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ABSTRACT
Based on a case study of Saudi Arabia's WTO accession, the article offers a critique of conventional factor- and sector-based models of trade policy, proposing instead a two-level institutional account that is likely to be relevant for non-democratic states in general. Historically grown patterns of institutional fragmentation in both public and private sector in Saudi Arabia have made interest formation and the building of policy coalitions difficult. Various WTO-related economic reforms have therefore been held up as long as they were negotiated within the disjointed Saudi system. However, as soon as the Saudi leadership decided to directly follow the reform demands of its international negotiation partners, changes were rammed through rapidly – as institutional fragmentation of interests prevented an encompassing veto coalition against a comprehensive policy package which was in its substance imposed from outside. Fragmentation of state, business and relations between them can hence mean policy stalemate, but can also make for rapid policy adjustment under conditions of external pressure. In its conclusion, the article relates these findings to the institutionalist literature on trade in general.
Notes
1. Cited in Montagu (Citation2001: 48).
2. Depending on how intensely they are involved in production structures of import- and export-competing sectors and what their own consumption patterns are, owners of mobile factors in a Ricardo–Viner world join either protectionist or free-trade sector coalitions – in either case, lobbying stays sector-based (CitationAlt and Gilligan, 1994).
3. For a more historical argument against reductionist explanations of economic and trade policy on other Middle Eastern examples, see CitationChaudhry (1999).
4. Middle East Economic Digest, 8 November 1996: 53; various interviews in Riyadh, 2003–2005.
5. Private Saudi capital held abroad has been estimated at up to US$500 billion. They have become the leading business stratum in the Middle East also in managerial terms; Oxford Analytica Daily Briefs, 8 February 2006.
6. This logic is likely to apply more strongly to diversified groups which are active in several sectors to similar degrees.
7. Interview with Saudi industrialist, March 2004.
8. The clientelist character of bureaucratic employment makes a politically autonomous bureaucracy a very remote prospect – never in Saudi history has a political challenge emerged from the ranks of the administration.
9. For some of Naif's statements cf. Arab News, 25 April 2000.
10. Interview with senior Saudi government consultant, June 2004.
11. Some 11,000 Saudi studied in the US towards the end of the 1970s; Middle East Economic Digest, 14 December 1979: 51.
12. The bilateral element in the WTO accession process generally leaves a lot of space for political interests, as the insiders are in a strong bargaining position (CitationHoekman and Kostecki, 2001: 66f).
13. Interview with senior Saudi government consultant, June 2004.
14. Interview with functionary of General Investment Authority (SAGIA), May 2004.
15. Interview with SAGIA functionary II, April 2004.
16. Interview with Western diplomat I, April 2004.
17. Interview with former Saudi minister, March 2004.
18. Arab News supplement, 17 January 2004: 17, 27.
19. Interview with member of Majlis Ash-Shura, April 2004.
20. Interview with former Saudi bureaucrat, November 2005.
21. Interview with British diplomat, June 2003.
22. Oxford Analytica Daily Briefs, 8 February 2006.
23. Discussion with Saudi diplomat in Oxford, February 2005; Arab News supplement, 17 January 2004: 17.
24. Experts did make tentative sectoral assessments (cf. CitationRamady, 2005: 320ff.). These were hardly reflected upon in the broader debate, however.
25. Discussion with Western economic advisor, December 2005.
26. Interview with SAGIA functionaries III and IV, Western diplomat III, June 2004.
27. Abdalrahman Al-Zamil on the Human Resources Development Forum, 23–25 May 2004 in Riyadh (author's notes).
28. Interview with SAGIA functionary III, May 2004; Arab News supplement, 17 January 2004: 14.
29. Interview with member of Riyadh Chamber board, May 2004; interview with former Saudi minister, March 2004; interview with Majlis Ash-Shura member II, May 2004.
