Gravity Model at Gcc Essay

5815 Words Aug 5th, 2015 24 Pages
Journal of Economic Integration
23(1), March 2008; 42-56

The Trade Potential of the Arab Gulf Cooperation
Countries (GCC): A Gravity Model Approach
Dr. Houcine Boughanmi
Sultan Qaboos University

The GCC region has recently witnessed the creation of a customs union between the countries of the region as well as the signature of many free trade areas with countries/blocs outside the region (i.e. US and EU). The purpose of this paper is to investigate the potential of trade of the GCC countries within the context of the old and the emerging preference trade arrangements in the region of Middle East and North African Countries (MENA). A gravity trade model was estimated based on pooled time series-cross-sectional data of bilateral
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The Trade Potential of the Arab Gulf Cooperation Countries (GCC): ~


• JEL classification: F15
• Keywords: Gulf Cooperation Council (GCC), Trade potential, Gravity model,

Free trade areas, Trade creatior, Trade diversion

I. Introduction
The countries of the Gulf Cooperation Council (GCC) have recently launched a customs union (GCC-CU) with the objectives of enhancing regional intra-trade and advancing the process of their economic integration with the rest of the world1. At the same time most GCC countries have separately signed Free Trade Areas agreements (FTA’s) with the United States, and have been for long collectively engaged in negotiation with the European Union to create a GCC-EU Free Trade
Area. In addition, all GCC countries are now members of the Greater Arab Free
Trade Area (GAFTA) and all are members of the World Trade Organization (WTO).
This proliferation of FTA’s and other integration schemes in the region is part of a recent global phenomenon. Worldwide, there has been a surge in the number of regional trade arrangements created despite the increasing role of WTO to strengthen the multilateral trading system. More than half of the existing regional trade arrangements worldwide were established after the creation of WTO in 1995
(WTO, 2005). This has renewed interest in studying the trade and non trade effects of Regional Trade Arrangements (RTA’s) and their merits (or non merits)

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