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EU
trade deal offers mixed blessing
for Tunisia |
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TUNIS(August
20,2008)
- Tunisia spent years demanding better access to European markets,
but now it has been granted, some in the small North African country
wonder if it wasn't too much, too soon.
In January, Tunisia became the first southern Mediterranean country
allowed to export manufactured goods free of customs duties to the
European Union, the world's biggest trading bloc with a population
of 500 million and a 10 trillion euro economy.
It is a big opportunity for a country of only 10 million on Europe's
doorstep which offers low costs and one of Africa's best educated
workforces but is struggling to cut joblessness currently running
at 14.3 percent.
Tunisia's main exports are machined components, processed foods and
textiles. The government says over 4.0 billion dinars ($3.26 billion)
have been spent to bring some 4,000 firms in line with EU norms.
But analysts warn there will be pain, at least in the near term, as
European consumer goods makers with unassailable economies of scale
lay bare inefficiencies of local producers and seize market share.
"With no barriers, no protection, Tunisia will represent an additional
market to European goods which means lower domestic output and a wider
deficit," said Fethi Jerbi, a professor at Tunis University.
"Many Tunisian factories are doomed to close their doors as they
are unable to compete with Europe's products," he said.
Among those seen as most under threat are producers of machined components,
industrial equipment and home appliances and makers of foods such
as biscuits who would be unable to fend off EU rivals offering better
quality for the same price.
The government hopes any loss of local markets to foreign firms will
be offset by higher export earnings, which it sees rising to 20 billion
dinars in 2011 from 15 billion last year.
Besides being a springboard to a broader market, the trade deal is
also expected to boost inward investment.
Annual direct EU investment is expected to double to 800 million dinars
in the next three years and create 100,000 jobs.
The deal already seems to be having an effect -- Tunisia's exports
to the EU were worth 5.99 billion dinars in the January to April period,
up from 4.86 billion dinars a year earlier.
But the trade deficit jumped to $2.572 billion in the first half of
the year from $1.877 billion a year earlier. Tunisia has run deficits
on its balance of trade for more than 20 years.
"Of course (the trade accord) is making Tunisian exports much
more attractive," said Peter Grimsdich, Editorial Director of
Oxford Business Group. "But it ... offers a bigger danger of
formal and legalized dumping."
With fuel and food prices soaring, Tunisia must work hard to become
self-sufficient in key industries such as cement and foodstuffs to
relieve its trade balance, Grimsdich said.
HIGHER ADDED VALUE
The EU is Tunisia's natural trading partner and just three EU countries
-- France, Italy and Germany -- absorb almost two thirds of its manufactured
and processed goods exports.
Once reliant on farming, Tunisia has outperformed neighbours by developing
textiles, car assembly and food processing.
More recently it has begun promoting higher value-added activities
ranging from medical services to consulting and information technology
which offer strong potential growth and can absorb growing numbers
of qualified graduates.
"A small country like ours with limited local demand must improve
competitiveness and focus on quality products, especially those with
high added value," said an analyst who asked not to be named.
A government programme was established in 1996 to give Tunisian companies
financial and technical support to improve their production and management
methods.
But competition from Asian rivals is fierce and Tunisian firms must
work harder than ever to benefit from freer trade.
Jerbi said the failure to form an effective economic union with Tunisia's
immediate neighbours was a serious handicap.
Maghreb officials regularly call for the Maghreb Arab Union (UMA)
proclaimed in 1989 to be made a reality in order to boost economic
growth and reduce joblessness in the region of 80 million people stretching
from Libya to Mauritania.
But bilateral exchanges still account for under two percent of the
countries' total foreign trade, according to the International Monetary
Fund. That compares with 30 percent in the Association of Southeast
Asian Nations.
"It would have been better to look to next door neighbours first
for a free trade accord," said Jerbi.
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