Saudi Arabia: The Effects of International Trade Policies and Agreements

Topic: Trading
Words: 631 Pages: 2

Saudi Arabia’s Participation in the World Trade Organization (WTO)

The World Trade Organization (WTO) is an international trade organization located in Geneva, Switzerland. Being the only global international trade organization, the WTO’s primary role is to set rules to govern trade across its member nations. Since joining the WTO on 11th December, 2005, Saudi Arabia has been actively involved in discussing favorable trade policies and agreements that ensure little or no conflicts arise during trading activities.

The country entered the WTO to reduce “country risk,” a concept discussed in international economics. If Saudi had hesitated to join the world trade agreement, it would have lost its sovereignty due to little flow in foreign currencies (Carbaugh, 2022). Saudi Arabia has the largest economy in the Middle East, with $1040 billion in GDP in 2022 (Carbaugh, 2022). As the highest exporter of oil and petroleum products and the 24th largest importer, Saudi Arabia’s decision to join the WTO stabilized the global trade system. During this time, various changes were experienced within the Kingdom. For instance, tariffs on all imported goods were reduced from the existent 12% to 5 % after joining WTO (Carbaugh, 2022). Before joining the WTO, technical barriers existed in Saudi Arabia’s domestic trade system, which the state removed to improve trading activities with developing countries.

Kingdom’s WTO Involvement vs. Participation

As one of the six states making the Gulf Cooperation Council (GCC), Saudi Arabia plays a central role in organizing and integrating other members to achieve trade unity and joint economic development. In addition to GCC, Saudi Arabia is a member State of the League of Arab States. Concerning trade barriers, trade activities within the member states in the League of Arab States and GCC are duty-free, contrary to the 5% imposed tariffs on goods within the world trade organization (Alam, 2018). The Trade and Investment Framework Agreement (TIFA) between Saudi Arabia and the United States, signed in 2003, also has conspicuous similarities and differences with the WTO. To bring economic liberalization between the countries, the TIFA sets legal protection for investors carrying out trading activities between the two nations (Amirat, 2020). Some differences occur between WTO and TIFA, which makes each agreement unique. The trade agreement between Saudi Arabia and the United States is bilateral, while Saudi Arabia engages in multilateral agreements with WTO. The TIFA provides information on expanding trading activities, while the world trade organization focuses on facilitating trade flow between its member states.

Membership or Trade Agreement that Benefits Saudi Arabia the most

Even though both WTO and TIFA agreements provide legal protection and intellectual property to the member states, Saudi Arabia has benefited more from the world trade organization than the trade and agreement framework agreement (Carbaugh, 2022). The bilateral TIFA has led to free trade between Saudi and the United States, leading to little revenue from oil products. The concept of partial specialization, as discussed in the coursebook, has helped Saudi Arabia achieve global recognition as a primary oil producer (Carbaugh, 2022). Specializing in oil production has helped the Kingdom fetch more returns in the WTO than in TIFA. Saudi Arabia has benefitted more by being a member state of the WTO than from the bilateral TIFA.

My Position on the Impact of Trade Treaties on the Kingdom of Saudi Arabia

The sovereignty of a nation is dependent on the free flow of foreign currency. Since the Kingdom of Saudi Arabia signed international trade treaties, the country has enjoyed a vast scope in its market; hence its annual GDP has increased to $1040 billion (Carbaugh, 2022). Although the reduction of tariffs has reduced the revenues in the partially specialized country, Saudi Arabia has enjoyed free trade with other member countries; therefore, I support the step taken by the country to join international trade agreements.


Alam, I., & Ahmed, S. (2018). India’s Trade with Gulf Cooperation Council (GCC) Countries: A panel gravity model analysis. Journal of Academic Research in Economics, 10(2), 248. Web.

Amirat, A., & Zaidi, M. (2020). Estimating GDP growth in Saudi Arabia under the government’s vision 2030: a knowledge-based economy approach. Journal of the Knowledge Economy, 11(3), 1145-1170.

Carbaugh, R. (2022). International economics. Cengage Learning.

Enhancing Sustainability and Operational Efficiency: Strategies for Abu Dhabi Port
Comparative Advantage Challenges