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the growing demand by large buyers that clothing producers take on more activities in the value chain, especially sourcing decisions regarding inputs. Restrictive rules of origin limit the opportunities for global sourcing. Compliance with these rules may leave MENA producers ill equipped to compete if preference margins in the European Union decline on signing of a multilateral trade agreement. In summary, preferential access to EU and U.S. markets under free trade agreements has played a critical role in stimulating new exports of clothing from Egypt, Jordan, Morocco, and Tunisia. These sectors now need to build on their success by developing strategies to boost long-term competitiveness, both to benefit from more diversified access to inputs and to prepare for a general reduction in tariffs that would reduce the protection accorded by preferences.
Access to the Markets of China and India The dynamic markets of China and India present potentially important export destinations for products from MENA countries. However, nonfuel shipments to both countries, especially India, face substantial trade barriers. The two giants have opened up significantly over the past decade, but simple averages of MFN duties remain about 10 percent in China and more than 18 percent in India (figure 9.9). Tariffs in China and India on imports from the MENA region are generally below average. Petroleum can enter China duty free, and it is subject to a relatively low duty of 10 percent in India. Nonfuel imports from Egypt and Tunisia face higher trade-weighted average tariffs in both China and India; nonfuel imports from Jordan and Morocco face belowaverage duties in both countries (figure 9.10). An outlier is Tunisia’s exports to China, which encountered very high duties in 2005 because of large shipments of diammonium phosphate fertilizer, which were subject to a 27 percent tariff. The tariff schedules of both China and India show substantial variation, with more than 100 tariff peaks each. In China, these peaks concern agricultural and industrial products in about equal proportions. In India, fourfifths of all peaks fall on agricultural tariff lines. In 2005, there were imports from the Agadir countries into China in six peak tariff lines and shipments into India in three lines, suggesting that some MENA exporters were able to access the Chinese and Indians markets despite very high tariff barriers.5 Thus, although access to the Chinese and Indian markets has been improving for MENA countries, as tariffs have come down, there remains scope for further improvements, which could facilitate higher exports