Interview: Roberto Azevêdo
What are the most significant benefits of WTO membership for countries like Oman that rely on hydrocarbons for the bulk of their income?
ROBERTO AZEVÊDO: WTO membership brings many opportunities for acceding countries, and can translate into expanded trade flows and enhanced market access within the 160-member block. Trading within a system of internationally recognised rules, and in stable and predictable conditions, also provides incentives for small and medium-sized enterprises to explore opportunities in new markets.
In the case of Oman, foreign trade has grown strongly in recent years. Between 2006 and 2012 merchandise imports and exports more than doubled. Almost half of Oman’s GDP and over 85% of merchandise exports are based on petroleum and natural gas. However, the Omani government is well aware of the challenges inherent in an homogenous export base. Oil resources are finite, and fluctuating demand can cause wide swings in price. Recognising this, Oman has tried to diversify production and exports away from hydrocarbons. Having a diverse economy and trade base can protect a country from some of the sharp swings in the global economy and widen its access to the know-how, resources and technologies that are essential for a vibrant and innovative business environment.
How transparent does the WTO assess the Omani market to be, and what more needs to be done?
AZEVÊDO: Oman has been a WTO member since November 2000, has been an active participant in the Doha Round and has a particular interest in industrial products and services. In April 2014, Oman’s trade policies were reviewed by the whole WTO membership – a peer review exercise that all members conduct regularly and which has provided a comprehensive update of Oman’s trade regime. Members were generally pleased with the strategies outlined in Oman Vision 2040 and with the way in which open trade and investment regimes were included. Such a programme will help the country further reduce dependencies on one sole sector of the economy. Members commended Oman for its liberal trade policies and for pursuing diversification. Oman achieved tremendous growth in GDP and trade over the past few years and remains a wealthy country, with per-capita GDP of nearly $30,000, just below Spain. Oman was also praised for weathering the financial crisis well, for maintaining low inflation and for its balanced fiscal positions. Members underlined the need for Oman to maintain efforts to ensure transparency in applying its trade policies.
How do the long-term benefits of opening an economy to free trade compare to the short-term risks, and what can be done to mitigate any challenges?
AZEVÊDO: Opening doors to global competition brings both challenges and opportunities. It is true in general that open economies tend to grow faster and more steadily than closed ones, and there is no doubt that economic growth is key to job creation. Increased competition can be a powerful stimulus for companies to seek better and cheaper ways of making products. An infusion of new ideas from abroad can make them more productive, as can enhanced access to export markets. Trade can also be a catalyst for greater efficiency and productivity, because it helps firms gain access to a wider range of high-quality, affordable inputs, as well as to technology and know-how that they could not obtain in a closed economy, which can boost innovation. Last, open trade means firms can seek to join global production chains that have proliferated in recent years.
But trade is only part of the picture. A range of policies are needed for the benefits of an open economy to be fully realised. For example, increased competition can bring local losses, which must then be remedied by adjustments in the wider policy mix, potentially through both economic and social policy. By providing greater transparency and predictability, the rules-based global trading system can help countries overcome such challenges and seize the opportunities on offer.