30. Arab News, 18 May 2000, 13 April 2004; Saudi Gazette, 16 March 2004.
31. Discussion with senior Saudi bureaucrat, December 2005.
32. Interview with senior economist of Saudi bank I, December 2003.
33. Arab News supplement, 17 January 2004: 28.
34. Gulf Business, May 1998.
35. A Riyadh Chamber study showing that Saudi will lose from WTO seems to have had no further impact (CitationMalik, 1999: 34). For many years, few people turned up at Chamber meetings on WTO issues.
36. International Spotlight Saudi Arabia, Washington Post, 10 March 2001.
37. Interview with senior economist of Saudi bank II, December 2003.
38. Arab News supplement, 17 January 2004: 17.
39. Gulf Business, May 98.
40. Interview with British diplomat, June 2003.
41. Arab News supplement, 17 January 2004: 28; Saudi Gazette, 4 September 2003; Arab News, 7 September 2003.
42. Arab News supplement, 17 January 2004: 17.
43. Ibid: 13.
44. Interview with SAGIA functionary I, May 2004.
45. Arab News, 1 August 2003.
46. Discussion with Western economic advisor, December 2005. Regarding SABIC's pro-WTO stance cf. CitationSABIC (2004).
47. Interview with senior Saudi government consultant, June 2004; interview with former Saudi minister, March 2004.
48. Arab News supplement, 17 January 2004: 17.
49. Arab News, 20 January 2004.
50. Interview with senior Saudi government consultant, June 2004.
51. Interview with SAGIA functionaries III and IV, April 2004; interview with senior economist of Saudi bank II, December 2003.
52. Interview with SAGIA functionary II, April 2004.
53. Muhammad Omar Al-Amoudi, Saudi agenda and WTO, Arabview, 5 January 2001; <http://www.Arabview.com/articles.asp?article=75>.
54. Interviews with Saudi banker, December 2003, former Saudi minister, March 2004. Majlis legislation itself had not taken WTO requirements into account sufficiently over the years; interview with SAGIA functionary III, May 2004.
55. Middle East Economic Digest, 17 January 1997: 4.
56. Oxford Analytica Daily Briefs, 14 May 1997.
57. E.g. telecoms. The government was reluctant to put pressure on local interests especially in telecoms and banking (CitationWilson, 2004: 91). Journal of Commerce, 20 November 1998.
58. Middle East Economic Digest, 12 June 1998: 30; 18 September 1998: 24; 17 September 1999: 9; William M. Daley, Usama Faqih, press conference 16 October 1999 in Riyadh; http://www.usembassy-israel.org.il/publish/peace/archives/1999/october/me1018a.html.
59. Middle East Economic Digest, 2 July 1999: 3.
60. Phone interview with Western diplomat II, March 2004.
62. Middle East Economic Digest, 16 March 2001: 20.
63. Arab News, 5 November 2001.
64. Middle East Economic Digest, 1 December 2000: 38.
65. Interview with senior Saudi government consultant, June 2004.
66. No one will lose their agent according to a senior businessman; Montagu (Citation2001: 60); Oxford Analytica Daily Briefs, 2 November 2005.
67. Interview with senior economist of Saudi bank II, December 2003.
68. Interview with Western diplomat I, June 2004.
69. Interview with former deputy minister, May 2004.
70. Interview with Western diplomat I, May 2004.
71. The law was also said to have been badly constructed in technical terms; interview with former deputy minister, April 2004; Arab News, 4 January 2004.
72. Middle East Economic Digest, 29 June 2001: 26.
73. Interview with senior Saudi government consultant, June 2004.
74. Arab News, 28 May 2001.
75. Interview with Saudi banker, December 2003. Robert Jordan, US ambassador in the kingdom from 2001 to 2003, commented that certain senior bureaucrats were less committed to the WTO than Crown Prince Abdallah, probably referring to Faqih; remarks Middle East Policy Council conference, January 2006; <http://www.mepc.org/public_asp/forums_chcs/42.asp>.
