Arab trade dynamics after the implementation of the Pan Arab Free Trade Area (PAFTA) (1998-2012)

in: Review of Middle East Economics and Finance 12 (1)

DOI: https://doi.org/10.1515/rmeef-2015-0041
Open access

With the entry into force of the Pan Arab Free Trade Area (PAFTA) in 2005, intra-Arab trade became tariff free, completing the trade liberalization process started in 1998. Making use of data covering the 1998–2012 period, we estimate the impact of PAFTA on intra-Arab trade in manufactured goods using a gravity model and applying panel data estimation techniques. Results suggest that PAFTA has increased intra-members’ trade by nearly 20 %. We also examine potential changes in the trends of Arab countries’ imports of manufactured goods from their main providers after the entry into force of PAFTA. In this respect, there is some evidence of an increase in Arab countries’ imports from Asia from 2005 onwards, in relation to the 1998–2004 period.