Natural resources: a key challenge in regional integration of the Middle East and North Africa region

Greater trade integration within Middle East and North Africa region is expected to happen through the completion of the Pan-Arab Free Trade Agreement. However; recent studies suggest that when resource rich and resource poor countries give preferences to each other; as in PAFTA; the resource rich country is very likely to suffer from trade diversion. Our recent empirical research states that it has happened in PAFTA. This could explain why resource rich countries may be reluctant to deepen further this type of agreement.