Inter-Arab trade is improving, yet still falls short of its promising potential. Mona El-Fiqi reports Arab countries never stop stressing the need to boost their mutual trade and economic cooperation. The latest venue in which this ever-elusive aim was again touted was the recent Arab League Summit held in Khartoum at the end of March. Despite its having topped the agendas of previous Arab summits as well as countless conferences, inter-Arab trade counts for no more than eight per cent of the overall trade undertaken by the Arab economies, and that according to the more optimistic estimates. The picture is not completely bleak however. More than a year after the entry into force of the Arab Free Trade Area (AFTA) in January 2005, the volume of trade between AFTA member countries has increased. According to the Central Agency for Public Mobilisation and Statistics (CAPMAS) Arab trade levels have grown, from $2.9 billion in 2004 to $3.7 billion in the first nine months of 2005. The increase nevertheless is still far below the expectations of the advocates of inter-Arab free trade. The agreement for an Arab Free Trade Area was signed in 1981 under the auspices of the Arab League. It was activated in 1998 by means of a gradual dismantling of customs which reached zero tariffs in January 2005. All products of Arab origin benefit from the agreement upon their entry into a country that is a member-state of AFTA. This includes all of the Arab countries except the Commoros Islands, Somalia, Algeria, Djibouti and Mauritania. The AFTA agreement does not apply to products manufactured in free zones or those prohibited for health, environmental or religious reasons. Egyptian Minister of Foreign Trade and Industry Rachid Mohamed Rachid said at a recent press conference that Egypt's imports from Saudi Arabia increased from $495 million in 2004 to reach $708 million in the first nine months of 2005. Egypt's exports to the United Arab Emirates have also grown from $125 million to $232 million in the same period. According to Rachid the increase reflects positively on Egypt's trade volume in addition to indicating an increase in the trade volumes of the other countries which have joined AFTA. The minister said that one of the many benefits resulting from AFTA has been the substitution of foreign imports by goods manufactured in the Arab countries. In a step aimed at further facilitating trade within the framework of AFTA the Arab League's Economic and Social Council has decreed that certificates of origin and invoices no longer need to be stamped by embassies. This is a procedure which has long been viewed an unnecessary obstruction to the free flow of goods. According to the Egyptian minister of trade and industry however, problems still beleaguer AFTA's smooth functioning. Amongst these is the absence of a consensus on what constitutes unified rules of origin, in addition to the lack of an adequate infrastructure and services which will support the smooth flow of trade. Professor of economics and former chairman of El-Sadat Academy for Administrative Sciences Hamdi Abdel-Azim says that the increase in Arab trade remains "moderate" despite its vast potential, especially when compared to trade between members of other economic blocs. Abdel-Azim says that "rules of origin are the first hindrance to the movement of trade amongst the Arab countries especially since Arab products undergo various stages of processing in every country." He adds that it is "difficult" to attain the 40 per cent of local processing which is the minimum needed so that a product may enjoy customs exemption. As a result of this, customs are paid for Arab products which raises their prices and puts them at an unfair disadvantage in the face of competing foreign goods. The Gulf countries still prefer to import products from the East Asian economies as well as China and Europe. "Goods from these countries compete with cheaper prices and superior quality," Abdel-Azim says. AFTA has also determined a lengthy "negative" list of products that are excluded from its free trade arrangement, thus contravening the very principle of free trade according to Abdel-Azim. Items excluded from free inter-Arab trade include engineering products, petrochemicals and food commodities. Lengthy administrative procedures in ports as well as in customs outlets remain, a cause for complaint on the part of investors. "Add to this the absence of international health and environmental certification for Arab products," Abdel-Azim says, explaining that one outcome of this situation has been the prohibition of Egyptian potatoes from entry into Saudi Arabia.
