Trade in Intermediates and Agro-Food Value Chain Integration: The Case of the Arab Region

- 1 January 2021

Trade topics: Regional Value Chains, Agricultural Trade, Gravity Model, Intermediates

Arab intra-regional trade in agro-food accounts for more than half of the total Arab agro-food trade, displaying strong “trade-intensity” over the past decade. This indicates the potential of developing agro-food regional production networks aligning with the region’s comparative advantage in agro-food products. However, intermediates trade, as an indicator of value chain integration, has been low and sluggish due to various structural and policy factors. This article aims to analyze the determinants of trade in agro-food intermediates in the Arab region, focusing on the role and significance of regional trade arrangements and trade facilitation. The Broad Economic Category (BEC) classification is used to categorize goods into intermediate and final goods. Our analysis, using the gravity model, shows that regional trade arrangements in their current form do not significantly affect regional trade (except in the Gulf Cooperation Council [GCC]). We also reveal that timeliness in export delivery is an important determinant of trade in agro-food intermediates. Thus, Arab countries should simplify their customs clearance procedures and engage in a deeper form of regional integration to help build trade corridors and enhance regional value-added chains (RVCs).