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The Trade Potential of the Arab Gulf Cooperation Countries (GCC): A Gravity Model Approach

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  • Boughanmi, Houcine

    ()
    (Sultan Qaboos University)

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    Abstract

    The GCC region has recently witnessed the creation of a customs union between the countries of the region as well as the signature of many free trade areas with countries/blocs outside the region (i.e. US and EU). The purpose of this paper is to investigate the potential of trade of the GCC countries within the context of the old and the emerging preference trade arrangements in the region of Middle East and North African Countries (MENA). A gravity trade model was estimated based on pooled time series-cross-sectional data of bilateral trade of the MENA countries with their major trading partners. The results indicate that in spite of the fact that the share of GCC intra-trade is too small in absolute terms, it is actually higher than expected on the basis of underlying trade determinants. However the level of the GCC intra-trade has not changed significantly over the years and had probably reached its full potential during the first decade of the GCC creation. Trade with the Mashreq countries are more than expected, while it is less than expected with the Maghreb countries despite the implementation of the GAFTA a decade ago. The GCC trade with the European Union and the US was found to be quite intensive although no formal trade arrangement existed between the GCC and both blocs for the time-period used in the analysis. The results suggest that the newly signed trade arrangements are promising in enhancing new opportunities of trade in the GCC region.

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    Bibliographic Info

    Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

    Volume (Year): 23 (2008)
    Issue (Month): ()
    Pages: 42-56

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    Handle: RePEc:ris:integr:0424

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    Web page: http://econo.sejong.ac.kr/
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    Related research

    Keywords: Gulf Cooperation Council (GCC); Trade potential; Gravity model; Free trade areas; Trade creatior; Trade diversion;

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    Cited by:
    1. A Salim, Ruhu & Mahfuz Kabir, Mohammad, 2011. "Does More Trade Potential Remain in Arab States of the Gulf ?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 217-243.
    2. Toledo, Hugo, 2011. "EU-GCC free trade agreement: Adjustments in a factors proportion model for the UAE," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 248-256, April.
    3. Thompson, Henry & Toledo, Hugo, 2010. "Labor skills and factor proportions trade in the gulf cooperation council," International Review of Economics & Finance, Elsevier, vol. 19(3), pages 407-411, June.

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