The year 2003 ended with yet another failure of the attempts to revitalise the Arab Maghreb Union (AMU) between Morocco, Algeria and Tunisia (and Lib- ya and Mauritania), with the suspen- sion sine die of the summit of the Chiefs of State of the five member countries, which was to be held in Al- giers on 23rd December 2003, thus wiping out four years of intensive di- plomatic efforts. Since its creation in 1989, the AMU has never truly got off the ground, and has not even been able to overcome the closure of the borders between Algeria and Moroc- co since the summer of 1994. If fi- gures can say more than a thousand words, 63 % of the Maghreb coun- tries’ trade exchanges are with the Eu- ropean Union, 19 % are with the United States and Canada, and less than 2 % with each other (trade exchanges be- tween the twelve EU partner countries in the South and East Mediterranean barely exceed 4.5 % of their total im- ports and exports). This paralysing of Maghreb integration is becoming a major Gordian knot for the economy dynamics of the Magh- reb, and the solution of one of its main strategic quandaries in the medium term, namely, its insertion in the world economic system. As single entities, the individual national markets are too small to attract productive investment by targeting their domestic markets, and their lack of competitiveness makes it very difficult for them to become export platforms. However, the influx of large volumes of foreign investment is a vital link for the feasibility of the in- ternal and external liberalisation and modernisation process in which these countries are immersed. 1 Even Morocco, which until now has monolithically made any progress in this area conditional on the formal re- cognition of its sovereignty over West Sahara, seems to be starting to ques- tion the cost of this attitude. In a report issued by its Finance Ministry in July 2003, 2 the benefits that could be ob- tained from removing barriers to eco- nomic exchanges within the Maghreb were estimated at 4.6 billion dollars a year (3 billion in increased foreign in- vestment and 1.6 billion in increased regional trade flows), that is, the equi- valent of 4.4 % of the joint GDP of Morocco, Algeria and Tunisia. The re- port stated that «the cost of the non- Maghreb could end up being unsus- tainable for the region’s economies». Although the study suffers from a few shortcomings in its handling of the fig- ures, 3 it does identify as a major issue the costs of the lack of Maghrebian integration in terms of lost foreign in- vestment, limitations of trade exchan- ges and lower figures in job creation, in addition to the increased bargai- ning power these three countries would have if they acted in collabora- tion at the international forums and toward their main trading partners, in- stead of negotiating separately, and to the potential for softening the fore- seeable negative consequences that the expansion of the European Union towards the east will have for these countries. Waiting for Agadir? In the midst of this rather depressing picture, the good news on the subre- gional integration front has been the Agadir Agreement, signed in Agadir on 8th May 2001 between Morocco, Tu- nisia, Egypt and Jordan, in order to mo- ve the calendar forward for trade lib- eralisation between them and to create a free trade area (FTA) for all their prod- ucts, without exception, by the start of 2006. In January 2003, the four countries concluded negotiations on the Agreement’s final text (except for certain technical appendices and the final tariff dismantling schedule). This text was to be approved by the coun- tries’ legislative bodies during the year and come into force in 2004. How- ever, apart from its declarative value –the European Union has been quick to offer its support – so far nobody has 164-165 Med. 2003 Panorama: the Mediterranean Year The Labyrinth of Subregional Integration in the South Mediterranean Iván Martín Universidad Carlos III de Madrid Economy and Territory Commercial Relations 1 On this subject, see I. MARTÍN (2001): «La inversión extranjera directa en los países del Magreb en el marco de la Asociación Eurome- diterránea: ¿el eslabón perdido?», in REM. Revista de Economía Mundial no. 4, pp. 175-206, University of Huelva (draft English version, «The Euro-Mediterranean Partnership and Inward FDI in Maghreb Countries», in http://econwpa.wustl.edu:80/eps/it/papers/0307/ 0307006.pdf). 2 Direction de la Politique Économique Générale, Les enjeux de l’integration maghrébine, working document no. 90, Rabat. (http://www.finances. gov.ma/dpeg/publications/en_catalogue/doctravail/doc_texte_integral/dt91.pdf.) 3 See I. MARTÍN: «¿De verdad la UMA vale $ 4.600 millones al año?», Magreb Negocios confidential bulletin, October 2003.