The Role of U.S. Trade with North African Nations and Its Impact on Economic Growth

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EXECUTIVE SUMMARY

This paper analyzes U.S. trade relations with the North Africa region. The study uses quarterly trade data for the period 1989-2008. There is a growing awareness among countries in the North Africa region regarding the importance of international trade for stimulating growth and integrating into the world economy. The research will attempt to achieve the following objectives: (a) analyze U.S. trade flows to the North Africa region; and (b) identify the effects of trade with the U.S. on economic growth in North African countries. The finding of the study may shed some light on the growing importance of U.S. trade relations with the North African nations.

Keywords: International trade, U.S trade flows, North African region, Economic growth

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INTRODUCTION

The North African region, consisting of Algeria, Egypt, Libya, Morocco, Tunisia, and Somalia, has two main groups of countries, namely, the Maghreb countries (Algeria, Libya, Morocco, and Tunisia) andthe Mashreq countries (Egypt and Sudan)(Bolle, 2006). These countries possess various connections comprising shared religion, culture and language. Conversely, they are distinct in terms of size, crude source endowments, and standard of living (Al-Atrash and Yousef, 2000). In this region, some are mainly farming and rural countries (Sudan), others are chiefly focus on energy sectors (Libya and Algeria), and others hold a promising and rising industrial foundation (Egypt and Morocco). According to the Business Monitor International (2009), while the North African region has proved resilient in 2009 largely escaping recession, its outlook for year 2010 appears more promising, driven largely by a pick-up in demand for exports. For Libya and Algeria, developments in the oil market will prove key, while Morocco and Tunisia will benefit from a pick-up in European growth.

The U.S. trade with North Africa is a trivial part of overall U.S. trade, accounting for about 0.8 percent of all U.S. exports and 1.1 percent of all U.S. imports in 2008. More than 60 percent of the oil and gas consumed in the United States each year is imported. Oil and gas imports from the Middle East constitute 70 percent of total U.S. imports from that region. Three main products, namely, mineral fuel, oil, etc., woven apparel, and knit apparel, account for more than 90 percent of the U.S. merchandise imports from North Africa. Of these products, mineral fuel, oil, etc. accounted for 87 percent of U.S. imports from the region in the first eleven months of 2009. On the other hand, more than 50 percent of the U.S. exports to North African countries are greatly focused in few industries: machinery (17%), aircraft and spacecraft (11%), mineral fuel and oil etc. (10%), cereals (9%), and miscellaneous grain, seed, and fruit (7%).

Although the U.S. trade with North Africa is a trivial part of overall U.S. trade, North African region's exports to the U.S. accounts for nearly 13 percent of region's overall exports. Therefore, this research will attempt to achieve two objectives: first, to analyze U.S. trade flows to the North Africa region; and second, to identify the effects of trade with the U.S. on economic growth in North African countries. The finding of the study may shed some light on the growing importance of U.S. trade relations with the North African nations.

The paper is structured as follows: the next section discusses the nature and the dynamics of U.S. trade with the North African region, whereas section 3 presents a survey of literature. Section 4 presents the specification of the econometric model and data sources. The empirical results are presented and discussed in Section 5 and finally, Section 6 summarizes the main results and concludes with some policy implications.

GENERAL PERFORMANCE OF U.S. TRADE WITH NORTH AFRICA

In this section, we describe the extent, nature, and dynamics of trade between the United States and North Africa. …