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Regional Economic Integration in the Middle East and North Africa: A Primer

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Book cover European Yearbook of International Economic Law 2010

Part of the book series: European Yearbook of International Economic Law ((EUROYEAR,volume 1))

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Abstract

The Middle East and North Africa (MENA) is not a region easily associated with economic integration. It more readily conjures up images of geopolitical discord, state-led economies, authoritarian regimes and oil Sheikdoms that fear the reverberations of political liberalization that might come with economic openness.1 Indeed, early attempts at regional integration from the 1950s until the 1980s failed unequivocally,2 and only in the last few years can it be said that any real progress has been made. The economic gains anticipated from MENA integration, by any estimate, are evidently not so dramatic3 as to have overcome domestic and regional political obstacles; and at the same time, in no other region of the world is the project of regional economic integration so politicized, in the sense that it is driven more by the idea of peace and stability through trade than by rational economic logic.4

The author wishes to thank Bruck Teshome and Michael Botstein for their research assistance. The cutoff date for the survey in this article is November 1, 2008.

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Notes

  1. 1.

    Moreover, international economic liberalization and the capitalist system pose fundamental challenges not only to governments, but to other traditional sources of social authority and legitimacy in the region; see Tripp, Islam and the Moral Economy: The Challenge of Capitalism, 2006.

  2. 2.

    For a brief history of early regional integration efforts in MENA, see Zarrouk, The Greater Arab Free Trade Area: Limits and Possibilities, in: Hoekman/Zarrouk (eds.), Catching up with the Competition: Trade Opportunities and Challenges for Arab Countries, 2000, p. 285; and see Sect. 4 infra.

  3. 3.

    Estimates differ between studies, but it is generally acknowledged that the rate of intra-regional MENA trade in proportion to total international trade with the region is very low, in most countries remaining at single digit figures – the lowest among all world regions except for South Asia (World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, p. 36). It is also a common, though more controversial finding that the economic benefits of regional integration are limited. See, e.g., Péridy, Toward a Pan-Arab Free Trade Area: Assessing Trade Potential Effects of the Agadir Agreement, The Developing Economies 43 (2005) 3, p. 32. One recent study of a MENA sub-region found that trade liberalization might double intra-regional trade, it would still remain at the modest level of 10% of total trade, see Tovias/Kalaycioglu/Dafni/Ruben/Herman, What Would Normalization of Economic Relations between Mashrek Countries, Turkey and Israel Imply? The World Economy 30 (2007) 4, p. 665 (683).

  4. 4.

    Much of the discourse sees MENA regional economic integration as a source of peace and political stability, in a pragmatic, Kantian mindset. See, e.g., Arnon/Bamya, Economic Dimensions of a Two-State Agreement between Israel and Palestine¸ 2007; Lawrence, A US–Middle East Trade Agreement: A Circle of Opportunity? 2006, pp. 4–7; for a critique of the peace-through-trade logic in the EU’s regional policy, see Broude, Between Pax Mercatoria and Pax Europea: How Trade Dispute Procedures Serve the EC’s Regional Hegemony, in: Ala’i/Broude/Picker, Trade as the Guarantor of Peace, Liberty and Security? Critical, Historical and Empirical Perspectives, 2006.

  5. 5.

    See Harders, Analyzing Regional Cooperation after September 11, 2001: The Emergence of a New Regional Order in the Arab World, in: Harders/Legrenzi (eds.), Beyond Regionalism? Regional Cooperation, Regionalism and Regionalization in the Middle East, 2008, p. 33.

  6. 6.

    In accordance with the League of Arab States (Arab League) Declaration on Pan-Arab Free Trade Area (Economic and Social Council’s Resolution No. 1317 – O.S. 59, Executive Program of the Agreement on Facilitating and Developing Inter-Arab Trade for Establishing Pan-Arab Free Trade Area, 1997), p. 14, full liberalization (in accordance with the relevant legal documents) was to be achieved by July 21, 2007; however, the process was expedited and formally completed on January 1, 2005, creating the GAFTA; see Sect. 6 infra.

  7. 7.

    Signed on February 25, 2004 by Jordan, Tunisia, Egypt and Morocco; see Sect. 6 infra.

  8. 8.

    See Mouawad, OPEC Ponders Choices as Oil Prices Plummet, New York Times, October 21, 2008.

  9. 9.

    Referring here to the “Middle East Free Trade Area Initiative” announced by President Bush in 2003, which has ultimately led only to a small number of trade agreements between the USA and MENA partners and some limited progress on cumulation of origin between Israel, on one hand, and Jordan and Egypt, on the other hand, in the specialized context of “Qualified Economic Zones” (QIZ), with little effect on regional integration as such; for a critique see Momani, A Middle East Free Trade Area: Economic Interdependence and Peace Reconsidered, World Politics 30 (2007) 11, p. 1682.

