Trade Policy and Economic Integration in the Middle East and North Africa The recent globalization trends have revived a long-standing interest in regional integration in the countries of the Middle East and North Africa (MENA) Despite numerous attempts to encourage economic integration in MENA in the past few decades, there is broad consensus that progress has been painfully slow and the record of economic integration in this region has been largely beset by failure This book examines the impact of recent changes in the world economy on trade policy within the MENA region and its economic relations with the rest of the world It considers regional integration and prospects for trade blocs; trade liberalization and economic restructuring; resource endowments and employment trends; and changes in economic boundaries, especially as a result of labour migration and regional conflicts Hassan Hakimian is Senior Lecturer in Economics at Cass Business School, City University, London He specializes in the economic development of Middle Eastern countries with special reference to Iran His main areas of interest include: globalization, demographic transition, and international trade and MENA’s water resources He has published widely and has extensive experience of consultancy in Asia and Africa Jeffrey B.Nugent is Professor of Economics at the University of Southern California, Los Angeles He specializes in Development Economics and especially on the following issues and aspects: institutions, international trade and capital flows, agriculture, demographic behaviour, reforms, economic modelling, the effects of income inequality, investment, foreign aid and economic planning in all regions of developing countries The Political Economy of the Middle East and North Africa (Series editor: Hassan Hakimian) Trade Policy and Economic Integration in the Middle East and North Africa Economic boundaries in flux Edited by Hassan Hakimian and Jeffrey B.Nugent Trade Policy and Economic Integration in the Middle East and North Africa Economic boundaries in flux Edited by Hassan Hakimian and Jeffrey B.Nugent LONDON AND NEW YORK First published 2004 by RoutledgeCurzon 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by RoutledgeCurzon 29 West 35th Street, New York, NY 10001 RoutledgeCurzon is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2005 “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to http://www.ebookstore.tandf.co.uk/.” Selection and editorial matter © Hassan Hakimian and Jeffrey B.Nugent; individual chapters © the contributors All rights reserved No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-63390-3 Master e-book ISBN ISBN 0-203-63732-1 (Adobe e-Reader Format) ISBN 0-415-30266-8 (Print Edition) Contents List of figures vii List of maps x List of tables xi List of contributors xvii Preface and acknowledgements xix Introduction HASSAN HAKIMIAN AND JEFFREY B.NUGENT PART I Past trends and future prospects for growth in MENA Reform and elusive growth in the Middle East—what happened in the 1990s? DIPAK DASGUPTA, JENNIFER KELLER, AND T.G.SRINIVASAN PART II Integration patterns, trade blocs, and regional policy Intra-regional trade integration in the Middle East: past performance and future potential RANIA S.MINIESY, JEFFREY B.NUGENT, AND TARIK M.YOUSEF Exchange rate regime and competitiveness of manufactured exports: the case of MENA countries MUSTAPHA KAMEL NABLI AND MARIE-ANGE VEGANZONESVAROUDAKIS Agriculture and trade liberalization in the MENA region: dynamic impacts of future scenarios ALI H.BAYAR, GHAZI BEN-AHMED, PAUL DE BOER, XINSHEN 10 11 38 39 64 82 DIAO, AND A.ERINC YELDAN PART III Trade and restructuring: lessons and outcomes Restructuring and economic performance: the experience of the Tunisian economy SOFIANE GHALI AND PIERRE MOHNEN Price