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Saudi Arabia's Trade Policy - Essay Example

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Saudi Arabia's Trade Policy

Saudi Arabia has embarked upon ambitious industrialization schemes, but, apart from possessing a few large modern plants in aluminum, steel and petrochemicals, their industrial structures are essentially simple. They are dominated by food processing and the production of an array of construction materials, though a wide variety of light industry is being promoted both by local demand and government encouragement (Saudi Arabia and WTO 2008). The improvement in the situation of Saudi Arabia with respect to food imports since 1990s is partly a reflection of changed prices for food, partly the result of quite minor shifts in the composition of trade and partly the result of successful, if "pensive, food security policies. It also arises from the importance of all primary products in exports and the leading roles of industrial supplies and machinery in imports. The export trade of Saudi Arabia is dominated by petroleum for which the major markets are outside the region, and most of their import needs cannot be met from within the Middle East. Political isolation, of course, has not helped its intraregional trade (Bradley 54).
The trade information allows to say that commerce is connected with total financial flows between trading partners, whilst investment capital is essential to programs of industrial and infrastructural development (Bradley 87; appendix 1). This lead to the expansion of development programs in Arabia and to the formulation of massive investment plans, but it also raised the problem of how to use the large surpluses whilst the absorptive capacity of the economies was growing. Financial services had to be improved in the oil rich states, not only to assist investment and development, but also to recycle funds abroad. New commercial banks were established, national banking systems were expanded and foreign finance houses were allowed to trade, especially in the states on the Arab side of the Gulf. "The Kingdom's balance of trade has improved noticeably since 1986, when it had a surplus of only SR3.6 billion (U.S.$0.96 billion). During the Gulf Crisis, the Kingdom's balance of trade recorded a surplus of SR76.2 billion (U.S.$20.3 billion) in 1990 and SR 70.1 billion (U.S.$18.7 billion) in 1991" (Saudi Arabia Trade.2008).
Small towns, however, play a more basic role in the internal trading patterns of Middle Eastern states. Agricultural goods flow into them for distribution up the urban hierarchy or export abroad, while the small towns distribute nationally manufactured goods and foreign imports to the countryside (Al-Rasheed 33). Further away from the centre are shops specializing in cloth and clothing, but mixed in with them are often traders in perishable goods. Its physical characteristics are narrow alleyways, old property, small open-fronted shops and workshops and a degree of spatial con- centration in the various types of activity. A fourth shopping zone lies outside the tradition bazaar, along modern streets and at major intersections (Cordesman 43).
According to statistical results, Trade per capita is (US$, 2004-2006)and Trade to GDP ratio (2003-2005) is 75.0 (appendix 1). These results allow to say that Saudi Arabia succeeds in its trade policy in spite economic changes and crises occurred in the region. During 2000-2004 it was Saudi Arabia which came to dominate the Middle Eastern scene with an oil production which approached 500 million tonnes in ...Show more

Summary

Saudi Arabia's trade policy is influenced greatly by its political and social situations and international relations with other countries. The policy framework is based on free market economy. "There are no foreign exchange controls, quantitative restrictions or tariff barriers…
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