Assessing the effect of the remote geographical position of Cyprus on its agricultural exports

Abstract

The geographical location of Cyprus, as an island country, in the Southeast Mediterranean Basin and its relative remote position from the European mainland, places Cyprus among the most geographically remote EU partners. This considerable geographical distance, from the rest of its EU partners, could bring about significant effects on the Cypriot trade in relation with other EU partners. Distance is directly associated with increased transportation costs consisting by that way an adverse factor on the conduction of international trade. The main objective of this work is to study the effect of geographical distance on intra-EU and extra-EU Cypriot agricultural exports. In order to achieve this, an augmented gravity equation model is estimated utilizing intra-EU and extra-EU agricultural exports observations of Cyprus for the period 2004–2012. In comparison to the estimated effect of distance on intra-EU agricultural trade as well as previous empirical findings, estimation results indicate that the effect of distance on Cypriot agricultural exports is almost double than that on the agricultural exports of an average EU or global partner. Therefore, the importance of the distance effect on Cypriot agricultural exports is substantially large so as to usher one to the conclusion that the Cypriot agriculture is facing intensive geographical disadvantages that exacerbates the already severe shortcomings of Cypriot agriculture due to the constrains of its natural resources.