2 Foreign and Intratrade Policies of the Arab Countries: The Basic Issues1
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

Abstract

This is the fourth in a series of seminars dealing with economic policies of particular importance to the Arab countries. The first seminar, held in 1987, dealt with adjustment policies and development strategies; the second was concerned with privatization; and the third was on investment policies. The present seminar comes at a time when trade policy reform constitutes one of the major themes in adjustment programs. This is not difficult to explain. Foreign trade policies have a direct bearing on the allocation of resources and hence on economic growth and development. No less important is the fact that they are one of the major factors underlying international competitiveness and external equilibrium. The subject of this seminar has acquired an added significance in the light of recent developments in the world economy. These developments might be summed up as globalization, regionalization, and a rising tide of protectionism. Globalization has come about as a result of four decades of remarkable growth in world trade. Between 1950 and 1980, world exports of goods and services increased at an annual rate of 7 percent compared with a 4 percent average annual growth of GDP. The growth of world trade was matched by no less far-reaching developments in international finance. One of the most distinctive features of the last two decades has been the enormous growth of international capital movements. A study by the Organization for Economic Cooperation and Development (OECD) estimates international financial transactions—transactions involving a movement across national borders—at some $200 billion daily, or forty times the volume of world trade. As a result of these developments, the world economy has become characterized by a high degree of interdependence. Countries are intertwined in an extensive network of commercial and financial ties. The growing interdependence of the world economy gives rise to both positive and negative effects. On the positive side, there are now vast possibilities for a fruitful international division of labor. At the same time, all trading countries where the foreign trade sector accounts for a high proportion of total economic activity have become increasingly vulnerable to external economic shocks. This aspect was driven home to the Arab countries following the economic turbulence of the 1980s.