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Estimating the Economic Benefits of Levant Integration

by Daniel Egel, Andrew Parasiliti, Charles P. Ries, Dori Walker

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Research Questions

  1. What are the potential benefits of economic integration in the Levant?
  2. How do assumptions about the movement of goods, people, and capital and the countries participating in the comprehensive trade agreement influence the total benefit?
  3. What steps can be taken to maximize the potential benefits of integration?

Economic integration in the Levant — in the form of a comprehensive free trade agreement (FTA) that eliminates tariffs, lowers investment and nontariff barriers, and waives visa requirements — could increase the average gross domestic product of the Levant nations by 3–7 percent. This economic expansion would likely create at least 0.7 million to 1.7 million additional new jobs, reducing regional unemployment rates by 8–18 percent — and total job creation might be substantially larger. These estimates are for a potential FTA among Egypt, Iraq, Jordan, Lebanon, Syria, and Turkey — six of the core Levant countries.

The authors have also developed an online tool that allows policymakers and the public to examine the economic dividend from economic integration. It allows users to (1) vary key assumptions about the movement of goods, people, and capital and (2) explore different combinations of countries participating in the FTA — even allowing the inclusion of Israel and the West Bank and Gaza, the latter two of which are referred to as Palestine. The benefits increase for larger blocs of countries and with reduced restrictions on the movement of goods, people, and capital among these countries. The authors recognize that regional integration might start with only a subset of countries and with only partial economic integration: The tool also allows examination of the benefits of these alternative arrangements.

Key Findings

Since the late 1990s, there has been a persistent, though sporadic, effort to deepen economic partnerships in the Eastern Mediterranean, a region often referred to as the Levant

  • Six core countries of the Levant — Egypt, Iraq, Jordan, Lebanon, Syria, and Turkey — have established a variety of bilateral economic ties, but attempts to establish broader regional economic partnerships have faltered.
  • Though the political turmoil in the region has prevented further progress, the recent Iraq-Jordan economic agreements — signed in early February 2019 — and trilateral Egypt-Iraq-Jordan summit the following month could provide the first steps toward achieving the benefits of Levant economic integration.

RAND examined three mechanisms through which a comprehensive FTA might affect the economies of the Levant

  • Trade in goods and services: A comprehensive FTA would increase trade by removing tariffs and reducing other nontariff restrictions on trade (e.g., rules of origin).
  • Domestic and foreign investment: This investment would occur with both local and international investors and businesses seeking to take advantage of the larger market for goods. Improvements in domestic and regional political stability will also enable new investment.
  • Increased tourism and travel: The elimination of visa restrictions would increase travel throughout the Levant and create new opportunities for collaboration in tourism.

Economic integration in the Levant could increase the average gross domestic product of the Levant nations by 3–7 percent

  • This economic expansion would likely create at least 0.7 million to 1.7 million additional new jobs, reducing regional unemployment rates by 8–18 percent — and total job creation might be substantially larger.
  • Although achieving these projected benefits will require some degree of stabilization of the Syrian conflict and significant coordination among sometimes troubled neighbors, there is now momentum to indicate that such a project could be successful.

Recommendations

  • Encourage more-expansive discussions of regional engagement, building on the recent Iraq-Jordan-Egypt trade agreements. A dialogue about the benefits of a shared economic future should complement inclusive political and cultural exchanges and feature direct engagement with policymakers and outreach via traditional media and social media, providing information in a format that is transparent and accessible to a broad variety of audiences.
  • Work with these countries to adequately plan and prepare for the new opportunities that Levant economic integration will bring. Short-term economic disruption as a consequence of increased movement of goods, people, capital, and services is inevitable. Facilitating deliberate planning involving representatives from government, industry, labor organizations, and other groups can help these countries prepare for potential disruptions and maximize the benefits of integration.

Research conducted by

This research was sponsored by the New Levant Initiative and conducted within the International Security and Defense Policy Center of the RAND National Security Research Division (NSRD).

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