  10. 10.

    Clinging to its immediate mandate, the chapter deliberately focuses on economic integration within the region, additionally granting specific contextual attention to the MENA states’ participation in the WTO, and more selectively to the broader environment of EU and US influences, which deserve more detailed analysis; on the latter, see Al Khouri, EU and US Free Trade Agreements in the Middle East and North Africa, Carnegie Endowment for International Peace, Carnegie Papers No. 8, 2008; Lawrence, A US–Middle East Trade Agreement: A Circle of Opportunity? 2006, pp. 81–89.

  11. 11.

    See Lewis, The Shaping of the Modern Middle East, 1994, p. 3.

  12. 12.

    Although it has been defined as a region “that embraces an area fringed by five seas: Mediterranean, Black, Caspian and the Red seas and the Persian or Arabian Gulf” (see Çarkoğlu/Eder/Kirişci, The Political Economy of Regional Cooperation in the Middle East, 1998, p. 7).

  13. 13.

    Richards/Waterbury, A Political Economy of the Middle East, (3rd ed.) 2008, p. 44.

  14. 14.

    Lewis, The Shaping of the Modern Middle East, 1994, p. 21.

  15. 15.

    Harders, Analyzing Regional Cooperation after September 11, 2001: The Emergence of a New Regional Order in the Arab World, in: Harders/Legrenzi (eds.), Beyond Regionalism? Regional Cooperation, Regionalism and Regionalization in the Middle East, 2008, p. 33, (pp. 34–35).

  16. 16.

    See World Bank website, http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/0,,menuPK:247619~pagePK:146748~piPK:146812~theSitePK:256299,00.html.

  17. 17.

    Without downplaying the importance of the Arab–Israeli conflict, it is by no means the only source of regional political discord and military tension in the region. In fact, the Middle East has for the last few decades held the position of most conflict-prone region in the world (Gleditsch/Wallensteen/Erikkson/Sollenberg/Strand, Armed Conflict 1946–2001: A New Dataset, Journal of Peace Research 39 (2002) 5, p. 615, (pp. 615–617). Central conflicts have included civil war in Yemen in the 1960s (with Egyptian and Saudi Arabian involvement) and 1990s, the Iran–Iraq war in the 1980s; the Iraqi invasion of Kuwait and the following first Gulf War in the early 1990s; Kurdish insurrection in the territories of Iraq, Turkey, Iran and Syria; civil war in Lebanon from 1976; civil war in Algeria in the 1990s and significant civil unrest in other MENA countries on the basis of social and religious fault lines.

  18. 18.

    2007 Figures based on World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, pp. 103–104, excluding Iran and with additional data for Israel.

  19. 19.

    This is true even with respect to MENA sub-regions such as the Mashrek: see Tovias/Kalaycioglu/Dafni/Ruben/Herman, What Would Normalization of Economic Relations between Mashrek Countries, Turkey and Israel Imply? The World Economy 30 (2007) 4, p. 665 (682).

  20. 20.

    GDP data is from 2007, based on World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, p. 103.

  21. 21.

    All GDP per Capita figures are Purchasing-Power Parity 2006 according to UNDP Human Development statistics available on the UNDP website at http://hdr.undp.org/en/statistics/.

  22. 22.

    For an interesting critique of the measurement of development in the Middle East, contrasting World Bank and UNDP approaches, see Fakhri, Images of the Arab World and Middle East: Debates about Development and Regional Integration, Sept. 1, 2007, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1096680.

  23. 23.

    Lawrence, A US–Middle East Trade Agreement: A Circle of Opportunity? 2006, p. 4.

  24. 24.

    Richards/Waterbury, A Political Economy of the Middle East, (3rd ed.) 2008, p. 7.

  25. 25.

    In Iraq, Lebanon, Jordan, Syria, Algeria, Libya, Morocco and Tunisia, as a whole, 74% odd arable land receives less than 400mm rainfall a year; see Hazell/Oram/Chaherli, Managing Droughts in the Low-Rainfall Areas of the Middle East and North Africa, EPTD Discussion Paper No. 78, International Food Policy Research Institute, September, 2001, p. 2, available at http://www.ifpri.org/divs/eptd/dp/papers/eptdp78.pdf.

  26. 26.

    Çarkoğlu/Eder/Kirişci, The Political Economy of Regional Cooperation in the Middle East, 1998, p. 57.

  27. 27.

    Richards/Waterbury, A Political Economy of the Middle East, (3rd ed.) 2008, pp. 165–176.

  28. 28.

    BP Statistical review of World Energy, 2007, http://www.tsl.uu.se/uhdsg/Data/BP_Stat_2008.xls.

  29. 29.

    Noland/Pack, The Arab Economies in a Changing World, 2007, p. 121.

