The results of the 2001 survey were reported in Zarrouk (2001, 2003). It revealed that the cost of getting goods across borders averaged 10 percent of the value of goods shipped. Next to tariffs and bureaucratic red tape, customs clearance procedures were the most important source of nontariff trading costs, with the average company spending 95 man-days per year resolving problems with customs and other government authorities. Excessive delays resulted from lengthy processes of clearance and inspection, the number of documents and signatures needed to process a trade transaction, and the frequency of problems with customs and other government authorities.

The survey that is the basis of the present paper replicated the main trade-related questions asked in the 2001 survey but goes beyond it by including specific questions relating to the implementation of the PAFTA and the relative importance of trade policies that are sometimes reported in the press to be problematical (such as rules of origin and enforcement of product standards). The survey suggests firms perceive PAFTA as being beneficial due to the removal of tariffs on intra-PAFTA trade. It also reveals a marked improvement in customs clearance-related procedures, with a substantial decline in the number of required documents and signatures, a significant reduction in the variance of clearance times, and fewer firms reporting having to make informal payments (bribes) to officials. Also of note is that only a minority of respondents reported having problems with rules of origin (13 percent), substantially fewer than those perceiving arbitrary customs valuation and costs associated with enforcement of product standards to be a problem. In 2001, tariffs were ranked as one of the most important barriers to intra-regional trade; in 2008 they were ranked last. Instead, transport-related infrastructure and real trade costs (trade facilitation) was ranked as the most important constraint. Thus, the survey reveals substantial satisfaction with implementation of PAFTA tariff liberalization. It also suggests that further action to reduce the trade costs associated with trade facilitation, enforcement of standards and other non-tariff policies is needed. From an economic policy perspective, actions on these fronts have the advantage of benefitting trade in general, not just from Arab countries, and thus can avoid giving rise to trade diversion costs.

The plan of this note is as follows. Section 1 briefly discusses the trade agreements signed by MENA countries, and summarizes some of the existing literature on prevailing trade policies and the determinants of the trade performance of the region. Section 2 discusses the survey. Section 3 presents and discusses the results. Section 4 concludes.

# **1. Regional Integration and Trade-related Policies**

Regional integration is a central element of the trade strategies that are being pursued by Arab countries. Efforts to integrate regionally date back to the 1950s. Examples are the 1957 Arab Economic Unity agreement, the 1964 initiative by Egypt, Iraq, Jordan, and Syria to form an Arab Common Market, the 1981 Gulf Cooperation Council and the 1989 Arab Maghreb Union (Algeria, Libya, Mauritania, Morocco and Tunisia). Regional trade integration was given a new stimulus in the mid 1990s, with countries around the Mediterranean signing free trade agreements with the European Community (EC) that aimed at the elimination of tariffs on trade in goods with the EC (with the exception of agriculture), and the revitalization of integration efforts by Arab League members through the creation of a Pan-Arab Free Trade Agreement (PAFTA) in 1998.

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