Free Trade Agreements: Saudi Arabia
Saudi Arabia’s free trade agreements primarily intend to liberalize the Saudian economy in a way that in essence links Saudi to the external market. With the onset of globalization, governments have undertaken to enter into agreements that allow free movement of both people and goods from one place and another. The Saudian Free Trade Agreements are essentially guided by the World Trade Organization benchmarks. According to the Department of Trade and Foreign relations, trade occupies a central position in the sustenance of Saudi’s economy. Saudi Arabia, though, a developed nation, still relies heavily on imports and to exports colossal amounts of goods to external markets. As such, the trade agreements intend to provide a link between Saudi and the globe.
In addition, the agreements address substantive issues concerning government procurement, intellectual property rights and competition laws. The world has disengaged from the old protectionist policies adopted and practised in the previous centuries. Today, free trade agreements are skewed towards encouraging international trade. However, nations like Saudi, seek to enter into agreements that favour their own national interests. Trade agreements could be bilateral or plurilateral in nature. The former refers to trade agreements between two nation parties while the latter refers to trade agreements between a group of countries.
Currently Saudi Arabia has entered into Free Trade Agreements and is in the process of negotiating more agreements. Saudi Arabia has eleven living bilateral Free Trade Agreements with the following nation states: Austria, Azerbaijan, Belgium, China, France, Germany, Italy, Malaysia, Philippines, South Korea and Taiwan. On the other hand, it is currently negotiating Free Trade Agreements with the following nations of which it already has trade cooperation: Indonesia, Iraq, Lebanon, Morocco, Pakistan, Russia, Syria, Tunisia and Turkey. In addition, Saudi Arabia has engaged in plurilateral free trade agreements in the following organizations: the Gulf Cooperation Council and the Greater Arab Free Trade Area. Incidentally, the countries that Saudi Arabia has engaged in bilateral agreements account for twenty eight percent of its international trade while the countries targeted by the negotiations account for forty four percent of Saudi’s trade.
The benefits that the agreements accrue to Saudi Arabia far outnumber the disadvantages. The agreements have allowed Arabian exporters and investors to enjoy mobility of labour and goods. Consequently, they have been able to permeate new and expansive international markets. In addition, government red tape in clearance of goods, compliance and standards have been fast tracked and harmonised for exporters and importers within the countries engaged in free trade agreements. Consequently, volume of trade between the member states has increased to substantial levels effectively improving the economic standards of Saudi Arabia. Trade not only provides employment opportunities in Saudi Arabia, but also supplies the nation with goods they lack competitive advantages in producing. However, the advantages have also seen Saudian government lose on its net taxes. This is because of the reduced amount of taxes charged on imports and exports destined to countries with living bilateral trade agreements.
Trade agreements usually impact on custom laws and procedures. The intention of the drafters and negotiators is to reduce the bottlenecks affecting trade. Free trade essentially implies that all restrictions to trade are extinguished. However, national law ought to be ratified in consonance with the agreements. Otherwise, conflicts will arise. Interestingly, the free trade agreements have occasioned the ratification of Saudi Arabian customs law and procedures for purposes of facilitating free trade. The impact usually is the application of different laws and standards in dealing with exporters from engaged nations as opposed to the exporters from non engaged nations.
Government of Kingdom of Saudi Arabia. (2012, July 31). Trade Agreements. Retrieved October 3, 2012, from TRADE AGREEMENTS: http://www.ic.gov.sa/en/business-environment/trade-agreements
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Ramady, M. A. (2010). The Saudi Arabian Economy: Policies, Achievements, and Challenges. Riyadh: Springer.
Shoult, A. (2007). Doing Business with Saudi Arabia. Riyadh: GMB Publishing Ltd.