competition between Turkish and East Asian exports in the European Union market in the 1990s: an empirical investigation ZELAL KOTAN AND SERDAR SAYAN Trade strategies and industrial development in Iran: 1979–98 BEHROUZ HADY ZONOOZ PART IV Resource endowments, factor markets, and employment issues Trends in informal sector employment in the Middle East JACQUES CHARMES Agricultural intensification and female labour in farm production in north-western Syria MALIKA ABDELALI-MARTINI, ELIZABETH BAILEY, GWYN E.JONES, AND PATRICIA GOLDEY PART V Economic boundaries in flux 10 Defining boundaries: Kuwait’s economic reconstruction, 1991–2001 KAREN PFEIFER 11 The redefinition of economic boundaries between Israel and the West Bank and Gaza Strip LEILA FARSAKH 12 Turkey after Helsinki: economic challenges SÜBIDEY TOGAN 13 Economic foundation for peace? The case of trade policy in the Oslo Agreement NU’MAN KANAFANI Index 98 99 118 137 162 163 182 203 204 227 251 268 287 Figures 1.1 Real oil price, 1976–2000 14 1.2 Real oil price and MENA growth, 1976–99 14 1.3 Real oil price and GCC growth, 1976–99 15 1.4 The correlation of oil prices and GDP growth in non-GCC oil producers, 1976–99 15 1.5 Oil prices and non-GCC diversified economies’ growth, 1976– 99 16 1.6 Composite Structural Reform Index in developing regions 18 1.7 Comparative trade policy indicators among developing regions 19 1.8 Highest marginal tax rate on individuals among developing regions 19 1.9 Highest marginal corporate tax rate among developing regions 20 1.10 Privatization proceeds among developing regions Cumulative proceeds from privatization to GDP rates 20 1.11 Real exchange rate overvaluation in developing regions 21 1.12 Change in Composite Reform Index, 1985–98 22 1.13 Pace of reforms and per capita GDP growth 24 1.14 Composite index of economic stabilization by regions 25 1.15 Credit rating improves with structural reforms for MENA 26 6.1 Growth of exports and exports to GNP ratio, 1980–99 120 6.2 Export growth and changes in real effective exchange rate (REER), 1990–9 120 6.3 Shares of selected product groups in the EU imports, 1990–9 121 6.4 Growth rates of Turkish exports in selected sectors, 1990–9 122 6.5 Export (FOB) and import (CIF) price differences, 1992–9: textiles, clothing and vehicles 128 6.6 Export (FOB) and import (CIF) price differences, 1992–9: machinery and equipment 129 9.1 Different irrigation systems used in sample farm households 191 9.2 Labour demand and supply for women and children in northwest Syria for winter and summer crops and trees 196 10.1 Gross domestic product and gross national income, Kuwait, 1971–2000 208 10.2 Growth rates of GDP, Kuwait, 1970–2001 212 11.1 Share of workers employed in Israel in total employment for the 231 WBGS, 1968–2000 11.2 Share of unemployed and of workers in Israel in total WB and GS labour force, 1993–2001 235 11.3 The ratio of domestic to Israeli-sourced wages for male Palestinian workers employed in the domestic and the Israeli construction sectors respectively and the economy at large, 1996–2000 236 11.4 New dwelling units constructed in Israel and in Israeli settlements in the WBGS 244 Trade policy and economic integration in the Middle East and North Africa 282 arrangement should make allowances to ensure an adequate base for economic progress and prosperity It is crucially important for determining to what extent a political arrangement can continue ignoring the elementary prerequisites for an economy to function in a proper fashion It is safe and rather uncontroversial to claim that the failure of the EP was exclusively due to a turbulent political environment and lack of political will In fact, the shortage of political will was already manifest in the design of the EP and not merely confined to its implementation Any future economic