Emad Mekay

CAIRO, Sep 13 2005 (IPS) — The United States and Saudi Arabia have concluded a trade deal that will help Riyadh join the World Trade Organisation (WTO), further open Saudi markets to U.S. goods, and partially lift the kingdom’s decades-long boycott of the Israeli economy.

The deal announced late last week gives U.S. companies greater access to the Saudi Arabian market, now glutted with surpluses from record high oil prices, in areas like agriculture, goods and services.

Riyadh committed itself to the duty-free entry of aircraft and information technology products and will substantially reduce tariffs on U.S. chemical imports to very low or zero rates of duty.

U.S. service providers will benefit from new commitments in the insurance, banking and telecommunications sectors, among others.

Under the deal, the United States will continue to help Saudi Arabia with its accession negotiations in the WTO and with economic steps the kingdom needs to complete before it can join the Geneva-based organisation – expected by the end of the year.

“In my consultations with Congress, members expressed their interest in ensuring that Saudi Arabia implements these important changes,” said U.S. Trade Representative Rob Portman in a statement. “We will be working with Saudi Arabia and our partners to ensure full compliance with WTO rules.”

Saudi Arabia, the world’s largest oil producer, has been negotiating to join the WTO for the past 10 years. The talks have been long and tough as the Arab kingdom weighed demands to overhaul its economy and pass legislation to comply with prescriptions from Washington. The deal with the U.S. marks a major shift in the country’s foreign trade policy.

Given Saudi Arabia’s influence with other Gulf and Arab states, the deal is also likely to have an impact on neighbouring countries, many of which wait for cues from Riyadh.

Although the United States has strong influence in the Kingdom, Saudi Arabia has resisted some of Washington’s demands, like giving foreign companies majority or complete ownership of local assets. The government has also expressed concern over genetically modified food.

The Saudi royal family, though highly undemocratic, has also gained popular legitimacy by adhering to the 1945 Arab boycott of Israel that came into existence after the 1945 Arab-Israeli war. The boycott primarily bars products and services that originate in Israel from entry into Arab states.

But now the deal with the United States requires Saudi Arabia to end a “secondary boycott” of businesses operating in Israel, and a “tertiary boycott” that shuns third-party businesses that have relationships with Israel-based companies.

However, Saudi Arabia has resisted Pres. George W. Bush’s proposal to create a Middle East Free Trade Area (MEFTA), which would link 22 Arab nations, Israel and the United States by 2013. Bush had proposed MEFTA following the Sep 11, 2001 attacks on New York and Washington.

Regional heavyweights like Egypt, a country with a population of 73 million people and a potentially large market for U.S. goods, and the oil-rich Saudi Arabia both threw cold water on the idea for its potential negative impact on local businesses.

Saudi Arabia has recently spoken openly against the deal and rebuked the tiny Arab Gulf Kingdom of Bahrain, which had started talks with Washington last year in defiance of the Gulf Cooperation Council, a regional economic grouping from the Gulf states that is dominated by Riyadh.

Saudi Arabia has been under near constant political pressure from Washington since the 9/11 attacks, in which most of the terrorists came from Saudi Arabia. Riyadh responded by softening its resistance to the U.S. trade agenda in the region.

On top of caving in to pressure to ease the Arab boycott, Saudi Arabia, with a population of 25.6 million, has also taken many steps to change its trade regime, revising laws in areas like intellectual property protection, import licensing, customs valuation and fees, and standards and technical regulations.

In May, after a meeting between then crown prince Abdullah and Pres. Bush, Riyadh sent a trade mission to the United States, offering “investment opportunities” in the Kingdom, including large projects in natural gas and petrochemicals.

The delegation, which toured New York, Atlanta, Houston, Chicago and San Francisco, offered trade and investments deals worth 623 billion dollars through 2020.

The Kingdom, which has been under the political and economic control of the al-Saud family since the late 18th century, said it was opening sectors like infrastructure, electricity and water, telecommunications, tourism, agriculture and information technology.

Moreover, the delegation invited U.S. companies to use Saudi plans to privatise state-run corporations and institutions within the next 10 years, at a whopping total of 800 billion dollars.

These moves come as international civil society organisations and development groups warn that the benefits of trade deals have been overstated and end up doing more harm than good to developing nations.

Under the heavy-handed rule of the al-Saud family, no civil society groups are able to operate in the Arab nation, making it easier for international corporations and financial institutions to press their economic agenda, critics say.

Gulf Arab countries, for example, have a deal with the World Bank – often accused of promoting U.S. and Western economic interests – to receive technical expertise for fees, according to a well-placed source inside the World Bank.

Some Saudi independent intellectuals have complained that the country is still under Western pressure, including from the WTO, to amend some of its Islamic Sharia-based economic laws. The international organisation says that the laws are not compatible with western legislation.