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Heard about Gatt?

SHOULD MIDDLE EAST economies take much notice of last December's Gatt accord? There has been little public response in the region to long-awaited completion of the Uruguay round of General Agreement on Tariffs and Trade negotiations (Gatt). This is worrying because it betrays a general lack of official interest in the implications of the accord.

Few Middle Eastern countries are members of Gatt but all must share the general sense of bafflement at the confusing package of changes reached after talks which seemed interminable. Although Middle East countries were peripheral to the negotiations, they cannot remain immune to the widerranging effects of the accord's implications.

Egypt, Turkey, Israel, Kuwait and Bahrain are signatories to Gatt. Saudi Arabia is seeking to join, while Jordan and Iran are considering membership. Even the countries of the region which have taken no more than passing notice of the Gatt talks will be forced to adapt their trade policies to the regime planned by the organisation as a pattern into the next century.

There are three reasons why Middle Eastern countries have taken little interest in Gatt's tortuous deliberations. Most importantly, the talks have been dominated by commercial quarrels between the United States, Japan and the European Community (now the European Union). Although all three have kept a wary eye on the challenge posed by the newly-industrialised countries, other trading states have played a minor role in the talks.

Second, Gatt has not so far taken hydrocarbons into consideration. Since this is the Middle East's most important export commodity and revenue earner, a degree of indifference towards Gatt deliberations is understandable. Third, there are conflicting reasons why countries in the region have taken little interest in Gatt's attempts to reduce trade barriers. On the one hand, countries (such as members of the GCC) which are heavily dependent on basic imports already apply low tariffs. On the other hand, many states are intent on jealously guarding trade barriers which are intended to protect sometimes fledgling domestic industries.

What is bound to change, however, is the perception that integration into the evolving Gatt system will be unavoidable. Last December's accord is supposed to lay the ground for the eventual establishment of a new World Trade Organisation. With varying degrees of commitment and enthusiasm, Middle East governments are starting to open up their economies to broader international trade as they tread the path of domestic economic liberalisation. This is particularly the case, for example, in North Africa where Morocco and Tunisia are eager to develop their relationship with the European Union.

Fitting in with the World Trade Organisation (on the still somewhat shaky assumption that it comes to pass) will be important in the context of this general policy direction. The new Gatt arrangements will give Middle Eastern economies improved access to the markets of the industrialised countries and provide them with the opportunity to promote manufactured exports. In return, participation in Gatt will make Middle Eastern countries more attractive to foreign investors, especially since multinational companies can expect to be guarded against protectionist measures.

There will, of course, be winners and losers. Major oil exporters with small populations and largely undiversified economies can expect to benefit. These comprise notably the GCC countries. Middle East states with large population levels, broader-based economies and dependence on net food imports will fare less well, particularly as the Gatt accords are expected to result in an upward pressure on food prices.

An important aspect of the new Gatt arrangements will be the effect of global petrochemical trade. Tariff cuts of around 30% have been agreed upon since 1991, although their implementation has been held up by the completion of the Gatt talks. But some estimates of the likely increase in world trade directly resulting from trade liberalisation are projected at over $10bn by the beginning of the next century. Gulf countries can be expected to take the major share of this expanded business, although it remains to be seen whether the Gatt accord will advance negotiations between the GCC and the European Union on free trade.

Most countries in the region will be able to exploit greater opportunities for their manufactured products. The impact will vary, however, between states currently outside international trading arrangements (which will gain) and those which already have free trade arrangements with their major commercial partners, such as Israel (which will benefit less).
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Title Annotation:Middle East countries and the GATT
Publication:The Middle East
Date:Mar 1, 1994
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