arrangements will have to confront this point Any political compromise, which ignores the economic prerequisites for securing sustainable improvements in the Palestinians’ living standards and their access over their resources, will be founded on sand I have attempted, in this chapter, to show that the trade regime of the EP was designed solely to serve tactical political purposes and that a great deal of the economic problems of the WBGS in the past years can be traced back to this unfortunate and short-sighted decision While the political design was obscure, partial and temporary, the EP exhibited the same characteristics in the economic sphere The degree of uncertainty that it has created would make it impossible for any economy to function properly Along with this, the complex trade arrangements and disagreements regarding the lists and tariff refunds have become new sources for additional disputes, stoking the political conflict even further Recent experience shows that the reasons behind the failure of trade go beyond the issue of physical siege The implementation of the EP on the ground, or lack of it, has exposed four major weaknesses that should be avoided in any future arrangements, as outlined below But even before considering these points, a fundamental element must be made very clear: it goes without saying that if Israel’s practice of ‘closure’ over the WBGS is permanent, occasional, or even probable in future, then there will exist no grounds whatsoever for cooperation between Palestine and Israel, be that economic or otherwise The Palestinians would then be forced to work for a total cut-off from Israel and to invent alternative routes for economic progress Of those four major weaknesses, the first is that interim, unfinished and half-hearted economic arrangements have had catastrophic economic consequences, if only for the fact that they are synonymous with uncertainty about the future Uncertainty is probably the single most important factor in explaining the dismal economic performance of the WBGS, especially with respect to productive investment The Israeli policy of closure is particularly harmful because it is totally unpredictable It is time to realize that any political settlement that does not ensure economic viability and improvements in standards of living, undermines its own foundations Second, the absence of a real enforcement mechanism and of effective arbitration between the parties is one of the major defects in the EP in general and its trade arrangements in particular The arbitration body should have full competence to deal with all trade disputes no matter what their origins are (security or mere customs valuation problems), and to so with an undisputed enforcement mechanism Both Israel’s notorious record of creative use of NTBs and the PA’s brief experience of trade matters promise endless trade disputes in the future This, along with the vast discrepancy in the bargaining power of the two contracting parties, implies the need for an effective arbitration mechanism and a permanent arbitration body Special arrangements could Economic foundation for peace? 283 probably be made to assign this role to the WTO, although the WBGS is not yet a member of this organization Third, the trade regime envisaged in the EP was unnecessarily complex in its structure, imprecise and not always fair Given the special circumstances of the region, the parties would certainly be better off with as simple, as straightforward and as fair a trade regime as possible As I have argued at some length, the hybrid trade regime envisaged in the EP was an unfortunate novelty It was basically a political creature that allowed the parties to continue their political battle by economic means It established a costly regime of double bureaucratic layers, double