Inter-Arab Trade and The Potential Success of AFTA

Trade among Arab countries has been very weak despite previous efforts to engage into different forms of regional economic integration. Using the flexible framework provided by the Gravity Model, the paper gives an order of magnitude of the main factors often presented in explaining the weakness of inter-Arab Trade. The results of the model together with several indicators about export profiles, trade correspondence, and revealed comparative advantage, are used to examine the prospects of increased inter-Arab trade following the liberalization of trade envisaged under the newly established Arab Free Trade Area (AFTA). We are able to establish a tentative list of commodities that represent opportunities for expanded trade as well as a list of partner countries’that have higher chances of benefiting from trade liberalization under AFTA. We argue that although the possibilities for expanded inter-Arab trade are real, the realization of these possibilities requires, among other things, the improvement of transport links among Arab countries and the de-linking of political from economic relationships between the latter countries.