Story: Transparency in trade is critical to increasing exports from Jordan (en)
Two-thirds of Jordanian companies struggle with regulations that block trade by adding costs and causing delays, say businesses interviewed for Jordan: Company Perspectives, which is now available in Arabic. Procedures related to compliance are the biggest challenge, they say.
The Arabic translation of this International Trade Centre (ITC) publication on non-tariff measures means the important voice of Jordanian traders can be more easily heard across the Middle East. Local business support institutions can better use the report to help Jordanian importers and exporters deal with procedures – because that’s where they face the most problems.
‘Pre-shipment inspections, the way officials apply regulations, high fees and charges, and rules of origin are the main obstacles that affect Jordanian businesses at their border, as well as in destination markets,’ the report finds.
Jordanian exports of goods such as agricultural products, chemicals and clothing were worth $7.75 billion in 2018.
Difficulties accessing Arab markets
Even though Jordan has forged numerous free trade agreements to position itself as a strategic trade hub, domestic policies are needed to tackle trade barriers. This is particularly true in other Arab countries.
Despite the Greater Arab Free Trade Area that eliminated customs duties among the 17 member countries, the region remains a tricky destination for Jordanian exporters. The 22 countries in the League of Arab States account for 93% of all regulatory difficulties that Jordanian exporters experience – although only 53% of their goods are destined for this region.
Rules of origin and related certificates of origin are a particular concern. Businesses reported that officials in the region, particularly in Saudi Arabia and Iraq, do not systematically recognize Jordanian testing certificates.
For instance, Iraq requires its embassy in Amman to stamp each copy of the certificates and ‘this is costly and time consuming’, one metal tube exporter said. A Jordanian perfume exporter complained that ‘when exporting to Saudi Arabia, the classification is not always right, which leads to a new set of testing that requires additional payments and delays’.
The many samples required for testing, and the various tests per shipment, can make the final bill too high for some companies – especially smaller firms.
Saudi Arabia, which plays a central role as a destination for Jordanian products and as a transit country, bought 16% of Jordan’s exports in 2015, but accounted for 33% of the troublesome regulations identified in the report.
Compliance is the main hurdle
In 88% of cases, the steps to comply with regulations are the problem – not the regulations themselves. This is considerably higher than the 60% reported by other developing countries where ITC conducted similar surveys.
‘This difference means Jordanian companies consider themselves to be more “export-ready”, which suggests searching for improvements in the field rather than by modifying regulations,’ the report says.
A third of the challenging procedures that Jordanian exporters face stem from the way officials apply regulations. For instance, some companies said customs officials use different methods to evaluate goods and to determine their codes in the Harmonized System classification. This leads to unpredictable tariffs and costs.
What can be done to aid Jordanian traders?
The government of Jordan and trade support institutions can help to address some of these barriers, the report says. A key recommendation is to create a national assessment centre to simplify testing and conformity assessment. In line with this, the report also urges the government to focus on attracting investment to modernize laboratories, especially those testing food and medicines.
Stronger communication channels between the public and private sectors and greater transparency in calculations for duties on imports are needed, the report says. In parallel, it recommends investing in training for governmental officials.
Better and deeper trade negotiations with Saudi Arabia would simplify cross-border procedures and ensure that those applied by the Saudis are more transparent. Expanding the trade agreement with the European Union to include agricultural products would give a boost to Jordan’s farm sector, the report says.