Trade

Trade, so far, has not played its potential role in enhancing sustainable growth and development in the Arab region when compared to other regions in the world. The majority of Arab countries still have a long way to go to advance trade logistics and reap the benefits of trade in services and digital trade.

 

Trade openness indicators (measured as the ratio of total trade to GDP) in the region range from more than 163 percent (130 percent for merchandise goods and 33 percent for services) in United Arab Emirates and 214 percent (98 percent for merchandise goods and 116 percent for services) in Somalia to around 32 percent (26 percent for merchandise goods and 6 percent for services) in Sudan. Differences in the size of the relevant economies and the indicator’s dealing with merchandise and services trade complicate comparing the region to the global trade openness figure of around 58 percent in 2018.[1] In the Arab region, trade in merchandise goods, namely oil, accounts for a major proportion of trade openness indicator whereas services play a limited role. Trade openness is at 87 percent for the Arab region, but should have been higher given the small size of the Arab economies.

 

Trade in the Arab region is significantly affected by the oil market: oil exports making up average 65 percent of total merchandise exports compared to a global average of 13 percent.[2] All Arab countries are net food importers even though food imports make up only 12 percent of total imports, compared to the global average of 12 percent.[2] The Arab countries have not tapped the potential of trade in services (e.g. in tourism, and transport), and are not highly engaged in world value chains.[3] Limited integration of Arab economies in the global value chain (measured mainly by trade in intermediate goods).[4] and the relative absence of an Arab regional value chain should signal the need for a new setup in light of the disruption that happened to global value chains as a result of the impact of COVID-19.

 

 

Arab countries are members of several preferential trade agreements (PTAs) whether among themselves (e.g. Pan Arab Free Trade Area, Agadir, Gulf Cooperation Council, Arab Maghreb Union) or with developed and developing countries and groupings (e.g. EU, USA, Canada COMESA, MECOSUR).[5] There is high variation among Arab countries, where Jordan, for instance, is a member of a large number of PTAs, compared to Comoros and Yemen which are engaged in very few PTAs. The majority of such PTAs have remained confined to removal of tariffs, and have not dealt with behind the border issues, illustrating the limited impact of PTAs in enhancing trade among Arab countries.

 

The socioeconomic implications of COVID-19 and the recent world economic crisis is likely to curb the role of trade in the Arab region, namely due sharply reduced demand for oil, and lock-down measures and the slowdown in trade as a result of the world economic recession. Disruption of world markets is also affecting trade, via protectionist measures in net food importing Arab countries. For example, Egypt imposed a ban on white and raw sugar imports for a period of three months starting June 6, 2020,[6] with the Minister of Trade and Industry citing low world prices during the pandemic and their potential to hurt  the domestic industry. (Egypt is a net importer of sugar). Other countries are likely to follow suit with ad hoc trade protectionist measures inspired by the flux in the world markets.

 

Service trade including tourism is being hit hard.[7] Tourism is a major source of foreign exchange and employment for a large number of Arab countries, including.[8] Saudi Arabia (Hajj and Umra pilgrimage); and Morocco, Tunisia, Egypt, UAE, and Lebanon (different types of tourism). According to the latest available data, tourism represented around 4.5 percent of GDP in the Arab region and provided 4.5 million jobs (7 percent of total employment in 2011).[9]

 

It is important to emphasize that Arab countries need to invest in trade logistics. Available indicators (e.g. trading across borders in the  doing business.[10] measures) confirm that Arab countries have a long way to reform their enacted trading systems. The doing business indicator for Arab countries on average put them in the rank of 121 among a total of 190 countries, with three Arab countries among the worst five performers globally. When focusing on the indicator associated with trade in specific, namely trading across borders, the rank deteriorates to 131 on average amongst 190 countries all over the world with two Arab countries among the worst five performers.[11] 

 

Arab countries need to pay extra attention to digital trade given the expected role it is likely to play in the post COVID-19 era. Existing data, such as ICT use for business to business transactions’ index, show that Arab countries are in a relatively middle position when compared to the rest of the world,[12] yet additional efforts to upgrade related services (ICT infrastructure and digital financial services are still needed)[13] to ensure e-trade readiness.

