By Richard Pomfret
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Additional resources for Mediterranean Policy of the European Community: A Study of Discrimination in Trade
The basis of the plan was for the establishment of a free trade area similar to that established in 1973 between Portugal (as a member of EFTA} and the Community. The Community would phase out tariffs on manufactured goods by 1977 (as with its EFTA partners) and would grant concessions covering at least 80 per cent of each Mediterranean country's agricultural exports to the Nine. The individual agreements would be reciprocal, with the extent and timing of reverse preferences depending on each partner's level of economic development and would include cooperation over capital and labour flows, technical and financial aid and environmental protection.
The only aggregative study, that by Matthew McQueen of Reading University, used, first, the performances of other developing countries which are not large exporters of oil and the rest of the world as controls, and, secondly, an extrapolation from past trends to provide an indication of what might have happened in the absence of preferences. The two approaches suggested a positive effect of preferences on Greek, Moroccan, Tunisian, Spanish and Israeli exports, but the picture is confused for Turkey.
2 Impact of removing a tariff Quantity NOTE: D and S are domestic demand and supply curves; other symbols are explained in the text. 40 Mediterranean Policy of the European Community exporting at the world price, P w· Domestic price falls from the tariff-inclusive price PM to Pw' domestic demand increases from OQ to OQ 2 and imports increase from Q3 Q 1 to Q4 Q 2 while domestic output falls from OQ3 to OQ4 • There is a loss of government revenue (c) and of producer surplus (a) but this is more than offset by the increase in consumer surplus equal to a+b+c+d.