76. Arab News supplement, 17 January 2004: 29; interview with former minister, March 2004.
77. Interview with British diplomat, June 2003.
78. An EU diplomat was cited that ‘It was a political decision on the Saudi side to move ahead. Dr. Yamani is firmly in favor of membership. That is a big change.’ Arab News supplement, 17 January 2004: 29.
79. Discussion with long-time advisor to Saudi government, November 2006.
80. Cf. <www.sagia.gov.sa>.
81. 9/11 might have contributed to the general sense that reforms are needed in the kingdom, but as the actual decision to push the WTO negotiations came one and a half years later, a direct link is difficult to establish. Moreover, in Saudi Arabia strategic decisions tend to be rather compartmentalized – social, economic and political reforms proceed at different paces and often reacting to different pressures.
82. Examples of sudden activism include the above-mentioned tariff reductions, Abdallah's rejection of a ‘negative list’ of sectors barred for FDI in summer 2000, the privatization of Saudi Telecom, and the 2005 announcement of new ‘economic cities’.
83. Saudi Gazette, 30 August 2003; Arab News supplement, 17 January 2004: 15. Banking has been one of the main areas the Saudi state wanted to protect (CitationWilson, 2004: 91).
84. AMEINFO, 6 July 2004;<http://www.ameinfo.com/news/Detailed/42278.html>; Arab News, 9 August 2003.
85. Oxford Analytica Daily Briefs, 2 November 2005.
86. Arab News supplement, 17 January 2004: 29; Financial Times, 26 February 2004.
87. Arab News, 6 July 2004.
88. Interview with SAGIA functionary III, May 2004.
89. Interview with senior Saudi government consultant, June 2004; more candid interview partners admitted a great role of the WTO.
90. Interview with Western diplomat I, November 2005.
91. Ibid.
92. Arab News, 10 November 2005; 12 November 2005.
93. Arab News supplement, 17 January 2004: 17. This is very much my own experience, too.
94. A seasoned Western observer involved in the negotiations stressed the crucial role of an external ‘judge’ for keeping the reform package coherent and preventing it from fizzling out between different government agencies; interview with Western diplomat I, December 2005.
95. Interview with senior Saudi government consultant June 2004.
96. Arab News supplement, 17 January 2004: 16.
97. Ibid: 17.
98. Interview with Western diplomat I, December 2005.
99. Oil price changes of recent years also did not lead to any of the shifts Frieden and Rogowski would predict in tradable/non-tradable sectoral interests (1996: 41f).
100. Once could say that through their state- and clientele-building strategies, regimes have manipulated the structure of interest representation (CitationNelson, 1988), but on a larger historical scale than envisaged in institutional theories.
101. Liberalization supposedly is the most successful where trade policy is delegated to insulated bureaucratic bodies (CitationHaggard and Webb, 1994). This is patently not the case if there are other bureaucratic veto players.
102. The existing debate on two-level games has mostly focused on the full-scale interplay of domestic and international negotiations (CitationEvans et al., 1993; CitationMayer, 1992; CitationPutnam, 1988). The issue here rather is how exogenous international intervention impacts existing domestic reform negotiations. Putnam has speculated in passing that a ‘chief negotiator’ can use international negotiations to impose domestic policies that would otherwise be unfeasible, but this is not the main focus of the discussion and conditions for this are not analyzed (CitationPutnam, 1988: 457). The comparative insight that if coalitions for change are difficult to organize in a purely domestic context, this will also make veto coalitions less likely and therefore externally imposed change easier to push through is new. In this argument, the policy ‘win-sets’ of two-level games analysis are less important than the more fundamental capacity to formulate and coordinate different interests.
103. Better availability of information arguably empowers protectionist groups (CitationGoldstein and Martin, 2000). In this sense, Saudi Arabia's liberalizing technocrats have been very lucky.