Free Trade Agreements Diverging Trade Flow Policies: Evidence from the Mediterranean Basin

Abstract

We examine the evolution of European Union’s trade regionalism across the Mediterranean in the context of the trade openness implications of the Prebisch-Singer hypothesis. We outline the impact of the 1995 Barcelona convention’s free trade agreement on trade openness convergence between the northern and southern Mediterranean counterparts, using a series convergence tests, accounting for endogeneity and instrumenting with spatial geographic matrices. The majority of southern Mediterranean partner countries reverse their convergent trade openness path, following the European Union’s 1995 free trade initiatives, ratifying Prebisch-Singer’s hypothesis.