Before rushing to sign - Jordan
Jordan Times
Before rushing to sign - Jordan
26 June 2006
Fahed Fanek
Relations among countries are normally defined by bilateral or multilateral agreements, especially when it comes to trade under reciprocal facilitation. The purpose, of course, is to maximise benefits. In order for such agreements to be sound and sustainable, they must be balanced and serve the best interests of both sides, otherwise the party at disadvantage will find a way to obstruct the implementation of the agreement and finally yield to pressure and revoke the agreement altogether.
Agreements to liberalise the exchange of goods and services, or to avoid double taxation, should always be feasible, balanced and beneficial to both parties. However, it is quite possible that under certain circumstances, an agreement may cause damages to one party granting facilities and exemptions without being able to gain similar facilitation and exemptions from the other side, thus opening up its market to the products of another party without having the other party opening up its market and removing obstacles and restrictions.
Jordan’s economy was closed for a long time. Industries used to enjoy very high customs protection against imports. The Kingdom opened up its economy during the past 15 years or so, but it may have gone too far in the opposite direction.
It seems that our officials have become fond of entering into agreements with any willing party, even when those agreements are one sided. We play the role of the giver without insisting on our right to benefit from similar advantages.
Normally, such agreements are the initiative of the other party, which is bound to benefit; they are blindly accepted by the government as a gesture of goodwill rather than as a result of cost-benefit analyses.
When I was the financial director of the Royal Jordanian Airline, three decades ago, a minister told me that he concluded an agreement with Kuwait to exempt airlines of the two countries from taxes applicable in each country. He thought that he did a service to our national carrier, but Kuwait was not at the time imposing any taxes on airlines. We did not have to pay taxes in Kuwait, while foreign airlines operating in Jordan are subjected to the normal taxes applicable to all companies and activities.
Something of the sort happened when we signed free trade agreements with Arab and foreign countries. One may ask if it is fair to import from a trade partner ten times more than we are allowed to export to that country and, at the same time, to open up our market to the products of that country while most of the restrictions against our exports remain in place.
It is not reasonable to exchange exemptions of custom duties with another country in which custom taxes, if any, do not exceed five per cent against our 30 per cent or, for that matter, to enter into free trade agreement with a country whose industries enjoy cheap energy and are exempted from taxes, unlike our industries which are supposed to compete on equal basis.
We have a free trade agreement with the European Union whose imports from Jordan do not exceed 6.5 per cent of its exports to the country. We also entered into an agreement with a powerhouse like Singapore, that can easily overwhelm our markets while our exports to Singapore are not above zero level and the potential does not exist.
Before we rush to sign a trade agreement with a third party, we have to go through cost/benefit accounts, and before we call on the television cameras to document the signing ceremony, and the photo ops, we should do our homework.
