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Arab Free Trade Area: Impact on Arab Economies

 

On 22 October 2003 Mr Mohammed Bashar Al Abrash, National Director of the Fiscal and Monetary Planning Department in the State Planning Commission, presented this seminar. He described the Great Arab Free Trade Area (GAFTA Agreement), gave an overview of the situation preceding its establishment, and illustrated the implementation constraints of the agreement. Finally, some recommendations on possible ways to improve the performance of GAFTA were formulated.

Mr Al Abrash started with highlighting the importance of economic activities as instruments in promoting social and political convergence: new economic groups are in fact playing a key role in converging Arab economic activities and political perspectives.

He mentioned how, despite the numerous efforts to engage into different forms of regional economic integration, inter-Arab trade has been lagging behind. The formation of a regional trading block, resulting from the effective implementation of trade agreements, has been unsuccessful: empirical evidence showed in fact that the impact of formal settlements on Arab regional trade liberalization has been extremely limited. Many factors were presented to explain the weakness of inter-Arab trade and the failure of previous Arab regional agreements to stimulate trade among Arab Countries (ACs). Among these, the main economic constraints can be identified as follows: difference in economic systems, similarity of production structure and traded goods, lack of adequate transportation infrastructure compounded by distance, overprotection, heavy reliance on trade taxes, lack of market information and poor competitiveness of products.

Furthermore, the lecturer explained the situation preceding the establishment of GAFTA, by presenting a historical excursus of the most relevant attempts to achieve Arab economic integration.

Hence, Mr Al Abrash referred to the main implementation constraints of GAFTA: lack of transparent information on trade flows and unclear methods of evaluation of commodities; taxation discrimination between local products and imported commodities: strict specifications such as the atomic lab analysis certificate to be applied to both local and imported commodities; administrative, quantitative, and monetary restrictions; non compliance with the commitments related to the rules of origin.

In order to reduce any shortcoming, ACs have to overcome several challenges. They have to activate arbitration mechanisms, set the rules of competition, and include trade services. The lecturer made a point on the fact that even though most restrictions were removed, trade exchange among ACs has not significantly improved.

 

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Last update: 24.05.2004