Ali, Hanan H.
(2025)
Assessing the Impact of GCC trade agreements with ASEAN and AfCFTA: implications for trade flows among key OIC member countries.
[Dissertation (University of Nottingham only)]
Abstract
This study investigates the intricate relationship between macroeconomic factors, trade agreements, and trade competitiveness, with a particular focus on the trade dynamics among the Gulf Cooperation Council (GCC), the Association of Southeast Asian Nations (ASEAN), and the African Continental Free Trade Area (AfCFTA) under the Organization of Islamic Cooperation (OIC) framework. The primary purpose of this research is to analyse how these trade-related variables and agreements influence trade flows and competitiveness within these regions, with the GCC serving as the anchoring point in these trade agreements.
Utilising a panel data set of 19 OIC member countries from these regions spanning from 1995 to 2023, the research employs an augmented gravity model to assess the impact of various determinants, including economic size, income levels, geographical distance, real exchange rates and policy-related factors such as trade openness and digitalisation. The methodology included estimation techniques such as Ordinary Least Squares, Fixed Effects, and the Generalized Method of Moments, ensuring robustness in the findings. The study also employed various econometric tests to address issues such as heteroskedasticity and multicollinearity, confirming the reliability of the results.
The findings reveal that the economic size of GCC countries significantly influences bilateral trade flows, highlighting the GCC's role as a dominant player in shaping trade dynamics with ASEAN and AfCFTA countries. Population size emerges as a critical determinant, with larger populations in GCC and partner countries positively correlating with higher trade volumes. Additionally, the study highlights the growing importance of digitalisation and trade openness, particularly in partner countries, which enhances trade competitiveness and facilitates smoother trade interactions. However, the analysis of real exchange rates reveals a complex relationship, where a positive correlation challenges the conventional assumption that stronger currencies reduce export competitiveness. The study finds that favourable exchange rates enhance trade competitiveness, although the significance of this variable varies across models.
The study also highlights the evolving role of trade agreements. It reveals that the GCC-ASEAN trade agreement positively influences bilateral trade flows, indicating successful economic integration between these regions. In contrast, the GCC-AfCFTA agreement shows an unexpected negative impact on trade flows, suggesting that the benefits of this agreement may not have been fully realised due to its early stage of implementation or structural challenges within the agreement itself. The study emphasises the importance of open trade policies and the impact of economic growth in partner countries post-2010.
The study's conclusions emphasise the pivotal role of the GCC in these trade agreements, influencing trade flows and economic integration with ASEAN and AfCFTA countries. By providing tailored policy recommendations, this research aims to aid policymakers in developing stable and beneficial trade relationships, ultimately contributing to enhanced economic cooperation and integration among key OIC member countries with the three economic blocs.
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