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One State, One Language, One People

The Arab-speaking countries of the Middle East and North Africa need to from an effective trading bloc to safeguard their markets and compete in the new global economy, says Khalaf Al Habtoor

There has been a discernible shift in the equation that has balanced economic, social and political structures around the world since the beginning of the 20th century. As the new millennium gets underway, nation states are joining together all over the world to defend themselves economically against incursions from other trading blocs into their economies and markets. These new groupings have been created not only to increase their influence inside their own regions, but to give them advantages when dealing with other trading entities in the global economy. The countries of Europe, for example, are in the process of adopting a single currency that will eventually translate into a unified European economy. East Asian countries have formed their own regional trade blocs and free trade zones. Even the United States has felt the need for a regional grouping. It has, with Canada and Mexico, formed the North American Free Agreement (NAFTA) to protect their interests.

So what about the Arab-speaking countries of the Middle East and North Africa (the region defined as MENA by the World Bank)? What have they done to form an effective trading bloc to safeguard their markets and compete in the new global economy?

The sad answer is very little. The Gulf States of Bahrain, Qatar, Saudi Arabia, Kuwait, Oman and United Arab Emirates have formed the Gulf Cooperation Council (GCC) and the Arab League has declared its intention to create an Arab Free Trade Area (AFTA) by 2008.

But the GCC has become bogged down by internal disputes over borders and tariffs and has postponed a proposed customs union, while the Arab leagues proposal looks over-optimistic given that it took northern Europe over thirty years to integrate member countries laws and economies to form the European Economic Union.

All around the globe governments are revitalising their economies, some by streaming lining their existing laws and others by drastic reforms to their economic and social structures. Arab economies on the other hand are not being changed quickly enough. They are therefore unable to participate fully in the drive to liberalise trade, so derive little benefit from changing world markets. Had they organised themselves earlier into an effective trading block they too might by now have been able to look forward to the future with confidence as the World Economy reshapes itself.

While other countries have set out to attract new investment many Arab countries are still printing glossy brochures that extol the virtues of facilities they could provide, that only in fact, exist in the brochure. Arab governments, as usual, watch wait and see; they should, by now, have had enough of this non-productive practice. Others are already awake and undertaking reforms and are consequently making progress. While Arab Countries watch and wait and see.

The future that awaits the Arab speaking states of the Middle East and North Africa, (MENA) depends on what strategies are devised to determine effective economic and social reform. 

One country standing alone could never hope to have much influence in a global economy dominated by powerful trading blocs. The greater the economic strength of the bloc the greater will be its clout at the negotiating table. So what hope is there for countries such as Lebanon, Libya, Bahrain, Qatar and other Arab states to obtain fair trading conditions when their interests are not represented within a larger grouping that speaks and acts as one? It is abundantly clear that unorganised countries will, like it or not, have to follow the dictates of the larger and more powerful trading entities.
There is only one way for Arab states to strengthen their hand and provide an effective counter to European, Asian or American designs. That is to immediately form an Arab Common Market. It is the most pressing imperative for the future of the region. There is no choice. Either the Arab-speaking countries act together, or they will remain bystanders, watching others in the world trading system benefit through their influence within the World Trade Organisation, and other economic forums as they use their economic muscle to shape decisions in their favour while the weakest are left behind.

Compete or Co-operate?
The greatest problem facing Arab states is that until now, they have preferred to compete with each other rather than to co-operate. So current circumstances work against them hindering any meaningful form of Arab or Islamic economic integration. Arab People and governments must build alliances based on trust not suspicion, they must learn to co-operate in order to create a powerful economic entity in this new era of economic trading blocs.

Without socio-economic integration between Arab nation states based on a strong identity rooted in the region’s history and culture they will always remain dependant on Western nations or trading blocs. This will not benefit Arab people.

Arab Nation-States can integrate, and this integration will not conflict with their trading relationships with the West. Arab countries have many common factors that should bode well for integration, religion, language, customs and traditions. But while the foundations are there for integration there are also large differences between them. Arab States have several different forms of Government, some are monarchies, and some are socialist and some republics. They have different legal codes, some are based on the Napoleonic code, some on the laws of the Ottoman Empire and some on British common law and all are influenced by Islamic law. None-the-less they can if they make the effort draw closer together in order to take on a new role on the global stage. This will give them a powerful unified voice in trade matters and world politics.

Currently, average government participation in Arab economies ranges from 36–50 per cent of GNP and in some countries it is as much as sixty per cent. To move towards a more competitive and effective economic framework for the region, governments of most Arab governments will have to reduce their role in the economies of their countries. An economy controlled by the state aimed at serving its political and security goals cannot hope to compete with economies structured around free trade. 

Barriers to free trade have been introduced by all Arab governments to protect their own internal markets from competition from more advanced economies. Inter Arab trade makes up only nine per cent of total Arab Trade against almost 65 per cent with the European Union, the United States and Japan. The effect of this is that almost all Arab countries have developed stronger economic relationships with countries and markets outside the region, and this has discouraged the development of a strong inter-regional trading zone. This emphasis on trade outside the MENA region has discouraged the setting up of institutions strong enough to formulate and implement sound economic, trade and monetary policies.

This lack of a MENA Free Trade Area (MFTA) allows developed Western Countries to flood regional markets with their consumer and capital commodities, this is borne out by the fact that over 72 per cent of Arab states imports of consumer and capital goods come from Europe, America and Japan.