  30. 30.

    For data on population growth, see World Bank, World Development Indicators, 2006.

  31. 31.

    Estimates differ between sources, ranging from 562 million to 639 million; see Richards/Waterbury, A Political Economy of the Middle East, 2008, (3rd ed.) pp. 165–176.

  32. 32.

    For an analysis of the effects of population growth in MENA on age groups, see Williamson/Yousef, Demographic Transitions and Economic Performance in the Middle East and North Africa, in: Sirageldin (ed.), Human Capital: Population Economics in the Middle East, 2002, pp. 16–31, (pp. 18–22).

  33. 33.

    Jalali/Roudi, Globalization and Unemployment in MENA, in: Sirageldin (ed.), Human Capital: Population Economics in the Middle East, 2002, pp. 194–201. See also Rivlin/Gal, Economic and Demographic Developments in the Middle East and North Africa, 1980–2000, 2004, pp. 6–26.

  34. 34.

    Noland/Pack, The Arab Economies in a Changing World, 2007, p. 76.

  35. 35.

    For recent data on population and work force growth in these different categories of MENA states, see World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, pp. 99–100.

  36. 36.

    In 2000, the same ratio (employment/GDP) in Syria was 32%/24%; in Tunisia – 22.1%/12.1%; and in Algeria – 14.1%/9.6% (based on Eurostat, Euro-Mediterranean Statistics, 2000).

  37. 37.

    Richards/Waterbury, A Political Economy of the Middle East, (3rd ed.) 2008, pp. 144–156.

  38. 38.

    Noland/Pack, The Arab Economies in a Changing World, 2007, p. 138.

  39. 39.

    Richards/Waterbury, A Political Economy of the Middle East, (3rd ed.) 2008, p. 179.

  40. 40.

    Sutherland/Siegman/Hoekman/Messerlin, Harnessing Trade for Development and Growth in the Middle East, Report by the Council on Foreign Relations Study Group on Middle East Trade Options, 2002, p. 17, fn. 18, citing Handoussa, A Scenario for the New Role of the State in MENA, Background Notes for Economic Trends in the MENA Region, 2000.

  41. 41.

    Noland/Pack, The Arab Economies in a Changing World, 2007, pp. 200–201.

  42. 42.

    Tovias/Kalaycioglu/Dafni/Ruben/Herman, What Would Normalization of Economic Relations between Mashrek Countries, Turkey and Israel Imply? The World Economy 30 (2007) 4, pp. 665–666, put the service sector’s GDP proportion in the Mashrek sub-region at 62%, with industry at 25% and agriculture at 13%.

  43. 43.

    World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, p. 36. See also Miniesy/Nugent/Yousef, Intra-Regional Trade in the Middle East: Past Performance and Future Potential, in: Hakimian/Nuggent (eds.), Trade Policy and Economic Integration in the Middle East and North Africa: Economic Boundaries in Flux, 2004, p. 41, (pp. 45–46). Intra-regional trade in sub-Saharan Africa is also generally low; compare Foroutan/Pritchett, Intra-Sub-Saharan African Trade: Is It Too Little? Journal of African Economies 2 (1993) 1, p. 74; Yang/Gupta, Regional Trade Arrangements in Africa: Past Performance and the Way Forward, African Development Review 19 (2008) 3, p. 399.

  44. 44.

    World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, pp. 36–38. Controlling for the dominance of extra-regional oil exports, if only non-oil intra-regional exports are compared to total non-oil exports, the ratio rises to about 25%.

  45. 45.

    See, e.g., Fischer, Prospects for Regional Integration in the Middle East, in: de Melo/Panagariya, New Dimensions in Regional Integration, 1993, p. 423 (434 et seq.).

  46. 46.

    Miniesy/Nugent/Yousef, Intra-Regional Trade in the Middle East: Past Performance and Future Potential, in: Hakimian/Nuggent (eds.), Trade Policy and Economic Integration in the Middle East and North Africa: Economic Boundaries in Flux, 2004, p. 41 (45–46).

  47. 47.

    See footnote 3 supra; and De Rosa, Gravity Model Analysis, in: Hufbauer/Brunel, Maghreb Regional and Global Integration: A Dream to be Fulfilled, 2008, p. 45 (finding that a free trade area in the Maghreb would yield a gain of only $1 Billion, or 1% of base total trade).

  48. 48.

    Bolbol/Fatheldin, Intra-Arab Exports and Direct Investment: An Empirical Analysis, Arab Monetary Fund Economic Paper No. 12 (2005), pp. 3–4.

  49. 49.