trade policies and customs books, and countless overlapping preferential trade agreements with third parties At the same time, the Palestinians lost the potential gains from a properly designed customs union without benefiting much from FTA concessions Finally, with regard to future arrangements, if a customs union is chosen, then some macro-formula for revenue sharing should be seriously considered It is well established, both in theory and from actual experience, that potential benefits from trade integration are not necessarily equally distributed between the participants A future CU between Israel and the WBGS should incorporate a mechanism for compensating the poorer and weaker members of the union If an FTA is chosen, there will be an even stronger need for an enforcement mechanism and arbitration to solve the problems related to rules of origin and to smooth the flow of trade on the customs borders Special non-reciprocal trade concessions should then be carefully negotiated to give the WBGS economy a chance to restructure itself and develop its productive base Acknowledgements An earlier version of this article was published in Economic Journal (vol 111, June 2001) The author and editors are grateful to Blackwell Publishers for permission to reproduce it here Note The Federation of Israeli Chambers of Commerce, in a letter dated 25 January 1996, argued that since the EP did not create customs borders, any Israeli importer, distributor, or agent of foreign manufactured goods should have the full right to distribute and sell these goods in the WBGS Furthermore, Dan Gillerman, from the Federation President’s office, made it clear that the services of the army would also be deployed to guarantee the interests of Israeli importers: ‘In our effort to avoid further damage… we are active together with the Israeli Government and army representatives to stop the impact of the [PA’s decisions].’ References Abed, G (1996) ‘The prospects for long-run sustainable growth’, paper prepared for a conference: The Palestinian Economy—Towards a Vision’ June 9–12, Ramallah, West Bank: Birzeit University and the Arab Economists Association Trade policy and economic integration in the Middle East and North Africa 284 Aminoff, N (1991) ‘The US-Israel free trade agreement of 1985: in theory and practice’, Journal of World Trade, 25:1 Brown, A (1961) ‘Separation versus a common market in developing countries’, Yorkshire Bulletin of Economic and Social Research, 12 (1 and 2): 33–40 and 88–96 Diwan, I and R.Shaban, (eds.) (1999) Development Under Adversity—The Palestinian Economy in Transition, Ramallah, West Bank: Palestine Economic Policy Research Institute (MAS) and the World Bank Dumas, J.-P (1999) ‘Fiscal leakage in the West Bank and Gaza Strip’ MEDA Programme of the EU, MEDA Team, The EU’s Directorate General B (April) El-Agraa, A (1989) The Theory and Measurement of International Trade Integration, London: Macmillan El-Musa, S and M.El-Jafari (1995) ‘Power and trade—the Israeli-Palestinian Economic Protocol’, Journal of Palestine Studies, 24:20–31 EP (1994) ‘Protocol on economic relations between the government of the State of Israel and the PLO, Representing the Palestinian People’, Paris Fassberg, C (1996) ‘Legal aspects of Israeli-Palestinian economic relations’, in Cotran, E et al (eds), The Arab-Israeli Accords—Legal Perspectives London: SOAS GATT (1995) ‘Trade policy review mechanism—Israel,’ World Trade and Arbitration Materials, 7(1): 59–77 Halevi, N (1999) ‘Trade and the Paris Protocol’, MEDA Programme of the EU, MEDA Team, The EU’s Directorate General 1B (April) Hamed, O (1996) The Palestinian banking system—reality and potentials, Ramallah, West Bank: Palestine Economic Policy Research Institute (MAS) ICBS (1996) National Accounts of Judea, Samaria and the Gaza