libya, Tunisia, Algeria, Morocco, and Mauritania. Historically, these five countries have had relationships characterized with unhealthy competition that resulted in trade barriers, among other setbacks. The Maghreb region has a combined population of more than eighty-one million bound by a common heritage and history. Governmental and institutional arrangements, however, do not reflect a desire to integrate the region neither culturally nor economically.

Today, trade within the Maghreb region relative to total trade is the lowest of any region.[1] Trade between the Maghreb countries has averaged only 200 million dollars per year–this amount of intra-regional trade merely accounts for three percent of the total trade of the Maghreb, which conducts more than sixty percent of its total trade with the European Union (EU).[2] The benefits of creating an integrated socio-economic union in the region are endless. The Tunisia-initiated “Arab Spring,”–a title that many scholars in fact refuse to use in protest of homogenization in viewing the Arab world–made no mistake in articulating one of the people’s most salient demands: employment. A famous slogan used in the 2010-11 Tunisia demonstrations was, "Employment, liberty, national dignity." Employment, as well as general economic growth, cannot be generated without a strong regional framework to support local economies.  

The Arab Maghreb Union’s success is incumbent upon the Maghreb countries to achieve shared goals. Now more than ever, the Arab Maghreb Union must be resurrected. The establishment of the Union had a terrible run so far, and a number of problems stymie the process on both regional and domestic levels. In this article, the reasons for this failure will be thoroughly explored and three recommendations for their resolution will be proposed. 

The Arab Maghreb Union's Foundation

The AMU is the region’s first real attempt at achieving economic integration, and is the first of its kind to include all five Maghreb countries–Algeria, Libya, Mauritania, Morocco, and Tunisia. Whereas other regional initiatives have been pursued, most of them followed the structure of bilateral agreements as opposed to the foundation of multilateral treaties that unify the region as a whole. The AMU aimed to change that. 

In 1988, leaders of the five Maghreb states met for the first Maghreb summit and discussed the creation of the AMU.[3] The following year, on 17 February 1989, all member nations signed the agreement and each state subsequently ratified the Constitutive Act in the years recently thereafter. The Constitutive Act lays out the preliminary framework of the Union, with the goal “to guarantee cooperation with similar regional institutions... [to] take part in the enrichment of the international dialogue... [to] reinforce the independence of the member states and... [to] safeguard... their assets.”[4] 

In political economic terms, Abdelaziz Testas, who has written extensively on the topic, has re-articulated the AMU’s objectives as follows: First, to increase intra-regional trade. Second, to provide a framework for coordinating policies regarding access to European markets. Third, to provide a framework for coordinating efforts to deal with the aftermath of the economic crisis that affected member states in the 1980s. Fourth, to normalize bilateral trade relations between member states. Fifth, to mitigate the impact of the Soviet Union’s collapse and the rapidly changing international geopolitical landscape.[5] A customs union was planned for 1995, and eventually an economic common market in 2000. Neither goal was accomplished.[6] While there have been numerous attempts to achieve Maghreb integration, most have failed to realize their objectives.[7] Some scholars go even further, arguing that the importance given to regional rhetoric is “inversely proportional” to its real application and effectiveness.

The latest attempt was seen on 3 September 2013, when the member states’ foreign ministers met in Cairo, Egypt and reiterated their commitment to the content of the 9 July 2002 Algiers Declaration on the security problem in the Maghreb region. The ministers also released a statement calling for “joint efforts to fight against these social evils in bilateral, regional, and international level amidst the cascade of a comprehensive strategy” based on an “integrated and coordinated approach of AMU states.” On 25 September 2013, the AMU’s Secretary General Habib Ben Yahia also called on member nations to work “more closely to fulfill the needs of youth with a view to integrating them into the active, productive life from which they are currently being excluded.” 

The AMU’s supreme decision-making body is the Council of Heads of State, which is supposed to meet biannually according to the Treaty (this was changed to annually in 1993). Any of the Council’s decisions must be unanimous. Prior to and in preparation for the Council of Heads of State's sessions, a Council of Foreign Affairs Ministers is to meet on several occasions to examine proposals that committees and four specialized ministerial commissions formulate: economy and finance, human resources, basic infrastructures, and food security.[8] Finally, a Consultative Council, consisting of thirty representatives from each member state, can advise the Council of Heads of State. [9] An AMU Court of Justice was to be formed with two judges from each member state, as well.[10] 

The AMU’s first stalemate was in 1994, when political tensions between Algeria and Morocco over the Western Sahara, a disputed territory, were at its highest. Today, the AMU has come to a screeching halt, despite the numerous calls from various political actors in the region. The Union is currently inactive. In the words of the Tunisian Central Bank’s former Governor, Mustapha Kamel Nabli, the Arab Maghreb Union is in a “clinical coma.”[11] The AMU is a regional trade agreement that has been forgotten in many ways, since only a small handful of political leaders heralded the idea of its materialization. Further, revitalizing the process and Maghreb economic unification is limited to discussions within economic circles, without much being done officially besides continuous calls to unity. Despite a number of AMU member states’ active efforts, economic integration has yet to be materialized.

