The road to integration among Arab countries : assessing the political and economic barriers and possibilities

Abstract

Arab countries attempts at regional integration started in the 1950s, but the goal of integration has produced very little substantive political or economic results. This lack of progress has blocked Arab countries from attaining benefits to their political and economic welfare that could accrue as a result. Arab Petro-states are reluctant to share the oil returns with other non-oil exporting countries, which have been struggling to develop their trade relations. Arab countries have not been able to develop their comparative advantages in trade due to historical problems, such as colonialism. Arab countries are also lacking effective supranational institutions that can balance the economic gains of integration among member states. This research outlines an implementation path that would ensure a realistic integration and application based on an assessment of past and current integration attempts with a special focus on the Greater Arab Free Trade Area (GAFTA), which is an Arab agreement that was signed in 1997. The assessment will determine the obstacles that have stinted past integration and how they relate to the status of integration in the Arab countries today. Unless Arab states have state-centric agreements, which share a common vision of developing industrial and agricultural bases that aims at developing states’ dynamic comparative advantages, the total intra-trade impact on Arab countries will be slightly positive or even negative since integration will result in trade diversion. Arab states can accept short-term losses that can result from trade diversion or loss of tariff revenues on condition that their comparative advantages can be developed on the long term. Finally, this thesis highlights the economic and non-economic benefits and obstacles of integration using statistical analyses that simulate the economic benefits of Arab intra-regional cooperation.