The distribution of the trade effects of the Arab Common Market

• Main Author: Khalaf, Rami
• Format: Others
• Published: PDXScholar 1983
• Subjects: Business costs; Arab countries > Economic integration; Arab countries > Commerce
• Online Access: https://pdxscholar.library.pdx.edu/open_access_etds/777; https://pdxscholar.library.pdx.edu/cgi/viewcontent.cgi?article=1776&context=open_access_etds

How much of the Arab Common Market provisions are actually implemented? And which member country benefits relatively more than the others from the Common Market arrangement? These are the two major questions that this research attempts to provide answers for. At present, the Arab Common Market is comprised of six member countries: Jordan, Syria, Iraq, Libya, Mauritania, and Democratic Yemen. Egypt was also a member until 1979 when its membership was suspended because of the Camp David Agreements. The first three are considered to be more advanced and were among the first to ratify the Common Market resolution as soon as it was passed in 1965. Accordingly, they are supposed to form a free trade area and are also supposed to be working on establishing a common external tariff against the outside world. Libya joined the Common Market in 1977. Mauritania and Democratic Yemen joined in 1980 and 1981 respectively. However, both were considered to be less advanced and were allowed to exclude a list of products from trade liberalization either to protect domestic industry or for revenue purposes. Goods not included in their exceptions lists were to be liberalized in a gradual process that will extend until 1988 for Mauritania and 1990 for Democratic Yemen. Currently, a free trade area is in operation for Jordan, Syria, and Iraq, at least as far as the removal of tariffs is concerned. However, some other non-tariff barriers are still practiced, such as licensing and foreign exchange allocations. Libya still excludes a number of items from trade liberalization with the objective of protecting domestic industry. Mauritania and Democratic Yemen joined the Common Market in 1980 and 1981; because they are considered to be less advanced, they still have until 1988 and 1990 respectively to implement the trade liberalization program. At present, both Iraq and Syria practice state trading and foreign trade planning. State trading could have a significant, positive or negative, impact on directing trade towards partner countries. It definitely weakens the causal relationship between market forces and trade flows, and subjects trade more to political factors. Because of the extensive use of state trading by Iraq and Syria, trade among member countries of the Arab Common Market fluctuates considerably, dropping when political relationships are tense to negligible amounts and increasing when friendly relationships dominate to an amount not justifiable by market forces alone. This was achieved without resorting to any of the traditional commercial policy tools. The second question regarding who benefits relatively more from the Arab Common Market was answered by looking at trade creation and trade diversion for each country and by looking at the volume of exports of each country to the other Common Market members and the degree of protection that those exports enjoy in their respective markets. Jordan experienced a high degree of trade creation; it has the largest volume of exports, and its exports enjoy the highest degree of protection in the Syrian and Iraqi markets. Based on these criteria, Jordan is assumed to benefit more from the Common Market arrangement. The research also identified other areas of research. Such areas include ex ante measurements of benefits for countries which are still reluctant to join the Common Market and an analysis of the impact of joint projects on the economies of the countries in which they are located and on other members. This is supposed to lead to a formula for allocating industries among member countries. One conclusion of this research is that a pure rational approach will be insufficient for analyzing the impacts of economic integration, and that a multiple perspectives approach is a must for such an analysis.