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Towards a foreign trade policy

Jan 28,2018 - Last updated at Jan 28,2018

Jordan’s foreign trade sector is very important, it reflects the big picture of the economic activities, a picture that we are not happy with.

The volume of foreign trade, imports and exports combined, amounts to around two thirds of the gross domestic product. This is one of the highest ratios. It shows how much Jordan is open commercially to the outside world, and to what extent it is exposed to the influence of external factors.

With the size and importance of this vital sector, it is only fair that it attracts more attention from the government.

The sector provides a number of negative features which can not be ignored for long. Numbers of the first ten months of the past year revealed that Jordan’s trade balance is to the negative side to the extent of JD7.55 billion, an increase of 11.1 per cent over the same period of 2016.

In the period under discussion, i.e., the first ten months of 2017, national exports used to cover 39.7 per cent of the cost of imports. For some reason, the percentage of coverage has dropped to 36.6 per cent in the same period of 2017.

This means that Jordan is importing three times the value of its exports. This is obviously an odd situation that can not be sustained for long.

To finance that much of imports means that we have to consume all the proceeds of exports and a sizable portion of expatriate remittances and foreign grants.

Relatively, big imports work as an outlet to lose most of foreign aid and expatriates’remittances.

To make things even worse, the cost of imported petroleum and derivatives rose by 21 per cent over the level in the same period of the previous year. This extra cost increased trade balance deficit and led to the consumption of more foreign currencies, so much so that the Central Bank reserve of foreign exchange declined gradually.

The external trade sector means a lot to industry, agriculture, trade balance and the balance of payments.

The cost of labour included in imported and exported goods does not appear on the documents, but we know that it forms around 40 per cent of the value of imported or exported goods. This shows the connection between trade and jobs. To make exports is to generate more labour internally and to make imports is to export jobs.

In theory, foreign trade falls under the Ministry of Trade and Industry, but this did not bring solution, simply because we lack a trade strategy.

Had we have a defined policy for foreign trade, Jordan would not have accepted to enter intounfair and unbalanced trade agreements with no restrictions and full customs tax exemption.

 

Jordan is unable to match imports and exports, not to allow the products of Europe, America, Canada, Turkey and the Gulf states to enjoy 100 per cent of customs tax exemption, while we don’t have exports to make  these exemption two sided or reciprocal.

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Comments

Jordan has an open and good trade policy and strategy (WTO accessed, several FTAs concluded and enacted), that alone doesn't solve the problem of quite unfavourable business environment with neighbours at war or just recovering from internal conflicts. The only viable access to Jordan's market comes through Aqaba, thus imports and exports towards Europe for instance have to go through the red sea then through the Suez Channel, making trading and processing of foreign inputs quite expensive. However, the trade balance is slightly saved by services, where Jordan has good chances to excel. Tourism (including medical one) brings some relief in the unfavourable account, including exporting human capital as the education level in Jordan is high.

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