Benefits of Integrated North African Trade

The benefits of a revitalized North African union are numerous. Economic integration would allow each country to attract significant trade, investment, and welfare benefits. A stable regional economy also ensures general stability in the region, particularly with regards to the ever-approaching threat of terrorism. 

The continuation of revitalization efforts is crucial for sustainable energy development not only in the Maghreb region, but also in all of Africa. The AMU is one of the eight regional economic communities that the African Union recognizes, all of which are considered the “building blocks” of Africa and are closely involved with the formulation and implementation of all AU programs.[12] Connecting the gas lines between Morocco and Algeria, both current and under construction, could increase the volume of trade in the western Mediterranean to eighteen million tons of oil equivalent by 2020, or twenty percent of all energy requirements in the region.[13] If Morocco were allowed to contract gas from Algeria, Morocco could receive fifty to seventy percent of its estimated gas needs from Algeria by 2020.[14] Joint capital energy investments, especially between the two energy giants in the region (Algeria and Morocco), will lead to more sustainable and cooperative energy production and consumption. The possibility of greater energy sharing and bonds can usher in better bilateral relations amongst each member state, and can lead to the formation of a regional Maghreb electricity market that is open to competition.

A gravity model analysis further suggests that the development of the AMU would yield a gain in total merchandise trade of some one billion dollars. This seemingly modest figure would nearly double the extent of commercial relations within the region and can lead to the deepening of ties. The gravity model analysis uses econometric techniques to evaluate thousands of individual observations on trade and investment between countries over time against the “gravitational mass” of explanatory variables that describe the characteristics of bilateral trade and investment partners. Examples of such factors include the joint real GDP levels of partners and the distance between them (DeRosa).

Due to the different strengths and weaknesses of each country, a strong trade-motivated AMU will augment the region’s economic diversity. The reduction of trade barriers between the five member states, as well as freedom of movement, will increase the whole region’s bargaining power in external economic relations – with the EU and the United States, for example. Currently, AMU member states have preferential interbloc tariff rates with the EU that do more harm to the Maghreb region than good. The negative tradeoffs of neoliberal free trade agreements with the EU and the United States are far-reaching and well studied. The EU began lowering tariffs in 1995 with the launch of the Euro-Mediterranean partnership, whose stated goal was to create a “common area of peace, stability and shared prosperity”. The European Neighborhood Policy in 2004 and a French-sponsored Union for the Mediterranean have since succeeded it three years ago. Despite the language in these various agreements, the EU is, for example, reluctant to even lower tariffs on agricultural products from North Africa – in fear that it would put the agricultural economies of Portugal, Spain, and Italy at risk due to greater competition. In short, the economic and social conditions in the Maghreb region would undoubtedly benefit from member states giving preferential treatment to one another and opening market access across the region. Testas, for example, argues that the elimination of tariffs among AMU states can increase general productivity and export volumes in the region as a whole.

It is worthwhile mentioning that trade liberalization alone can harm the economies of less developed countries such as those of the Maghreb. Peter Robson observes that,

at low levels of development, not only are the benefits of classical integration on the basis of trade liberalization limited, but also, because of widespread distortions, trade liberalization itself gives rise to major problems. Successful economic integration among less developed countries therefore seems likely to call for a more deliberate approach than has been found necessary in advanced economies. Moreover, since it finds its rationale largely in the gains from coordinating and stimulating investment, it must be accompanied by measures to create or strengthen the production structures.[15]

As Cammett concludes, integration in the Maghreb must then entail a greater focus on planning and does not arise automatically through regulatory competition.

Barriers and Impediments to Economic Integration

Four primary obstacles stand in the way of the successful establishment of the Arab Maghreb Union. Accordingly, this section will be divided into two sections. First, it will discuss the political impediments that plague the union’s development. Second, it will discuss the economic impediments to the same. 

Political Impediments: The Western Sahara Conflict and Social Upheaval of 2010/2011

Political tensions between members, most notably Algeria and Morocco, have initially brought progress to a screeching halt back in 1994. The Western Sahara dispute between the two countries, which is one of the longest running regional conflicts and the last unresolved decolonization issue in Africa, is arguably the most salient stumbling block for the union’s success. Since Spain withdrew its forces from this resource rich area, both the Moroccan government and the Popular Front for the Liberation of Saguia el Hamra and Rio de Oro (the Polisario Front) have claimed controla local independence movement that touts the backing of Algerian government.[16] The day Spain withdrew on 27 February 1976, the Polisario Front proclaimed Western Sahara an independent state, to be known as the Sahrawi Arab Democratic Republic (SADR). 

