Syria Today | Trading Up

Trading Up

By Muhammad Atef Fares & Edwin Lane
Photo Adel Samara

Syria is looking to its Middle Eastern neighbours to forge an economic presence on the world stage.

When foreign ministers announced plans for a new free-trade zone encompassing Syria, Lebanon, Jordan and Turkey at the Turkish-Arab cooperation forum in June this year, they stressed that the agreement would be good not only for trade, but for political relations in the region, too.

"Political dialogue and economic growth" were the joint aims of the plan, Lamia Aasi, Syria's Minister for Economy and Trade, said. Her Lebanese counterpart, Mohammad al-Safadi, said the agreement was based on "an important vision" to make the quartet a "regional force".

The details of the plan are still to be agreed upon. In August, the quartet announced that a cooperation council would be set up to look at the specifics of how the trade bloc might be formed, with the first high-level meeting scheduled for January in Istanbul.

But leaders have already said the free-trade bloc will be based on pre-existing bilateral agreements between the countries along with a new agreement between Lebanon and Turkey – who have yet to sign their own free-trade deal – with the aim of allowing the total free movement of goods between the four countries.

It would also allow the free movement of people within the bloc without the need for visas, a joint declaration by the four countries said, and there will be measures to free up the flow of money for investment across borders, particularly to help small- and medium-sized businesses and to support scientific research. It is also envisaged that the bloc will help the countries work together in international trade negotiations, with the members using their collective economic weight to agree better deals with outside trading partners.

Closer ties
For Syria, such a deal would mean strengthening ties with its already-important trade partners. Last year Lebanon accounted for 7 percent of Syria's total external trade, according to the International Monetary Fund (IMF), making it Syria's fourth-biggest trading partner after the European Union, Iraq and Saudi Arabia.

Turkey, which already has a three-year-old, bilateral free-trade deal with Syria, is fast catching up. Last year it took 5.5 percent of Syria's trade, and Turkish figures suggest trade so far this year is already up 50 percent from 2009.

Jordan lags behind. Although its membership of the Greater Arab Free Trade Area (GAFTA), along with Lebanon, gives it tariff-free trade with Syria, it accounts for just 1.5 percent of Syria's foreign trade.

A new free-trade deal could therefore do much to boost Jordan's trade with Syria, and indeed Jordan's trade with the other two members of the quartet, where volumes are also low.

But analysts argue that such an arrangement would have significant benefits for Syria too, both economically and politically.

Abed Fadlieh, a professor of economics at Damascus University, argued that forming an economic bloc is especially important for smaller economies like Syria and its neighbours in what is now a global economy dominated by economic giants like the United States, China and the EU.

"After the globalisation of trade, it has become very necessary, for the benefit of economies, to form economic groups to confront other economic groups," he said. "Separate states cannot confront this economic change [alone]."

Including Turkey in the Middle East trade bloc would certainly give it some extra clout on the world stage. This year Turkey's economy is expected to record a gross domestic product of SYP 43trn (USD 935bn), according to the IMF. In comparison, Syria's GDP is expected to total just SYP 4.9trn (USD 105bn), though it will in turn dominate Jordan and Lebanon, with much smaller economies worth SYP 1.6trn (USD 35bn) and SYP 2.7trn (USD 58bn), respectively.

But Fadlieh argued that the inclusion of Lebanon and Jordan as well as Turkey also suits Syria's economy. Syria can expand its export markets in the weaker economies, and, through increased competition with Turkey, it can improve the competitiveness of its own industries, even if some businesses initially struggle with that competition after decades of Syrian protectionism.

"We have to have relations with the weaker economies to achieve more benefits," he said. "With relations with more powerful partners, you might see some negatives, but you will also learn something, and become stronger as a result."

Regional trade zone
The trade bloc also presents an opportunity for closer political relations, analysts argue, with closer cooperation in global trade likely to lead to closer political cooperation.

Fadi Haruka, a Turkish analyst and associate fellow at the London-based think-tank Chatham House, suggested that Turkey is looking at the EU – the world's biggest trade bloc – as a model for the planned Middle East trade zone, with the political cooperation that EU member states enjoy also very much part of Turkey's long-term plan.

"What Turkey is looking for is more economic convergence, the free movement of people and maybe even a customs union," he said. "That economic convergence may then lead to political convergence or closer political cooperation."

Fadlieh suggested the plans for the trade bloc showed that political relations had already improved.

"Syria is at the heart of the Arab world and has good relations with most of its neighbours," he said. "So when political relations improve, it is also normal to build up other relations – including trade."

But he was more sceptical that a Middle East trade zone could achieve the kind of political and economic integration that resembles the EU.

"It would not be easy to imitate the EU," he said. "To create the same kind of institution [here in the Middle East] is impossible. Historically there has been democracy and economic development in Europe for decades. These are the factors the EU was based on when it was formed.

"We have, theoretically, other factors that may be stronger like religion, Arabic nationality, language and more, but it will be difficult."

Haruka added that the targets for economic cooperation alone were ambitious, given the Middle East's record on similar trade unions.

"The Arab world had the first customs union in the modern world in 1950, but they never implemented it," he said. "They have had countless free-trade agreements at an Arab League level that were never implemented. [The Middle East] tends not to implement plans for economic integration."

Current plans for a free-trade bloc between Syria, Lebanon, Turkey and Jordan also ignore the fact that other trading partners outside the Middle East – particularly Europe – are still much more important to all members of the quartet.

For Syria and Turkey, the EU is still by far the biggest trade partner, with 23 percent of Syria's trade and a massive 43 percent of Turkey's. Jordan relies on the EU for imports, but its largest export market is the US. Lebanon's top four trading partners include Syria, but the other three are again the EU, the US and China.

Whether a free-trade deal in the Middle East could ever rival those vital trade relationships remains to be seen.