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Saudi Arabia Launches New Phase in International Trade Relations


Last month, after 12 years of negotiations, Saudi Arabia joined the World Trade Organization. To comply with WTO rules, the kingdom had to make concessions and reforms that, some analysts say, signal Saudi Arabia is opening up to the world. And, they expect more changes to come.

Former U.S. Ambassador to Saudi Arabia Charles Freeman says the kingdom's accession to the WTO shows it is embracing international trade standards for the first time. "WTO accession really marks the end of an era in many respects. That was an era where some people quipped, the national motto in Saudi Arabia was 'progress without change.' This era has come to an end, and much change is in store," he said.

Before this era could commence, many issues had to be resolved. Among them were removing trade barriers, lowering tariffs, easing quota restrictions and eliminating the need for foreign businesses to have a Saudi agent in the kingdom.

A panel of former U.S. ambassadors, officials and other experts recently Friday gathered under the auspices of the non-profit Middle East Policy Council to discuss some of those obstacles to accession, and the impact WTO membership is likely to have on the world's largest oil exporter.

Former Deputy U.S. Trade Representative for Labor William Clatanoff says some of the strongest resistance to Saudi membership came from one of its closest allies - the United States. "In the negotiations, the United States was the most difficult. We were the last country to agree to the Saudi accession. But it was primarily investment was our issue, as well as some other issues," he said.

Another obstacle Saudi Arabia had to overcome was internal. Former U.S. Ambassador to the kingdom Robert Jordan explains, some Saudis were concerned that WTO membership would compromise their Islamic principles. "We encountered a great deal of resistance among certain segments of the Saudi society. They had the impression that if they joined the WTO, some [people] did, they would be required to import pork and alcohol. They would be required to allow the establishment of cinemas that would show pornographic materials in their society," he said.

Saudi Arabia does not formally recognize WTO member Israel, and this presented another potential hurdle. But Christopher Parlin, an American attorney who represented Saudi Arabia in its accession talks, says the Saudis did not press the matter. "The Saudi delegation, [Saudi Trade and Industry] Minister [Hashim] Yamani, were very clear that they would not utilize the opportunity that existed in the WTO to declare that there would not be WTO trading relations between Saudi and any other WTO member, including Israel. They did not exercise this treaty authority. Minister Yamani made very clear that the Saudis would respect the obligations of the WTO," he said.

Attorney Parlin says the impact of Saudi Arabia's accession is already evident. "The reality though, is across the board. The Saudis liberalized their markets and restructured their legal regimes. In short, they fostered a more open and balanced economy, one that will be infinitely more receptive to foreign participation than had been the case in the past. And there will be countless new opportunities for both Saudi and non-Saudi entrepreneurs in a wide scope of business interests," he said.

But Ambassador Freeman cautioned that some bumps should be expected along the road, as Saudi Arabia adapts to a system very different from its own. "I expect Saudi Arabia will have many difficulties as it proceeds. But the fact is, that it has taken the historic step of committing itself to join the world, and it will be under scrutiny and pressure to make good on this commitment," he said.

The panelists said Saudi Arabia's decision to seek WTO membership is a major shift in how the kingdom deals with the world. It is also a statement on Saudi Arabia's commitment to internal economic reform. They say, fulfilling WTO obligations will help the world's largest oil exporter become internationally competitive in other areas of trade.