Enhanced Trade Integration with Europe: New Prospects of Growth and Development for Libya?

The paper deals with the prospects of economic recovery and growth of Libya after the suspension of the UN sanctions. Here, the risks and chances of Libya s participation in the so-called Barcelona Process are viewed. Based on the results of a similar study for Egypt and an empirical analysis of Libya s trade performance, the findings suggest that the Libyan-EU trade is characterized on the one hand by a high gravity, and on the other, by a strong dissimilarity, making economic integration difficult. Free-trade, as a stand-alone measure, would not be necessarily conducive to Libya, however, the secondary effects of free trade, fueled by enhanced incentive to pursue courageous structural reforms could have important effects on the international economic competitiveness of Libya, a dire need with a view to the limited crude oil resources.