An Analysis of Economic Impacts of FTAs on Strategic Industries in Jordan

Abstract

This paper analyzes the economic impacts of Jordan's regional trade agreements on its major strategic industries. We calculate each individual industry's revealed comparative advantage (RCA) index to identify Jordan's strategic industries showing comparative advantages. And then we analyze each individual industry's export performance before and after its regional trade agreements have entered into force. This paper found that the bilateral free trade agreement (FTA) between Jordan and the United States has shown a positive impact on the Jordanian export performance, mainly in the textiles and clothing industry. However, it has not been quite as effective in enhancing Jordanian export opportunities in other industries, such as chemicals, vegetable products, paper and paperboard, and prepared foodstuffs, although there has been a growing positive impact on precious stones. The positive impacts of the FTA with the United States on Jordan's textiles and clothing industry have been heavily dependent upon its initiatives and programs of QIZs. Pan Arab Free-Trade Area (PAFTA) has shown a relatively positive impact on several industries, such as chemicals, vegetable products, paper and paperboard, precious stones, and prepared foodstuffs, although chemicals and vegetable products have shown a steady export performance no matter whether PAFTA enters into force. However, the bilateral FTA with the EC has failed to show any significant impact on the Jordanian export performances of its strategic industries having comparative advantages.