Saudi Accession to WTO - Essay Example

Insert Your Name Here Title: Saudi accession to WTO Date: Saudi accession to WTO Saudi Arabia is a country that is approximately 2 million square kilometers. Its major cities are Riyadh and Jeddah. Most of the country is arid land though there is more to the aridity than meets the eye. Below the arid land, lies oil deposits that have been the backbone of the country for ages. These oil deposits account for 75% of the government’s income. The government is run through a monarchy system and this seems advantageous since they are able to safeguard the wealth that they acquire from the export of oil. 90% of the export products in Saudi Arabia are oil and oil products. This shows that the backbone of the Saudi economy is oil related. In addition to exports, the Saudi stock exchange has a great percentage of the listed companies being related to the petrochemical industry. In addition to having oil exports, Saudi experiences a high tourist turnover every year since it is the mother of the two great mosques that Muslims go to pay pilgrim. These are the Mecca and Medina mosques. The tourism and hospitality industry therefore thrives from the great numbers of visitors to the country. Being bordered by the UAE, the Saudi gets a large chuck of business from the country with a free port (US Dept. of State). The World Trade Organization (WTO) is a major trade organization that is formed by countries with a common good that is trade. Its main aim is to streamline trade between the member countries. Saudi has been signed into the WTO in the recent past. This shows the readiness of the monarch state to do business with other states across the globe. Being a major producer of oil and oil products, the Saudi is the country that had a great right in deciding the world prices of oil. The joining of the Saudi to the WTO has left many leaders with the expectations that their countries will be able to access oil t cheaper rates and at constant intervals (WTO 09). With Saudi being the largest exporter of oil, it has been experiencing exponential growth all along and this has made the country’s economy to rise steadily. There has been creation of jobs and many people have migrated to the Saudi for employment. With such great financial indicators, Saudi has been seen by other countries as a land of financial prosperity. Many of the countries envy the Saudi due to its development in the oil industry. It has therefore been welcomed to the WTRO with high expectations from the WTO member states (Anthony 03). Being the 149th country to join the WTO, Saudi has had a rough journey on its way to the WTO. There has been 12 years of futile negotiations but recently there was an agreement and now Saudi is a member of the WTO. From the 2008 statistics, the economy of Saudi runs on a GDP of $527 Billion and it experiences a growth of approximately 6.1% with a per capita GDP of $21,062. Saudi has a large number of local industries since its economic state favors small business development. This has seen the formation of many small-scale industries. Now that the Saudi has joined the WTO, there are expectations that there will be a better market for the small-scale industries and this shows that with due time, the economy is likely to grow. This is mainly because the boundaries of the member countries of the WTO are now open to the owners of the small industries in the Saudi. There will be business development between the Saudi and the member states and this will lead to sharpening of trade skills by the Saudi and innovation to ensure that they capture the external market that has been availed by the WTO. There are fears that Saudi may lose the supremacy that it has been having all along due to its high percentage of provision of oil to other countries which has made it rise above its neighboring countries. However, this is expected to have better results since the supremacy has a negative effect on the foreign relations between the Saudi and other states (Mark & Fowler 08). A comparison of the opportunities to the threats shows that there are more merits of the Saudi joining the WTO than demerits. This is because in addition to there being a streamlined channel and market for the products produced from the Saudi local industries, Saudi will also be able to indulge in other lines of business like manufacturing since it will be easier to import goods from any part of the globe. This is expected to increase job opportunities in the Saudi. Local investors will also look for a chance to invest in the oil rich state. This will create a good business relationship with other countries and it will promote inter-country trade to ensure that there is a constant provision of all the facilities that the Saudi needs. Due to the improved foreign relations, there will be an increase in the number of immigrants and investors who will relocate to Saudi for business. This is likely to increase the rate of urban