Saudi Arabia has maintained a trade surplus since 1967 (when its trade statistics were first compiled in their current form). As the kingdom generates a majority of its revenue from petroleum exports, this surplus tends to rise and fall with the price and production of oil. After the oil embargo of 1973, when oil prices were high, the king-dom's trade surplus rose, increasing steadily until 1978. This trend continued after the Iranian revolution of 1979 when oil prices rose to new levels. Between 1978 and 1981 Saudi Arabia's trade surplus doubled, reaching a peak of US$82.5 billion.
|Trade (expressed in billions of US$): Saudi Arabia|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.|
The surplus declined steadily throughout the 1980s as export volume diminished and oil prices fell. By 1985, the balance of trade had fallen to just US$7 billion. In 1990, Iraq invaded Kuwait, prompting the United Nations to place an embargo on Iraqi oil. The cut in supply sent prices back up, and as Saudi Arabia heightened production to meet world demand (from 5.1 million b/d in 1989 to 8.2 million b/d in 1991), export revenues increased and the trade surplus rose once again. In 1996, export revenues exceeded import expenditures by US$35.3 billion.
In 1998, the world economy slowed. At the same time, oil production by both OPEC and non-OPEC members increased. The higher production levels coupled with lowered demand caused the price of oil to fall by almost US$7/barrel, from US$19.12/barrel in 1997 to US$12.76/barrel in 1998. In Saudi Arabia, oil receipts fell and the trade surplus dropped to US$11.2 billion. In 1999, oil producers worldwide lowered production, and the corresponding rise in prices helped boost Saudi Arabia's export revenues, pushing the trade surplus to US$25 billion. This upward trend continued throughout 2000 when the surplus rose to US$52.4 billion.
Saudi Arabia imported US$28 billion worth of goods in 1999. A majority of that expenditure went toward the purchase of machinery, electrical equipment, chemicals, foodstuffs, and transportation equipment (cars, trucks, buses). Agricultural imports accounted for 17 percent of the total in 1999, up 11 percent since 1992, reflecting cuts in farm subsidies and the consequent decline in domestic food production. Electrical equipment and machinery accounted for 24 percent of the kingdom's total imports in 1999.
Saudi Arabia's exports totaled US$48 billion in 1999. Over 90 percent of those earnings were derived from the export of oil.
A majority of Saudi Arabia's trade is conducted with the United States. U.S. goods in 1998 accounted for 21 percent of Saudi imports, over twice as much as the king-dom's next leading suppliers, the United Kingdom and Japan, whose imports to Saudi Arabia amounted to 9 percent each. Germany, France, and Italy were other major suppliers of goods.
Japan emerged as the leading buyer of Saudi goods in 1998, purchasing 17 percent of the kingdom's exports. The United States was close behind with 15 percent of Saudi exports. Saudi Arabia provides the United States with approximately 20 percent of its imported crude oil. The kingdom also is a major exporter to South Korea, Singapore, India, and France.
Saudi Arabia and its fellow members of the Gulf Cooperation Council (GCC)—Kuwait, Qatar, the United Arab Emirates, Bahrain, and Oman—have, over the past decade, been trying to promote higher levels of trade between themselves by removing barriers to the free exchange of goods, services, and capital between member states. One of these barriers, the lack of a common external tariff, has continued to complicate moves toward greater economic integration.
Saudi Arabia generally applies a 12 percent tax on imported goods, unless those goods compete with locally produced items, wherein the tax is issued at 20 percent. (Taxing certain imported items at higher rates raises the price at which the items are then sold. This helps keep local manufacturers competitive.) This is the highest import tax in the Middle East and is a point of contention between Saudi Arabia and other GCC members. In order to gain entry into the WTO, Saudi Arabia will be forced to lower tariffs to a maximum of 7.5 percent, bringing import taxes in line with other WTO member states. Imported medical goods, basic foodstuffs, and other items considered essential are exempt from the tax.
Some items, either for religious reasons or purposes of state security, are banned in Saudi Arabia. The import of non-medical drugs and alcohol is forbidden, as is any religious material which might be deemed offensive to the principles of Islam. Furthermore, the import of weapons and electronic equipment is tightly controlled.