The Partial and General Equilibrium Effects of the Greater Arab Free Trade Agreement

The Greater Arab Free Trade Agreement (GAFTA) is a regional trade agreement among the Arab countries. We incorporate recent advances in the literature to investigate the partial and general equilibrium effects of GAFTA. The partial equilibrium estimates suggest that GAFTA had a positive and significant effect on bilateral trade of around 40% in 1998 and 61% after the phasing out of tariffs. The general equilibrium analysis suggests that the welfare effects of the agreement are mostly negligible. The results highlight that deeper integration among the Arab countries is imperative to bring about further welfare benefits to the member states.