Trade

At the crossroads of Africa, Asia and Europe, the Arab region has participated in some of the oldest trade routes in human history including Silk Road commerce linking Asia and Europe. Arab countries’ total share of world exports has doubled since 2000, reaching 7% in 2013.[1] When excluding fuel, the Arab region’s non-oil exports made up 2% of world exports in 2013 up from 1% in 2000.[1] Trade openness ratio in the Arab region averaged 97 in 2013, but international trade to GDP ratio exhibits large variations ranging from 176 in United Arab Emirates to 19 in Sudan.[2] Trade in services in the Arab region averaged 16.4% of GDP in 2014 with Lebanon having the highest trade in services to GDP ratio of 62.4 in 2015.[2] The region’s main trade partners are the EU, US and Asia although intraregional trade is rising. 

 

Nonetheless, compared to other regions, the Arab region is less globally and regionally integrated in terms of trade. Early pan-Arab regional integration initiatives date back to the 1950s, but it is only since the 1980s that Arab countries started to adopt outward-oriented trade policies. Currently, all Arab states are members of the Pan Arab Free Trade Agreement (PAFTA) with the exception of Mauritania and Somalia which are candidate countries; four Arab countries signed the Agadir agreement, six are members of the Gulf Cooperation Council (GCC) and five are members of the Arab Maghreb Union (AMU). The impact of the regional integration initiatives has been limited in the Arab region with Arab intraregional exports amounting to 16.6% of the total exports of the region in 2014, while intraregional exports in the European Union countries amounted to 62% of total exports.[3] 


In addition to intraregional agreements, 13 Arab countries are members of the World Trade Organization (WTO) and 7 are observers and several Arab countries have signed trade agreements with the European Union, the United States, the European Free Trade Association (EFTA), Turkey, the Common Market for Eastern and Southern Africa (COMESA), the Southern Common Market (MERCOSUR) and others.


While Arab countries’ trade policies reflect elements of protectionism as well as trade liberalization and export promotion, many challenges impede the Arab countries’ capacity to reap the full benefits of their potential. These include relatively low economic diversification, weak governance structure and poor trade-related infrastructure in some countries. 


The Arab region is outstandingly rich in oil and gas and the relatively low level of economic diversification leads to a persistent dependence on these commodities for growth. Fuel exports, representing the vast majority of exports in the oil producing countries, amounted to 69.2% of the region’s merchandise in 2014.[2] The majority of imports in the Arab countries are manufactures imports. Except for the oil-exporting countries, the external balance on goods and services remain relatively low or negative in the Arab countries. 


The Arab region has an average performance on the Logistics Performance World Bank indices of quality of trade-related infrastructure and efficiency of customs clearance process; with the UAE scoring the best logistics performance. In order to boost trade across borders and enhance the enabling environment, many Arab governments have tried to implement custom reforms and modernize their trade logistics infrastructure despite the fact that trade costs remain high according to the World average Logistics Performance Index (LPI).[4] New policies and regulations put in action in countries such as the UAE, Qatar and Tunisia, have been remarkable in terms of the efficiency of customs clearance process, and in the UAE, Qatar and Saudi Arabia, in terms of quality of trade and transport-related infrastructure, as the LPI shows. Challenges remain however in the quality of “soft” infrastructure such as customs facilitation and administrative procedures.[2]

At the crossroads of Africa, Asia and Europe, the Arab region has participated in some of the oldest trade routes in human history including Silk Road commerce linking Asia and Europe. Arab countries’ total share of world exports has doubled since 2000, reaching 7% in 2013.[1] When excluding fuel, the Arab region’s non-oil exports made up 2% of world exports in 2013 up from 1% in 2000.[1] Trade openness ratio in the Arab region averaged 97 in 2013, but international trade to GDP ratio exhibits large variations ranging from 176 in United Arab Emirates to 19 in Sudan.[2] Trade in services in the Arab region averaged 14.5% of GDP in 2013 with Lebanon having the highest trade in services to GDP ratio of 62% in 2013.[2] The region’s main trade partners are the EU, US and Asia although intraregional trade is rising. 

 

Nonetheless, compared to other regions, the Arab region is less globally and regionally integrated in terms of trade. Early pan-Arab regional integration initiatives date back to the 1950s, but it is only since the 1980s that Arab countries started to adopt outward-oriented trade policies. Currently, all Arab states are members of the Pan Arab Free Trade Agreement (PAFTA) with the exception of Mauritania and Somalia which are candidate countries; four Arab countries signed the Agadir agreement, six are members of the Gulf Cooperation Council (GCC) and five are members of the Arab Maghreb Union (AMU). The impact of the regional integration initiatives has been limited in the Arab region with Arab intraregional exports not exceeding 8% of the total exports of the region in 2012, while intraregional exports in the European Union countries amounted to 62% of total exports.[3] 


In addition to intraregional agreements, 13 Arab countries are members of the World Trade Organization (WTO) and 7 are observers and several Arab countries have signed trade agreements with the European Union, the United States, the European Free Trade Association (EFTA), Turkey, the Common Market for Eastern and Southern Africa (COMESA), the Southern Common Market (MERCOSUR) and others.


While Arab countries’ trade policies reflect elements of protectionism as well as trade liberalization and export promotion, many challenges impede the Arab countries’ capacity to reap the full benefits of their potential. These include relatively low economic diversification, weak governance structure and poor trade-related infrastructure in some countries. 


The Arab region is outstandingly rich in oil and gas and the relatively low level of economic diversification leads to a persistent dependence on these commodities for growth. Fuel exports, representing the vast majority of exports in the oil producing countries, amounted to 82% of the region’s merchandise.[2] The majority of imports in the Arab countries are manufactures imports. Except for the oil-exporting countries, the external balance on goods and services remain relatively low or negative in the Arab countries. 


The Arab region has an average performance on the Logistics Performance World Bank indices of quality of trade-related infrastructure and efficiency of customs clearance process; with the UAE scoring the best logistics performance. In order to boost trade across borders and enhance the enabling environment, many Arab governments have tried to implement custom reforms and modernize their trade logistics infrastructure despite the fact that trade costs remain high according to the World average Logistics Performance Index (LPI).[4] New policies and regulations put in action in countries such as the UAE, Qatar and Tunisia, have been remarkable in terms of the efficiency of customs clearance process, and in the UAE, Qatar and Saudi Arabia, in terms of quality of trade and transport-related infrastructure, as the LPI shows. Challenges remain however in the quality of “soft” infrastructure such as customs facilitation and administrative procedures.[2]

 

This overview has been drafted by the ADP team based on most available data as of 30 September 2016.

 


  1. UNCTADStat database, UNCTAD, 2015
  2. World Development Indicators, The World Bank 
  3. United Nations Conference on Trade and Development (UNCTAD), Data Center.
  4. The Logistics performance index, a benchmark developed by the World Bank, reflects perceptions of a country’s logistics based on efficiency of customs clearance process, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics service, ability to track and trace consignments, and frequency with which shipments reach the consignee within the scheduled time. The index ranges from 1 to 5, with a higher score representing better performance.


Trade Statistical Snapshot 2016
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Data Highlighted

  • The Arab region is outstandingly rich in oil and gas and the relatively low level of economic diversification leads to a persistent dependence on these commodities for growth. Fuel exports, representing the vast majority of exports in the oil producing countries, amounted to 82% of the region’s merchandise.

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