Jordan’s multitude of free trade agreements (FTAs) has created a vehicle for both domestic economic development and greater integration with the global economy. In 1997 King Hussein signed the Greater Arab Free Trade Agreement (GAFTA), marking the first of a series of trade-related accords. Throughout the 2000s, Jordan signed more than seven FTAs, making its economy one of the most open in the Middle East. These developments are a testament to the kingdom’s commitment to economic liberalisation policies as well as its efforts to forge stronger political ties through commercial diplomacy.
Strong Relations With The US
In 2000 King Abdullah II ibn Al Hussein implemented a series of policies to accelerate economic reform that facilitated the kingdom joining the World Trade Organisation. Following its membership, Jordan signed an FTA with the US, which was implemented incrementally over the course of the following decade, becoming fully operational in 2010. The agreement marked a key moment for both countries. For the US, it was only the third FTA the country had signed and the first agreement of its kind with an Arab country. For Jordan, the FTA affirmed its strategic relationship with the US while also creating a strong incentive for American foreign direct investment and increasing access to the US market for Jordanian exporters.
The empirical impact of the US-Jordan FTA cannot be overstated. Economic ties between Jordan and the US have dramatically increased since the agreement: bilateral trade increased from $31m in 1999 to $1.1bn in 2011, and in 2014 the total volume of traded goods between the two countries was $3.45bn. The kingdom soon became a clothing-manufacturing hub, as American firms such as Walmart and Target set up factories in the country. The agreement has galvanised the manufactured clothing industry, which has become a leading export sector for the country; in 2014, $1.35bn worth of garments were exported from the kingdom, constituting 15.2% of Jordan’s total global exports.
GAFTA
While trade links between Jordan and the US are robust, the kingdom has also actively sought greater integration into the regional economy as well. GAFTA is part of an effort to boost economic cooperation among the 22 Arab League member states. The agreement came into full effect in 2005 and has resulted in multiple exemptions from Customs duties and charges. GAFTA has significantly increased Jordan’s trade relations with neighbouring countries in 2014 trade volumes with GAFTA members totalled JD7.53bn ($10.59bn).
Particularly vital to Jordanian exporters is the Iraqi market. Jordan is a natural gateway for goods destined for Iraq, and the kingdom’s port city of Aqaba has historically played an important role in transporting goods to the country. However, recent turmoil in the region has taken a toll on bilateral trade, increasing security risks and transportation costs for truck drivers crossing Iraq’s Anbar Province and disrupting traffic. According to the Department of Statistics, Jordan’s exports to Iraq fell by 17.5% during the first two months of 2015, from $186.57m to $154m. Moreover, Bilateral trade volumes decreased by over 26% between 2013 and 2014, from JD1.14bn ($1.6bn) to JD833m ($1.17bn).
Other Trade Agreements
In addition to numerous accords with the US and members of the Arab League, Jordan has signed trade agreements with a number of other regional bodies and countries. In 2001 Jordan signed an FTA with the European Free Trade Association – a group comprising Iceland, Liechtenstein, Norway and Switzerland – which resulted in the complete liberalisation of trade by 2014. Additionally, in 2002 the kingdom signed an economic association agreement with the EU, paving the way for more liberal movements of capital between the region and the kingdom.
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