One of the latest round of tensions came on 31 October 2013, when the Algerian President called for an international mechanism to monitor the human rights situation in Western Sahara, and the Algerian flag flying from the roof of the Algerian consulate in Morocco was torn down. The Moroccan Ministry of Foreign Affairs and Cooperation later announced that the Kingdom is recalling its ambassador to Algiers for “consultation” over the remarks made by the Algerian president. Even more recently, on 8 October 2014, the Moroccan government has accused Algerian intelligence services of using an anonymous Twitter account to leak a number of confidential documents and emails. Most of the leaks pertained to Morocco’s diplomatic strategies on the Western Sahara question, its lobbying efforts in Washington D.C., and its cooperation with various international think tanks in relation to the Western Sahara issue. The Moroccan foreign ministry has claimed that the “Moroccan Wikileaks” are the responsibility of “pro-Polisario elements."

While Algeria has a more economic interest in the Western Sahara, the Moroccan government looks to formalize its historic claim to the region. The failure of UN-brokered talks in 1994 led to the complete and effective shutdown of the Moroccan-Algerian border. Keeping in mind that the two countries’ combined GDP accounts for sixty-six percent of the AMU total, the border close was harmful to the whole region. The closure of the border proved especially detrimental to Morocco’s economy, which relied on the border for transport and movement of goods. Because of this, Yahia Zoubir hypothesizes that Algeria decided to keep the border closed, as it is a major source of leverage on the Moroccan authorities to soften their position on the Western Sahara. In 2007, Morocco renewed calls to start dialogue and offered to compromise on the territory. After four UN-organized rounds of talks came to a stalemate, the UN Security Council issued a statement calling for “realism” in reaching a resolution.[17] 

As Zoubir discusses, “Either side's stubborn insistence on the rightness of its point of view may lead it to act in ways that circumvent internationally agreed upon resolutions, and thus prolong the conflict and/or create an impasse.”[18] Zoubir also discusses King Hassan of Morocco’s refusal to recognize the question of Western Sahara as a decolonization issue or to agree to talks with the Polisario Front. Zoubir argues that SADR was purposely left out of the creation of the AMU. In this case, the tensions between the two countries have clearly created an impasse in attaining cross-regional AMU integration.

The rest of the AMU countries have had little to no impact on the deterioration of diplomatic efforts in regards to the Sahara issue – dabbling with the issue and later leaving it to the Moroccans and Algerians. For example, Mauritania, which joined Morocco in its invasion of the territory in 1975 but then later withdrew, has maintained relatively fraternal relations with both the Moroccan government and the Polisario Front. Libya’s Gaddafi, too, initially provided military and financial support to the Polisario Front, lauding his support of them in 1971. Later in 1984, however, Gaddafi pledged to cease funding Morocco’s Sahrawis separatists following a meeting he had with Morocco’s King Hassan II that resulted in a joint cooperation agreement between the two countries. 

Other political tensions that are unrelated to the Western Sahara also hamper progress on the AMU. Inter-Maghreb relations have seldom been harmonious and have been marked by suspicion, lack of trust, hegemonic regional competition, ideological differences and geopolitical calculations.[19] The region’s history is mired in accusations of spying (such as Mauritania accusing Libya of interfering in an attempted coup against the Mauritanian president) and other political roadblocks. Furthermore, temporary competing political alliances or bloc formations have long been formed with the goal of overcoming time-sensitive, political issues. This is particularly true when dealing with issues related to the Western Sahara debacle.

The second political impediment to the AMU’s establishment is the lack of political willpower from all member states. Since the 2010/2011 uprisings that swept across the entire Arab region, most countries have become more or less self-concerned and self-centered in their political initiatives and orientations. In North Africa, the Algerian government was busy attempting to stifle dissent, continuing to ban marches by opposition groups in Algiers, and putting up additional security measures to prevent anything similar to what happened in Tunisia from taking place in Algeria.[20] Similarly, the Moroccan authorities refused to authorize demonstrations in support of the Tunisian protesters that were planned in Rabat.

