Enhanced Trade Integration with Europe: 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 Libyan-EU trade is characterised on the one hand by a high gravity, but on the other hand 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, fuelled by enhanced incentive to pursue courageous structural reforms could have important effects on an improvement of international economic competitiveness of Libya, a dire need with a view to the limited crude oil resources.