    Under Article XII of the Agreement Establishing the WTO, accession to the WTO is open to “any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement.” In principle, therefore, a non-State entity such as the Palestinian Authority, could become a WTO Member. However, given the current disconnect in the governance of the West Bank and Gazah, this remains a highly theoretical possibility, and even under the formal terms of the largely defunct agreements between Israel and the Palestinians, Palestinian accession was not possible; see Broude, WTO Accession: Current Issues in the Arab World, Journal of World Trade 32 (1998) 6, p. 147.

  50. 50.

    “Under the mercantilist logic that dominates trade negotiations, there is little incentive for them to join the WTO – no country imposes tariffs on oil” (Noland/Pack, The Arab Economies in a Changing World, 2007, p. 212). Indeed, the motivation of Saudi Arabian accession, for example, had little to do with prying open foreign markets, and more with political and investment-related concerns (see Broude, WTO Accession: Current Issues in the Arab World, Journal of World Trade 32 (1998) 6, p. 147).

  51. 51.

    An issue of continued interest is Saudi Arabia’s enforcement (albeit sporadic) of the Arab boycott against Israel, despite assurances that it would be discontinued after accession. Saudi Arabia agreed not to invoke the Article XIII WTO Agreement non-application clause vis-à-vis Israel to the WTO and to stop boycott policies. However, various reports as well as statements by Saudi Arabian officials suggest that the boycott has not been terminated, with general reference to security exception justification. For analysis of the boycott see Broude, WTO Accession: Current Issues in the Arab World, Journal of World Trade 32 (1998) 6, p. 147; Kontorovich, The Arab League Boycott and WTO Accession: Can Foreign Policy Excuse Discriminatory Sanctions? Chicago Journal of International Law 4 (2003) 2, p. 283; Weiss, Congressional Research Service Report for Congress, Arab League Boycott of Israel, April 19, 2006.

  52. 52.

    Sutherland/Siegman/Hoekman/Messerlin, Harnessing Trade for Development and Growth in the Middle East, Report by the Council on Foreign Relations Study Group on Middle East Trade Options, 2002, p. 38.

  53. 53.

    See Choi, Legal Problems of Making Regional Trade Agreements with Non-WTO Member States, Journal of International Economic Law 8 (2005) 8, p. 825.

  54. 54.

    World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, p. 41. It is noteworthy that most of the high-tariff MENA countries are beneficiaries of Generalized System f Preference (GSP) programs in developed markets.

  55. 55.

    World Bank, Middle East and North Africa Region, 2008 Economic Developments and Prospects: Regional Integration for Global Competitiveness, 2009, p. 42, based on Kee/Nicita/Olarreaga, Estimating Trade Restrictiveness Indices, World Bank Working Paper, January 2008, http://siteresources.worldbank.org/INTRES/Resources/OTRIpaper.pdf.

  56. 56.

    For description and data, see Lawrence, A US–Middle East Trade Agreement: A Circle of Opportunity? 2006, pp. 44–47.

  57. 57.

    WTO, Kingdom of Bahrain – Schedule of Specific Commitments, WTO Doc. GATS/SC/97, April 15, 1994; WTO, Kingdom of Bahrain – Schedule of Specific Commitments – Supplement – WTO Doc. GATS/SC/97/Suppl. 1, February 26, 1998.

  58. 58.

    WTO, Tunisia – Schedule of Specific Commitments, WTO Doc. GATS/SC/87, April 15, 1994; WTO, Tunisia – Schedule of Specific Commitments – Supplement, WTO Doc. GATS/SC/87/Suppl. 1, April 11, 1997; WTO, Tunisia – Schedule of Specific Commitments – Supplement 2, WTO Doc. GATS/SC/87/Suppl. 2, February 26, 1998.

  59. 59.

    WTO, The Kingdom of Saudi Arabia – Schedule of Specific Commitments, WTO Doc. GATS/SC/141, March 29, 2006.

  60. 60.

    WTO, The Hashemite Kingdom of Jordan – Schedule of Specific Commitments, WTO Doc. GATS/SC/128, December 15, 2000.

  61. 61.

    For a strong critique of inefficiencies in the MENA services market, see Sutherland/Siegman/Hoekman/Messerlin, Harnessing Trade for Development and Growth in the Middle East, Report by the Council on Foreign Relations Study Group on Middle East Trade Options, 2002, pp. 13–21.

  62. 62.

    Noland/Pack, The Arab Economies in a Changing World, 2007, p. 105.

  63. 63.

    See WTO, Trade Policy Review Body, Trade Policy Review – Egypt – Report by the Secretariat – Revision, WTO Doc. WT/TPR/S/150/Rev. 1, August 5, 2005, pp. 23–24.

  64. 64.

    See WTO, Trade Policy Review Body, Trade Policy Review – Egypt – Report by the Secretariat – Revision, WTO Doc. WT/TPR/S/150/Rev. 1, August 5, 2005, p. 29.

  65. 65.

