The need for trade barriers in the Gulf Cooperation Council is far more pressing now than it was a few years ago, but political hurdles to their implementation remain. This was the general consensus of participants at this week’s Arab Iron & Steel Union (AISU) summit.
Foulath chairman Khalid Al Bassam said it was understandable that 4-5 years ago GCC governments were hesitant to impose trade barriers considering the regional steel market’s small share in global terms.
“We’ve seen huge increases when it comes to cost in general… electricity costs… gas… water… labour, etc,” he said at the Amman meeting attended by Kallanish. “Many of the industries that were built in Saudi Arabia and the GCC in the late 1970s, 80s and 90s, I think they were built based on a competitive advantage which was an energy cost that is more competitive compared to other markets.”
“Now the situation is totally different. The situation… revolves around economic viability and survival of industries including the steel industry,” he continued. For Foulath, for example, annual costs have risen some $65 million. “It’s not a matter of debate now, it’s a matter of survival, it’s a matter of being able to compete, being able to survive,” Al Bassam added.
Charles Julien of White & Case International Trade Practice Group said that, although there has been some steel trade case movement in Saudi Arabia, more needs to be done on a GCC level. Most countries have imposed steel tariffs and there is the potential supply will be diverted to the GCC, which is an open market.
He cited the “… very difficult experience” of Saudi seamless pipemaker Jesco whose petition launched an anti-dumping probe into China-origin imports. The investigating authority found that all conditions had been satisfied, “… and then for political reasons, no measures have been imposed,” Julien observed.
GCC authorities could give preference to local suppliers for state projects, but this is not the case, Julien added. He did concede, however, that collection of statistical data crucial for trade probes is a huge problem in the GCC. Moreover, whenever a probe is initiated by Saudi, other GCC members object to it because they have little or no production and fear it will impact consumers.
An official from the Saudi Industrial Export Company (SIEC/Sadarat) said that absolute protectionist measures cannot be imposed, but individual cases can be communicated to authorities. Initiatives on local content do exist. Moreover, the focus should be on improving efficiency and technology to make products competitive on the international market.