Area 1968–1993, Jerusalem: Israel Central Bureau of Statistics Kanafani, N (1996) Trade Relations between Palestine and Israel—Free Trade Area or Customs Union?, Ramallah, West Bank: Palestine Economic Policy Research Institute (MAS) Kanafani, N (2000) ‘Associating Palestine with the European Union—the present framework and the way ahead’, Working paper series 9937, Cairo: Economic Research Forum for the Arab Countries, Iran, and Turkey Kanafani, N., C.Woodcraft, and A.Daoud (1998) ‘lmplementation of trade-related articles of the Protocol on Economic Relations between Israel and Palestine’, Brussels: A Report to the European Commission, Directorate General B Kessler, V (1999) ‘Palestinian’s external trade performance under the Paris Protocolhopes and disillusions’, MEDA Programme of the EU, MEDA Team, The EU’s Directorate General 1B (April) Kleiman, E (1997) quoted in The Economic Pulse Ramallah: The Arab Economic Association, September–October Krueger, A (1995) ‘Free trade agreements versus customs unions’, NBER Working Paper No 4198 PA (1997) ‘Non tariff barriers imposed on Palestinian trade’, Ramallah: The Ministry of Agriculture, Palestinian National Authority PA (1998) ‘Financial losses’, A letter from the Palestinian Ministry of Finance to the JEC’s Palestinian coordinator, the Deputy Minister’s Office (15 March) Panagariya, A and R.Findlay (1994) ‘A political economy analysis of free trade area and customs union’, World Bank Policy Research Working Paper No 1261, March PCBS (1999) Foreign Trade Statistics—Main Results, Ramallah: Palestinian Central Bureau of Statistics Rivlin, P (1992) The Israeli Economy, Westview: Boulder UNSCO (1997–9) ‘Report on economic and social conditions in the WBGS’, Quarterly Reports, Jerusalem: The UN Office of the Special Coordinator in the Occupied Territories Economic foundation for peace? 285 UNSCO and the World Bank (1997) ‘Closure of the West Bank and Gaza—August-Sept’, Jerusalem: Fact Sheet World Bank (1993) Developing the Occupied Territories—An Investment in Peace, six volumes, Washington, DC: World Bank Index Abbas, H 216 Abdalla, A 59–62 Abed, G.T 43, 275 Abu-Shokor, A 233 Achy, L 67 activity analysis model 3, 5, 101–5, 112 Agarwala, R 18 Agenda 2000 84, 256–7 agricultural calendar 197–200 agricultural intensification 184–203 agricultural labour, demand for 200–2 agricultural production and trade 84–9; modelling of 89–95; in Turkey 255–7 Al-Dàaas, À.À 223 Al-Harun, A.R 224 allocative efficiency 6, 111, 267 Allum, P 59 Al-Mashat, R.A 44 Al-Sabah, M 208, 212–14, 216 Al-Salih, À.G 224 Al-Tamimi, À 224 Al-Yousuf, A 209, 214, 215 Aminoff, N 277 Amir, S 231, 244, 247–8 Amsden, A.H 139−40, 154, 226n 11 Amuzegar, J 224 Arab Common Market (ACM) 42, 43, 57, 58 Arab Economic Unity Agreement 42 Arab Maghreb Union 1, 42 Arak Petrochemical Complex 146 Arnon, A 231–2 Astrup, C 232–3 Baffes, J 67 balance of payments 79, 80, 142, 223, 285 Balassa, B 76, 79n.l, 138–9, 142, 158 Bar-Nathan, M 244 Index 288 Barro, R.J 35 Bartram, D 244 Baumol, W.J 155 Bayar, A 90 Behbehani, D 224 Bernstein, H 200 Bhagwati, J 44, 159 Bonaglia, F 19 Bosworth, B 27–8, 37n.6 Brada, J.C 121 Brown, A 274 Burton, M.L 201 Canning, D 267 capacity utilization, rate of 103–9, 113–14, 116, 150, 152, 158, 215 capital mobility 112–13 chaebols 140, 154 Chalk, N.A 217, 220, 223 Charmes, J 6, 169, 173, 175 Coe, D 90 Collins, S.M.A 66 Common Agricultural Policy (CAP) 8, 84, 88, 254–5, 256, 268–9 comparative advantage 5, 80, 101, 108–9, 113, 114, 139, 182, 208, 211, 216, 259, 266, 268 computable general equilibrium (CGE) model 3, 5, 104 convergence, economic 262–3 Cordesman, A.H 208, 215, 220, 226n.5, n.15, 227n.22 Cottani, J.A 66, 76 Council on Arab Economic Unity (CAEU) 42, 61n.l credit ratings 26–7 crop rotation 190–2 Crystal, J 213, 219, 225n.l, 226n.3, n.5 currencies: