The paper analyses the determinants of intra-Arab exports and FDI during the 1997-2003 period. It does that against a background of multitude of preferential trading arrangements currently under way in the Arab world. Section II presents a brief description of intra-Arab exports, their intensity, and their comparative advantage, in addition to the main features of intra-Arab FDI. Section III develops an augmented gravity model, to assess the adequacy of Arab exports and to check the efficacy of Arab free trade arrangements at the subgroup and group levels; it also presents an estimate of the tariff equivalent reduction of adopting a common currency by the GCC. Section IV applies the same gravity equation to intra-Arab FDI. And section V concludes, the main thesis of which is that the problem with Arab exports is not the dearth of Arab free trade agreements but the deficiency of Arab export capability
