BUS613: Advanced International Business

Over the last decade, preferential liberalization under the Pan Arab Free Trade Area (PAFTA) and other PTAs has been complemented by reductions in most favored nation (MFN) tariffs. The average uniform tariff equivalent of all tariffs (ad valorem and specific) for the region fell from nearly 15% in 2002 to 6% in 2009. In fact, MENA was the region where tariffs decreased the most during the global financial crisis, especially on manufactured goods. Yet, despite progress made in the last decade, tariff protection in MENA remains high by international standards. According to the Tariff-only Overall Trade Restrictiveness Index (OTRI_T), only South Asia had higher levels of tariff restrictiveness. The MENA region compares unfavorably with competitors in Europe and Central Asia, Latin America and the Caribbean, and East Asia and the Pacific - the new dynamic poles of the world economy. 

Wide variations in trade restrictions exist across MENA. The GCC has made tangible progress in improving backbone infrastructure and reducing trade barriers. The GCC succeeded in bringing its common external tariff down to 5% on most imported merchandise and to zero on essential goods. North African countries continue to have prohibitive trade restrictions vis-à-vis the rest of the world. In Morocco the common weighted average import tariff in 2011 remained high at 17 %. Studies suggest that comprehensive reforms to strengthen competition and streamline regulatory frameworks would yield benefits two to three times greater than those achieved through tariff removal alone. Opening up the services trade would facilitate trade in parts and components and contribute to the emergence of regional production networks.