Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-26T21:43:02.907Z Has data issue: false hasContentIssue false
  • English
  • Français

Arab Trade and Free Trade: A Preliminary Analysis

Published online by Cambridge University Press:  29 January 2009

Ali A. Bolbol
Ali A. Bolbol
Affiliation:
Ali A. Bolbol is Professor of Economics at Ryerson Polytechnic University, 350 Victoria Street, Toronto, Ontario M5B 2K3, Canada.
Get access Rights & Permissions [Opens in a new window]

Extract

It would not have been wrong to argue twenty years ago that a united Arab economy would most likely be represented by the economies of Algeria and Iraq. Such an economy would have been characterized as having a promising industrial base, a viable agriculture, and a wealth of oil and mineral resources. From today';s viewpoint, of course, choosing these two countries could not have been more unfortunate. Algeria is in a state of siege that is keeping its economy hostage to political-military considerations, and Iraq's economy, after two wars and an embargo, is in a state of meltdown, to say the least. As a result, today's unqualified image of the Arab economy in general is that of wasted oil wealth, poverty, and political instability.

Type
Articles
Information
International Journal of Middle East Studies , Volume 31 , Issue 1 , February 1999 , pp. 3 - 17
Copyright
Copyright © Cambridge University Press 1999

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Notes

1 Among others, see Amin, Samir, The Arab Economy (London: Zed Books, 1982).Google Scholar

2 This is the general view that one gets from the celebrated text by Richards, Alan and Waterbury, John,A Political Economy of the Middle East (Boulder, Colo.: Westview Press, 1996).Google Scholar

3 For more on this point, see Olson, Mancur, “Economic Nationalism and Economic Progress” The World Economy 10, 3 (09 1987).CrossRefGoogle Scholar

4 A detailed examination of Arab economic integration efforts is in Owen, Roger,“Arab Integration in Historical Perspective: Are There Any Lessons?” Arab Affairs 1,6 (06 1988)Google Scholar; and for a brief summary, see Zarrouk, Jamal,“Intra-Arab Trade: Determinants and Prospects forExpansion,“ in Foreign and Intratrade Policies of the Arab Countries, ed. Said El-Naggar, (International Monetary Fund, 1992).Google Scholar

5 On the political arguments for integration, see Luciano, Giacomo and Salame, Ghassan, “The Politics of Arab Integration” (and the reference cited therein), in The Arab State, ed. Luciano, Giacomo (Berkeley: University of California Press, 1990)Google Scholar; on the role of intra-Arab trade, see Askari, Hossien and Cummings, John, “The Future of Economic Integration Within the Arab World,” International Journal of Middle East Studies 8, 4 (04 1977).Google Scholar

6 For a given money income, an increase in the price level produces a reduction in real income, and since imports are one-third of GDP, a 1 percent increase in the price of imports generates, roughly, onethird of a percentage increase in the price level.

7 For more on the commercial policies of the Ottomans, see Issawi, Charles, An Economic History of the Middle East and North Africa (New York: Columbia University Press, 1982)Google Scholar, and Owen, Roger, The Middle East in the World Economy, xx1800–1914 (London: Methuen, 1981).Google Scholar

8 Lebanon is the only country which adopted a liberal trade regime and, to a lesser extent, the Gulf countries.

9 The average self-sufficiency ratio, which is the ratio of domestic output to domestic consumption, is 0.75 for the Arab world. It is especially low for rice and dairy products, where it does not exceed 0.2.

10 Among others, see the report Claiming the Future (World Bank, 1995).Google Scholar

11 In Latin America, more of the capital flow went to finance consumption, whereas in East and Southeast Asia, more of it went toward investments. See Corbo, Vittorio and Hernandez, Leonardo, “Macroeconomic Adjustment to Capital Flows: Lessons from Recent Latin American and East Asian Experience,” World Bank Research Observer 11, 1 (02 1996).CrossRefGoogle Scholar

12 This was especially the case for Egypt, Jordan, Morocco, Tunisia, and the Gulf countries.

13 There is a possibility that the wrong specialization might arise, however. This happens when a country's wage exceeds the margin of productivity over its trading partner in a given good, so it prices itself out of the market though it has a comparative advantage in the good.

