International Trade Debate

Advantages of International Trade

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Professor XXXXX

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Introduction

This discusses briefly the advantages of international trade through World Trade Organization (WTO ) membership using the petrochemical industry of Saudi Arabia as a case in point

Advantages of WTO Membership

Saudi Arabia has a comparative advantage of producing petrochemicals over foreign competitors because of the relatively cheap priced inputs e .g , feedstock - domestic investors pay less than the export price of feedstock since the domestic market does not require an export marketing infrastructure

(Global Investment House , 2008 . With this cost advantage , the country gains more from its membership to WTO through (1 ) Increased international competitiveness of the petrochemical industry . The tariff reduction requirement for all WTO members has opened foreign markets , particularly tariff-protected markets like US and Japanese markets , to Saudi Arabian petrochemical exports . The cheaply-priced exports relative to the products of its foreign competitors have increased Saudi Arabia 's export earnings on petrochemicals (Al-Sa 'doun , 2005 (2 ) Improved domestic competitiveness of the petrochemical industry With reduced tariff , Saudi Arabia has opened its market to imported petrochemical products . This stimulates strong competition among petrochemical producers as they compete for a share in the domestic market . This competition ensures products of low price and high quality that matches or even exceeds that of the world standards . In the short-run , this may result to a narrower profit margin on local sales but will boost the competitive capacity of Saudi petrochemical industry in the long-run (Al Zuhd , 2005 (3 ) Increased anti-dumping protection . Saudi Arabia can use the WTO dispute settlement mechanism against any anti-dumping duties or other barriers in the foreign markets on its petrochemical exports of Saudi Arabia (Al Zuhd , 2005

References

Al-Sa 'doun , A (2005 . The impact of Saudi Arabia 's accession to WTO on petrochemical industries . Arab News . Retrieved June 23 , 2008 , from http /www .arabnews .com ?page 6 section 0 article 74580 d 12 m 12 y 2005

Al Zuhd , T (2005 , December 11 . Saudi Arabia 's accession to the World Trade Organization : a quick assessment of its economic commercial impact . Saudi Commerce and Economic Review . Zaywa . Retrieved June 25 2008 from http /www .zawya .com /printstory .cfm ?storyid ZAWYA436 l 000000 051211

Global Investment House (2008 . Petrochemical industry - Saudi Arabia economic and strategic outlook . Global Investment House Economic Report Retrieved June 24 , 2008 , from www .tradearabia .com /news /downloadmktreport .asp /source /Market_Ana lysis /Market_Analysis127 .doc

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