Therefore, the starting point for an Arab Free Trade Area is to reduce the involvement of government in the economies of the region. Internal markets need to be opened up to free trade through structural reform in every MENA country. This can be achieved by liberalising exchange rates, interests rates, pricing on commodities and services, opening up markets by decreasing customs and administrative barriers on imports and exports, while at the same time cutting down on subsidies, rationalising government expenditure and reforming monetary and taxation systems. 

Further, to achieve greater economical and social integration a MENA Council should be set up based on that which serves the EU. Its mission would be to organise relations between Member States to promote economic and social progress and to assert the identity of the MENA region in the international arena, introduce common citizenship and develop an area of freedom, security and justice for all members.

It would become the main decision making body of the Member States. It would bring together their representatives at ministerial level, on a regular basis, to make decisions on trade, finance, education, telecommunications, foreign affairs and all other issues on the Council’s agenda. It would be a legislative body for a wide range of issues. It would co-ordinate the broad economic policies of member states and would conclude on their behalf agreements with one or more non-member countries or international organisations. 

It would have budgetary authority and would therefore influence spending.
Alongside the Council and equal to it, there should be an independent executive body to which Commissioners would be elected by the council. They would sit in permanent session to implement the council’s decisions. It would be tasked with setting up institutions that would administer a customs union that would cover all trade in goods and services. It would enforce a prohibition of customs duties on imports and exports, and all other charges that have an equivalent effect, between member states. They would set a common customs tariff in their trading relationships with non-member states.
The commissioners would also set a common agricultural policy with would control all agricultural products such as crops, fishing, stock farming and first stage processing such as Butchery, canning, packing and shipping.

Another important issue to be addressed by the Council and Commission would be the free movement of labour and capital between countries in a MENA Free Trade Area. The Council would formulate and enact laws that could be implemented by the commissioners, which would enshrine the right of workers to free movement within MFTA in the pursuit of jobs or business opportunities. This will mean the abolition of any discrimination based on nationality between workers in member states as regards employment, remuneration and other conditions of work or employment. This right can be subject to limitations only on the grounds of public policy, public security or public health. 

Alongside the guarantee of free movement of people and capital within a MENA Free Trade Area would be the creating of a common citizenship for all the people within MFTA, this would not conflict or replace national citizenship, but compliment it. It would confer a number of civil rights on MENA citizens.

An independent Court of Justice would be set up to protect these civil rights by enforcing compliance with the council’s directives by all Member States. It would also ensure that the laws are uniformly interpreted and effectively applied. It would have jurisdiction in all disputes involving member states, institutions, businesses and individuals.

A court of First Instance would be attached to it that would hear all actions brought by natural legal persons against the council and commissioners for annulment, failure to act and for damages.

To ensure continued development of MFTA a Central Bank would be set up to frame and implement MFTA monetary policy and work towards a single currency. It would conduct foreign exchange operations and ensure the smooth operation of payment systems.

There would also be a MFTA investment Bank that would finance investment projects that contribute to the balanced development of MFTA towards economic and social cohesion of member states. To fulfil this mission it would raise on international markets substantial volumes of funds and direct them, on favourable terms, to finance capital projects according to the objectives of MFTA.

To oversee all transactions within MFTA a Court of Auditors would be set up whose duty would be to check that all revenue that has been received and all expenditures that have been incurred, have been done so in a lawful and regular manner. It would also oversee the financial management of the MFTA budget.

To build this type of MENA Free Trade Area and making it efficient and effective requires Arabs Governments throughout the region to truly commit themselves to the concept of union, rather than merely paying it lip service. The main stumbling block to this objective is the issue of trust. All to often suspicion between Arab governments sours relations at times when unity is needed. Arab Governments will need to trust each other to be strong enough to face the storm of protest that will be unleashed by importers and local manufacturers who will fight hard to maintain government protection of their markets that supports their monopolies and prevents fair competition.
The biggest test along with trust, for Arab governments when working towards economic and social integration, will be to treat the setting up of a well regulated market of common interest as if it was an over-riding strategic issue to be implemented in the shortest possible time frame. They need to shrug of worries of who will dominate who in any regional forum. They need to face up to the fact that they cannot go on being single weak economic entities. Forever dependant on the whims of G7 countries who have already formed their own strong alliances or have implement trading and social agreements that protect there economic interests and give them negotiating strength in the Global Economy.

Without mutual trust, commitment and cooperation, economic and social integration will be limited. Arab governments will miss the opportunity to provide their people with a foundation for economic prosperity, and to lessen their dependence on foreign nations, Particularly the West, for most consumer and industrial products. 

To achieve a viable future, as independent states, and preserve its cohesive regional identity in the Global Economy. MENA countries have to face the fact the in order to achieve this aim governments in the MENA region will have to transfer some of their sovereignty to a regional body such as MFTA. This will enable them to confidently negotiate diplomatic, economic and trade issues with other regions for the benefit of their citizens.

The short-term obstacles to achieving an integrated trading block may seem at first insurmountable. But the harsh reality of the new economic world order is that a failure to cooperate and develop a market of common interest will cripple Arab economies in the future. It will blight the prospects of ordinary people in the region to enjoy a standard of living comparable to that in the developed countries. Therefore all MENA governments should act with alacrity if they are to benefit from the changing patterns in World Trade.