development and also bring in foreign exchange to Saudi (Paul & Gerd 06)). The extreme consequences of the accession of Saudi to the WTO are increased foreign investment to the country that will lead to greater urban development and creation of jobs. There is a likelihood of the Saudi also venturing into neighboring states that are member states of the WTO and mining oil and this will unravel the untapped potential that those countries have. In matters of foreign trade, there will be a regulation in the latter stages of the development where the financial market of the Saudi will be uniform to that of other member states of the WTO. This will make sure that there is no supremacy of one state above the others which will be an advantage for all states Fath 03. The current recession that is hitting many countries has been a great disadvantage to Saudi since it has forced the economy down and it will take a couple of years before the economy gets back to its feet. Though there seems to be improvements, they are not drastic and therefore the economic recuperation is likely to take time. However, being in the WTO allows the Saudi to access resources that are not available in their country from other WTO member countries. This has ensured that there is still availability of raw materials for local industries as well as a ready market for the goods that Saudi produces (WTO 07). Saudi has enacted 42 new trade laws that conform to the trade laws of other WTO member staes. This is a milestone in indicating that it is ready to join other WTO member states in common trade for the good of all. However, the loss of supremacy in controlling the oil industry will be a threat in Saudi. This is mainly because the oil price will from now henceforth is subject to a debatable price and there will be premiums for the WTO member states. This will require Saudi to clearly states the way it plans to go ahead with the oil industry price index. The advantage that Saudi will have is that it will now have its economy competing on the same platform with other countries that are members of the WTO. These countries will therefore serve as parameters of growth of the Saudi Arabia economy. This is likely to trigger a wake up call to the Saudi and this will make the Saudis work extra hard to ensure that they keep up to standard. They will have to catch up with the pace of economic improvement of the member states of the WTO (Daniel & Helge 04). There will be creation of investment opportunities for the Saudi businessmen in other countries in the WTO. This is because there will be a waiver of a certain amount of requirement now that Saudi Arabia is a WTO member. With the Saudi Arabia industries already implementing the new trade laws that have been enacted, there is a high possibility that the companies will have to change their business systems to conform to those of industries in other WTO member states. This will induce effectiveness and efficiency in the companies which will in the end promote similarity of business systems and there will be occurrence of mergers within companies that share a common good. This business system integration is for the better of the Saudi Arabian local industries that have been having limited export and import benefits when there was a row between Saudi Arabia and the WTO. The accession of Saudi Arabia into the WTO has led to many countries according respect to the Saudi Government for embracing a cost-effective move in its trade sector. This shows that there are leaders who have a vision for Saudi Arabia and it is now evident that the economic times have improved across the WTO member states (Niblock 06). In conclusion, since the world’s largest oil exporter has found more markets for its oil products, there has been a great improvement in business for the period since Saudi Arabia joined the WTO. Works Cited 1. US Department of state. January 2009 Bureau of Near Eastern Affairs 12th May 2009 2. World Trade Organization. What is the World trade Organization? Geneva Switzerland 12th May 2009 3. Paul Aarts, Gerd Nonneman. Saudi Arabia in the balance: political economy, society, foreign affairs New York University Press, 2006 4. Mark Weston, Wyche Fowler, Jr. (FRW). Prophets and Princes: Saudi Arabia from Muhammad to the Present John Wiley & Sons, 2008 5. Anthony H. Cordesman. Saudi Arabia enters the twenty-first century: the political, foreign policy, economic, and energy dimensions Greenwood Publishing Group, 2003 6. Fath el Rahman Abdalla El Sheikh. The Legal Regime of Foreign Private Investment in Sudan and Saudi Arabia Cambridge University Press, 2003 7. World Trade Organization. Protocol on the Accession of the Kingdom of Saudi Arabia: Geneva 11 December 2005 Cambridge University Press, 2007 8. Daniel Heradstveit, Helge Hveem. Oil in the Gulf: obstacles to democracy and development Ashgate Publishing, Ltd., 2004 9. Tim Niblock. Saudi Arabia: power, legitimacy and survival Routledge, 2006 Read More