220 Trade costs and inclusive growth Rodriguez, F. and Rodrik, D. (2001), Trade policy and economic growth: a skeptic’s guide to the cross-national evidence. In NBER Macroeconomics Annual 2000, 8 Regional integration in the MENA region: Volume 15 (pp. 261-338). MIT Press. Deepening the Greater Arab Free Trade Seck, A. (2014), “Trade Facilitation and Trade Flows in Africa”, paper presented at Area through trade facilitation the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal, 18–20 Houcine Boughanmi* June. Retrieved at: https://www.gtap.agecon.purdue.edu/resources/res_display. asp?RecordID=4408 Squalli, J. and Wilson, K. (2011), “A New Measure of Trade Openness”, The World Economy 34(10): 1745-1770. Abstract United Nations Economic Commission for Africa (UNECA) (2013), Trade This chapter assesses the trade facilitation performance of the countries of the Facilitation from an African Perspective, Addis Ababa: UNECA. Middle East and North Africa (MENA) region and determines the welfare and sectoral effects of trade facilitation improvements within the context of regional Wacziarg, R. and Horn Welch, K. (2008), “Trade Liberalization and Growth: New trade integration. It shows that introducing a trade facilitation provision in the Evidence”, World Bank Economic Review 22(2): 187-231. Greater Arab Free Trade Area (GAFTA) will lead to a significant welfare increase for all MENA sub-regions compared with a scenario of further trade liberalization Wagner, J. (2007), “Exports and Productivity: A Survey of the Evidence from Firm- without trade facilitation. Trade facilitation in the GAFTA would enhance export level Data”, The World Economy 30(1): 60-82. competitiveness and lead to a significant increase in overall and intra-trade export value for all countries, but particularly for the Mashreq and Maghreb countries. In Wilson C. E. (2011), Working Together: Economic Ties between the United the analysis, all sub-regions witnessed an export boost in agro-food product States and Mexico, Washington DC: Woodrow Wilson International Center for exports, particularly those products in which the Mashreq and Maghreb countries Scholars. have a comparative advantage. The welfare-enhancing results of this analysis indicate that the MENA region has a high stake in implementing the WTO Wilson, J. S., Mann, C. L. and Otsuki, T. (2003), “Trade Facilitation and Economic Agreement on Trade Facilitation (TFA), and should begin with areas that contribute Development: A New Approach to Quantifying the Impact”, World Bank Economic the most to trade cost reduction, such as automation and streamlining of trade Review 17(3): 367-389. procedures. Wilson, J. S., Mann, C. L. and Otsuki, T. (2005), “Assessing the Benefits of Trade Facilitation: A Global Perspective”, The World Economy 28(6), 841-871. World Trade Organization (WTO) (2015), World Trade Report 2015 – Speeding Up Trade: Benefits And Challenges of Implementing the WTO Trade Facilitation Agreement, Geneva: WTO. Zaki, C. (2014), “An Empirical Assessment of the Trade Facilitation Initiative: Econometric Evidence and Global Economic Effects”, World Trade Review 13(1): 103-130. * The contents of this chapter are the sole responsibility of the authors and are not meant to represent the position or opinions of the WTO or its members. 221 222 Trade costs and inclusive growth Regional integration in the MENA region 223 8.1 Introduction 8.2 Trade facilitation in the MENA region Over the last 20 years, Arab countries have liberalized their trade through unilateral Trade facilitation, in its narrow scope, focuses on improving administrative reform, multilateral negotiations and regional integration. The latter has involved the procedures at the border (simplification, harmonization and transparency), while its creation of a number of regional trade agreements (RTAs), of which the most broad scope includes changes to behind-the-border measures, such as non-tariff comprehensive in terms of product and country coverage is the Greater Arab Free barriers (WTO, 2015).5 The purpose of trade facilitation is to ease the movement of Trade Area (GAFTA).1 However, and unlike most recent RTAs, the GAFTA has goods at the border and reduce trade cost. Inefficient and cumbersome trade limited itself to goods liberalization and does not include trade facilitation among its procedures constitute an indirect cost to trade that is significantly more restrictive provisions. In its existing shallow form, the GAFTA has had little impact on regional than tariffs and other direct border charges, which have been progressively trade and has faced substantial challenges because of restrictive non-tariff reduced through negotiations over the years (WTO, 2015).6 Despite tariff measures and inefficient cross-border measures (Shui and Walkenhorst, 2010). reductions, trade costs including inefficient customs procedures and country- Some analysts estimate that non-tariff measures, combined with cumbersome specific factors, are still quite high. For example, in a recent study, trade costs were border measures, are more restrictive than tariffs in the MENA region and their estimated to be equivalent to applying ad valorem tariffs on traded goods of 213 presence could significantly reduce the expected benefits from regional integration per cent for developing countries and 134 per cent for developed countries (WTO, (Dennis, 2006). 