Joining the club

Published on 23 January 2014 in Business
Ali Saeed (author)

Ali Saeed

Dr‭. ‬Hamoud Al-Najar

Dr‭. ‬Hamoud Al-Najar

For 13 years, Yemen was at the negotiation table with the World Trade Organization (WTO) trying to secure its place in the international organization. Finally, at the end of 2013, the Gulf nation’s membership was approved, and it became the 160th country to join the WTO. Dr. Hamoud Al-Najar, the chief of the communication and coordination office for the WTO at the Ministry of Trade and Industry, accompanied Yemen on its over-a-decade-long journey. Despite mounting criticisms of the negative impact Yemen’s accession will have on its national economy, Al-Najar says the fight to join the WTO was well worth it. He discusses with the Yemen Times what it took to get there and how the Arabian Peninsula’s poorest country can benefit from the global markets is now a part of.

On why the World Bank (WB) and the Intentional Monetary Fund (IMF) both recommended Yemen join the WTO:   

Al-Najar: Yemen started financial and administrative reforms in late 1995 in partnership with the IMF and the WB. Trade was one component of the financial and administrative reform program. At that time Yemen's trade system was outdated ―all imported goods had to have a license from the Ministry of Supply and Trade [now referred to as the Ministry of Trade and Industry].

This license was hard to get due to bureaucracy. Officials personally sold licenses instead going through the law. This law was later revoked. However that does not mean the door was opened for all goods to be imported. Pesticides, explosives and drugs still require licenses to enter the country.

The IMF and the WB also recommended Yemen redraft its customs’ tariffs as they were not based on an economic plan. Tariff rates did not differentiate much between luxury goods, commodities and raw materials. The aim of the tariffs was just to generate revenue with no consideration of how it fits into the economy. The IMF and the WB suggested that Yemen gradually shift to a tax system. Yemen eventually responded to this request and dropped its customs’ tariff and introduced a new sales tax law that took a long time to implement.  

In 1998, Yemen began thinking about joining the WTO. So the government set up a committee to explore the possibility of WTO membership.

In 1999, Yemen applied to become a WTO observer and was accepted.

On Yemen’s application process to become a WTO member:

Yemen applied for full WTO membership in April 2000. The application was accepted by the WTO’s general council in its meeting on July 7, 2000. The general council allowed Yemen to begin negotiations allowing for accession. I had the honor to stand next to our minister of supply and trade, Mr. Abdul-Aziz Al-Kumaim, as he delivered Yemen's statement pertaining to its application for WTO membership. Building new mechanisms and finding sufficiently trained individuals were required to begin dealing with the membership negotiations.

  A national committee was set up to deal with the issue. The committee, called the National Committee for the Preparation and Negotiations with the WTO, was headed by the minister of trade and industry. Twenty-two others, including deputy ministers, representatives from the private sector and the Yemeni Workers Union were also included in the committee.  

A Higher Committee was also established. It was headed by the prime minister.

This committee was tasked to guide the national committee and to set specific mandates for the minister of trade and industry.

An administrative office was also set up at the ministry of trade and industry. It was called the Communication and Coordination Office for the WTO. This was a joint office for both the committees.  

Besides supporting Yemen’s accession as a whole, the European Union supported the establishment of this administrative office.

On why Yemen's WTO membership took so long:

When Yemen applied in 2000 for WTO membership, and the application was accepted, Yemen had to prepare a trade policy fact book called the Memorandum on Foreign Trade Regime (MFTR). It had to be submitted to the WTO’s secretariat in order to be disseminated to the organization’s members.  

MFTR uses a standard template for all acceding members to fill out according to a specific outline.  

Yemen was not ready to do this. There was no one to prepare this document. Therefore, the data collection and the preparation for the document took two years. It took time for officials to familiarize themselves with the literature of the [WTO].

The National Committee needed time and the Communication and Coordination Office working with the WTO needed time to streamline its work at the Ministry of Trade and Industry.

In 2000, I was tasked as the economic attaché, responsible for Yemen’s WTO file. I continued my work there until 2005. Then, I came to Yemen. Nagib Hamim, the chief of the Communication and Coordination Office at the Ministry of Trade and Industry took a new job. He left for Geneva, and I took over his job here in Sana'a.

