Abdel Aziz Abu Hamad Aluwaisheg, director general of international economic relations at the Gulf Cooperation Council (GCC), suggested that the GCC should preserve its ability to take "targeted counter measures," if other countries impose new tariffs on oil, gas or petrochemicals.
Aluwaisheg referred to recent research, including that by professor Simon J. Evenett from the University of St. Gallen, Switzerland, who was also the session's moderator. He said the message that research conveys is that protectionism is back and may get worse in the next year or so. But, according to him, the new forms of protectionism have been less severe than had been feared, thanks in part to the vigorous advocacy of the G20 against protectionism.
He said the Europeans want to impose new tariffs on oil in the name of fighting climate change. This would be in addition to the already exorbitant internal taxes that almost every European country levies on oil. Similarly, in the United States, he said, there is renewed talk about the $2 tax on imported oil.
"What is a country like Saudi Arabia to do then? What is a region like the GCC to do?" he asked, but advised against any blunt retaliation, as it would be like "shooting ourselves in the foot, because a healthy international trading system should be of utmost interest to us."
The senior GCC official called for moving cautiously on local, regional and international fronts to safeguard the interests of the Gulf economies while also contributing to global recovery.
He highlighted some important steps that Saudi Arabia recently took toward opening up its market: In 2001, it unilaterally reduced its import tariffs by over 30 percent; in 2005, it joined the WTO and in the process eliminated many barriers to foreign investment and outlawed the most egregious forms of monopoly; and in 2008, it eliminated protective tariffs on scores of goods.
The Saudi Arabian General Investment Authority (SAGIA), he said, has vigorously sought and assisted foreign investors to enter into areas that had been out of limits to foreign investors. "But we should not stop there, despite the international trend toward protectionism, because liberalizing our own market is intrinsically beneficial," he opined.
On the regional level, Aluwaisheg referred to the GCC's measures toward liberalizing its internal market, including two recent milestones: The GCC Customs Union and the Common Market.
"Contrary to our modest expectations, the GCC customs union has nearly quadrupled intra-GCC trade, from less than $30 billion in 2002, to close to $80 in 2009, a nearly 300 percent increase in a mere 7 years," he said.
On the international front, he called for continuing to work through multilateral talks toward a less protective, but more equitable, international economic system.
As a reminder to the GCC investors, Aluwaisheg said that the global economic crisis has shown that investments abroad are not necessarily safe or more profitable than within the region. "The GCC market is currently estimated to be around $1 trillion in size, and is expected to double within a decade or so, thus creating great opportunities for GCC capital. However, to make the most of these conditions, the GCC should look into deepening its integration further," he said.
Moderating the session, Professor Evenett highlighted the work of the Global Trade Alert (GTA), a project that looks into protectionist trends, with the latest report particularly focusing on Gulf regional trade. Copies of the GTA report were distributed among delegates. The report points out that there has been an increase in protectionist measures with the mix of the types of measures applied actually increasing in light of the economic crisis.
Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development (UNCTAD), focused on the trading system one is likely to see in the aftermath of the financial crisis. To be sure, there had been deterioration in the global trade system in 2009 and it is even likely that one could see further protectionist measures being considered in key industrialized countries. Overall, the economic recovery remains fragile and there is significant pressure to protect domestic markets, he said.
Some of the tariff increases being imposed are in fact legitimate and within WTO rules but they certainly do not promote greater trade, according to Panitchpakdi. Even in investment, there has been a trend whereby countries are trying to regulate the foreign direct investment coming in. The latest round of the Doha trade talks allowed for a period of respite but with technical issues resolved, political will is now needed to finish the negotiations. This would certainly send the right signal needed at this time.
Ewa Björling, Sweden's minister of trade, picked up on the same theme by arguing that an economy needs to be open and trade-oriented to bring about prosperity.
While there had been worries that protectionism would pull the world back to a situation similar to the 1930s, this has not materialized. Here, institutional initiatives, like the WTO (World Trade Organization) effort to monitor protectionism, have been positive and have been successful in reversing some trends.
She acknowledged that the pressures for restrictive measures will continue which, however, underscores the need for more concerted and joint action. Open trade and investment are essential even for other key challenges such as climate change as trade promotes technological innovation, according to the minister.
