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Economy too deserves an Arab Summit

Issam Jurdi - Al-Hayat - Beirut - 03 April 2006

Economy Too Deserves an Arab Summit

Surprisingly, not one economic item was placed on the agenda of the Arab Summit held in Khartoum. Conversely, in all other high-level international summits - for instance the G8, the European Union (EU), APEC, Mercosur, and others - economy and trade are brought to the forefront, whereas the political issues are either secondary or discussed outside the agenda.

The explosive security and political questions crippling the Arab world, from Iraq to the Western Sahara, a bone of contention between Algeria and Morocco, let alone the growing extremist, fanatic terrorism-leaning movements - that live on the anti-terrorist policies adopted in the Middle East - are all economically due to backwardness and underdevelopment and scientifically to unemployment, marginalization, and social exclusion.

We all know the sensitivity in holding an Arab economic summit, due to the concept of "excess and scarcity". Easily justified and best underscored among the rich and the poor Arab countries, this macroeconomic concept is erroneously consecrated as distorting the Arab economic development and the joint Arab economic action. Hence, it shifts from the urgent needs (of investment, development, trade, job opportunities, and consequently benefit distribution) to a mere financial assistance and aid.

Accordingly, the poor countries can neither build a strong economy nor embark on development. In parallel, the rich countries are constantly urged to give incessantly, which is not needed anyway.

In fact, many reasons are evoked to justify why the joint Arab economic action stumbled more than 50 years ago. Some referred in this respect to the incompatible goals, policies and mechanisms, or to the regimes where investments and public decisions are either controlled by the public or the private sector. Under these circumstances, the trade facilitation agreement was born in the 50s then the common Arab market agreement in the 60s.

Today, the private sector and the market economy reign supreme. Even more, we are obliged to ensure that they prevail in compliance with the international economic standards we strive to abide by irrespective of their advantages and distortions. So, what hampers the joint Arab economic action and the socioeconomic development?

The Great Arab Free Trade Area Agreement (GAFTA) was enforced in January 2005 after a 7-year preparatory transition period. This is the first joint Arab economic action likely to help the Arab countries gain huge profits in line with the regulations of the WTO, the venue absorbing regional economic blocs.

Most probably, the results in the first experimental year were not up to the expectations. For the obstacles to the agreement were not fully leveled, whether as concerns the detailed lists of origin for Arab goods, specifications, or facilitating transit and the movement of goods and businessmen. Let alone the disguised tariffs similar, in their effect, to custom duties on exports. Not to say they most often outstrip the value of the abolished custom duties. As we all know, the said obstacles, if maintained, can hamper the Arab trade. With fully non-transparent lists of origin, the Arab markets face non-Arab dumping goods. In the same vein, the production costs are still so disparate between Arab countries to be made equal in the facilities to set up the Arab Free Trade Area. What about the infiltration of non-Arab commodities or goods with insufficient Arab inputs?

In this case, some Arab countries, mainly where production costs are high, use the lists of origin as a pretext to stick to the protectionist policies in an attempt to protect their national products. Protectionism is still a different problem that lacks no pretexts. Things are not always better when it comes to the specifications and quality standards - so important to gain an export competition margin outside the regional Arab trade area.

As for the constraints some Arab countries still impose on transit and the movement of Arab goods, they are neither provided for in the Arab Free Trade Agreement nor in the WTO rules. In truth, some stringent international laws have guaranteed the free movement of goods and commodities, even before the UN legalisations, the GATT, and the Uruguay negotiations.

The Arab League Social and Economic Council brokering the Arab Free Trade Area failed to bring these impediments down in a series of meetings held last February in Abu Dhabi. Clearly, settling these questions require a political decision at the summit level or a common government decision unlikely to be taken outside a summit conference.

The Arab Free Trade Area was depicted as one of the key growth factors. Irrespective of whether it can become in the long run a cornerstone of the socio-economic development - since such goal cannot be simply attained by the private sector alone - some hoped that the openness of the Arab countries to an unrestricted trade would boost the inter-Arab trade and help establish new production enterprises with an acquired competition margin. This entails affordable transportation and insurance costs in geographically close countries, then ensures the quality of production, and mobilizes Arab savings from countries hungry for direct investments and capital to ease pressures on their systems of payments, while mobilizing and preparing the Arab labor force - with some 21 million unemployed in the region according to the Arab Labor Organization. Most importantly, with the success of the Free Trade Area project, the Arab countries will become more eligible to integrate into the international trade at the least possible losses in the first stage.

Alarmingly, while the GAFTA stumbles, Arab countries open up, each one alone, to instantaneous temptations. They conclude agreements with the United States on unrestricted exports, like the Qualified Industrial Zones (QUIZ) provided that the Israeli inputs in the Arab products that can be exported to the US markets are not less that a minimum of 11.7%... In economy as in politics, the eligibility criteria also favor Israel.

In short, the Arab summit or any such summit must adopt stances on such issues. As for development, it needs more than that.

* Mr. Issam Jurdi is a journalist and writer.

 source: Dar Al Hayat