    See WTO, Trade Policy Review Body, Trade Policy Review – Tunisia – Report by the Secretariat – Revision, WTO Doc. WT/TPR/S/150/Rev. 1, 31 October, 2005, pp. 24–25 and 89.

  66. 66.

    But compare with the 2008 TPR on Jordan, which is generally favorable in its descriptions of Jordanian trade policy (WTO, Trade Policy Review Body, Trade Policy Review – Jordan – Report by the Secretariat, WTO Doc. WT/TPR/S/206, October 6, 2008).

  67. 67.

    See WTO, Trade Negotiations Committee, Geographical Indications – The Significance of “Extension” in the TRIPS Agreement and Its Benefits for WTO Members – Addendum, WTO Doc. TN/C/W/14/Add. 2, July 15, 2003.

  68. 68.

    See http://www.g-20.mre.gov.br/members.asp; the G-20 of developing countries in WTO negotiations is not to be confused with the G-20 of major economies http://www.g20.org/G20/ in which Saudi Arabia is the only Arab member, leading to some tension with other Arab countries who question whether Saudi Arabia represents broader MENA country interests (see, e.g., World Bulletin, Egypt Supports Saudi Presence in G-20 Minister, November 26, 2008, http://www.worldbulletin.net/news_detail.php?id=32163).

  69. 69.

    WTO, Negotiating Group on Market Access, Market Access for Non-Agricultural Products – Proposal on a Sectoral Agreement on Materials – The Primary Aluminum Case – Communication from the UAE, WTO Doc. TN/MA/W/37/Add. 1, May 28, 2004; and WTO, Negotiating Group on Market Access, Market Access for Non-Agricultural Products – Communication from the UAE, WTO Doc. TN/MA/W/37/Add. 2, April 21, 2005.

  70. 70.

    Starting with WTO, Committee on Trade and Environment – Special Session, Environmental Goods – Submission by the State of Qatar – Paragraph 31(iii), WTO Doc. TN/TE/W/14, October 9, 2002.

  71. 71.

    See WTO, Dispute Settlement Body – Special Session, Jordan’s Contribution towards the Improvement and Clarification of the WTO Dispute Settlement Understanding – Communication from Jordan, WTO Doc. TN/DS/W/43, January 28, 2003.

  72. 72.

    WTO, Committee on Trade and Environment – Special Session, Energy Taxation, Subsidies and Incentives in OECD Countries and their Economic and Trade Implications on Developing Countries, in particular Developing Oil Producing and Exporting Countries – Submission by Saudi Arabia, WO Doc. WT/CTE/W/215, TN/TE/W/9, September 23, 2002.

  73. 73.

    The disputes are: DS205 Egypt – Import Prohibition on Canned Tuna with SoyBean Oil, DS211 Egypt – Definitive Antidumping Measures on Steel Rebar from Turkey (settled by the Panel Report in WTO Doc. WT/DS211/R, August 8, 2002), DS305 Egypt – Measures Affecting Imports of Textiles and Apparel Products, and DS327 Egypt – Antidumping Duties on Matches from Pakistan.

  74. 74.

    WTO, European Communities – Trade Description of Sardines, WTO Doc. WT/DS231/AB/R, adopted October 23, 2002.

  75. 75.

    The translated text of the Egypt–Jordan FTA is available online at http://mba.tuck.dartmouth.edu/cib/trade_agreements_db/archive/Jordan-Egypt.pdf.

  76. 76.

    See Hashemite Kingdom of Jordan, Ministry of Industry and Trade, http://www.mit.gov.jo/Default.aspx?tabid=739.

  77. 77.

    See Government of Egypt, Ministry of Trade and Industry, Trade Agreement Sector, http://www.tas.gov.eg/english.

  78. 78.

    See Republic of Tunisia, Ministry of Trade and Handicrafts, http://www.commerce.gov.tn/coop_1.htm.

  79. 79.

    Indeed, for better or for worse, “greater economic integration in the Arab world has consistently been a stated goal of public policy and a yardstick for evaluation of the achievements of Arab nationalism in the post-independence era” (Maamri, Free Trade Areas, Euro-Mediterranean Partnership and Prospects of South–South Integration in the Mediterranean, in: Prassello, Sustainable Development and Adjustment in the Mediterranean Countries following the EU Enlargement, 2006, p. 166 (175).

  80. 80.

    See Sect. 6 infra.

  81. 81.

    Zarrouk/Zallio, Integrating Free Trade Agreements, World Bank Working Paper, 2000, p. 19, http://www.worldbank.org/mdf/mdf3/papers/global/Zarrouk.pdf.

  82. 82.

    Zarrouk/Zallio, Integrating Free Trade Agreements, World Bank Working Paper, 2000. p. 14.

  83. 83.

