Saudi closer to WTO membership

SAUDI Arabia looks set to join the World Trade Organisation (WTO) by the end of the year, following the signing of a key trade agreement with the United States last week. The kingdom will become the last of the six GCC members to join the WTO.

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By  Rhys Jones Published  September 18, 2005

SAUDI Arabia looks set to join the World Trade Organisation (WTO) by the end of the year, following the signing of a key trade agreement with the United States last week. The kingdom will become the last of the six GCC members to join the WTO. The agreement signed last week requires Saudi Arabia to open its markets to imports of more farm and manufactured goods from the US, as well as service companies in sectors including banking, telecommunications, energy, express delivery, transportation and hotel and restaurant management. Under the agreement, tariffs on over 90% of US agricultural goods will be no higher than 15% and the deal removes barriers to hormone-treated beef, and poultry exports. The National Association of Manufacturers noted Saudi Arabia would lock in tariffs on 75% of US industrial goods exports at an average rate of 3.2%. Signed in Washington, the deal was the fruit of “nearly five months” of intensive negotiations and was “decisive” in Saudi Arabia’s drive to join the WTO, according to Hashem Yamani, Saudi’s commerce and industry minister. He added that he hoped the kingdom would now be able to attend a WTO ministerial gathering in Hong Kong in December “as the 149th member” of the group. Saudi Arabia still needs to complete talks with other members, but the deal with Washington removes one of the biggest obstacles that stood in the way of its membership. The kingdom has so far signed WTO accords with 38 countries. Saudi and US officials last week described the agreement as a major achievement and said it would boost investment, economic and trade cooperation between the two countries. “As a result of negotiations on its accession to the WTO, we will see greater openness, further development of the rule of law, and political and economic reforms in Saudi Arabia,” said Rob Portman, US trade representative. The US posted a US$15.7 billion trade deficit with Saudi Arabia in 2004 — a figure sure to rise this year because of elevated oil prices. Almost all US imports from Saudi Arabia last year were crude oil while US exports of automobiles, industrial engines, appliances, and food totaled just over US$5 billion — a quarter of the overall figure. There are over 360 Saudi-American joint ventures operating in the Kingdom. Furthermore, the deal looks set to create further business opportunities for US companies. “It will further integrate Saudi Arabia into the world trading system, create significant new opportunities for trade and commercial activity, and advance the transparent rule of law in the Saudi trade regime,” said R. Michael Gadbaw, vice president for international law and policy of General Electric (GE). The kingdom’s accession to the WTO also looks set to encourage foreign investment. And it will also benefit US manufacturing and service industries, agriculture and American workers by providing increased access to Saudi’s growing markets. “Saudi accession to the WTO will be beneficial for all GCC states, as they will be able to negotiate as a group within the organization,” said Jassem Al Saadun, head of Kuwait’s Al Shall Economic Consultants. Last week’s deal is the result of months of final talks with the US, which were attended by experts from the Saudi ministries of foreign affairs, commerce and industry, finance, economy and planning, agriculture, health, culture and information, petroleum and mineral resources and labor as well as the Saudi Arabian General Investment Authority, Saudi Arabian Monetary Agency, the court of grievances, customs department, the Civil Aviation Corporation and the Saudi Arabian Standards Organisation. Despite the recently signed deal the European Union (EU) said the oil giant must still address its questions over Saudi gas prices. The OPEC producer has already signed a similar accord with the EU but that deal, signed in 2003, left two issues outstanding. “One related to insurance, which has now been cleared up, and the other was on (gas feedstock prices for) petrochemicals,” said Bernard Savage, EU delegation head in Saudi Arabia. He said petrochemicals producers in Saudi Arabia obtained natural gas — a raw material in the production of petrochemicals — at rates below international prices, putting producers in Europe at a disadvantage. “We have been having discussions with the Saudis on this,” Savage told Reuters, adding he did not believe the issue was an insurmountable obstacle to the kingdom’s WTO accession. “The objective is for Saudi Arabia to join the WTO formally at the Hong Kong ministerial meeting (in December). That is our objective and that is the Saudi objective,” he concluded.

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