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Morocco’s New Geo-Economics: Implications for U.S.-Moroccan Partnership

Morocco’s New Geo-Economics: Implications for U.S.-Moroccan Partnership

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This policy brief argues for a closer relationship between Morocco and the United States.
This policy brief argues for a closer relationship between Morocco and the United States.

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Published by: German Marshall Fund of the United States on Oct 18, 2013
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05/15/2014

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Summary:
Morocco’s geo-economic position is evolving in ways that will shape U.S.and international interestsin the country and open newavenues for cooperation. Keydrivers of change in this contextinclude Morocco’s stake ingreater economic integrationin the Maghreb, a growing role in Africa, new energy andinfrastructure projects, and theemergence of Morocco as a hubfor communications around thewider Atlantic. As Morocco’seconomic engagement takes ona stronger regional and globalcharacter, the U.S.-Moroccanagenda needs to evolve to rein-force opportunities for develop-ment and stability, to hedgeagainst risks, and to get moreout of existing frameworks fortrade and investment.
Wider Atlantic Program
Policy Brie 
Morocco’s New Geo-Economics:Implications for U.S.-Moroccan Partnership
by Dr. Ian O. Lesser 
1744 R Street NWWashington, DC 200091 202 745 3950F 1 202 265 1662E ino@gmus.org
October 2013
Changing Geo-Economics
Te partnership with Morocco isamong the oldest o the United States’international connections. From its18
th
-century origins to the present, theeconomic dimension has been at theoreront. It is also a “geo-economic”relationship in the sense that Moroc-co’s strategic signicance or theUnited States has been shaped not just by bilateral trade and investmentties — relatively modest in globalterms — but by Morocco’s proximity to areas o vital U.S. economic interestand its position between the Mediter-ranean, Arica, and the Atlantic. Fordecades, the
 geopolitical 
dimensionhas eatured more prominently inthe United States’ view o Morocco,and turmoil across the Maghreb hasonly reinorced this reality. Yet severaltrends point to a rediscovery o thelongstanding
 geo-economic
dimensiono Morocco’s international postureand its importance to U.S. interests.From Arican development to globalood security, rom new transporthubs to renewable energy, the issueson Morocco’s international economicagenda now go well beyond tradi-tional questions o trade and nancewith Western partners. Morocco’socus is increasingly drawn south andwest, to Arica and to the wider Atlan-tic.
1
At the same time, challenges inNorth Arica underscore the persis-tent lack o economic integrationacross the region, and the costs thisimposes on Morocco and others. Allo these actors should be reected inuture U.S. policy toward Morocco.
New Dynamics in TraditionalPartnerships
Europe remains the leading economicpartner or Morocco, and Morocco’saccess to European markets andinvestment will continue to be a key driver o the country’s economicdevelopment or the oreseeableuture. Commodities (agriculture andphosphates) are an important tradecomponent here, alongside manuac-turing (including autos and aeronau-tics) and, increasingly, services. Inaddition to the dominate position o European oreign direct investmentin Morocco, a signicant portion o Morocco’s tourism revenue comesrom European visitors. Remittancesrom the Moroccan diaspora, princi-pally in Europe, still make a contri-bution to the Moroccan economy,although Europe’s economic travailshave aected Morocco on this and
1 See Ian O. Lesser, Geoffrey Kemp, Emiliano Alessan-dri, and S. Enders Wimbush,
(Washington: The GermanMarshall Fund of the United States and the OCP Founda-tion, 2011).
 
Wider Atlantic Program
Policy Brief 
2
The U.S.-Morocco trade
relationship might benet from
some visible new examplesof success, at scale, andwith value chains of clear
benet to Morocco’s economic
development.
other ronts. Te character and pace o economic recovery in Europe will exert a strong inuence on Moroccangrowth prospects over the next ew years. So, too, Moroccois a stakeholder in the overall evolution o the EuropeanUnion project, including the economic and political ate o southern European members. Sustained weakness in Spainand Portugal, in particular, could have a range o negativeimplications or Morocco-EU relations, rom mobility totrade and investment.Morocco’s economic relationship with the United Statesholds considerable potential, but has not expanded at therate many envisioned when the U.S.-Morocco Free radeAgreement was concluded in 2004, and then came intoeect in 2006. In 2012, the volume o Moroccan goodsexported to the United States approached $1 billion,a steady increase over previous years (U.S. exports toMorocco total almost three times this amount). In the view o many analysts, complexity hinders progress in this area,especially or small- and medium-sized manuacturersthat are less well placed to navigate the agreement’s provi-sions on rules o origin. France, Spain, Brazil, India, andothers remain more important bilateral trading partnersor Morocco, and Moroccan exports to the EU stood atroughly $16 billion in 2012. Beyond the rules o originquestion, there has been considerable debate over how toget more benet out o the bilateral FA. Overall, the U.S.-Morocco trade relationship might benet rom some visiblenew examples o success, at scale, and with value chains o clear benet to Morocco’s economic development. Tereare ew such examples to compare to the success o theRenault plant in angier, or other projects in a Morocco-Europe setting. Tis discussion is now unolding againstthe backdrop o active transatlantic trade negotiations. Teoutlook or these negotiations as well as the likely costsand benets or Morocco remain unclear, but a deal on theransatlantic rade and Investment Partnership (IP)could spell changes on rules o origin and other issues o importance to Morocco’s bilateral trade.Energy is also set to become a more prominent item onthe agenda. Morocco has an ambitious national programor the development o renewable energy, both solar andwind. Tis can contribute to Morocco’s economic develop-ment, but could also become a more important elementin the country’s geo-economic posture. Renewable energy can be a vehicle or cooperation with neighbors in theMaghreb and Atlantic Arica, including Cape Verde, andurther aeld. It was proposed that electricity generatedrom renewable sources could eventually be exported toEurope, and various ocial and commercial ventureshave been hotly engaged on this ront, including
Desertec
.With demographic changes and demand shifs, Moroccois now looking to send a greater share o its power exportssouth, to energy-poor Arican states. Te renewables sectorshould attract growing interest rom U.S. and other inves-tors, especially i solar and wind power can be augmentedwith access to natural gas at reasonable prices. Lookingurther ahead, Morocco may also be able to exploit poten-tially substantial oshore oil and gas resources. Overall,these elements can help to reduce Morocco’s high nationalexpenditure on imported energy and domestic energy subsidies.
Opportunities and Opportunity Costs in the Maghreb
Over the last two decades or more, analysts and policy-makers have pointed to the substantial costs o a “non-Maghreb.”
2
Te very small volume o intra-Maghreb tradeand the closed land border between Morocco and Algeriahave had measureable, negative consequences or economicgrowth across the region. Te uprisings across the Arabworld, including North Arica, underscore the urgentneed or government and business leaders to ocus on thecore task o job creation, especially or large numbers o unemployed or underemployed youth. Morocco, Algeria,unisia, and Libya remain tied to a series o hub-and-spokeeconomic relationships with Europe. Tere have been some
2 See Gary Clyde Hufbauer and Claire Brunel, eds.,
Maghreb Regional and Global
Integration: A Dream to Be Fulflled
(Washington: Peterson Institute for InternationalEconomics, 2008).
 