misalignment 4, 66–7, 69–75, 80n.l1; nominal exchange rate 67, 68, 79; overvaluation 74, 75; real exchange rate 19, 21, 22, 23, 33, 34, 66, 80, 90, 93, 96, 121, 144 current account 26, 36, 62, 79, 90, 96, 101, 219, 220, 262 Cushman, D.O 66, 74 customs duties 128, 130–2, 270n.9, 283, 284 customs territories 281–2 customs unions (CUs) 8, 44, 61, 89, 120, 232, 255, 257, 267, 269, 271–5, 279, 281, 287 Daniels, P 120 Dasgupta, P 139 Davidson, R 125 De Kleine, A.I 46 De Melo, J 91 De Melo, M 19 Demir, N 119, 135n.2 demographic transition 23, 245, 250, 267 deregulation 19, 25, 223, 259 Index 289 De Rosa, A 85 Dessus, S 232–3 Dhareshwar, A 34, 36 Diao, X 89, 91 Dicks-Mireaux, L 19 diversification, agricultural 194, 196–7, 203; export 33, 74, 76, 79n.2, 88 Diwan, I 232–3, 276 Doha meeting (2001) 84 Dollar, D 22, 33n.4 Domac, I 67 domestic resource cost (DRC) 140–1, 152–3, 159–60 Dow Chemical 222 Dumas, J.-P 283 Dunsky, N 245 Easterly, W 18, 27 economic performance 61, 66, 141, 152; Kuwait’s 207, 224; Turkey’s 261, 262; WBGS’s 275, 276, 286 economic policy 66, 70, 76, 79, 138, 158 education 5, 29, 75, 102, 115, 179, 216, 223; adult 35; female 7, 182; free 213; investment in 115; primary 75; university 156 Edwards, S 66–9, 76, 80n.11 El-Agraa, A 274 Elbadawi, I.A 67 electricity supply 260 El-Erian, M 59 El-Imam, M 42 El-Jafari, M 275 El-Musa, S 275 El-Naggar, S 59 Engel, R.F 69 environmental legislation 265 equity 44, 90, 232, 261, 273 Erlat, G 119, 135n.l, n.2 Euro currency 262–4, 267–9 Euro-Med initiative 1, 43 Euro-Mediterranean Agreements (EMAs) 41, 43, 84 European Central Bank 262 European integration, technical barriers to 255 European Monetary Union (EMU) convergence criteria 262–3 European Union: MENA exports to 87–8; MENA imports from 88–9; Turkey’s accession to 8, 254–69; Index 290 Turkish exports to 119–32; see also Common Agricultural Policy Evans, P 140 exchange rates see real exchange rates export performance 66, 71–5 Farsakh, L 237–41, 243, 244 Fassberg, C 274 Feenstra, R.C 48–9 Feldstein, H.S 187 fertility, soil 192 fertilizers 197, 200, 201, 256; use of 194 financial services 108, 114, 115, 216, 219, 257–9 Findlay, R 139, 274 Finger, J.M 133 fiscal leakage 283–4 Fischer, S 59–60 Fischer test 70, 73, 80n.10, n.13 foreign exchange shortages 150–2 Frankel, J 44, 48, 61, 68, 90, 267 Free Trade Agreement (FTA) 42, 44, 49, 51–5, 58, 85, 91–5, 101, 273–5, 287 free trade areas see Free Trade Agreement Gagnon, J.E 66, 74 Galal, A 43, 45 Gaza Strip see West Bank and Gaza Strip General Agreement on Tariffs and Trade (GATT) 261, 271, 277, 281 Gesser, S.C 244, 248, 25ln 14 Ghura, D 66, 74 globalization 169, 175, 176, 182 Golani, Y 245 Granger, C.W.J 69 gravity model 4, 41, 48–60 passim, 135n.11 Greater Arab Free Trade Area (GAFTA) 43 Grennes, T.J 66, 74 Grethe, H 87 Griliches, Z 102 Grobar, L.M 66, 74, 81 n 12 Gross Domestic Product 14, 150, 211, 219 Grossman, G 102 growth 14–15; decomposition by factor inputs 112; modern theory of 102; and oil prices 16–18; sources of 26–33 Guerrieri, P 120 Gulf Cooperation Council (GCC) 1, 13, 42, 85, 170, 225 Gulf War (1990–1) 7, 16, 31, 35, 42 Halevi, N 277 Index 291 Hall, R.E 32 Hamed, O 272 Harberger, A 66 Harris, J 238 Harrison, G.W 267 health sector 29, 179, 213, 216, 224 Heckscher-Ohlin model 60 Helpman, E 102 Hoekman, B 43, 61n.2 home-based workers 166, 176–8 human capital 28, 29, 34, 36, 72, 101, 102, 106, 141, 155–7 import substitution 6, 119, 138−40, 142, 144, 148, 150, 152, 153, 158 incentive systems 140, 142, 145, 148 income 5, 15, 90, 186, 190, 195; additional 186, 203; growth 219, 221; inequality 92, 95, 138; per capita 6, 20, 34, 60, 80, 88, 209, 272 inconsistencies in economic policy 148–9 industrial development, impact of trade policy on 149–58 infant industries 139 inflation 4, 14, 26, 70, 79, 148, 156, 256, 