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Assessing Arab Economic Integration Report

Towards the Arab Customs Union

image of Assessing Arab Economic Integration Report

The goal of this first edition of the Assessing Arab Economic Integration Report is to provide a quantitative assessment of regional economic integration efforts, and generate practical and implementable policy advice for Member States. Following a concise review of the potential impact and channels of economic integration, a system of indexes has been developed for performance evaluation, monitoring and comparison of integration at the global, regional, and bilateral levels. This report shows that Arab countries’ abilities to unlock the potential for further intra-regional integration rely partly on their capacity to address a number of cross cutting structural features that act as facilitators and condition their performances. It makes a clear argument that economic integration is a means by which Arab countries can ensure their growth and diversification, thus bringing both individual country-level and communal regional-level benefits.

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From a free trade agreement to a customs union: A bumpy pathway for Arab economic prosperity?

A customs union is an advanced form of economic integration deeper than that of FTAs. Under a customs union, member countries, following the removal of tariffs among them, apply a common external tariff (CET) to imports from the rest of the world. Despite the various benefits of a customs union, progressing from an FTA to a customs union spawns many challenges, most notably the concurrence on a unified tariff structure; the CET that will be applied against third parties; and the mechanism for distributing the revenues collected as well as dealing with the consequences of fiscal revenue distortion, especially for members that depend heavily on customs duty revenues to finance their budgets.

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