2015).7 Trade facilitation has been a matter of global interest, which culminated in 2013 in The performance of the MENA region in terms of trade facilitation is reflected in the the multilateral Agreement on Trade Facilitation (TFA) under the auspices of the World Bank’s Ease of Doing Business Indicators and, in particular, the Trading WTO. WTO members are currently in the process of adopting measures to bring Across Borders Indicators (World Bank, 2013). These indicators reflect the the Agreement into effect, which will take place once two-thirds of the WTO’s number of documents, the time and the costs associated with exporting and members have domestically ratified the Agreement. At time of writing, none of the importing by seaport. By this account, the MENA region in 2013 was the lowest Arab countries had ratified the Agreement although 10 Arab countries had notified performer in terms of time needed to export and import as well as the number of their category A commitments.2 This relatively slow progress in ratification may documents required to export, compared with other regions (Table 8.1). The longer reflect a lack of general understanding in the region of the benefits of early the time to comply with border inspection and documentation requirements, the implementation of trade facilitation measures, whether under the TFA or within the higher the trading cost faced by MENA exporting and importing firms. Beyond various regional trade facilitation initiatives and programmes that exist. regional comparisons, it takes three times longer for a MENA exporter to comply with customs procedures than an exporter in the world’s most efficient trading The objective of this chapter is to assess the economy-wide as well as the sectoral country (Denmark). effects of trade facilitation on the MENA region within the context of the GAFTA. For modelling purposes, the GAFTA is divided into three sub-regions: the Gulf Table 8.1 Trading across borders, by region Cooperation Council (GCC) countries,3 the Maghreb countries and the Mashreq Time Cost to Cost to countries. The assessment used a general equilibrium approach (GTAP 8.1) to Documents Time to to export import Region to import export simulate two scenarios of trade integration. The first assumes that the three sub- import (US$/ (US$/ (number) (days) regions eliminate the remaining bilateral tariff barriers,4 and the second assumes (days) container) container) that, in addition to eliminating tariffs, the three sub-regions undertake trade MENA 8 20 24 1,304 1,342 facilitation measures. East Asia and the Pacific 7 20 22 839 867 Latin America and the 7 17 18 1,343 1,722 Caribbean High-income OECD 4 11 10 1,060 1,085 Denmark* 3 6 7 795 745 Note: * Denmark is the world’s best performing country on trading across borders indicators. Source: World Bank (2013). 222 Trade costs and inclusive growth Regional integration in the MENA region 223 8.1 Introduction 8.2 Trade facilitation in the MENA region Over the last 20 years, Arab countries have liberalized their trade through unilateral Trade facilitation, in its narrow scope, focuses on improving administrative reform, multilateral negotiations and regional integration. The latter has involved the procedures at the border (simplification, harmonization and transparency), while its creation of a number of regional trade agreements (RTAs), of which the most broad scope includes changes to behind-the-border measures, such as non-tariff comprehensive in terms of product and country coverage is the Greater Arab Free barriers (WTO, 2015).5 The purpose of trade facilitation is to ease the movement of Trade Area (GAFTA).1 However, and unlike most recent RTAs, the GAFTA has goods at the border and reduce trade cost. Inefficient and cumbersome trade limited itself to goods liberalization and does not include trade facilitation among its procedures constitute an indirect cost to trade that is significantly more restrictive provisions. In its existing shallow form, the GAFTA has had little impact on regional than tariffs and other direct border charges, which have been progressively trade and has faced substantial challenges because