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Merchandise Trade

Currently the region is covered by a complex array of trade agreements, many of which have never been implemented and are effectively dead, but continue to exist on paper. The region-wide agreement currently in force and still being implemented—where security and political conditions allow—is the gafta, which was established in 1997 and progressively led to some reduction of tariffs on bilateral trade. Among sub-regional agreements, one should of course mention the Gulf Cooperation Council and the Agadir Agreement (encompassing Egypt, Jordan, Morocco and Tunisia). The former group decided, already when it was formed in 1981, to establish a common market, but has not yet succeeded in doing so;[1] the latter is an example of deep integration but as the four countries involved are not contiguous, trade between them is hindered by logistical difficulties.

In addition, there have been attempts to establish trade liberalisation agreements in the context of the Barcelona Process between the eu and the ‘Southern Neighbours’[2] (a set that does not include all Arab countries, but only those with a shore on the Mediterranean, plus Jordan; notably excluding member countries of the Gcc); and between the us and a select number of Arab countries (Bahrain, Jordan, Morocco and Oman). The latter, dubbed Middle East Free Trade Area (mefta), was launched in 2003 by the Bush Administration in the context of other initiatives aimed at reshaping the Middle East (regime change in Iraq being the first and foremost of these), but appears to have been largely abandoned by the Obama Administration. In addition, the eu has officially been pursuing a free trade area with the GCC (separate from the Barcelona Process), but has never succeeded in finding sufficient common ground with the intended partners.

It is, in the literature, well established that trade agreements between the eu and the Southern neighbourhood countries have led to an increase in eu exports towards these partner countries, but not of partner countries’ exports to the eu (Parra et al., 2016; Gylfason et al., 2015). Empirical analysis shows that this result might change if trade in agricultural products were liberalised alongside trade in industrial products, but this is not something that the eu has been ready to contemplate.

Notwithstanding its slow implementation, the literature has also found that gafta has had a moderately positive impact on South-South trade, at least until the eruption of the Arab Spring and the political disarray that followed. In contrast, the findings on the effect of the Agadir Agreement are not unanimous:

Gylfason et al. (2015) find that the agreement has stimulated horizontal trade, notwithstanding the fact that signatories are not contiguous countries, and conclude that ‘deep and comprehensive free trade agreements between contiguous and economically large countries could increase trade flows significantly’. The limited importance of horizontal trade between Arab countries is therefore attributable to conflicts between immediate neighbours, which stifle proximate trade liberalisation. The authors therefore propose to reverse the tide by aiming at a deep and comprehensive trade agreement between Egypt, Israel and Jordan, which they deem politically feasible because these three countries have signed peace treaties with each other—a proposal that is optimistic at best. In contrast, Parra et al. (2016) do not find a beneficial effect of the Agadir Agreement.

Following the Arab Spring and the drift towards a full-scale regional civil war, attention to trade liberalisation is no longer a priority. Yet it is difficult to imagine that a virtuous circle of democratisation can be supported in the absence of a convincing project for trade liberalisation. Is it conceivable that this might be sponsored by outside actors, such as the European Union (eu) or the us? Both attempted to do so in the past, the eu through the Barcelona Process and the us through mefta. In each case, the respective projects suffered from their partial nature, being addressed to subsets of the membership of the Arab League and therefore being viewed as having a divisive rather than an integrative impact on the region. Such schemes have justifiably been accused of aiming to impose a hub-and-spoke style trade pattern that would cement the dependence of Arab countries on either the eu or the us, and their isolation from each other. It is possible that a joint EU-US initiative encompassing all Arab countries and aiming at creating serious opportunities for regional integration might, in a context of regional pacification, succeed in finally putting in place adequate agreements, including the necessary supranational institutions and enforcement mechanisms. The conditions for such an initiative do not exist today and have not existed for the past half-century (since at least 1967); they may not be reunited in the future either. Yet, the recurrent temptation to cut corners and launch partial initiatives will, in all likelihood, doom such initiatives to failure.

  • [1] A customs union was announced in 2003 and the common market was officially launched in2007 and should have started the following year, but in practice the member countries havenot surrendered sovereignty for all external trade matters to a central authority such as theGCC secretariat.
  • [2] The Barcelona Process or Euro-Mediterranean Partnership was launched in 1995. In 2008 theUnion for the Mediterranean (UfM) was created to inject new life into the process, but thisobjective can hardly be said to have been achieved.
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