WTO membership takes a backseat to Islam, say Saudis

Published May 2nd, 2001 - 02:00 GMT

Could it be that Riyadh is getting cold feet at the last moment? In a meeting conducted last week between the Saudi Arabian commerce minister, Osama Al-Faqih, and EU Trade Commissioner Pascal Lamy, the trade representative of the Gulf nation, that for years has been pushing for membership in the World Trade Organization, urged the international body not to make any demands that might compromise its special Islamic status. 


Saudi Arabia—the only member of the Gulf Cooperation Council (GCC), which is not a member of the WTO—has in recent months been implementing measures that would ease its entry into the organization. These involve steps to liberalize the economy and to attract foreign investors into a variety of business and financial sectors. 


Nonetheless, certain red lines have been set, beyond which the Saudi government is not prepared to move. "It should be clear to our trade partners that the kingdom has a status which is unique in the world. We have been honored as hosts of the two holy mosques [in Mecca and Medina],” Al-Faqih was quoted by the AFP news agency. 


"While talking about opening up to world trade, we must affirm that there are commodities, activities and services forbidden in Islam and thus cannot be practiced in Saudi Arabia," the commerce minister added. 


Before Al-Faqih’s meeting with Lamy, the Saudi minister issued a statement that urged the European Union to appreciate “the unique conditions of the kingdom ... which is proud of implementing the Sharia [Islamic law], and that of the conservative nature of the Saudi society.” 


An example of the type of conflict that arisen from Saudi Arabia's Islamic tradition versus the stringent economic model expounded by the WTO is the difference that emerged over tariffs for pork products. For its part, Saudi Arabia refuses to apply any tariff, however high, against pork, the eating of which is strictly forbidden by Islamic law. The WTO insists that each product on its list be assigned a tariff rate.  


Saudi Arabia first applied for WTO membership in 1996, with one of its clearly stated aims being to attract up to $200 billion worth of foreign investment over a 20-year period. Speaking in November 1999, King Fahd stated that "the world is heading for...globalization" and that "it is no longer possible for [Saudi Arabia] to make slow progress." 


But, at present, Saudi Arabia’s top-heavy economy is not well suited to the global economy. The country's finance ministry has been pushing for a larger private sector role, but it’s been a tough battle. While last year the private sector accounted for about 40 percent of Saudi Arabia's GDP, and 89 percent of employment, only between five percent and 10 percent of those employed in the private sector were Saudi nationals. In other words, the country could ill-afford to drop protectionist legislation, which has been propping up state-owned industry. 


Saudi Arabia's first offer for accession to the WTO was made in October 1998 and rejected as not being generous enough. Indeed, instead of offering tariff levels at or below the current levels, it sought huge increases in permissible tariff levels. In the ensuing months, the Saudis lowered their expectations, although from the perspective of the Saudi business community, this was done wilt extreme reluctance.  


In October 2000, John Weekes, the chairman of the working party on Saudi Arabia's accession to the WTO, said that it appears likely that Saudi Arabia will join the trade body by the end of 2001.  


However, several obstacles still exist, including bilateral trade agreements with the United States and the European Union. The United States insisted that Saudi Arabia must eliminate tariffs on information technology, pharmaceuticals, and chemicals, and significantly lower duties on agricultural products. The United States and the European Union also expect Saudi Arabia to open its banking, insurance and telecommunications markets to foreign involvement.  


There is no “umbrella” set of rules that each country must abide by as a member of the WTO, but rather an individual set that is hammered out prior to membership, and all WTO members must agree on the terms. This is done through the establishment of a working party of WTO members and through a process of negotiations. However, since all members enjoy the privileges that other member-countries give them and the under the security that the trading rules provide, they are expected make commitments to open their markets and to abide by the rules. 


For most WTO members, the negotiations took place under the old GATT system. Most, automatically became founder members of the WTO, when it was established on January 1, 1995, because they had signed the Uruguay Round agreement in Marrakesh in April 1994.  


Some joined GATT after April 1994 but before the WTO was set up and they also joined the WTO automatically. Another small group had participated in the Uruguay Round but did not complete their membership negotiations until 1995, when they, too, joined. All of these countries are considered “original” WTO members. 


There currently are about 30 countries waiting for WTO membership. The most prominent among them are Russia, China and Saudi Arabia. — (Albawaba-MEBG)

© 2001 Mena Report (www.menareport.com)

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