The Effect of Free Trade Agreement between the Mediterranean Arab Countries and Turkey on Foreign Trade Flows

Abstract

This paper aims to investigate the impact of the bilateral free trade agreement that Egypt, Jordan, Morocco, and Tunisia signed with its trading partner, Turkey. The study used the gravity model, which is considered the best and most widespread standard model for estimating the effects of free trade agreements on trade flows. The results indicate the positive impact of the country's size on foreign trade flows, especially the GDP of exporting countries. Bilateral trade flows are affected positively by the total population of the importing country, while the effect is negative for exporting countries by 1.29%. Distance and sharing of borders and language had a zero effect as a result of the weak intra-Arab trade. The results of the study nullify the claim that the Free Trade Agreement between Arab countries and Turkey did not enhance trade. Rather, we found that it boosted trade exchange by 0.47%. The effect of spreading corruption on both the exporting and importing sides also appears to limit bilateral trade flows. The effect of the political instability factor was negative on trade flows to source countries, while the effect was positive for importing countries.