Wider Atlantic Program
Policy Brief 
3
modest links via energy trade. Morocco has had limitedaccess to Algerian gas rom the rans-Maghreb Pipeline.But the volumes are limited and the potential or largerscale collaboration based on the regions abundant gas andmineral resources remains unexploited.Even as economic and social pressures grow, the revolu-tions in unisia, Libya, Egypt, and elsewhere have not done very much to encourage regional integration. I anything,regional governments are now deeply concerned about thesecurity o their borders in light o chaotic conditions andnew ows o economic migrants and reugees. Regionaleconomic cooperation is not at the top o national agendas,despite Rabat’s desire or change on this ront. From theClinton years onward, successive U.S. administrationshave promoted regional economic cooperation initiatives(the “Eizenstat Initiative” o the 1990s is probably the bestknown). Without doubt, the evolution o the perenni-ally troubled Moroccan-Algerian relationship will be akey determinant o what is possible in this realm. Sharedeconomic as well as security interests can be a driver o rapprochement, and the business communities on bothsides could well be a vehicle or détente and commercialcooperation. Te private sector has played a role o thiskind in other settings, including Greek-urkish rapproche-ment rom the mid-1990s onward, and eorts towardeconomic cooperation between India and Pakistan, despiteunresolved political and security disputes. Tis remains asphere with considerable potential, but renewed eorts willbe needed on the part o Morocco’s partners, including theUnited States and Europe, i headway is to be made.
Morocco Looks South
Morocco enjoys close historical ties with societies inWest Arica, and as Arica begins to show real signs o sustained economic growth, the potential or a substantialMoroccan geo-economic opening to the south is real, andit is attracting new attention in the country and abroad.Tis phenomenon is evident rom the nancial sector —Moroccan banks are among the most successul in Arica— to agriculture, phosphate exports, and pharmaceuticalmanuacturing.
3
o be sure, political and security actorsare also at play in Morocco’s growing Arican interests,especially in light o the rapidly evolving terrorism, insur-gency, and tracking scene aecting Atlantic Arica andthe Sahel — the dark side o regional geo-economics. But
3 See Haim Malka, “Morocco’s Rediscovery of Africa,”
CSIS Analysis Paper 
(Middle EastProgram), July 2013.
Moroccos expanding economic role looking south showsevery sign o becoming a structural actor in regionaldevelopment and a more signicant acet o U.S. interestin, and cooperation with, Morocco. On the commerciallevel, there is considerable potential or new U.S.-Moroccan joint ventures aimed at Arican markets, along the lines o the Dupont-OCP Group cooperation on industrial processdevelopment. Another good example is the CasablancaFinance City initiative, which was launched with the goal o providing a regional base or nancial services throughoutCentral and West Arica.Inrastructure will be an essential part o this equation.Improved communications between Arica and the Medi-terranean and Atlantic economies — ports, rail, roads,pipelines, even oshore bre optic links down the WestArica coast — will greatly benet Morocco as it looks toexpand its trade and investment engagement in Arica. Teanger-Med port complex has emerged as a very competi-tive venue or container transits between Asia, the Mediter-ranean, and Atlantic destinations. anger-Med has givenMorocco a more direct stake in global maritime trends,including the long-term implications o Panama Canalexpansion, and even the debate over new routes acrossthe Arctic. Air travel is already a visible and dynamic aceto Moroccos links to Arica, as Casablanca airport hasbecome a leading hub or transits between Arican capi-tals, Europe, and America, north and south. Morocco’schanging geo-economic role in Arica holds the poten-tial to support U.S. interests in Arican development and
Regional governments are nowdeeply concerned about thesecurity of their borders in lightof chaotic conditions and new
ows of economic migrants and
refugees. Regional economiccooperation is not at the top of national agendas.

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