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GCC exports over 73 million tonnes of chemicals annually

GCC exports over 73 million tonnes of chemicals annually



Need for reform in post-Covid era

In the new post Covid reality, World Trade Organisation (WTO) modernisation will be more important than ever, says Dr Adbulwahab Al-Sadoun, Secretary General, Gulf Petroleum and Chemicals Association (GPCA)

February 2021

The chemical industry in the Arabian Gulf is largely export oriented. With an overall share in global chemical exports of 4.3 per cent, the GCC chemical industry trades with more than 100 countries worldwide, exporting over 73 million tonnes of chemicals annually. The GCC region is a major hub for the production and export of chemicals, and as the industry in the region continues to grow, it will undoubtedly improve its global trade position.

Having free access to global markets is a lifeline for the regional industry. Since its inception in 2006, Gulf Petroleum and Chemicals Association (GPCA) has advocated for open market policies as we believe that market liberalisation helps individual producers from the Arabian Gulf to gain access to key markets, and the wider industry to earn greater returns, which can be invested back into researching further value adding products or directly into the economy. Today the industry finds itself operating in an environment, characterised by rising protectionism, in the form of higher tariffs, closed border sentiment and other trade restrictive measures as a result of the Covid-19 pandemic.

According to figures from the World Trade Organisation (WTO), 41 per cent of countries and customs territories worldwide introduced export prohibitions or restrictions in the height of the pandemic, often not in line with WTO rules. This new, and continuously evolving landscape calls for a revitalised approach to world trade, for if we don’t move with the times, the existing trade policies will cease to be relevant and impactful.

 

Dr Adbulwahab Al-Sadoun

Dr Adbulwahab Al-Sadoun

Change is needed

Over the years, the GCC states, all of which are members of the WTO, have supported the global trade body and the role it plays in driving global trade, economic growth, enforcing trade agreements and advancing sustainable development. However, the new reality in which chemical companies operate today creates an urgency for modernisation of the WTO and even closer cooperation among trading partners.

Moving forward, transparency will be key. The Covid-19 pandemic has been the catalyst for the changes needed to advance and update the global trade regime. As we’ve seen, a number of WTO member countries issued new export restrictions during the Covid-19 pandemic without notifying the relevant WTO Committees or offer stakeholders the opportunity to provide meaningful comment. For the WTO to remain relevant, members must make their measures as transparent as possible.

Furthermore, addressing trade barriers such as forced technology transfer; forced localisation of production; the protection and enforcement of trade secrets; foreign investment limitations; administrative review and licensing, will be crucially important in modernising the WTO. Beyond devising investment policies and incentive programs, the WTO can play a more active role in investment facilitation by focusing on the business case for investment.

 

Sadara chemical plant in Jubail

Sadara chemical plant in Jubail

Trade liberalisation pacts

Discrepancies in national legislations and the lack of harmonised international rules pose great uncertainty and concern for the chemical sector in the region. Governments around the world are responding to national developments and sentiments, and as a result develop new, complicated, and contradictory rules covering the environment, standards, technology, and digitalisation. As a result, chemical companies are having to adapt to different national markets, which is inefficient, costly, and complicated from a compliance perspective.

The Covid-19 pandemic has acutely demonstrated the need for a trade liberalisation agreement on healthcare products and their raw materials. Ineffective tariffs have only served to hinder the supply of vital products to markets that need them the most and contributed to higher consumer prices. Sectoral tariff initiatives like the Chemical Tariff Harmonisation Agreement (CTHA) are more important than ever before and we hope to see WTO members expand their commitment to the initiative.

We strongly advocate for the global application of the CTHA, of which Oman and Saudi Arabia of the six GCC states are signatories. However, the needs of the chemical industry go beyond the harmonisation, and progressive elimination of tariffs and touch upon complex issues such as rules of origin, intellectual property (including the protection of trade secrets), and regulatory cooperation, in particular with respect to standard setting.

 

Regulatory cooperation

The WTO should foster regulatory cooperation on chemical substances to prevent barriers to trade. We urge the WTO to place regulatory cooperation higher on its modernisation agenda. Higher prioritisation would create a new opportunity for trade negotiators, regulators, and industry to negotiate better ways to prevent barriers to trade through greater regulatory transparency, data and information sharing, and the adoption of best practices.

Furthermore, the WTO should consider updating the list of prohibited subsidies; modify rules to ensure greater transparency and compliance with notification of subsidies; and, critically, prevent forced technology transfer. The WTO should engage with the chemical industry to ensure a clear understanding of anti-competitive subsidies currently distorting trade and developing and implementing updated rules.

 

Reform in post-Covid era

The new post Covid reality will not be short of challenges as the world is preparing to face the implications on the economy, society, businesses, and consumers. We need to accept the fact that trade has been dramatically impacted by the restrictive measures that were put in place as a result of the pandemic. Rather than improving access to services and goods, the world has regressed on free trade, jeopardising the prosperity and economic development of nations all over the world. Now is the time to enact change built on transparency and cooperation and the WTO can play a crucial role in driving the new agenda forward. Businesses must have a role in the modernisation process. The modernisation should include key issues such as dispute resolution. Other aspects to cover can include commitment towards the Trade Facilitation Agreement of the WTO (all GCC states have ratified it), improvements in digital trade rules as well as data protection.

*This comment piece includes excerpts of ICCA’s position paper ‘ICCA Recommendations on Modernisation of the World Trade Organisation (WTO)’. GPCA endorses the recommendations by ICCA and provides a regional perspective on the issues discussed therein. GPCA is a full member of ICCA and has a permanent seat on the ICCA Board since 2012.  




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