Great Arab Free Trade Area Prospectives and results

1
Great Arab Free Trade Area Prospectives and
results
Prepared By Waficca Hussni
2
Study objectives

• To review GAFTA implementation and impacts in
  Syrian by using some of MPI methods.

3
Establishment

• 1981 Agreement to facilitate and develop trade
  among Arab states
• In 1997, decided to start stage of Preparatory
  implementation period 1998-2004
• Establishment of Free Trade Area started in
  1/1/2005.

4
Member countries

• Asia
• Syria
• Lebanon
• Jordan
• Iraq
• Saudi Arabia
• Qatar
• Oman
• Kuwait
• Bahrain
• U.A.Emirates

• Africa
• Egypt
• Tunisia
• Libya
• Morocco

5
Objectives

• Increase total and agricultural trade volume
• Distribute the agricultural production according
  to comparative advantages
• Modify the investment structure to promote the
  exports to the Arab markets and to develop the
  marketing infrastructure
• Care about quality standards and qualifications
  to ensure price competition
• Harmonize matching between production and trade
• Promote trade through monetary and banking
  policies
• Make complete liberalization of trade conducive
  to creation of an economic block.

6
Instruments

• Gradual tariff reduction up to elimination
• Non Tariff Barriers removal.

7
Changing condition affecting GAFTA implementation

• Related to GAFTA
• Bilateral trade agreements
• Accompanied with GAFTA
• Tariff regulations
• Exchange rate
• NTBs
• Institutional reforms