14 The average rate of population growth for the Arab countries is 2.7 percent, the second highest in the world after Sub-Sarahan Africa.

15 The index is fully explained in Yamazawa, I. et al. , “Evolving Pattern of Comparative Advantage in the Pacific Economies,” in The Pacific Economy: Growth and External Stability, ed. Ariff, M. (New York: Allen and Unwin, 1991).Google Scholar

16 Lebanon and Jordan, being small economies, have more than 25 percent of their total trade with the Arab world. Similar trade intensity indices for Jordan-Lebanon-Syria were found for Britain-Ireland, Belgium-Luxembourg-Netherlands, and Malaysia-Singapore-Thailand; see Goto, Junichi and Hamada, Koichi, “Economic Preconditions for Asian Regional Integration,” in Macroeconomic Linkages: Savings, Exchange Rates, and Capital Flows, ed. Ito, Takatoshi and Krueger, Anne (New York: Cambridge University Press, 1994).Google Scholar

17 This is one possible argument why normalization of relations between the Arab countries and Israel will generate more regional trade.

18 For example, in the European Union static gains were negligible while dynamic gains are on average about 6 percent of the union's GDP.

19 A price elasticity <1 means that any percentage decrease in price due to tariff removal will generate a larger percentage increase in output demanded. For more on the elasticity estimate, see Zarrouk, “Intra-Arab Trade.”

20 In fact, the evidence shows that non-oil intra-Arab trade in other manufactures stayed constant at 20 percent over the last decade, so trade creation is bound to be large with tariff reductions, whereas that of chemicals increased from 20 percent to 36 percent, which indicates that Arab producers are competitive in these products. See ibid.

21 Intra-industry trade among the Arab countries is below the average of 15 percent for the developing countries. This implies that New Trade Theories, which emphasize that countries trade among one another because they have similar tastes and income, apply mostly to the developed countries where intraindustry trade is more than 60 percent of their total trade.

22 This is the term used for the trade-to-GDP ratio in Goto and Hamada, “Economic Preconditions.”

23 The Arab oil-exporting countries receive 25 percent of the value of every barrel of oil that reaches the European consumer. The rest goes to refining, distribution, and taxes.

24 A 13 percent tariff was also applied on Gulf petrochemicals. See Wilson, Rodney, “The Economic Relations of the Middle East: Toward Europe or Within the Region?” Middle East Journal 48, 2 (Spring 1994).Google Scholar

25 For an elaboration, see Joffe, E.G.H., “Relations Between the Middle East and the West,” Middle East Journal 48, 2 (Spring 1994).Google Scholar

26 This view is expressed in Salame, Ghassan, “Torn Between the Atlantic and the Mediterranean: Europe and the Middle East in the Post-Cold War Era,” Middle East Journal 48, 2 (Spring 1994).Google Scholar

27 This point appears in Heckman, Bernard and Djankov, Simeon, “The EU's Mediterranean Free Trade Initiative,”; The World Economy 19, 4 (07 1996).Google Scholar

28 For more on aspects relating to FDI, see ibid. In addition, if the European Union were interested it could have invested in the 1970s when industrial goods made in the Mashreq/aghrib could enter the EU duty-free. This is particularly true for investments in Morocco and Tunisia, which are politically stable countries not only by Arab but also by world standards, and their manufacturing wage, at a monthly average of $175, is between similar wages in South Asia and Eastern Europe.

29 For more on this point, see Panagariya, Arvind, “East Asia and the New Regionalism in World Trade,” The World Economy 17, 6 (11 1994).CrossRefGoogle Scholar

30 The net impact on any specific country will depend on how the export loss from lower tariffs on zero-duty goods relates to the export gains made on the adjusted non-zero-duty goods. For a general analysis, see Chabrier, Paul et al. , “Implications of the Uruguay Round for the Arab Countries,” The Uruguay Round and the Arab Countries, ed. Said El-Naggar, (International Monetary Fund, 1995).Google Scholar

31 For more on the question of bound tariff rates, see Jamal Zarrouk, “Policy Implications of the Uruguay Round for the Arab Countries,” in the Uruguay Round, ed. El-Naggar.

32 This idea is made in reference to Japan in Salame, “TornBetween the Atlantic and the Mediterranean.”

33 Not necessarily in the classical liberal sense.