Optimal Regional Trade-Integration Schemes in North Africa

Optimal Regional Trade-Integration Schemes in North Africa : Toward a Pro-Industrialization Policy

This article examines the status of industrial production in North African Countries as well as the role that regional trade integration through free-trade agreements and trade facilitation may play in spurring this region’s reindustrialization. The study uses Applied General Equilibrium model to assess the potential impact of the establishment of a Continental Free Trade Area as well as the reduction of costs to trade across borders. This article also measures the additional impact of the implementation of the Great Arab Free Trade Area and, finally, a deeper free trade agreement among North African countries and the European Union. The main findings indicate that each free-trade agreement configuration will stimulate, in relative terms, North African countries’ exports from a number of main industries. Whereas industrial products represent the largest share of North African countries’ export gains to Africa in general, mining and energy dominate North African countries’ export gains to the rest of the Arab League and food dominates the exports to the European Union. Therefore, the establishment of the Continental Free Trade Area, accompanied by trade-facilitation measures, appears to be crucial in providing support for North African countries’ industrialization.