the importance of arab regional integration perspectives for development global cge analysis
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The importance of Arab regional integration Perspectives for development Global CGE Analysis. Economic Development and Globalisation Division. The GAFTA. In 1981, the members of the Arab-League adopted an Agreement to Facilitate and Develop Inter-Arab Trade (AFDIAT). - PowerPoint PPT PresentationTRANSCRIPT
The importance of Arab regional integration
Perspectives for developmentGlobal CGE Analysis
Economic Development and Globalisation Division
The GAFTA• In 1981, the members of the Arab-League adopted an Agreement to
Facilitate and Develop Inter-Arab Trade (AFDIAT).
• The AFDIAT aimed at liberalization, perhaps even the establishment of a regional FTA, it was vague in its language and left open the selection of covered products to a set of malleable “principales”.
• It could well have been seen as yet another part of the Arab League’s facade dissimination. Nevertheless, 16 years later was to become the basis for what might be seen as a the Arab trade integration scheme.
2
The GAFTA (Cont.)• On February 19, 1997, the Social and Economic Council of the Arab League
adopted a declaration on a Pan-Arab FTA establishing an “executive program” for the AFDIAT, which is in fact the text of the GAFTA.
• The GAFTA required that “all Arab goods traded among the party-states shall be liberalized in accordance with the gradual liberalization principle which shall be applied as of January 1, 1998”, allowing for “full liberalization” by July 21, 2007.
• It established a principle of national treatment among states parties, and a general prohibition on non-tariff barriers”, GAFTA members include 17 of the 22 Arab League countries of which Yemen and Sudan, as LDCs, have a longer period of liberalization (until 2010) and the Palestinaian Authority has been exempted from tariff reductions.
• In 2002, the Arab League’s Economic and Social Council resolved to accelerate the gradual liberalization process, abolishing tariffs by January 1, 2005 3
Compared to other regions…
The Arab region is less integrated, even compared to African countries
Fig1: Intraregional exports as % of total exports (2010)
Source: ITC
Arab league
GCC Maghreb UE 27 NAFTA Asean Africa0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
5.2 2.6 2.5
64.5
48.7
24.8
12.4
Intra-Arab trade volume has on average grown by 24.1% between 2005 and 2009, but recent data shows a change in trend
Value of intra Arab trade in Billion USD
2005 2006 2007 2008 20090
102030405060708090
100
46.256.1
67.6
88.4
71.1
Compared to Arab exports to the world, intra-Arab exports are more diversified and less concentrated on chemical products
Structure of Arab exports
Agriculture Agrofood Products
chemical products
other manuf
11.8 14.3
31.9
42.0
1.6 2.1
82.7
13.6
Arab league's exports to Arab leagueArab league's exports to world
Why the impacts are too small?• The main GAFTA’s weakness
is in the realm of non-tariff barriers, reflecting the general problem.
• Moreover, trade in services and investment liberalization are not included in GAFTA and will require further efforts.
• None well determined rules of origins
• NTMs are not homogeneous across countries
• Non convergence in terms of indirect fiscal instruments on imports. Other taxes have similar impacts as tariffs are not removed (consumption, excess...)
• Licenses, negative lists and many other barriers still active
• Very heterogeneous system of implicit and explicit subsidies on production that affect relative competitiveness harms the development of intra-trade.
7
Scenarios definition
8
Sim 1 (FTA): A full implementation of intra-Arab FTA
Sim2 (TR) =Sim1+ a 50% reduction of intra-Arab transport costs
Sim3 (CU) : Sim2+ a customs union for non agricultural products. The Common external tariffs is supposed to be equal to the minimum tariff applied by non oil producing countries. Countries that have a lower tariff are supposed to maintain their current tariffs.
Sim4 (Migration): Sim3+the replacement of 20% of non Arab migrant stock by Arab migrants
sim4:sim3+ An Arab preference for migration quotas in OPC
sim3: sim3+a common external tariffs (for non agriculture products
sim2: sim1+ 50% reduction in transport cost
sim1: A complete Free trade Area
Simulations results: Impacts on trade
Share of the intra-Arab trade in total trade
9sim1 sim2 sim3 sim40.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
10.1
38.5
32.6 33.0
ref sim1 sim2 sim3 sim40.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
8.59.3
11.510.6 10.7
• A full implementation of the FTA increases intra-Arab trade increase by around 10 per cent. If 50 per cent transport cost is reduced intra-Arab trade could increase by 38.5%.
