Term Paper: International Trade Between Bahrain

Pages: 11 (3214 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: History - Israel  ·  Buy This Paper

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[. . .] As a result, Saudi should attempt to mediate the dispute. Bahrain, with its track record of good relations with Saudi Arabia perhaps expected it to decide in favor of Bahrain. Bahrain's decision to boycott the summit is also the result of its unease at the warming of relations between Qatar and Saudi Arabia, which has a strong influence over Bahrain, according to a senior Arab diplomatic source. Relations between Qatar and Saudi Arabia have improved, following a period of strain when Qatar expressed reservations over the way Saudi national Jamil al-Hujeilan was selected as G.C.C. secretary general.

Bahrain-Saudi Trade Relations

Bahrain's trade and investment relations with Saudi Arabia and other members of the Gulf Cooperation Council are particularly strong and it grants them preferential treatment on tariffs, investment and government procurement. Bahrain has also attempted to reduce the size of the public sector which dominates key economic activities. Full or partial privatization of several companies, especially in services, and contracting out of some government services to private sector providers are in the offing. The report stresses the need for a more systematic and stepped up privatization Programme to increase private investors' confidence in the economy and to attract foreign investment. Competition policy legislation may also be needed to address issues relating to monopolies and unfair competition in the economy. Bahrain's well developed financial services sector has been the subject of liberalization reform to strengthen the sector further. Banking, especially offshore banking has grown rapidly.

Financial services were the only sector in which Bahrain made commitments under the General Agreement on Trade in Services (GATS). Liberalization has also been proceeding in other services, notably telecommunications, and transport, although more slowly than in financial services.

The petroleum and manufacturing sectors tend to be dominated by the public sector. Bahrain has targeted investment in downstream activities related to Bahrain's existing energy intensive industries as part of its diversification strategy. The report concludes that despite these efforts, important sectors such as petroleum and telecommunications appear to be essentially closed to private investment, whereas reform in services, other than financial services, has been piecemeal. It recommended acceleration and deepening of economic reform.

Free Trade Agreement Between Gcc And Eu

GCC members - Saudi Arabia, Bahrain, the United Arab Emirates, Oman, Qatar and Kuwait - presented a list of 'sensitive' products in respect of which they are demanding better access to EU markets that include petrochemical products, oil products and aluminum. Gulf countries have also pledged, in answer to EU demands and as a prerequisite to a Free Trade Agreement, to introduce a common customs tariff in the context of the Customs Union within the GCC from March 2005 at the latest. (European Report, 04-25-2001). In this context, the issue of reciprocal investment is also important. A report has been prepared by the GCC reviewing developments in investment conditions in GCC member countries and there is to be co-operation on industrial and commercial standards, and on customs issues, energy and the environment. (European Report, 04-25-2001)

Saudi Arabian TRADE

Because of Saudi Arabia's reliance on foreign sales of petroleum, its yearly exports rose rapidly in the 1970s but declined almost as sharply in the 1980s. They dropped from $111 billion in 1981 to $23 billion in 1987, while imports decreased from $30 billion to $18 billion. In 1996, exports totaled $56.7 billion, and imports $28.8 billion. Exports of petroleum and petroleum products are made to Japan and the United States, followed by South Korea, Singapore, France, and India. Chief imports are transportation equipment, machinery, basic metals, textiles, chemicals and chemical products, food products, and animals and animal products. Main suppliers are the United States, the United Kingdom, Japan, Germany, France, and Switzerland.

Epilogue

Rivlin cites thee different types or categories of "new trade" that can result in an expansion of exports and imports in the region. These do not exist at present, and are: products sensitive to economies of scale; products sensitive to input-sharing; and distance-sensitive products. The lower transportation costs can benefit these countries As far as the products sensitive to economies of scale are concerned, small domestic markets in the Middle East, may not justify producing goods locally to substitute imported items, but a joint market of two or more states might justify constructing a plant in one of the countries. Arab states, including those in the Gulf Cooperation Council (GCC), have very politicized economic systems in which the governments intervene extensively in the investment process. They often block joint projects that rely on Arab sources of supply to discourage what they call 'dependency' to develop and are more open to outside sources. For scale-sensitive trade to develop investment will have to be depoliticized and for regulation or funding investment, they will have to use economic criteria alone. (Rivlin, 2000)