8
Bilateral Agreement in The Context of GAFTA

• Lebanon
• Jordan
• U. A. Emirates
• Egypt
• Saudi Arabia

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Expectations
Overall trade with GAFTA increases faster than with RoW Rate of increase of imports from GAFTA gt rate of increase imports from rest of the world Increase vol. value of intra agric. imports from GAFTA Rate of increase agric. imports from GAFTA gt increase of agric. imports from the rest of the world Rate of increased exports to GAFTA gt rate of increase exports to RoW Increased vol. and value of intra agric. exports to GAFTA Rate of increase of agric. Exports to GAFTA gt rate of increase of agric. exports to RoW Rate of increase intra non-agric. exports gt rate of increase intra agric. Exports
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Trends in Overall Syrian Trade (Imports
Exports) 1996/97 - 2001
millions millions millions millions millions millions millions millions
Item Year Year Year Year Year Year
Item Average 1996/97 1998 1999 2000 2001 A.V
Agricultural trade 19.953 19.313 18.800 18.198 17.870 -2,7
Non agricultural trade 77.265 56.855 63.090 79.811 94.745 5,2
Total trade 97.218 76.168 81.890 98.009 112.615 3,7
Agricultural trade/ total trade 21 25 23 19 16 -6,2
Non agricultural trade/ total trade 79 75 77 81 84 1,4
Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000
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The Evolution of Syrian Trade with GAFTA Compared
to Total Trade, 1996/97-2001
SP millions SP millions SP millions SP millions SP millions SP millions SP millions SP millions
Items Year Year Year Year Year Year Year Year Year
Items Average 1996/97 1998 1998 1998 1999 2000 2001 2001 AV
Total trade (exim) 97.218 76.168 76.168 76.168 81.890 98.009 112.615 112.615 3,7
GAFTA Total Trade (exim) 12.911 11.207 11.207 11.207 10.918 12.529 13.209 13.209 0,6
GAFTA total trade / total trade 13,3 14,7 14,7 14,7 13,3 12,8 11,7 11,7  
Total Agri Trade (exim) 19.953 19.313 19.313 19.313 18.800 18.198 17.870 17.870 -2,7
GAFTA Agricultural Trade (exim) 6.545 5.716 5.716 5.716 5.974 5.747 5.936 5.936 -2,4
GAFTA agr. Trade / total agr. Trade 32,8 29,6 29,6 29,6 31,8 31,6 33,2 33,2  
Total Non Agr. Trade (exim) 77.265 56.855 56.855 56.855 63.090 79.811 94.844 94.844 5,3
GAFTA Non Agr. Trade (exim) 6.366 5.490 5.490 5.490 4.944 6.781 7.273 7.273 3,4
GAFTA non agr. Trade / total non agr. Trade 8,2 9,7 9,7 9,7 7,8 8,5 7,7 7,7  
Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000 Data source CBS NAPC database The value of trade is calculated depending on old exchange rate before 2000
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Table 7 Syrian Exports to GAFTA Compared to
Exports to the Rest of the World
SP million SP million SP million SP million SP million SP million SP million SP million SP million SP million
Items Average 1998 1998 1999 1999 1999 2000 2001 AV
Items 1996-1997 1998 1998 1999 1999 1999 2000 2001 AV
Exports to GAFTA 8.821 7.868 7.868 7.535 7.535 7.535 7.897 8.487 -0,96
Exports to the rest of the world 35.599 24.575 24.575 31.345 31.345 31.345 45.026 51.040 9,4
Total exports 44.420 32.443 32.443 38.880 38.880 38.880 52.638 59.209 7,4
GAFTA exports / total exports 19,9 24,3 24,3 19,4 19,4 19,4 14,8 14,2
Exports to the RoW / total exports 80,1 75,7 75,7 80,6 80,6 80,6 85,5 86,2
GAFTA exports / exports to RoW 24,8 32,0 32,0 24,0 24,0 24,0 17,4 16,5
NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000
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Syrian Agricultural Exports to GAFTA and to the
Rest of the World
SP million SP million SP million SP million SP million SP million SP million SP million SP million SP million
Items Average 1998 1999 1999 1999 1999 2000 2001 AV AV AV AV
Items 1996/97 1998 1999 1999 1999 1999 2000 2001 AV AV AV AV
Intra agricultural exports 5.789 4.812 5.083 5.083 5.083 5.083 4.688 4.975 -3,7 -3,7 -3,7 -3,7
Agricultural exports to the rest of the world 4.828 5.619 3.804 3.804 3.804 3.804 4.160 4.089 -4,1 -4,1 -4,1 -4,1
Total agricultural exports 10.617 10.431 8.887 8.887 8.887 8.887 8.808 9.024 -4,0 -4,0 -4,0 -4,0
Share of GAFTA agr. Exports / total agr. exports 55 46 57 57 57 57 53 55
GAFTA agr. exports / agr. Exports to the RoW 120 86 134 134 134 134 113 122
NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000
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Syrian Total Imports from GAFTA Compared with
the Rest of the World
SP million SP million SP million SP million SP million SP million SP million SP million SP million SP million
Items Average 1998 1999 1999 1999 1999 2000 2001 AV AV AV
Items 1996/97 1998 1999 1999 1999 1999 2000 2001 AV AV AV
GAFTA imports 4.089 3.339 3.383 3.383 3.383 3.383 4.632 4.722 3,7 3,7 3,7
Imports from the rest of the world 48.709 40.386 39.627 39.627 39.627 39.627 40.739 48.684 -0,01 -0,01 -0,01
Total imports 52.798 43.725 43.010 43.010 43.010 43.010 45.371 53.406 0,3 0,3 0,3
Intra imports / total imports 7,7 7,6 7,9 7,9 7,9 7,9 10,2 8,8      
Imports from RoW / total imports 92,3 92,4 92,1 92,1 92,1 92,1 89,8 91,2      
Intra imports / non intra Imports 8,4 8,3 8,5 8,5 8,5 8,5 11,4 9,7      
NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000
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Syrian Agricultural Imports from GAFTA from
the Rest of the World (RoW)

Items Average 1998 1999 1999 1999 1999 2000 2001 AV GR
Items 1996-1997 1998 1999 1999 1999 1999 2000 2001 AV GR
GAFTA agricultural imports 756 904 891 891 891 891 1.060 961 6,2 27,1
Agricultural imports from RoW 8.580 7.978 9.021 9.021 9.021 9.021 8.330 7.885 -2,1 -8,1
Total agricultural imports 9.336 8.882 9.912 9.912 9.912 9.912 9.390 8.846 -1,3 -5,2
GAFTA agr. imports/Total agr. Imports 8,1 10,2 9,0 9,0 9,0 9,0 11,3 10,9
GAFTA agr.imports/ agr. Imports from RoW 8,8 11,3 9,9 9,9 9,9 9,9 12,7 12,2
NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000 NAPC database The value of trade is calculated depending on old exchange rate before 2000
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Changes of agricultural Import and export
structure
Share of 19 most important products in total agr. exports Share of 17 most important products in total agr. imports Years
74.1 93.0 2000
67.2 67.5 2001

• In 2001, 103 new products entered on the import
  side and 45 products went out
• 257 new products entered on the export side and
  102 product went out.

