New EU – Morocco Trade Deal

The European Union approved a bilateral trade agreement with Morocco on Thursday, February 16th, a deal that will expand the duty-free exchange of agricultural goods between the two parties. Starting this spring, 70% of the EU’s agricultural exports will enter Morocco duty-free, while 55% of Morocco’s agricultural exports will enter the EU duty-free. There was controversy over this deal because of concerns that it would negatively impact small-scale farmers in both Europe and Morocco.

According to reports from the International Centre for Trade and Sustainable Development (ICTSD), fruits and vegetables currently account for 80 percent of total EU imports from Morocco, and farming accounts for 13 percent of Morocco’s gross domestic output.

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European Woes Spell Trouble for Morocco’s Economy

In the past Morocco’s economy has benefited from the country’s close ties to Europe. Currently, 2.5 million Moroccan migrants live and work in Europe. Moroccan migrant workers are generally based in France, Spain and Italy and work blue-collar jobs. Relatives in Morocco depend on whatever cash their relatives abroad can wire home. Remittances from migrant workers generate more revenue than Morocco’s top export, phosphate sales. The blue collar jobs held by many Moroccans are the most vulnerable to cuts when economies slow. This means that economic austerity in Europe is likely to spread to Morocco.

Morocco’s economy has  performed well during Europe’s debt crisis thus far. Part of the reason is the government’s increase in social spending to maintain political stability during last year’s Arab Spring. Finance Minister Nizar Baraka estimated this week that the economy grew 5 percent last year, up from 4 percent in 2010. Salwa Karkari, an economic expert and member of the parliament from the opposition USFP Socialist Union party said

“We have yet to see the full extent of the repercussions of the euro zone crisis on our economy.”

2012 looks to be a difficult year economically for Morocco. Around 60 percent of Moroccan export revenues are generated by trade with the European Union. In addition, 80 percent of Morocco’s foreign tourists come from Europe. The tourism industry  provides 400,000 jobs and 10 percent of the country’s gross domestic product. Karim Tazi, chair of the AMITH, an industry lobby group said

“The forecasts for 2012 are not very optimistic…The conditions for 2012 should be more difficult. Exporters now have visibility only for the short term. France and Spain are our main markets.”

Economic troubles will test the power of the new constitution. Increased economic strife will fuel the protesters’ message and is likely to lead to more protests throughout the country. Morocco has managed to avoid a regime toppling revolution; however, economic disparity will continue to challenge the king and prime minister. The king and new government will have to work hard to maintain a level of satisfaction with their governance and economic policy.

To read more about the connection between Moroccan and European economies check out

http://www.reuters.com/article/2012/02/17/us-morocco-europe-idUSTRE81G1X820120217

Source: Reuters