The geographic advantage that the MENA (Middle East and North Africa) region used to have - because Eastern Europe was effectively closed to open exchange with the West - has disappeared and trade data reveal that the Central and East European countries (CEECs) are well on the way to exploiting their geographic proximity to the EU. In Discussion Paper No. 1226, Research Fellow Bernard Hoekman studies the trade policy status quo in the MENA region, the need for change, and the possible role of external institutions in facilitating reforms. The author begins with a discussion of current trade policy in MENA countries, going on to use trade data to illustrate how the policy stances have inhibited private investment in export-oriented production by comparing MENA's recent export performance with that of the CEECs. The economic impact of the Uruguay Round, policy and institutional implications of the WTO and the potential of membership of these institutions are assessed.

An important element supporting the export growth of the CEECs has been the Association Agreements negotiated with the EU in 1992. Similar agreements are being negotiated by Egypt, Jordan, Morocco, Tunisia and Israel. The European Commission has proposed that these become part of a wider Europe-Mediterranean Economic Area. This offers a window of opportunity to pursue further reforms in a setting that could help governments overcome existing credibility problems. The main elements of a likely agreement with the EU are presented together with an evaluation of how such an accord could help enhance a more market and private sector-friendly regulatory regime in the region.

The WTO, the EU and the Arab World: Trade Policy Priorities and Pitfalls
Bernard Hoekman

Discussion Paper No. 1226, August 1995 (IT)