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. Asia Syria; Lebanon; Jordan; Iraq; Saudi Arabia; Qatar; Oman; Kuwait; Bahrain; U.A.Emirates; Africa Egypt Tunisia; Libya; Morocco Member countries

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

10. Expectations

11. Trends in Overall Syrian Trade(Imports + Exports) 1996/97 - 2001

12. The Evolution of Syrian Trade with GAFTA Compared to Total Trade, 1996/97-2001

14. Table 7: Syrian Exports to GAFTA Compared to Exports to the Rest of the World

15. Syrian Agricultural Exports to GAFTA and to the Rest of the World

18. Syrian Total Imports from GAFTA Compared with the Rest of the World

19. Syrian Agricultural Imports from GAFTA & from the Rest of the World (RoW)

21. Changes of agricultural Import and export structure • 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.

22. In imports: In 96/97, Egypt, Morocco, UA Emirates, and S Arabia; In 2001 Egypt, EA Emirates, Morocco, and Lebanon;

23. In exports: In 96/97, S Arabia, Lebanon, Jordan, and Kuwait; In 2001, S Arabia, Egypt, Lebanon, and UA Emirates;

24. The link between GAFTA and bilateral agreement • Trade creation; • Trade diversion.

25. Finding Expectations fulfilled? x √ √ √ x x (√) (√)

26. 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; Expectation related to the Agricultural Calendar

27. N u m b e r o f p r o t e c t e d w e e k s P r o t e c t e d w e e k s i n 2 0 0 0 P r o t e c t e d w e e k s i n 2 0 0 2 C o u n t r y w i t h p r o t e c t e d w e e k s C o u n t r i e s w i t h o u t p r o t e c t e d w e e k s Agricultural Calendar

28. GAFTA Agriculture calendar adopted by Syria, 2000-2002 (weeks)

29. 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);

31. Member countries’ calendar

34. 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; √ √ √ Expectations related to the Agricultural Calendar Finding

35. 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.

37. 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;

38. 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;

39. 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;

40. 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?

41. For your attention Thank you