    This assessment is based on the above working paper and on the summary of Egypt’s FTAs available at Government of Egypt, Ministry of Trade and Industry, Trade Agreement Sector, http://www.tas.gov.eg/english.

  84. 84.

    Zarrouk/Zallio, Integrating Free Trade Agreements, World Bank Working Paper, 2000, p. 19, http://www.worldbank.org/mdf/mdf3/papers/global/Zarrouk.pdf.

  85. 85.

    One could also mention in this context the bilateral Israeli–Palestinian relationship under the relevant instrument of the Oslo accords (Protocol on Economic Relations between the Government of the State of Israel and the P.L.O., representing the Palestinian People, Paris, April 29, 1994); however, there is a significant gap between the framework of the agreement and the actual practice of Israeli–Palestinian economic relations, and current economic relations are too strongly linked to the political and military situation. On forward looking options, see Arnon/Bamya, Economic Dimensions of a Two-State Agreement between Israel and Palestine, 2007.

  86. 86.

    Peters, Practices and their Failures: Arab–Israeli Relations and the Barcelona Process, UC Berkeley Institute of European Studies, paper 040402, 2004, http://repositories.cdlib.org/ies/040402/.

  87. 87.

    For example, see Kaye, Beyond the Handshake: Multilateral Cooperation in the Arab–Israeli Peace Process, 1991–1996, 2001, Chap. 5, (pp. 129–130).

  88. 88.

    Agreement on Trade and Commerce between Israel and Egypt, May 8, 1980, http://www.mfa.gov.il/MFA/Foreign%20Relations/Israels%20Foreign%20Relations%20since%201947/1979-1980/Annex%20IX%20-%20Agreement%20on%20trade%20and%20commerce%20between. Other efforts to encourage Israeli–Egyptian economic cooperation will be discussed in Sect. VI infra.

  89. 89.

    See Israel, Ministry of Industry, Trade and Labor, http://www.israel-industry-trade.gov.il/NR/exeres/B9C3F9D4-1339-4757-B57A-859E3153042E.htm. For an economic analysis of free trade between Israel and Jordan (prior to the revision of the agreement) see Tovias/Al-Khouri, An Empirical Estimation of the Potential Economic Effects of a Bilateral Free Trade Area Agreement between Israel and Jordan in the Context of the Euro-Mediterranean Partnership, Israel Affairs 10 (2004) 3, p. 138.

  90. 90.

    Arab League membership includes four states not included in this article’s definition of MENA: Sudan, Somalia, Comoros and Mauritania.

  91. 91.

    See Pact of the League of Arab States, March 22, 1945, available at http://avalon.law.yale.edu/20th_century/arableag.asp.

  92. 92.

    Article 2(a) of the Pact.

  93. 93.

    See Articles 7–8 of the Treaty for Joint Defence and Economic Cooperation between the States of the Arab League, June 17, 1950, available at http://avalon.law.yale.edu/20th_century/arabjoin.asp.

  94. 94.

    Convention on the Facilitation of Trade Exchange and the Regulation of Transit Trade, Resolution 590/19 of the Council of the Arab League, September 7, 1953. This convention was subsequently amended four times between 1954 and 1959. The English and French texts of the convention were published as 1955/53 and 1955/54 (respectively), Agreements and Conventions Concluded Between Member States Within the Framework of the Arab League (League of Arab States Treaty Series); the English text of the convention with its amendments is available GATT, Accession of the United Arab Republic – Memorandum on the Commercial Policy of the United Arab Republic – Addendum, GATT Doc. L/1816/Add.3, October 18, 1962 http://www.wto.org/gatt_docs/English/SULPDF/90760427.pdf.

  95. 95.

    See also Boutros-Ghali, Recueil des Cours, Collected Courses of the Hague Academy of International Law, 1972, p. 71.

  96. 96.

    See Pollan, Legal Framework for the Admission of FDI, 2006, p. 174.

  97. 97.

    See http://www.caeu.org.eg/English/Intro.

  98. 98.

    For a detailed description of the ACM’s early years, see Hershlag, The Economic Structure of the Middle East, 1975, pp. 193–194.

  99. 99.

    For complementary analyses of the political and institutional roots of the Arab League’s inability to promote Arab unity and economic integration, see Fawzy, The Economics and Politics of Arab Economic Integration, in: Galal/Hoekman (eds.), Arab Economic Integration: Between Hope and Reality, 2003, p. 13, 20 et seq.; Barnett/Solingen, Designed to Fail or Failure of Design? The Origins and Legacy of the Arab League, in: Acharya/Lain (eds.), Crafting Cooperation: Regional International Institutions in Comparative Perspective, 2007; a central issue is the structural (and partially deliberate) ineffectiveness of the organization: the Arab League has adopted thousands of resolutions (of which 80% were never implemented), and established bureaucracies and other trappings of an international organization, although it lacks any monitoring or sanctioning powers – an endeavour to “be seen but not heard,” (Ibid., pp. 213–215).

