Bessma Momani offers a plethora of arguments, some compelling and some not, against a Middle East Free Trade Area (MEFTA) in the latest edition of The World Economy:

The US government has often cited the US-Jordanian Free Trade Agreement as a guide for other Middle East states to follow. The MEFTA plan could backfire, however, as structural barriers have limited past attempts to spur intra-regional economic cooperation and trade. A hub-and-spoke relationship results in minimal economic benefit accruing to the Middle East and in minimal intended political benefits to the United States…

Intra-regional economic cooperation and trade… continues to be limited because of four interrelated factors that are chiefly structural.

First, Middle East countries in their respective subregions have similar resources and production structures; accordingly, each country has a low comparative advantage with its neighbour (Fawzy, 2003)… Second, each Middle East economy is relatively small and unable to provide economies of scale in production (Hoekman and Messerlin, 2002, p. 13). There is a significant amount of state-ownership in the region, spurring inefficient and protected industries that further limit the successful adoption of an export strategy… Third, there is a wide disparity of income among Middle East countries; therefore, states have different consumption patterns and production strategies (Hoekman and Messerlin, 2002, p. 13)… Fourth, the Middle East is characterised by a high degree of both tariff and non-tariff barriers… it is most likely that in, the short term, Arab economies will continue to be inward-looking and relatively isolationist…

It is argued that a US plan for a MEFTA will become a hub-and-spoke relationship, due to the structural impediments to economic cooperation in the Middle East. The United States, as the hub, will export higher value-added manufactured goods and services; Middle East countries, as the spokes, will export unprocessed primary goods to the United States. The negative economic implications of a hub-and-spoke relationship on Middle Eastern states are numerous. A hub-and-spoke MEFTA could potentially divert foreign investment away from the Middle East, as investors would prefer to set up manufacturing or service facilities in the United States and get duty-free access to all of the Middle East spokes. Again the lack of trade complementarity in the Middle East will exacerbate this. Companies will see little advantage to setting up facilities in the Middle East, where intra-regional trade is already low. Intra-regional economic cooperation will slow further under a MEFTA. Moreover, American businesses will be deterred from setting up manufacturing facilities in the Middle East as conflict continues in the region…

As the United States continues to negotiate each FTA bilaterally on its own terms and preferences, Middle East countries will have little say in what each new trading partner brings to the negotiation table. New trading partners will either have better access to the US market or new partners will undermine workers’ conditions and environmental standards. Consequently, a hub-and-spoke MEFTA will result in Middle Eastern countries involved in a race to the bottom, where each country will continue to lower wages, erode labour rights and soften commercial regulations to attract American investment away from other signatories…

The current structural impediments to intra-regional economic cooperation, however, will inhibit the prospects of an integrated Middle East economic system. Middle East economies do not complement one another to build an effective economic bloc on their own. Moreover, Middle East socio-political systems are predicated on remaining relatively isolationist and inward-looking. Middle Eastern states have little comparative advantage to increase economic cooperation; therefore, a MEFTA will create a hub-and-spoke relationship. Consequently, we will see Middle Eastern states acceding to the United States for purposes of keeping strong economic ties.