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French Version

Agreements mark economic milestones - The Daily Star

Euromed, wto talks point way to future despite many challenges.
Lebanon achieved much by inking deals – but must still prepare its laws and regulations for bid to join international trading bloc.

Daily Star staff

Lebanon’s share of trade agreements became pretty full in 2002, with the government finally inking an association agreement with the European Union, securing a free trade deal with Iraq and beginning official talks with the World Trade Organization (WTO).

But the economic recession and imposition of a 10 percent value-added tax in February dampened imports. In the first 11 months of this year, imports fell by 12 percent to $5.09 billion compared with the same period of last year, according to customs figures. Exports, though, continued to rally, scoring a 20 percent rise to $953 million through November compared with the same period of last year, as industrialists sought new markets to make up for lower domestic consumption.

Lebanon’s trade figures, though, are not thought to be reliable due to under-invoicing. “I believe imports this year fell by around 20-25 percent, not just 12 percent,” said Roy Badaro, the head of the EuroMed-WTO unit at the Chamber of Commerce. “Exports have certainly exceeded $1 billion, particularly as disclosed figures for certain exports such as jewelry are too low.” The jewelry sector, according to industrialists, is credited for making Switzerland a prime export market in 2002. Exports to Switzerland, according to custom figures, rose by 91 percent to $111 million up to November 2002 compared with the same period of last year.

However, gross exports still stand at around one-seventh of Lebanon’s import bill. Following much hype and several delays, Lebanon ended in June around six years of on-and-off talks with the European-Union and signed an association agreement with its main trade partner.

However, the signing of the trade agreement did not come without the usual political fray. Having initialed the agreement in January, Lebanon decided to miss the official signing ceremony in April to avoid participating in a EuroMed meeting attended by Israel.

Due to the postponement and long-winded process of ratifying the agreement, Lebanon did not benefit in 2002 from the tariff cuts the agreement secured. But in addition to securing an association agreement, Lebanon’s chief EuroMed negotiator, Economy and Trade Minister Basil Fuleihan, inked an interim deal.

This deal would allow Lebanon to benefit from early tariff-free access to the European market, before all 15 EU member states ratify the original association agreement. The ratification process usually takes around two years. “The key word to the EuroMed deal is competition,” said Badaro.
“Industrialists have to spend money to improve their products. This requires financing, which the Lebanese banking sector is still not ready to offer.” The interim deal, which was ratified by the Parliament along with the association agreement in December, will only enter into force in February 2003.

The association agreement, though, had left the services sector out until Lebanon launches its own talks with the WTO. Lebanon’s WTO talks will require an overhaul of antiquated legislation and the introduction of new laws for trademarks and import licensing, among others.

Even before starting talks with the WTO, the government decided to end protection for exclusive dealers and sent Parliament a draft bill for ending their monopolies. “These laws are important not only to get into the WTO, but also to establish transparency and predictability in Lebanon’s legislative regime,” said Badaro.

Fuleihan is angling to secure an early entry into the WTO by 2004 to avoid having to implement more WTO membership conditions, which are expected to spin out of the Doha development round currently taking place among the 144 WTO members. Fuleihan has set April as a tentative date for holding the second round of talks with the WTO. But the process of actually acceding to the WTO will depend on Lebanon’s speed in adapting its laws and in presenting offers acceptable to all member states.

The WTO agreement may prove technically challenging, but other free trade agreements clinched relied more on politics. The free trade agreement with Lebanon’s former biggest export market, Iraq, needed political backing. The rapport between Lebanon’s key Gulf allies and Iraq during this year’s Arab League summit in Beirut gave the green light for Lebanon to sign the agreement with Baghdad in April.

The agreement, inked by Iraqi Vice-President Taha Yassin Ramadan in Beirut, came into force in mid-June. But the instability of the Iraqi market will spill into 2003, as the sanctions-hit country faces the threat of war. A war in Iraq will not only lead to Lebanon’s loss of a market regained, but also distort trade ties with key export markets to Lebanon, such as Saudi Arabia. “The Arab countries, particularly Syria, Jordan, Saudi Arabia and Iraq, will remain our key export markets,” said Badaro. “In the future, Europe could take on this role, if we concentrate on agro-industries, particularly by developing organic products.”

Also in 2002, Lebanese industrialists began a zero-tariff regime with Syria. Lebanese exports to Syria amounted to $70 million up to November of this year, versus $35 million for the whole of 2001. Syrian exports to Lebanon fell to $187 million up to November this year, against $328 million for 2001.

So far Lebanon has signed six bilateral free trade agreements with Arab countries – Egypt, Jordan, Syria, the United Arab Emirates, Kuwait and Iraq. But it is seeking to expand the scope of its deals with Arab partners beyond trade in goods.

Beirut 07-01-2003
Dania Saadi
The Daily Star

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