THE END OF HISTORY REQUIRES CAPITALISM AND pROTESTANTISM, NOT JUST DEMOCRACY:

Trade as a means to consolidate the Arab revolutions: Political turmoil has swept across the Arab world. This column argues that the movement towards more open and representative societies could create the conditions for a big push toward greater trade integration within the region – and the rest of the world. A good place to start would be to complete the Pan-Arab Free Trade Agreement. (Jean-Pierre Chauffour, 2 March 2011, Vox)

Today's historical circumstances present an opportunity for the Arab world to make a big push toward greater regional and global integration. Until now, the region has suffered from discretionary and arbitrary implementation of policies, and from lack of government credibility to really change a deeply rooted status quo of privileges and unequal treatment of investors (World Bank 2009). While the current political turmoil in the Arab region could end up further entrenching those privileges or creating new ones, it could also create the conditions for more open, non-discriminatory, and rule-based economies. In this scenario, the Arab world could start reaping the full benefits of global and regional integration.

As far as regional integration is concerned, completing the Pan-Arab Free Trade Area (PAFTA) would be a good place to start. This would essentially consist of:

1. completing the free movement of goods within PAFTA, notably through the elimination of unnecessary non-tariff measures;
2. implementing the regional initiative to liberalise services trade, including identifying a number of services sectors for early regional liberalisation (e.g., trade facilitation and transport, banking and finance, and communication and information); and
3. strengthening the institutional rules and discipline applicable to regional trade and other policies of common interest (Chauffour 2011).

Free movement of goods

Completing the free movement of goods within PAFTA, notably through the elimination of unnecessary non-tariff measures (NTMs), and integrating better the region into global supply chains and production networks would create the conditions for the emergence of the “Arab factory”. A concerted effort to streamline all unnecessary NTMs in PAFTA countries will remove one of the major remaining bottlenecks to intra-regional trade in goods.

This would involve reviewing the substance of existing NTMs, streamlining them using methodologies experimented in other regional agreements around the world, including a guillotine approach when appropriate, and establishing regulatory impact assessments to improve the process through which new NTMs are created.

To facilitate the integration of the region into global supply chains and production networks, countries in the region could unilaterally reduce their most favoured nation (MFN) tariffs, especially tariff peaks, to the level of the most competitive regions of the world (e.g., East Asia). Such unilateral liberalisation has proven to be a successful strategy in a number of emerging economies that are now sustainable growth poles (Figure 1).