Saudi Arabia and International Preferential Agreements

Subject: Economics
Pages: 5
Words: 1497
Reading time:
6 min
Study level: PhD

Introduction

The modern economic and geopolitical landscape of the world is changing. With the rising importance of globalization, no country can exist without forming any lasting bonds with others. International trade brings great benefits along with the risks of existing in a large, globalized system. The Kingdom of Saudi Arabia has been in the center of Middle Eastern political and economic life for a long while and has established itself as one of the leaders of the Gulf Cooperation Council (GCC) and as a bridge between the Eastern and the Western countries, both in terms of trade and policy.

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As such, the country benefits from a multitude of agreements with various superpowers of the world, such as the EU, the USA, China, and Russia. In addition, the KSA presides over various inter-regional agreements among various members of the GCC. Preferential agreements are usually for countries to benefit from large, dedicated, and unrestricted flows of goods, money, and services. The research question is as follows: whether Saudi Arabia is able to gain significant benefits from interacting with different powerful states? The purpose of this paper is to analyze some of the most prominent agreements made by the KSA with the USA, the GCC, and Russia.

Literature Review

To analyze the topic thoroughly, it is essential to study relevant resources containing valuable information regarding the theme under consideration. According to the article Saudi Arabia Well Placed to Take Advantage, one of the major trade agreements negotiated between the countries of the GCC, as well as several North-African states, is the Greater Arab Free Trade Area (GAFTA). It is a pan-Arabic free trade zone created in 1997, including countries such as Egypt, Iraq, Jordan, Kuwait, Libya, Mauritania, Palestine, Saudi Arabia, Sudan, Tunisia, Syria, the United Arab Emirates, and Yemen (“Saudi Arabia Well Placed to Take Advantage”). The agreement covers a wide area of issues surrounding trade and regulates up to 95% of the rotation of goods and services in the region (“Saudi Arabia Well Placed to Take Advantage”).

The most prominent parts of the document regulate the rights of individual member states, as well as the objectives of the economic unity agreement. GAFTA ensures an individual’s freedoms to exchange goods and services, protects possessions and inheritance, and guarantees personal and capital mobility. It also regulates the use of ports and airports, which are paramount to the facilitation of large-scale economic activity in the region. This agreement has been beneficial to Saudi Arabia and the region in general. The lack of standardization and differences in regional practices made other markets very difficult to penetrate. Governments imposed their own rulings and regulations as they saw fit, making the region less attractive to investors. In addition, the lack of uniformity regarding imports and exports made it hard to transit goods between countries. With the appearance of GAFTA, nearly all Arabic trade became regulated, bolstering the economic development of the region and attracting additional investments. According to the article, as Saudi Arabia was one of the richest countries of the GCC even before GAFTA, the agreement managed to solidify its leading position (“Saudi Arabia Well Placed to Take Advantage”).

Another article related to this topic is called Saudi Arabia – Trade Agreements. It reviews the agreements signed, and particular attention is paid to the US. The US has a vested interest in the Middle East due to its critical positioning to the world economy, as well as due to its possession of copious amounts of oil. Saudi Arabia has been one of its greatest allies in the region, in exchange for various trade and economic benefits. Nevertheless, due to the instability of the region, various nuances of Saudi Arabian law, and financial among between businesses and agents, the country remained a risky option for the majority of the US investors. The Trade and Investment Framework Agreement (TIFA) between the US and the KSA was signed in 2003 and provided sufficient legal protection for the investors and their assets, as well as intellectual property protection and alterations in the existing government and commercial regulations (“Saudi Arabia – Trade Agreements”). The document also allowed for provisions to be enacted every two years. The last negotiation within the TIFA format happened in 2018.

