Literature Review: The Impact of Global Trade Policy Uncertainty on the Moroccan

Economy
Introduction
Global trade policy uncertainty has become a significant factor influencing economies
worldwide, particularly in developing nations like Morocco. As a country closely integrated
into global trade networks, including the European Union (EU), the United States, and
African markets, Morocco's economy is especially vulnerable to fluctuations in global trade
policies. This literature review aims to explore how changes in global trade policy uncertainty
affect Morocco's economic performance, particularly trade flows, foreign direct investment
(FDI), and overall economic stability. By reviewing relevant research, this review aims to
highlight the various ways in which global trade policy uncertainty impacts Morocco's
economy, while also identifying areas for future research.
Defining Global Trade Policy Uncertainty
Global trade policy uncertainty refers to the unpredictability surrounding government policies
related to international trade, such as tariffs, trade agreements, regulations, and diplomatic
relations. Research by Bown (2018) and Furman (2019) emphasizes how uncertainty
surrounding trade policies, such as changes in tariffs or trade barriers, can significantly affect
business decisions, international supply chains, and cross-border investments. Trade policy
uncertainty can arise from political changes, economic shifts, or geopolitical tensions, such as
the U.S.-China trade war, Brexit, or trade disputes within multilateral organizations like the
World Trade Organization (WTO).
Theoretical Framework
The literature on trade policy uncertainty is often based on established economic theories of
international trade, such as comparative advantage and game theory. Magee (2008) suggests
that trade policy uncertainty can distort market expectations, leading to reduced international
trade, lower investment, and slower economic growth. Krugman (1993) argues that small
open economies, such as Morocco, are especially sensitive to trade policy shocks due to their
reliance on trade and investment flows. Additionally, Aghion et al. (2001) discuss how
uncertainty in trade policies can cause businesses to adopt a "wait-and-see" approach,
delaying investments and trade deals that would otherwise stimulate economic growth.
Impact of Global Trade Policy Uncertainty on the Moroccan Economy
Morocco's economy is highly dependent on trade, particularly in sectors such as agriculture,
textiles, and mining, with the EU and the U.S. being key trading partners. Global trade policy
uncertainty impacts several key aspects of the Moroccan economy, including trade volumes,
investment flows, and macroeconomic stability. The literature can be organized into several
themes:
1. Trade Flows and Export Performance
Global trade policy uncertainty often leads to a slowdown in export growth as
businesses become hesitant to commit to long-term contracts or enter new
international markets. Lendle et al. (2012) find that uncertainty, particularly related to
tariff increases or changes in trade agreements, negatively affects countries that rely
on exporting manufactured goods and raw materials, such as Morocco. El Azhary
(2019) further demonstrates that fluctuations in trade policies, particularly with the
EU, have led to reductions in Moroccan exports, especially in the agricultural and
textile sectors.
However, some studies suggest that Morocco’s trade agreements, such as the EU-
Morocco Association Agreement, provide a stabilizing effect, mitigating the negative
impacts of global policy uncertainty. Ouchicha and Chaouachi (2020) argue that the
 certainty provided by long-term trade agreements helps Moroccan firms maintain
trade relationships despite shifting global policies. Still, these agreements are not
immune to external challenges, as political tensions in the EU or U.S. could influence
trade outcomes.
2. Foreign Direct Investment (FDI)
FDI flows are a key component of Morocco’s economic development, and global
trade policy uncertainty significantly impacts these flows. Chen et al. (2021) argue
that FDI is highly sensitive to policy instability, with foreign investors seeking stable
environments in which to invest. Morocco’s foreign direct investment has been
closely linked to trade policies, particularly those of the EU and North America.
Berkmen et al. (2013) find that foreign investors are less likely to invest in countries
with high trade policy uncertainty, fearing future regulatory changes that may disrupt
market access or profitability.
On the other hand, some studies suggest that Morocco’s strategic position as a
gateway to Africa may buffer some of the adverse effects of global trade policy
uncertainty. Benchekroun and El Hilali (2018) highlight that Morocco’s investment
climate, combined with its strategic location in global supply chains, continues to
attract foreign capital, even amid broader global uncertainties.
3. Macroeconomic Stability and Growth
The broader impact of global trade policy uncertainty on Morocco's macroeconomic
stability is complex. Several studies suggest that such uncertainty can slow GDP
growth due to its negative effects on trade, investment, and consumption. Jouini and
Zghal (2020) demonstrate that periods of heightened global uncertainty, such as the
U.S.-China trade war, have led to slower growth in Morocco due to declining exports,
lower FDI, and increased risk aversion among domestic businesses.
Additionally, global trade policy shifts can lead to greater volatility in Morocco's
exchange rate and inflation rates. El Haouli (2017) finds that uncertainty often
exacerbates volatility in the Moroccan dirham, making imports more expensive and
affecting key commodity prices, such as fuel and food.
Critical Analysis and Gaps in the Literature
While the existing literature provides valuable insights into the impact of global trade policy
uncertainty on Morocco’s economy, there are several gaps that warrant further exploration.
Many studies focus primarily on the economic consequences of uncertainty but fail to
account for the political factors influencing trade policies. El Azhary (2019) notes that
Moroccan policymakers often struggle to anticipate or mitigate the economic consequences
of external policy changes, suggesting the need for stronger policy frameworks to buffer
against such shocks.
Moreover, while much of the literature examines the short-term effects of trade policy
uncertainty, there is a lack of research on the long-term structural impacts, particularly in
terms of industrial development and diversification. Future studies should explore how
prolonged uncertainty might affect Morocco’s economic development trajectory and its
ability to adapt to shifting global trade dynamics.