After submitting the MFTR, we received 167 [points needing clarification] on the contents of MFTR. This is a relatively low number compared to other countries submitting the document. We were lucky and this is because Yemen had positive global relations at that time.

The clarifications included questions on legislation and laws, as well as trade policies. It took more than one year for Yemen to clarify the 167 [points]. When WTO members asked for information, the concerned department or ministry, prepared the answers and then the National Committee discussed and approved them. It took a long time because the answers had to be translated to English first and had to be reviewed by an international consultant here in Yemen. Sometimes it required a review by international consultants abroad.

This conservativeness [of Yemeni politicians regarding foreign trade policy] caused many more questions. During the first round of questioning, we were afraid that we would be questioned more. Each answer had to go through the [appropriate] government department, the Technical Committee, the National Committee, the consultants and then sent to the WTO’s governing body.  

In 2004, the first meeting regarding Yemen’s accession was held, chaired by Mr. Hartmut Roeben from Germany.

Then we were asked to present goods and services offers [regarding market access]. This is protocol. The U.S. and the EU asked Yemen for a bilateral meeting in addition to a multilateral meeting.

Then negotiations went ahead in two tracks—bilateral and multilateral negotiations. There were also plurilateral negotiations. This was done by a group of members with interests in agricultural support and other issues.  

On criticisms that Yemen consumes goods and services and doesn’t produce, and therefore WTO membership is not appropriate:

Let's ask all these people who say [Yemen’s current economic state puts it at a disadvantage], ‘how do you know that there is a loss for Yemen as a result of joining the WTO?’ Where is the loss?

This is a common misconception among many people even economists. They say Yemen is at a loss from the WTO membership. I ask, where is this loss? Earnings and losses are based on figures. So tell me where the loss in revenues and for Yemen's membership at the WTO?

It is really nothing. Why nothing? Because we have not made any commitment beyond the current situation. Yemen does not lose anything because of the WTO membership.

Let's say that our situation is not great and Yemen's economic policies are wrong. The current poor economic circumstances are consequences of inappropriate economic policy.

In the 1960s and 1970s Yemen adopted extreme policies that curbed in the importation of foreign products to protect its domestic ones. This policy encouraged owners of industrial plants to drop in quality because there was no competition.

Yemen later opened the door to imported products that consequently hurt [local] textile factories. Yemen doesn’t have anything to lose, [it was already at rock bottom].

On whether Yemen’s WTO membership will contribute to a more secure and stable nation:

Yemen’s WTO membership will encourage competition and boost the state's economy to keep up with global trade under a multilateral trading system. It also promotes direct foreign investment in the country. New investments, even in limited numbers, will create job opportunities. More national products will be exported to other markets without customs tariffs or quotas. This will bolster the national economy. Whenever an economy grows, opportunities for peace and stability increase.

On whether it is possible to change import/export regulations in a way that is beneficial for Yemeni products:

Some law and articles related to import and export regulations had to be amended by Yemen before the WTO finalized Yemen’s accession. They were amended in compliance with the WTO’s standards. There are only two or three laws Yemen is still required to pass. Then, the legal frame of the internal and external trade system in Yemen will be in line with the WTO agreements. Concerned departments in Yemen should review these laws and regulations in parallel with the world trade developments.

On the major benefits of Yemen’s WTO membership:

It is an important chance for Yemen. Some countries have been able to benefit from their WTO status and others have failed to do so. The question is how does Yemen use this chance?

Yemen has many advantages that others do not have, this includes its strategic geographic location.

Yemen's location will enable it to play a vital role in the region and later on in world. In the past, Yemenis had been known for their work in trade more than their work in agriculture or in industry. Trade between Africa and South Asia opens many doors. It is an opportunity for the next generation.

Yemenis have to use commercial trade routes that their ancestors once did. After that, they will have the wealth to move to manufacturing and maintain trade relations. In a statement made at the WTO’s ninth ministerial conference in Bali, Indonesia, the minister of trade and industry, Dr. Saadaldeen Bin Talib highlighted the strong global trade routes Yemenis used to have.

On how membership in the WTO will affect the common consumer

Yemen’s WTO membership will not be the cause of price hikes and will not mean that products are counterfeit. Yemen’s WTO membership ensures the consumer his right to buy a product that is not counterfeit and of international standards. In the next period, Yemen will be making many efforts to ensure the consumer that imported products are meeting international standards.