  100. 100.

    See Boutros-Ghali, Recueil des Cours, Collected Courses of the Hague Academy of International Law, 1972, p. 71.

  101. 101.

    “It appears therefore that this whole edifice of conventions is nothing but a façade that hides the crisis that Arab cooperation is undergoing.”

  102. 102.

    Barnett/Solingen, Designed to Fail or Failure of Design? The Origins and Legacy of the Arab League, in: Acharya/Lain (eds.), Crafting Cooperation: Regional International Institutions in Comparative Perspective, 2007, p. 209. However, the seeds for the GAFTA as we know it today were in fact sown in 1981 with the signing of the Arab League’s Agreement to Facilitate and Develop Inter Arab Trade (AFDIAT) in Tunis in 1981 (see infra). Almost two decades would pass before the AFDIAT was given concrete meaning, leaving a vacuum that allowed the emergence of sub-regionalism, which in turn may have had a negative impact on regionalism.

  103. 103.

    Although the Agadir Agreement currently has only four members among MENA state’s it is not a form of sub-regionalism in that its membership is open to “all Arabic nation members of the Arab League and the Greater Arab Free-Trade Zone and with Association Agreements or free trade agreements with Europe” (Article 29, Agadir Agreement).

  104. 104.

    See Charter of the Cooperation Council for the Arab States of the Gulf, May 25, 1981, http://www.gcc-sg.org/eng/index.php?action=Sec-Show&ID=1 (the “GCC Charter”).

  105. 105.

    The GCC was “originally conceived of as a security organization – to counter perceived threats from Islamic Revolutionary Iran, Baathist Socialist Iraq, and the Soviet incursion into Afghanistan” (Al-Momani, Reacting to Global Forces: Economic and Political Integration of the Gulf Cooperation Council, Journal of the Gulf and Arabian Peninsula Studies 34 (2008) 128, p. 47). For an evaluation of the defense and security aspects of GCC cooperation, see Legrenzi, Did the GCC Make a Difference? Institutional Realities and (Un)Intended Consequences, in: Harders/Legrenzi (eds.), Beyond Regionalism? Regional Cooperation, Regionalism and Regionalization in the Middle East, 2008, p. 107 (109–111).

  106. 106.

    Article 4 of the GCC Charter.

  107. 107.

    Article 10 of the GCC Charter.

  108. 108.

    See The Unified Economic Agreement between the Countries of the Gulf Cooperation Council, November 11, 1981, http://mba.tuck.dartmouth.edu/cib/trade_agreements_db/archive/GCC.pdf.

  109. 109.

    Articles 1–3 and 4, respectively.

  110. 110.

    To qualify for GCC origin for the purposes of the GCC UEA, products must satisfy a double rule: 40% value-added in GCC Members; and 51% GCC citizens’ ownership in the producer (Article 3(1) UAE).

  111. 111.

    See Legrenzi, Did the GCC Make a Difference? Institutional Realities and (Un)Intended Consequences, in: Harders/Legrenzi (eds.), Beyond Regionalism? Regional Cooperation, Regionalism and Regionalization in the Middle East, 2008, p. 107 (116).

  112. 112.

    Implementation Procedures for the Customs Union of the Cooperation Council for the Arab States of the Gulf (The GCC Customs Union), 2003, approved by the GCC Supreme Council in Qatar, December, 2002, http://www.gcc-sg.org/eng/index.php?action=Sec-Show&ID=93.

  113. 113.

    On the latter, see Article 13 of the CU Implementation Procedures.

  114. 114.

    Kawach, Oman Reaffirms that It Will not Join Currency Union, Emirates Business 24/7 news, July 08, 2008, http://www.business24-7.ae/articles/2008/7/pages/07082008_41b341e598aa44779bc8159663cd75b9.aspx.

  115. 115.

    Negotiations at some level have in fact been conducted since 1988; current difficulties relate to the EU requirement of human rights conditionality and the abolition of export duties by the GCC (see AFP, GCC Suspends EU Free Trade Talks, December 24, 2008, http://www.arabianbusiness.com/541941-gcc-suspends-eu-free-trade-talks.

  116. 116.

    See Benslimane, The Permanent Consultative Committee of the Maghreb, Journal of Modern African Studies 5 (1967) 1, p. 129.

  117. 117.

    See Treaty Establishing the Arab Maghreb Union, Marrakech, February 17, 1989, http://www.maec.gov.ma/EN/UMA.htm (the “AMU Treaty”).

  118. 118.

    Articles 12 and 13 of the AMU Treaty, respectively.

  119. 119.

    Article 2, Treaty Establishing The Arab Maghreb Union (February 17 1989, Marrakech).