262 informal sector employment 165–82, 264; data sources on and proxies for 167–9; definition of 165–7; trends in and structure of 173–80 input-output model 101, 159 integration, economic 1–3, 7, 8, 42–5, 216, 225 International Conference of Labour Statisticians (ICLS) 165–7 International Monetary Fund (IMF) 222–4, 257, 262 intra-industry model of international trade 60 investment incentives 152, 261 Iran 6, 30, 35, 42, 47, 55, 58, 74, 138–58, 171, 172, 181, 211, 220, 226n.l5, n.l6, 227n.22 Iraq 3, 42, 59, 87, 207–8, 211, 214–15, 217, 220, 226n.l5, n.16, n.22 irrigation 184, 188, 192–4, 196–200, 203, 256; effect on labour demand and supply 194–5 Ismael, J.S 217, 226 Israel 231–50; ‘closure’ policy 276, 286; construction sector 245–50; settlement policy 242–3, 246, 249–50; trade policy 271–7, 281–4 Israel-Palestine conflict 3, 8–9, 231–2, 249, 271 Japan 46, 87, 135n.5, 148, 154, 211, 212 Jones, C.I 32 Kalatzidakis, P 102 Kanafani, N 275, 280, 282 Kav Laoved 241, 247–8 Index 292 Keller, J 27 Kemp, M 44 Kessler, V 275 Khurshid, M 224 Kleiman, E 232, 243, 276 Korea, Republic of 120, 125–8, 131, 139−40, 142, 148, 154 Kotan, Z 121, 122, 124–5, 130, 135n.8 Krenin, M.E 133 Krueger, A.O 61n.3, 102, 138–9, 274 Krugman, M.A 139 Kuwait 7–8, 207–25; external economic boundaries 207–11; internal economic boundaries 212–14; reconstruction and boundary adjustment after Gulf War 217–25; structural problems 214–17 labour force participation rates 6, 169, 176, 238 labour market flexibility 264–5 labour migration: from Palestine to Israel 231–50; from Turkey to the EU 264–7 labour mobility 113 labour shortages 104, 197, 199, 200, 202 land use patterns 188–92, 194, 196 Lee, J.W 35 Levine, R 90 Lewin-Epstein, N 243 Liang, N 139 liberalization of trade 144, 148, 267, 273; bilateral and coordinated 90–2 Limam, I 59–60 Lindahl, M 102 Lloyd, P.J 123 Lohrmann, A.M 120, 128, 135 Loizos, P 187 Looney, R.E 214 Lora, E 19 Lucas, R 102 Maastricht Treaty 262 McGillivary, M 18 McKibbin, W.J 89 MacKinnon, J.G 125 Maclachlan, M.D 186 macroeconomic crises 14, 66 macroeconomic indicators 156 macroeconomic policies 67, 80, 141 macroeconomic reform 4, 15, 33 macroeconomic: stability 8, 13, 14, 15, 19, 27, 30, 254, 261–3, 268; instability 4, 26, 144 market failure 139 Martini, M.A 186, 200–3 Index 293 Massey, J.A 238 Matyas, L 125 Mauro, P 32 Mazid, A 190 mechanization, agricultural 184, 186, 188, 192, 195–6, 201 Mejren, A 217, 219 Mercenier, J 89 Merkies, A.H.Q.M 120, 123 Middle East Economic Association Milana, C 120 Mobarakeh Steel Plant 146 Mohnen, P 102, 104 monetary integration 262–3 Mongardini, J 67 Morley, S.A 19 Morrison, C 116 Nabli, M.K 46, 59 natural gas supplies 261 Nehru,V 34, 36 neoclassical economic theory 138–9 New Regionalism Noland, M 128, 130 non-tariff barriers to trade (NTBs) 20, 59, 271, 278, 281, 284, 286 non-traded goods 2, 159, 160 North American Free Trade Area 44, 46, 49, 56, 57, 87 Nugent, J 46, 104, 112 Obstfeld, M 93 oil prices 15–18, 29, 30, 209, 211, 214, 218 optimal resource allocation 104, 106–7 Organization of Petroleum Exporting Countries (OPEC) 15, 214, 217, 223 Oslo Accords 2, 8, 232, 241–2, 271; Protocol on Economic Relations (EP) 272–8, 281–7 overvaluation of currencies 4, 19, 21–3, 66, 70–6, 121, 128, 142, 150 Pack, H 139 Page, J 28 Palestine see Israel-Palestine conflict; West Bank and Gaza Strip Palestinian Authority (PA) 84, 85, 87, 242, 271–86 passim Panagariya, A 44, 274 PHARE programme 268–9 Pissarides, C.A 102 Poats, S 187 political influences 59, 276–7, 285–7 population growth rate 37, 90, 184, 186, 201, 238 Pratt, B 187 preferential trade agreements 254, 274–5, 287 privatization 19, 20, 22, 224, 259, 261 productivity see total factor productivity Index 294 protection 139–40, 154, 155, 158, 178, 271; and inefficiency in resource allocation 152–3; nominal