The Past and the Future Trade Patterns of the MENA Region: The Pursuit of Growth

This study investigates the past trade patterns of the MENA region and analyzes the sectoral growth impacts of them. We employ a sample of two agriculture, one mining, ten manufacturing, and twelve service sectors of 19 MENA countries and 186 trading partners from 1990 to 2015. Our graphical illustration indicates that while the shares of the EU (the major trading partner with a share higher than 30%) and other developed countries in all types of trade decrease, the share of the other developing countries in all kinds of trade and the share of China in intermediate trade increase. Our growth results suggest that while expanding forward global value chain participation with all groups or countries promotes the manufacturing sector, expanding forward global value chain participation with China and other developing countries enhances the service sector. All industries gain from an increase in the backward global value chain participation with the EU and the US. Our findings also propose a strong heterogeneity within the MENA region in terms of types of trade flows and trade partners. Given these results, we argue that global value chain participation of the MENA region promotes the growth of all sectors depending on the types of flows and trading partners. These results reveal the importance of systematic and dynamic trade policies to effectively integrate the MENA region into both regional and global value chains and to reap the benefits of them.