According to the conclusions of the article, Saudi Arabia has benefitted greatly from signing this important document (“Saudi Arabia – Trade Agreements”). It provided the investors from USA and Europe with the necessary assurances and facilitated the flow of investments into the country. Due to that money, today, the country reforms its production sector in order to decrease the economy’s reliance on oil exports as the primary means of sustenance. Therefore, the use of the agreement is evident, which allows saying about a successful interaction policy.

Another article reviewing the topic of the agreements signed among Saudi Arabia and other states pays particular attention to interaction with Russia. According to Rozin, this country is an emerging superpower that has an interest in projecting its power and influence in the Middle East. As the author argues, Russia supports Iran in many of its endeavors (Rozin). Nevertheless, the KSA is looking to become Russia’s major trade partner. The visit of King Salman bin Abdulaziz Al Saud to Moscow in 2017 ended up with signing preferential contracts with Russia about supplying several billion dollars worth of military-grade hardware to Saudi Arabia, as well as helping the country build up its own weapons plants (Rozin). The profit to Saudi Arabia from this agreement is obvious since the country not only benefits from premium prices on high-grade military equipment but also acquires the means of military independence from other nations.

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Methods and Materials

To find useful data concerning the topic under consideration and answer the research question, it is essential to engage an appropriate strategy for evaluating the materials obtained. As the sources of information, the official facts presented in free access will be analyzed. To answer the question about the benefits of Saudi Arabia from agreements with other countries, the outcomes of this interaction will be considered on the basis of intermediate and current results. The key hypothesis is that the beneficial partnership established among the KSA and other countries of both the Arab region and remote parts of the world can make positive changes to the economic indicators of the state’s development and the growth of its resources that are necessary to maintain a consistently high standard of living.

The methodology for evaluating the hypothesis under consideration may be based on the comparison of the development indicators of individual sectors, in particular, economics, trade, and other important areas before and after the signing of relevant agreements. As an assessment criterion, statistical data can be given, and reports in the form of tables may be compiled to obtain a comprehensive picture. To ensure the accuracy and reliability of the study, all the facts should be taken from reliable sources in order to avoid using outdated information, which is particularly important when working with figures. Searching for proper resources can be performed due to appropriate keywords, and contemporary electronic databases may be of good use. Since statistical indicators will be the main factor of evaluation, the study will be quantitative, and all the results of the work done will be given in percentage.

Proposed Analyses

The study based on a quantitative method will imply assessing the statistical information obtained and comparing the results. Based on the research question, all the data about the success of the aforementioned agreements will be considered in terms of the growth of the country’s individual sectors. In Saudi Arabia where much attention is paid to partnerships with powerful states, there are special boards that monitor and evaluate the results of such work and the profits gained through effective interaction. By analyzing the information that is freely available, it is possible to determine how the economic, commercial, business, and other spheres of the country have improved due to the signing of agreements with Arab countries, the USA, and Russia. As a basic technique, comparative reports will be proposed, which is one of the most visually convenient ways of displaying digital parameters. The timeframe is not limited; however, it does not take too long to evaluate the collected data. A few weeks will be enough to find necessary figures, convert them to percentages, and compare the results.

Conclusion

Negotiating preferential agreements with other nations has always been a strong point in Saudi Arabia’s diplomacy. The Gulf region is of strategic importance to facilitate trade between Europe and Asia and is valuable for the world oil trade. As was demonstrated in this paper, the agreements negotiated by the KSA helped attract investments, purchase various goods and materials, and establish itself as a political, military, and economic power in the region. Based on the proposed research question about the benefits of agreements for individual sectors of the country, a quantitative study may be conducted with the assessment of indicators from different years and the compilation of statistical reports.

Works Cited

Rozin, Igor. “What Weapons Is Saudi Arabia Buying from Russia During King Abdulaziz’s Visit?” Russia Beyond. 2017, Web.

“Saudi Arabia – Trade Agreements.” Export.gov, 2018,

“Saudi Arabia Well Placed to Take Advantage of Its Trade and Investment Strengths.” Oxford Business Group, 2016, Web.

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