Trade Policy Review of Qatar

One of the newer emirates in the Arabian Peninsula, Qatar is coming of age – economically and socially. Once a land where fishing and pearling was a source of income, Qatar’s economy has surged forward after the discovery of the precious liquid – oil. Since 1940, the discovery has turned the nation inside out and Qatar currently boasts of everything a modern nation could ask for. Large portions of the country’s income are derived from oil and natural gas exports.

Although these supplies will last for several years to come, Qatar is making a wise choice by branching out and investing in the private sector. Yes, Qatar has made immense economic progress in the recent past and is definitely on its way to being placed amongst the top few income economies in the world. As a direct result, life style patterns of the people in Qatar are undergoing a dramatic change. A mushrooming customer base makes the country a perfect destination for exporters and investors. Demands are rising and choices are varied.

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Powered by the development and export of huge natural gas reserves, Qatar’s GDP growth has been impressive, and sound monetary policy has brought inflation under control…Qatar’s task is to further diversify its economy, a challenge the government is pursuing through its promotion of investment in small and medium-sized enterprises that use hydrocarbon by-products and its opening of some service sectors to foreign investment. Keeping this scenario in mind, the Qatar government would be doing right if it practiced and permitted trade liberalization in its markets.

The unhindered flow of goods and services between Qatar and several partner countries would open up investment opportunities for both. Policies that encourage free trade and its protection would also be a step in the right direction. This would mean reduction in tariffs and trade barriers, permitting more foreign competition and investment in the economy. Countries all over the world are eager to sign free-trade pacts with Qatar. It would do more good than harm. There is substantial US investment in Qatar that continues to expand.

The US hopes to see during this year the beginning of the process to sign a Free Trade Agreement (FTA) with Qatar. With respect to Qatar, elimination of all or at least most trade tariff barriers will create a worldwide free trade zone. Qatar’s agenda of just reducing the present trade barriers that exist may not be good enough. When Qatar sets for itself certain restraints, it is important to keep in mind that there will be several repercussions. In the case of voluntary export restraints or VERs, Qatar can set its limits on how much their firms will voluntarily export to a particular country.

Since Qatar is not in a position to aggravate the countries that it is currently importing to (after all, they’re most probably investors), the Qatar trade policy could maintain the Voluntary Export Restrictions. It is hardly voluntary, considering that exporting countries have no choice. Exporters in Qatar are forced to agree to such restrictions fearing more stringent trade and tariff barriers, resulting in quotas. In the area of countervailing, Qatar is not as much in danger as it is in the case of anti-dumping.

Imports to Qatar being subsidized by a foreign country are less likely to happen than antidumping by Qatar itself. If a Qatar company had to export one of its products, and sell it at a lower price than that available in Qatar, will the scales of competition tilt slightly towards Qatar? Countries that import from Qatar are not too pleased to note this unfair phenomenon. Thomas J. Prusa in his article East Asia’s Anti-dumping Problem comments on how countries in the middle-east are all being accused of this trend…

East Asia accounts for a large and growing share of worldwide anti-dumping (AD) activity. East Asian countries have long been the main targets of AD actions, accounting for about one-third of all AD actions during the 1980s, more than 40 per cent of all AD actions during the 1990s, and almost 50 per cent of all AD actions in recent years. After controlling factors that might influence filings such as the exchange rate and trade volume, it is found that East Asian countries are subject to about twice as many cases as either North American or Western European countries.

Moreover, the trend in filings against East Asian countries is increasing, meaning that in recent years the propensity for countries to direct their AD filings against East Asian countries is growing. Qatar should take care to differentiate clearly between trade creation and trade diversion simply because the outcome of diversion, in the case of the exporter is a higher net economic profit than that of creation. It is sure to hurt a few producers but keep in mind that the question of trade creation only arises when the price of import is lower than the domestic cost.

That may not mean too much to Qatar, while in the case of trade diversion, the imports are being obtained at a higher cost to the economy of the importer. What of countries like the United States that is trading with countries like Qatar, who are known to be countries with poor human rights records? Indecisive trade policies towards these countries are sometimes the norm. While on one side they wish to promote a better form of government, the US continues to collaborate and maintain in power through its financial support and trade relations a multitude of corrupt and despotic regimes in Middle-East countries.

Qatar should keep an eye out for such practices, and knowing its history and progress in the last few years, one is confident that Qatar will stand up to it. The understanding of the WTO members towards infant industries in Qatar is remarkable. Countries have eased the overly firm commitments for these start-up names. This helps Qatar give its infant industries the required levels of tariff protection and nurture its economy better. If Qatar is thinking of infant industries in the vicinity, is it also thinking of local content requirements?

As it provides for several others at an excellent price and reaps the benefits, Qatar should not forget to feed its own self. Creating markets for its own requirements is a priority. Striking a balance between selling in the local market and exporting outside of Qatar is a challenge. A great way to develop infant markets is to try to offer them the export subsidies that they will need greatly. This will encourage specified products and uplift the industries that the government singles out.

Leveraging the global market and making it work will be Qatar’s responsibility and its tools are all the agreements that will meet its eye – bilateral and multilateral. When compared to regional trading in Qatar which could get into sticky situations at times, it is a safer option to consider multilateral and bilateral agreements. No doubt the profit is not immediate but the global market place opens up doors that Qatar may have never had access to. As product cycles get shorter and multilateral negotiating cycles get longer regional and bilateral arrangements may appear to bring speedier results in terms of opening markets.

In the process, Qatar will have to work towards WTO accession. The advantages of the accession, especially for a developing country like Qatar are too many to mention Transparency, most-favored nation status, permanent membership and legal protection are just a few. Even as Qatar takes a look at its policies and works on them, what could play a vital role is an effective international negotiation process. The positive results for economic development, labor rights and business interests that will come out of it cannot be stressed upon enough.

And can regional economic integration be a possibility in this scenario? Well, yes and no. Although Qatar has several other important concerns at hand, economic integration would help production between partners and open new business channels. To think beyond trade wars and opposing free trade by raising or decreasing a price simply because another nation is doing it, should be Qatar’s goal. Qatar’s offerings are capable of all this and more. Industries are booming in Qatar and leashing them or unleashing them will depend on trade policies, reviewed and re-reviewed.