 

 

This overview has been drafted by the ADP team based on most available data as of June 2020. 


[1] United Nations Conference on Trade and Development (UNCTAD). 2020. [ONLINE] Available at: https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx [Accessed 22 June 2020].
[2] The World Bank. 2020. World Development Indicators. [ONLINE] Avaialble at: https://databank.worldbank.org/source/world-development-indicators [Accessed 22 June 2020]. 
[3] United Nations Economic and Social Commission for West Asia (ESCWA). 2017. Transport and Connectivity to Global Value Chains: Illustrations from the Arab Region. [ONLINE] Available at:
https://www.unescwa.org/publications/transport-connectivity-global-value-chains [Accessed 22 June 2020]. 
[4] Organization for Economic Co-operation and Development (OECD). 2015. Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies Summary Paper. [ONLINE] Available at: https://www.oecd.org/countries/gabon/Participation-Developing-Countries-GVCs-Summary-Paper-April-2015.pdf ​[Accessed 22 June 2020]. 
[5] The World Bank. 2020. Global Development Data. [ONLINE] Available at: https://wits.worldbank.org/gptad/database_search_results.aspx ​[Accessed 22 June 2020]. 
[6] EG24 News, Egypt. 2020. How does the ban on importing sugar affect local comapnies and marker prices? [ONLINE] Available at: https://www.eg24.news/2020/06/how-does-the-ban-on-importing-sugar-affect-local-companies-and-market-prices.html ​[Accessed 22 June 2020]. 
[7] Arezki, Rabah and Ha Nguyen. 2020. Novel coronavirus hits the Middle East and north Africa through many channels”, in  Richard Baldwin and Beatrice di Mauro (eds), Economics in the Time of COVID-19, A VoxEU.org Book, CEPR Press. [ONLINE] Available at https://voxeu.org/content/economics-time-covid-19-0 ​[Accessed 22 June 2020]. 
[8] World Economic Forum. 2019. Travel and Tourism Competitiveness Report 2019. [ONLINE] Available at: https://reports.weforum.org/travel-and-tourism-competitiveness-report-2019/regional-profiles/middle-east-and-north-africa/. ​[Accessed 22 June 2020], and The World Bank. 2013. Tourism in the Arab World can mean more than Sun, Sand, and Beaches. [ONLINE] Available at: 
https://www.worldbank.org/en/news/feature/2013/02/11/tourism-in-the-arab-world-can-mean-more-than-sun-sand-and-beaches ​[Accessed 22 June 2020].
[9] Arezki Rabah and Ha Nguyn (2020), op.cit.
[10] The World Bank. 2020. Ease of Doing Business Rankings. [ONLINE] Available at: https://www.doingbusiness.org/en/rankings ​[Accessed 22 June 2020].
[11] The World Bank. 2019. Doing Business 2019. [ONLINE] Available at: https://www.doingbusiness.org/content/dam/doingBusiness/media/Profiles/Regional/DB2019/Arab-World.pdf ​[Accessed 22 June 2020].
[12] The World Bank. 2016. ICT use for business-to-business transactions, 1-7 (best). [ONLINE] Available at: https://tcdata360.worldbank.org/indicators/hf0d27aa9?country=DZA&indicator=3443&countries=BRA&viz=line_chart&years=2013,2016 ​[Accessed 22 June 2020].
[13] World Economic Forum. 2016. The Global Information Technology Report. [ONLINE] Available at: http://www3.weforum.org/docs/GITR2016/WEF_GITR_Full_Report.pdf ​[Accessed 22 June 2020].



view all

Data Highlights

  • 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.

view all

Publications