Essays on trade integration among GCC countries

Abstract

This dissertation consists of the three essays; in these three essays I study different areas of trade integration among Gulf Cooperation Council Countries (GCC) by examining the effect of GCC Free Trade Agreement (GCC FTA) on trade among GCC countries during the 1983-2010 period. In the three essays, different variations of the gravity model of international trade are applied to a set of bilateral trade flows among 54 countries representing GCC countries and their major trade partners during the 1978-2010 period.

The first essay is presented in chapter two, where I investigate the effect of GCC FTA on aggregate trade among GCC countries. The findings of chapter two suggest that GCC FTA has resulted in trade creation among GCC countries during the 1983-2010 period.

The second essay is presented in chapter three, where I investigate the effect of GCC FTA on intra-industry trade among GCC countries. Investigating GCC FTA effects for disaggregate trade is important, as the aggregate results may suffer from aggregation bias. Also, it helps identify the sectors that benefit more from GCC FTA which is an important issue for GCC countries that are seeking diversification of their economies. Chapter three results suggest that GCC FTA trade creation was more concentrated in sectors that exhibit lower shares of GCC intra-trade during the 1983-2010 time period.

The third essay is presented in chapter four where I investigate whether GCC FTA trade creation/destruction effect (aggregate and intra-industry trade) among GCC countries was attributed mainly to new trade relations (extensive margin) or to existing trade relations (intensive margin), and whether GCC FTA led to an increase in new trade relations among GCC countries. Chapter four results suggest that GCC FTA trade creation is attributed mostly to trade along the intensive margin while GCC FTA has a negative effect on trade along the extensive margin for most trade sectors.

Overall, the results of the three essays suggest that trade integration among GCC countries is not very deep. Although GCC FTA is effective at the aggregate level, however GCC FTA failed to promote trade among GCC countries in larger intra-trade industries and failed in creating trade in new products among GCC countries. GCC countries have plans for a unified currency, since a unified currency requires deeper levels of economic integration than those needed for an FTA, the shallow level of trade integration maybe a sign that GCC economies are not yet ready to adopt a unified currency.

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Identifiers

ORCID for Jean-Yves Pitarakis: orcid.org/0000-0002-6305-7421

ORCID for Hector Calvo-Pardo: orcid.org/0000-0001-6645-4273

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