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Diop, López-Cálix, and Walkenhorst
Regional Integration Part IV looks at the status and prospects for regional integration. There has been no shortage of regional trade and investment agreements among the region’s countries. Such agreements include many bilateral preferences, the Pan-Arab Free Trade Area, the Arab Maghreb Union, and the Agadir Agreement. The impact of these preferential integration efforts has been disappointing, however, because of the narrow focus in terms of preferential trade coverage on industrial goods, insufficient political commitments to live up to the spirit of the agreements, and administrative challenges of implementation. In chapter 10, Shui and Walkenhorst show that there are substantial untapped opportunities from regional integration by the countries of the Middle East and North Africa, particularly through expansion of coverage of preferential agreements to agricultural products, services, foreign direct investment, and labor flows. The authors identify the proliferation of agreements in the region as a challenge for effective implementation and highlight the need for high-level political support to ensure that free-trade provisions in regional agreements are implemented. They view regional integration as a complement rather than an alternative to integration into global markets. Quantifying the benefits and costs of regional integration initiatives provides policy makers with a sense of the direction and magnitude of prospective changes in production, income, and employment. In chapter 11, Anos-Casero and Seshan compare shallow integration, which includes preferential reforms for merchandise trade only, with deep integration, which also opens services sectors to partner trade and includes regulatory reforms to strengthen competition and market contestability. Their findings show that shallow integration is likely to generate very limited gains but that benefits would multiply if deep integration were pursued. If the EU serves as the external anchor for services integration and investment climate reforms, reforms could have an even greater effect. In conclusion, this book shows that the Middle East and North Africa region has yet to seize all the opportunities offered by the four recent global trends that shape trade policy and performance around the world. It also identifies additional reforms that could strengthen global production networks, allow countries to benefit more from trade in services, better capture the opportunities offered by the rise of China and India, and harness the potential of regional integration. All of these reforms could help boost growth and job creation in the region.