The second type of new trade involves new sources of inputs, which can be final products, raw materials, or intermediate goods. Cheaper inputs can enhance the competitiveness of firms, industries, or economy, and can be the basis for trade. Trade in inputs makes it possible to develop or expand manufacturing and other economic activities, in one or both of the potential trading partners and also enable industries to improve their competitiveness in local and export markets. Here, purchases of competitive inputs from neighboring countries can substitute for locally produced or expensive imported inputs. For example, the Gulf States could import more iron and steel from Egypt and Egypt could import aluminum from Bahrain, a major producer. It is often easier to replace expensive imports than local inputs because domestic suppliers generally have more political clout than foreign suppliers in influencing import policy. (Rivlin, 2000) The third category is distance-sensitive trade that includes items sold by virtue of their freshness such as dairy products, fresh fruits, and vegetables. Airfreight is a way to increase trade of distance sensitive materials provided the consumers have the purchasing power to cover increased cost of freight, and the GCC countries' nationals have that purchasing power.

Similarly, heavy or bulky goods that incur high transport costs, [mining products such as stones, sand coal, or ores] can find markets in neighboring countries. These three types of new trade can be combined to meet widened opportunities, using diminished distance, larger-scale production; bigger markets; and new sources of inputs in various combinations. (Rivlin, 2000)

According to Zakaria, a genuine entrepreneurial business class would be the strongest catalyst for change in the M-E. The Palestinians, the region's best merchants have unfortunately been made to engage in a life and death struggle, but there are signs of genuine economic activity in parts of the Middle East in Jordan, Egypt, and the oil-rich countries of the Gulf such as Bahrain and the United Arab Emirates. . . .which are trying to wean themselves of their dependence on oil. Even Saudi Arabia recognizes that its oil economy can provide only one job for every three of its young men coming into the workforce. (Zakaria, F., 2001) Thus increased inter-regional trade between neighbors would go to the benefit of the economies of the countries in the region.

references

1. http://cf.heritage.org/index/country.cfm?ID=10

2. U.S. DEPARTMENT OF STATE: BAHRAIN ECONOMIC POLICY AND TRADE PRACTICES. FEBRUARY 1994.

3. http://www.worldbank.org/search.htm

4. http://www.wto.org/english/tratop_e/tpr_e/tp139_e.htm

5. Dr. A.F. Alhajji August, Investment levels rise higher.(Saudi Arabia) World Oil 2001.

6. Author not available: Eu/Gulf Co-Operation Council: Moves To Boost Talks On A Free Trade Agreement. European Report. 04-25-2001.

7. Alhajji, A.F., "Investment in Saudi Arabia needs patience and more patience." World Oil 2000

8. Rivlin, Paul: TRADE POTENTIAL IN THE MIDDLE EAST: SOME OPTIMISTIC FINDINGS. Volume 4, No. 1- March 2000.

9. Zakaria, Fareed, With Christopher Dickey in Amman and Cairo, How to Save the Arab World., Newsweek, 12-24-2001, pp 22.

10. Trade Policy Reviews: First Press Release, Secretariat And Government Summaries Press Release Press/Tprb/139 Bahrain.13 October 2000

11. Author not available, EU/GULF CO-OPERATION COUNCIL: MOVES TO BOOST TALKS ON A FREE TRADE AGREEMENT., European Report, 04-25-2001.

12. Middle East Economic Survey (MEES), (Nicosia, Middle East Petroleum and Economic Publications) January 11, 1999.

13. World Trade Organization, Annual Report 1998 (Geneva, WTO, 1998), Vol. 1, p. 11.

14. Ronald Soligo and Amy Jaffee, The Economics of Pipeline Routes: the Conundrum of Oil Exports from the Caspian Basin, The James Baker III Institute for Public Policy, Rice University, April 1998.

15. B. Balassa, "Trade Liberalization and Revealed Comparative Advantage," in the Manchester School of Economic and Social Studies, Vol. 33 (1965), pp. 99-123.

16. M. Porter, The Comparative Advantage of Nations, Harvard Business Review, March-April, pp. 73-93, 1990.

17. Washington Report on Middle East Affairs.

18. Askari, Hossein. Economic Development of the GCC: the Blessing and the Curse of Oil. Greenwich: JAI Press, 1997

19. http://europa.eu.int/comm/trade/pdf/bilstat/econo_bahrain.xls

20. Fred Lawson, Bahrain: The Modernization of Autocracy, (Boulder, Colorado: Westview, 1989), p. 80-82.

21. Beblawi in Luciani, p. 94; Abdulkarim Hamoud Al-Dekhayel, "The State and Political Legitimation in an Oil-Rentier Economy: Kuwait as a Case Study," D. Phil. dissertation, University of Exeter, 1990, pp. 403-09.… [END OF PREVIEW]

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