• The application of common external tariff increases trade with non-Arab partners as the market access will increase in both directions.
• The business as usual (BaU) scenario will lead to 8.5 per cent share of intra-Arab trade. If scenario 2 is implemented, the share of intra-regional trade will increase by 3 points
Share of the intra-Arab trade in total trade
Simulations results: Impacts on GDP
10
Saudi Arabia
UAE
Bahrain
Kuwait
Oman
Qatar
Algeria+Libya
Egypt
Tunisia
Morocco
Rest of Mashrek
-1 0 1 2 3 4 5 6 70.12
0.22
0.31
0.06
0.11
0.02
-0.14
0.55
0.03
0.12
0.42
1.23
0.92
3.22
0.68
1.21
0.44
0.15
1.58
1.04
0.42
2.24
2.9
4.63
6.5
4.3
1.88
1.57
1.94
3.22
2.09
0.54
3.37
4.02
6.02
6.34
4.65
0.82
1.18
1.95
5.48
3.07
2.39
4.44
Migration CUtranport cost reduction FTA
Arab C
ountr
ies
Oil Prod
ucing
Cou
ntries
(OPC)
Non- O
il Prod
ucing
Cou
ntries
0.2 0.10.4
1.10.8
1.6
3 3.12.8
3.93.7
4.5
FTA tranport cost reduction CU Migration
Simulations results: Impacts on Households Revenue
11
Saudi Arabia
UAE
Bahrain
Kuwait
Oman
Qatar
Algeria+Libya
Egypt
Tunisia
Morocco
Rest of Mashrek
-2 0 2 4 6 8 10
0.23
0.21
0.44
0.12
0.15
0.03
-0.44
0.71
0.27
0.18
0.57
1.99
0.76
3.74
0.89
1.19
0.17
-0.16
1.94
1.1
0.41
2.22
4.77
4.72
8.52
8.32
2.24
1.71
3.23
0.52
2.66
0.52
3.76
6.59
5.92
8.33
8.92
0.94
1.23
3.26
2.86
3.89
2.25
4.99
Migration CUtranport cost reduction FTA
0
1
2
3
4
5
6
0.30.1
0.5
1.3
1
1.7
3.4
4.4
1.8
4.6
5.2
3.6
FTA tranport cost reduction CU Migration
Simulations results: Impacts on unemployment
12
• both skilled and unskilled unemployment rate can be reduced significantly, by around 4 basis points in the Arab region as a whole.
• As expected, the impact is most important in the non-oil producing countries that will experience a reduction in both unskilled and skilled unemployment by around 5 basis points.
• scenario 4 will contribute greatly reduce unemployment in most Arab countries. At the country level, Egypt, Tunisia and Morocco could register around a 5 basis points reduction of unskilled and skilled unemployment. This would reduce both their unskilled and skilled unemployment rate reduced by around 40 per cent.
Absolute variation of unskilled unemployment
Arab Countrie
s
Oil Pro
ducing C
ountries
(OPC)
Non-Oil P
roducin
g Countri
es
-6.0
-4.0
-2.0
0.0-0.3
0.1
-0.5-1.4
-0.5-1.8-1.8 -2.0 -1.7
-3.93
-2.27
-4.8
Sim1 Sim2 Sim3 Sim4
Absolute variation of skilled unemployment
-6.0-4.0-2.00.0
-0.1
0.2
-0.2-0.7 -0.1 -1.0-1.0 -1.1 -0.9
-3.8-1.3
-5.1
Sim1 Sim2 Sim3 Sim4
Thank you!
For additional information, please contact: UNITED NATIONS – ESCWA
P.O. Box 11-8575, Riad el-Solh,Beirut – Lebanon
Web: http://www.escwa.un.org/