Free Trade Agreements Saudi Arabia

Published on April 9, 2021

The creation of new trade relationships and the expansion of the export market list are another strategic priority for government planners, and concerted efforts have recently been made in this regard. In October 2018, Pakistan and Saudi Arabia agreed to negotiate a free trade agreement or preferential trade agreement to increase the volume of trade between the two countries. The kingdom is an important source of oil for Pakistan, and in early 2019, Saudi Arabia signed eight contracts worth a total of $20 billion, with which the kingdom will finance an $8 billion oil refinery in the city of Gwadar, Pakistan. The United Arab Emirates also signs the World Trade Organization(WTO) Information Technology Agreement (ITA), a treaty that binds 78 countries (which account for 97% of world trade in computer products), which aims to eliminate tariffs on computer products. The many products covered by the treaty are estimated at more than $1.300 billion per year. The Government of Abu Dhabi has established the Advisory Committee on Free Trade Agreements, which aims to lift trade restrictions between the Emirate of Abu Dhabi and the countries with which the United Arab Emirates is negotiating a free trade agreement. The recovery in oil prices since 2017 has pushed the kingdom`s trade balance towards more positive ground since it collapsed in 2014-15, reaching about $158 billion in 2018, according to the Saudi monetary authority. However, this trend only highlights the correlation between oil prices and the Kingdom`s ability to maintain a trade surplus. Given the importance of hydrocarbon activity to the economy, this link will not be interrupted for the foreseeable future; However, a weakening of the correlation through the diversification of export activities would be a success for the government`s ongoing economic reform agenda. Saudi Arabia`s efforts to improve its trade infrastructure are also helping to improve its attractiveness as a foreign direct investment (FDI) site. One of the main objectives of the 2030 vision is to increase the payout to the country from 3.8% of GDP to 5.7%.

However, to meet this challenge, it will be necessary to reverse a negative trend in foreign investment, which has continued for several years. The main obstacle for MEFTA is the involvement of Israel. There are other complications in securing agreements between the United States and countries such as Iran and Syria. There could still be complications in the rapprochement of trade with Lebanon and the Palestinian Authority, with Israeli autonomy constantly controlling the occupied territories[2] and militant groups such as Hamas and Hezbollah.