In Mauritania, the 25 February Movement front was formed, calling greater employment opportunities and better education. To respond to their demands, the Mauritanian government announced a thirty percent reduction in basic commodity prices to make them more affordable to the population. The Tunisian and Libyan governments, of course, were busy with the economic and political struggles that come with democratic transition processes. Libya in particular is still dealing with the remnants of the armed rebellion and foreign interference, both of which resulted in serious security threats for the rest of the region. Because of such preoccupations, regime changes in Tunisia and Libya have placed a heavy burden on the other three member states (Morocco, Algeria, and Mauritania) to restart the process. However, the more endowed members of the bloc must have the courage and patience to carry a load heavier than the rest in the belief that the sacrifices of the present will be the benefits of the future for all members.[21]

Finally, as mentioned earlier, the sole decision-making body within the Arab Maghreb Union is the Council of Heads of State (Article 6 of the Treaty[22]). Any decisions rendered therein must be approved unanimously. The Council has not met since the Tunis summit in February 1994, after which relations between Algeria and Morocco reached an all-time low. This structural rigidity in the AMU’s founding document poses a real problem to the Union regaining momentum, notwithstanding any of the member states’ independent calls to unity. 

Economic Impediments: Lack of Economic Organization and Security Threats Pushing away Foreign Direct Investment (FDI) and Impacting Major Sources of Income for Member States

Beyond purposely imposed trade barriers, the lack in harmonization of financial and economic policy among the Arab Maghreb Union’s member states is a significant factor contributing to the halt of the union’s progress. Scholars such as Ben Guirat and Pastoret underscore the need for more efficient management and organizational rules. They warn, however, that this will not work singlehandedly and that greater reforms of the financial sector in particular is necessary. These reforms can include deepening financial markets, strengthening financial sector oversight, and upgrading financial infrastructure.

Despite the efforts of North African governments to restructure their financial sectors and bring them into line with international standards, each country’s infrastructure still needs great overhaul and reform. A common element of necessary reform among member states is requiring the adoption of harmonized frameworks for regional payment systems. Substantial efficiency gains are to be achieved here since Maghreb banks are too liquid, as they do not use all the funds collected from lending activity. This contributes to the weakness of the region’s financial markets. Most importantly, however, is the lack of institutional investors as well as the lack of framework to support their attraction to the region.[23] The lack of foreign exchange is detrimental to the formation of the union and greater trade growth. According to Ben Guirat and Pastoret,

As a result of economic dependency [on former colonial powers], North African countries have experienced difficulties in accumulating the necessary foreign exchange to pay for the import content of their growth, which has further constrained economic growth, especially in more diversified countries such as Morocco and Tunisia. Maghreb countries are no longer forced “by arms” to export their commodities at low prices to European countries; but because their industry and technology is not yet competitive and their currency is not a dominant currency, they need to import machinery and technological goods, and to this end, they need to export primary goods to gain the necessary foreign exchange.[24]

Furthermore, the imposition of very high tariffs by member states against one another, while intended to protect domestic markets weakened by the economic crisis of the 1980s, in fact hinder intra-Maghreb economic activity. As discussed earlier, exporters are required to pay high duties on imported inputs, which constrains their ability to compete in regional and world markets. This is especially true under agreements with the European Union and the United States, which require minimal intra-bloc tariffs if not eliminate them fully. For example, except for Mauritania, which posts the most liberal tariff regime in the Maghreb, the average height of applied tariffs in the Maghreb is at least double the height of applied tariffs found in the world at large or in the aggregate of low- and middle-income countries – in spite of the relatively high level of privatization in Tunisia and Morocco. DeRosa argues that that the high tariffs reflect a desire to protect domestic markets from foreign competition, and thus prevents the Maghreb countries from enjoying greater gains from enlarged trade. According to the World Bank, the imposition of high tariffs and duties causes an average net loss to the economies of both countries: the country which has the tariff imposed on it, and the country imposing the tariff.[25] This contributes significantly to the lack of regional integration, and the absence of regional uniformity of tariff structures exacerbates this contribution.

The security situation following the 2010/2011 social unrest in the region has brought substantial implications for the AMU member states, particularly for Algeria, which shares a 1,000-kilometer border with Libya. Morocco was not impacted much by the Libyan civil war and rebel groups primarily due to the geographic distance. Algeria and Libya share significant commercial interests that the insecurity on the desert border have impacted. The Algerian oil company Sonatrach, which operates in the Ghadamès Basin, boasts considerable interests in Libya, while Libya has invested in several sectors in Algeria. So far, the situation has led Algeria to redeploy some of the troops from the Algerian-Moroccan border to the Libyan front. Zoubir argues that the redeployment has in fact strengthened the traditionally weak, more sensitive western front.

The Tunisia-Libyan and Tunisian-Algerian border areas suffered as well – the smuggling of arms and drugs has increased the security presence on both fronts and has, in fact, decreased the inflow and outflow of commercial goods. Tunisia and Libya both experienced macroeconomic downturns in the aftermath of their respective revolutions, and the insecurity along the borders has significantly impacted trade between the three countries. The pace of political change must speed up to make way for successful economic transitions for individual member states, as well as the region as a whole. This requires careful coordination, particularly in regards to security measures along the borders.