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In imports In 96/97, Egypt, Morocco, UA
Emirates, and S Arabia In 2001 Egypt, EA
Emirates, Morocco, and Lebanon
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In exports In 96/97, S Arabia, Lebanon,
Jordan, and Kuwait In 2001, S Arabia, Egypt,
Lebanon, and UA Emirates
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The link between GAFTA and bilateral agreement

• Trade creation
• Trade diversion.

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Expectations fulfilled?
Finding
Overall trade with GAFTA increases faster than with RoW Rate of increase of imports from GAFTA gt rate of increase imports from rest of the world Increase vol. value of intra agric. imports from GAFTA Rate of increase agric. imports from GAFTA gt increase of agric. imports from the rest of the world Rate of increased exports to GAFTA gt rate of increase exports to RoW Increased vol. and value of intra agric. exports to GAFTA Rate of increase of agric. Exports to GAFTA gt rate of increase of agric. exports to RoW Rate of increase intra non-agric. exports gt rate of increase intra agric. Exports

• x
• v
• v
• v
• x
• x
• (v)
• (v)

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Expectation related to the Agricultural Calendar

• Decrease of imports of protected products during
  the time of protection
• Market prices of protected products increase
  during time of protection
• Decrease of exports of products protected by
  member countries during time of protection

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• Agricultural Calendar

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GAFTA Agriculture calendar adopted by Syria,
2000-2002 (weeks)
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Syrian Agricultural calendar evaluation

• In principle, it against the free trade area
  concept because it works as NTB
• Imports quantities lower during (PP) except for
  watermelon and tomato
• Only watermelon and onion recorded imports
  quantity during (PP)

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Member countries calendar
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Expectations related to the Agricultural Calendar
Finding

• Decrease of imports of protected products during
  the time of protection
• Market prices of protected products increase
  during time of protection
• Decrease of exports of products protected by
  member countries during time of protection

• v
• v
• v

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Conclusions

• Overall impacts of GAFTA very limited
• The only clear impact of GAFTA was on import
  side
• The significant increase in imports brought about
  by removal of NTB import ban by Syria
• Poor economic integration leads to the loss of
  the comparative advantages, competitiveness, and
  to stagnation of exports to external markets

36
Reasons behind not (yet) fully achieving GAFTA
objectives

• General reasons
• Absence of peaceful environment
• Absence of real efforts toward economic
  integration
• Conflict of interest because some MC are member
  of WTO, or involved in A.A with EU
• Differences in national laws and regulations
• Macroeconomic differences
• Structural reform programs require time for
  results to appear
• Insufficient trade services
• Only very limited tariff reduction during the
  firs years of GAFTA implementation.

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Specific reasons

• The executive program does not regulate in
  details subsidies, protection procedures, and
  anti-dumping
• The exceptions to free trade in agriculture
  reduce the possibilities of regional trade
  expansion
• GAFTA has not adequately addressed the issues of
  NTBs
• MC applied different rules of origin and no
  agreement on this issue
• Bilateral agreements between MC disturb overall
  GAFTA implementation
• Little complementarity in the economies of the
  Arab countries due to similar production
  structures
• Numerous and excessive (sometimes illegal) fees
  on trade
• Cumbersome inspections and other practices at
  borders
• Treatment of Free Trade Zones not clear

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Recommendations

• To make the NTBs explicit, transparent, and work
  toward elimination
• Define clear and agreed rules of origin
• Better linking of the domestic financial markets
  with the world financial markets
• Strengthen regional market information services
• Promote research toward specialization of
  production according to comparative advantages
• Promote public awarness regarding GAFTA

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• Better harmonization of economic policies in MC
• Develop statistical information system
• Ensuring free movement for goods, capitals, and
  persons
• Address the problems of reduced government
  revenues due to tariff reduction
• Planning to build GAFTA customs union

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After this elaboration in monitoring GAFTA
implementation, two big questions arise

• Is tariff elimination alone sufficient tool to
  achieve free trade area?
• Is Free Trade Area alone lead to regional
  integration?

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For your attention
Thank you