Middle East and North Africa (MENA) countries have to tap into the opportunities the ongoing Covid-19 crisis is presenting for more trade integration and liberalisation, the World Bank (WB) has urged.
In its economic outlook update report for MENA, released Monday, the WB outlined an approach to regional trade integration in MENA based on three objectives.
These include achieving economic efficiency, driven largely by the quest for market liberalisation and free trade, through the expansion and deepening of trade agreements and other instruments, including rules of origin.
Further, the approach urges attaining gradual convergence of per capita income and living standards among countries in critical parallel sectoral reforms, cooperation among institutions, and harmonisation of regulations, according to the WB approach.
In addition, explicit goals should be set to prevent social and territorial inequalities that would naturally result from free trade, through the provision of public goods and specific measures targeting local areas and vulnerable population groups.
Economic integration will pave the way for stronger regional alliances that allow countries to better compete in global markets. Regional cooperation can also attract the investment needed to generate more and better jobs, according to the WB.
The WB expounded that the positive effects of trade integration go beyond socioeconomic gains to include political benefits, as an increase in bilateral trade interdependence and global trade openness may result in less conflict between countries and bring more peace and stability.
Trade integration has been and continues to be, a means of prosperity, growth, job creation, and stability, the WB said.
Trade openness can be a significant factor in achieving inclusiveness, yet to promote growth that benefits all segments of society, trade reforms must move in parallel with other policy reforms, according to the WB approach.
Trade liberalisation also can contribute to growth and better jobs, but it can also be associated with increased income inequality, according to the WB.
In this regard, the WB called for promoting global labour standards simultaneously with trade liberalisation, which could increase public support for trade agreements while reducing inequality.
Furthermore, trade liberalisation can aggravate pre-existing geographic and social income disparities if income rises for the factors of production, especially labour employed in sectors enjoying comparative advantage, and if income and employment fall in sectors with comparative disadvantage, according to the WB.
The WB highlighted the African Continental Free Trade Area (AfCFTA) — which came into force in 2019 with more member countries, at 55, than any other free trade area — as connecting 1.3 billion people and having a combined GDP of $3.4 trillion.
Preferential trade under the AfCFTA was to commence 1 July 2020, but has been postponed due to the Covid-19 pandemic.