  120. 120.

    See Brunel, Maghreb Regional Integration, in: Hufbauer/Brunel (eds.), Maghreb Regional and Global Integration: A Dream to be Fulfilled, 2008, p. 7 (10).

  121. 121.

    For an economic assessment of Maghreb sub-regional integration, see Brenton/Baroncelli/Malouche, Trade and Investment in the Maghreb, World Bank, Middle East and North Africa, Working Paper No. 44, June, 2006; and for a forward looking analysis, see Brunel/Hufbauer, Reviving Maghreb Integration: Recommendations, in: Hufbauer/Brunel (eds.), Maghreb Regional and Global Integration: A Dream to be Fulfilled, 2008, p. 163.

  122. 122.

    See Agreement on the Establishment of the Arab Cooperation Council, February 16, 1989, UNTS No. 26558, Vol. 1530 (1989), p. 417.

  123. 123.

    See Ryan, Jordan and the Rise and Fall of the Arab Cooperation Council, The Middle East Journal 52 (1998) 3, p. 386.

  124. 124.

    Article 6.1 of the Agadir Agreement.

  125. 125.

    On EU–MENA relations, see Momani, The EU, the Middle East and Regional Integration, World Economics 8 (2007) 1, p. 47.

  126. 126.

    Note, however, that GAFTA too has an EU context: the fact that in the mid-1990s eight Arab League Members had chosen to participate in the EU’s Euro-Mediterranean Program (discussed briefly in the next section) served as a wake-up call for pan-Arab economic integration; see Zorob, Intraregional Economic Integration: The Cases of GAFTA and MAFTA, in: Harders/Legrenzi (eds.), Beyond Regionalism? Regional Cooperation, Regionalism and Regionalization in the Middle East, 2008, p. 169.

  127. 127.

    Article IV AFDIAT.

  128. 128.

    Fn. 99 supra.

  129. 129.

    See fn. 6 supra.

  130. 130.

    Article 2.1 of the GAFTA.

  131. 131.

    Article 1.4 of the GAFTA.

  132. 132.

    Article 3 of the GAFTA.

  133. 133.

    Arab League member countries that are not members of GAFTA are Algeria, Djibouti, Somalia, Comoros Islands, and Mauritania.

  134. 134.

    See Syria, Ministry of Agriculture and Agrarian Reform, National Agricultural Policy Center, working Paper No. 8, Implementation of the Great Arab Free Trade Area Agreement: The Case of Syria (undated), http://www.napcsyr.org/dwnld-files/working_papers/en/08_gafta_en.pdf. Indeed, the Palestinian Authority can hardly make effective tariff reduction commitments under present circumstances.

  135. 135.

    Resolution 1431/2002.

  136. 136.

    See Lawrence, A US–Middle East Trade Agreement: A Circle of Opportunity? 2006, pp. 50–51.

  137. 137.

    For a critique of the weakness of dispute settlement in the GAFTA see Hassanien, Trading Spaces: Lessons from NAFTA for a Robust Investment Dispute Settlement Mechanism under Great Arab free Trade Agreement (GAFTA), 2007 ExpressO, http://works.bepress.com/mohamed_hassanien/1.

  138. 138.

    Article 4 of the Agadir Agreement.

  139. 139.

    Article 5 of the Agadir Agreement.

  140. 140.

    See, e.g., Articles 5, 9, and 10 of the Agadir Agreement.

  141. 141.

    See Article 6.1 of the Agadir Agreement.

  142. 142.

    Differential prospects for cumulation of RoOs is a central, though not exclusive, aspect of this relationship. Whereas the EU has adopted the Pan-Euro-Mediterranean RoO as a general policy aimed at promoting intra-regional efforts producing exports to the EU, the USA has followed a modest and selective path through the establishment of “Qualified Economic Zones” between Israel, on one hand, and Egypt and Jordan, on the other, limited in product coverage and scope of effect on preferences. The difference between US/QIZ policy and EU/RoO policy is an important one, but one that cannot be covered in the scope of this introduction.

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  1. Hebrew University, Jerusalem, Israel

    Tomer Broude

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  1. Chair for Constitutional and Administrative Law European Law, European and International Economic Law, Passau University, D-94030, Passau, Germany

    Christoph Herrmann LL.M

  2. Department of European Law, Hamburg University, Schlüterstraβe 28, 20146, Hamburg, Germany

    Jörg Philipp Terhechte (Assistant Professor of Law, Faculty of Law) (Assistant Professor of Law, Faculty of Law)

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Broude, T. (2010). Regional Economic Integration in the Middle East and North Africa: A Primer. In: Herrmann, C., Terhechte, J.P. (eds) European Yearbook of International Economic Law 2010. European Yearbook of International Economic Law, vol 1. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-78883-6_12

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