and effective rates of 146–8 qualified labour, rate of return on 110–14 Rama, M 116 Rathgeber, E 187 Razin, O 66 real exchange rates (RERs) 144; and manufactured exports 71–5; misalignment of 66–71, 75–6; modelling long-run equilibrium of 67–9; short-term dynamics of 78–9 reform, economic 14–15; effects on growth 27–33; measurement of 18–26 regionalism 42–3; reasons for promotion of 44–5 Renelt, D 90 research and development (R&D) 90, 91, 102, 154, 158, 261 revenue sharing 260, 285, 287 Robinson, S 79n.2, 91 Rogoff, K 93 Romer, D 61, 68, 90, 102 Rose, A 48–9, 51, 62n.9, 267 Salvatore, D 138 Sampaïo de Souza, M 89 SAPARD programme 268–9 Sayan, S 119, 121, 124–5, 130, 135 Schmid, L 200 Schultz, T.P 102 self-employment 6, 165, 167–9; trends in 169–73 Semyonov, M 243 Serageldine, I 224 services sector 5, 107, 108, 111, 114, 115 sewerage systems 265–6 Shaban, R 232–3, 276 shadow prices 5, 105; and efficiency 109–10, 112, 114 Singh, A 141 social capabilities 141, 155, 156 Solow-Ramsey model 90 Sorsa, P 67 Southern Africa Customs Union (SACU) 285 Spencer, W 220 Srinivasan, T.G 19, 159 stabilization policy 257, 262 Stiglitz, J.E 139 Index 295 structural adjustment programmes 5, 101, 102, 105, 109–12, 114, 119–21, 169, 182, 261 structural reform 13, 14, 18–27; data sources for index of 33−4 Sundararajan, V 67 Syria 7, 13, 20, 31, 42, 55, 87, 174–6, 184–203 Talbi, B 116 Tangermann, S 87 tariffs 20, 21, 34, 42, 43, 59, 85, 90–6, 142, 144, 209, 254, 255, 261, 273, 274, 279–82, 286 taxation 21–2, 149, 208, 222, 264, 272–3, 282–5 technological capability 139, 146, 148, 150 technological innovation 155–8, 259 telecommunications industry 257, 259–60 ten Raa, T 104 time-use surveys 175–6 Todaro, M 238 Togan, S 264, 266 Topel, R 102 total factor productivity (TFP) 14, 15, 27–33, 36, 79, 90–5, 141, 155 trade creation and trade diversion 44, 51, 267, 273–5, 278, 284–5 trade flows: in agricultural products 84–9; modelling of 41–2; reasons for low level within MENA 58–60; statistics of 85–7; structure and size in MENA 45–55 trade liberalization see liberalization trade policy: impact on industrial development 149–58; and long-term growth 153–8; and technological innovation 155–8 trade potential, intra-regional 55–60 transport costs 48, 60, 128–32, 135n.7 Tunisia 5, 14, 20, 25, 42, 71, 74, 86–9, 101–16, 173–81 Turkey 5–8, 42, 45–7, 55, 84–96, 119–32, 171–5, 181, 254–69 unemployment 13–14, 43, 101, 105, 106, 110, 113–15, 233, 238, 249, 264, 272 Union Carbide 222, 227n.l8 United States Labour Department 224 Uruguay Round 1, 84, 88, 257; see also GATT utility functions 124 Uygur, E 121 Van Der Meer, T 120, 123 Véganzonès-Varoudakis, M 59 Vestal, J 154 wage differentials 116, 178–82, 240–1, 243, 247, 267 Wan, H 44 Index 296 Washington consensus 13, 19, 26 Weinblatt, J 232 welfare effects: of European integration 254, 268; of trade liberalization 92–3 West Bank and Gaza Strip (WBGS) 8–9; labour flows from 231–2; trade of 271–87 Westphal, L.E 139 White, D.R 201 Williamson, J 19, 66, 80n.3 women’s employment 6, 165, 170-82, 97-203 World Bank 28, 34-6, 108, 222-4 World Trade Organization 43, 84, 85, 275, 281-2, 287 Yaghmaian, B 141 Yeldan, E 89,91 zaibatsus 154 Zarrouk, J.E 43, 59-60, 61n.2 ... Trade Policy and Economic Integration in the Middle East and North Africa Economic boundaries in flux Edited by Hassan Hakimian and Jeffrey B.Nugent Trade Policy and Economic Integration in the Middle. . .Trade Policy and Economic Integration in the Middle East and North Africa The recent globalization trends have revived a long-standing interest in regional integration in the countries of the. .. University in the summer of 2001 The theme of the conference was ‘Global Change and Regional Integration: The Redrawing of the Economic Boundaries in the Middle East and North Africa (MENA)' The aim