Additionally, the literature tends to focus on the broader impacts of trade policy uncertainty
but often lacks detailed studies on the mechanisms through which uncertainty affects specific
economic outcomes. For example, what are the specific channels through which trade policy
uncertainty impacts FDI or export performance? How do businesses adapt to uncertainty, and
what strategies have been identified to mitigate its effects?
Thesis Outline
Chapter 1: Introduction
 Introduction to the research topic
 Background and significance of the study
 Research objectives and questions
 Overview of Morocco’s trade and economic structure
 Research methodology and approach
 Structure of the thesis
Chapter 2: Defining Global Trade Policy Uncertainty
 Concept and scope of global trade policy uncertainty
 Types of trade policy uncertainty (e.g., tariffs, trade agreements,
regulations, geopolitical risks)
 Key drivers of trade policy uncertainty (political shifts, international
relations, etc.)
 Previous research on trade policy uncertainty and its global effects
Chapter 3: Theoretical Framework
 Theories related to international trade (comparative advantage,
game theory, etc.)
 Theoretical foundations on the impact of uncertainty on trade and
investment
 Frameworks for analyzing trade policy uncertainty and its effects on
economies
 Discussion on the economic models used in trade policy uncertainty
research
Chapter 4: Morocco's Economic and Trade Structure
 Overview of Morocco’s economy (key sectors, GDP composition)
 Importance of international trade to Morocco's economic
development
 Morocco’s trade relations with key partners (EU, U.S., Africa)
 Morocco’s role in global supply chains and foreign direct investment
(FDI)
Chapter 5: Global Trade Policy Uncertainty and Its Effects on Developing Economies
 General effects of trade policy uncertainty on developing economies
 Mechanisms through which uncertainty affects economic
performance (trade flows, FDI, investment climate)
 Case studies of trade policy uncertainty in other developing
economies (e.g., the U.S.-China trade war, Brexit, etc.)
 Applicability of global lessons to Morocco’s economy
Chapter 6: The Impact of Trade Policy Uncertainty on Morocco’s Trade Flows
 Empirical analysis of Moroccan trade flows before and after major
policy changes
 Impact of trade policy uncertainty on Moroccan exports and imports
 Sectoral analysis (agriculture, textiles, mining)
 Effects of uncertainty on trade agreements, such as the EU-Morocco
Association Agreement
Chapter 7: The Role of Foreign Direct Investment (FDI) in Morocco
 Importance of FDI to Morocco’s economic development
  Analysis of how global trade policy uncertainty impacts FDI flows to
Morocco
 Key sectors attracting FDI and the effect of policy uncertainty on
investment decisions
 The impact of Morocco’s strategic position as a gateway to Africa on
mitigating FDI decline
Chapter 8: Macroeconomic Stability and Growth in Morocco
 How global trade policy uncertainty affects GDP growth in Morocco
 Effects on domestic consumption, inflation rates, and employment
 Analysis of the volatility of the Moroccan dirham and its implications
for trade
 The role of government policy in stabilizing the economy during
periods of uncertainty
Chapter 9: Trade Policy Uncertainty and Domestic Business Responses
 How Moroccan businesses react to trade policy uncertainty
 Shifts in business strategies, investment decisions, and risk
management
 Role of local businesses in adapting to shifting trade conditions
 Survey or case studies of Moroccan businesses impacted by global
trade uncertainty
Chapter 10: Institutional and Policy Responses to Trade Policy Uncertainty
 Analysis of Morocco’s trade policies in the context of global
uncertainty
 The role of Moroccan government institutions in mitigating the
effects of trade policy shifts
 Policy recommendations for improving Morocco’s resilience to trade
uncertainty
 The role of regional organizations (e.g., the African Union, Arab
League)
Chapter 11: Comparative Analysis of Morocco’s Experience with Other Countries
 Comparative study of Morocco and other nations facing similar trade
policy uncertainties
 The impact of trade uncertainty on Morocco versus other developing
countries (e.g., Egypt, Tunisia, Kenya)
 Lessons from other countries that Morocco can apply to strengthen
its economy
Chapter 12: Long-Term Structural Effects of Trade Policy Uncertainty on Morocco
 The potential long-term consequences of trade policy uncertainty on
Morocco’s economic structure
 Industrial diversification and the resilience of Morocco’s economy
 Impact on labor markets, infrastructure development, and
technological innovation
 Examining the role of Morocco’s education and industrial policy in
adaptation to uncertainty
Chapter 13: Case Study of Morocco's Response to Specific Trade Disruptions
  Detailed case studies of Morocco’s response to specific instances of
trade policy uncertainty (e.g., the impact of Brexit on Morocco’s
exports to the EU, changes in U.S. trade policy)
 Analysis of Morocco’s adaptive strategies and their effectiveness
 Lessons learned from these specific events
Chapter 14: Policy Recommendations and Strategies for Managing Trade Policy
Uncertainty
1.Overview of key findings from the research
2.Specific policy recommendations for the Moroccan government to
mitigate the impact of global trade policy uncertainty
3.Suggestions for improving Morocco’s economic resilience and
diversifying its trade relationships
4.Recommendations for businesses in Morocco to better prepare for future
uncertainties
Chapter 15: Conclusion
1.Summary of key findings from the research
2.Reflection on the implications of global trade policy uncertainty for
Morocco’s economy
3.Limitations of the study and areas for future research
4.Final thoughts on how Morocco can navigate global trade
uncertainty and sustain economic growth