CHAPTER 9
Globalization and Competition from China and India: Policy Responses in the Middle East and North Africa Paul Brenton, Lulu Shui, and Peter Walkenhorst
The countries of the Middle East and North Africa (MENA) face growing competition—and opportunities—from the rise of China and India and changes in the structure of global trade. The share of China and India in global exports increased from about 2 percent in 1985 to more than 5 percent in 1995 and 11.5 percent in 2005. Although China and India have intensified competition in global markets, they also provide additional sources of demand. This increased demand provides new opportunities for MENA country exports and a chance to reduce reliance on traditional but slow-growing markets in the European Union (EU) and the United States. The rise of China and India has occurred in tandem with the growing importance of global production chains and the growth of trade in services, fueled by technological change and declining transport and telecommunication costs. Although they offer new routes to export and growth, these developments have increased the premium on access to lowcost inputs. Firms that have to pay more for their key inputs, including 227