Jordan should not subsidize the Saudi economy
Gone is the time when Saudi Arabia was at the top of the list of traditional markets for Jordanian exports. The situation is being turned upside down. Jordan became an accessible consumer market for Saudi Arabian products, be they foodstuffs, appliances and equipment or other commodities.
During the first nine months of the year 2000, Jordanian exports to Saudi Arabian markets reached around 68 million Jordanian dinars, while imports, during the same period, exceeded JD81 million. Thus trade balance shifted in favor of Saudi Arabia by JD13 million, an annualized amount of JD17.3 million, or the equivalent of $25 million.
For each dollar of Jordanian exports to Saudi Arabia, Jordan imported $1.20 from Saudi Arabia. These figures indicate an important set back for Jordan, but the real fact is even worse. The major part of Jordanian exports to Saudi Arabia is represented by live animals, mainly sheep, which should not count as real exports.
During recent years, a social class emerged in the Jordanian eastern badia, making their living by raising cattle in Jordan for export to Saudi Arabia. The reason for this kind of trade is the direct and indirect subsidies enjoyed by farmers and cattle owners in Jordan.
Trade in live animals with Saudi Arabia may be beneficial to the traders and cattle raisers, but it does not benefit the Jordanian economy; it is actually a financial burden. The Jordanian treasury is shouldering the cost of subsidizing animal feed, water and medical services while cattle traders hardly pay any tax.
When it comes to industry, we find that unequal and unfair competition is the rule of the day. The Saudi industry has full access to cheap fuel and electricity. It enjoys interest free financing and full exemption from customs duty on industrial input and income tax on profits. Thus, it is able to drive out Jordanian industrial products from the Jordanian and Saudi markets.
To make things even worse, the government, motivated by political considerations, entered at times into trade protocols and special arrangement to facilitate trade between the two countries. Saudi products became exempted, in part or totally, from the relatively high customs duties in Jordan, which gave these products a great price advantage in the Jordanian market, while Jordanian products, intended for export to Saudi markets, hardly benefited from reciprocal exemption due to the fact that customs duty in Saudi Arabia is very low, if it exists at all. Thus, the Jordanian products are effectively deprived of a meaningful price advantage in the Saudi markets.
Trade relations between Jordan and Saudi Arabia should be studied thoroughly, aiming at maximizing trade between the two Arab countries and endeavoring to base such trade relations on fair and equal foundations. Saudi Arabia used to be a source of support and subsidy to the Jordanian economy; it should not expect to be supported or subsidized by Jordan.
In all fairness, one has to admit that Saudi Arabia is not alone in this respect. Whatever is said about the Saudi industry applies equally to the industries of other Gulf states, such as the United Arab Emirates and Kuwait.
Jordan adopted an irrevocable policy of trade openness to the whole world. That is why Jordan entered into free trade agreements with the European Union and the United States of America, and became a member in the World Trade Organization. However, the Jordanian products should be protected from unfair competition and other malpractices, in accordance with the law that protects national production.— ( Jordan Times )
© 2001 Mena Report (www.menareport.com)