Saudi Arabia, US conclude bilateral, paving way for Saudi accession at Hong Kong

Original Publication Date: 
19 September, 2005
On 9 September, Saudi Arabia and the US concluded a bilateral deal on Saudi Arabia's accession to the WTO. This sets the stage for the world's largest oil producer to join the WTO at the global trade body's December Ministerial Conference in Hong Kong.

WTO accession rules require prospective members to negotiate bilateral market access deals with any Members that request them. The US had been the main trading partner with which Saudi Arabia had not yet signed such an agreement. Among the contentious issues was the Saudi approach to the Arab League's boycott of Israel. As part of the bilateral pact with the US, Saudi Arabia has agreed to have "WTO relations with all WTO Members." However, according to Saudi press, this would not entail an end to the boycott of Israeli companies as such, but merely that the kingdom would not restrict business with US companies that also deal with Israel.

Saudi Arabia made substantial commitments in the areas of goods, services and agricultural market access, and agreed to reforms of rules on intellectual property rights and sanitary and phyto-sanitary measures. Among these, Saudi Arabia agreed to abolish its ban on hormone-treated beef, an issue not all WTO Members agree on (see BRIDGES Weekly, 7 September 2005, http://www.ictsd.org/weekly/05-09-07/story1.htm).

Saudi Arabia will implement all its WTO commitments immediately, without relying on transition periods. US business representatives welcomed what they termed a "high-quality" agreement. The response of the Saudi Arabian business community was mixed, however, with companies seeing both opportunities and threats. Fawaz Al-Tuwaijeri, an investor in the agricultural sector, voiced his fear that dumped products from developed countries, would "threaten the existence of many of our agricultural projects."

The issue of Saudi domestic energy pricing was not covered by the agreement. Prices of gas used as feedstock for the Saudi petrochemicals industry are lower than for exported gas. The EU, though it already concluded a bilateral deal with Saudi Arabia two years ago (see BRIDGES Weekly, 23 September 2003, http://www.ictsd.org/weekly/03-09-25/inbrief.htm#6), asked Riyadh to resolve the issue before accession. The EU is of the view that dual energy pricing constitutes a de facto subsidy, and thus is incompatible with WTO rules.

The accessions of the world's two foremost oil exporters, Saudi Arabia and Russia, have been flagged as possible "deliverables" at the Hong Kong Ministerial Conference (see BRIDGES Weekly, 27 April 2005, http://www.ictsd.org/weekly/05-04-27/story4.htm). The Saudi accession process started in 1993.

Civil society groups have criticised the bilateral market access component of the WTO accession process for giving developed country Members an opportunity to exert direct pressure on applicants to make concessions deeper than those demanded by WTO rules.