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Experts urge politicians to tackle trade deficit

  • File - Trucks and cars are seen at the entrance of the Beirut port, Monday, Aug. 26, 2013. (The Daily Star/Mohammad Azakir)

BEIRUT: Industrial and agricultural experts urged the government over the weekend to take measures aimed at curbing a trade deficit that has neared $7.33 billion in the first five months of 2014, recording an increase of 1.85 percent in comparison with May 2013.

Lebanon’s balance of trade deficit widened by $133 million to just below $7.33 billion during the first five months of 2014, according to statistics published by the Higher Council of Customs.

The increase in the deficit was buoyed by a $578 million contraction in exports to around $1.39 billion, which outweighed the $445 million year-on-year drop in imports to around $8.71 billion.

Antoine Hwayek, head of the Farmers’ Association, attributed the hike in the trade deficit partly to the government’s lag in implementing measures that would protect the production of farmers, resulting in an increase in imports of cheaper products from other countries.

“The government should impose tariffs on imports of foreign products in order to protect farmers’ crops,” he said. “This would enable them to sell their produce locally and even increase their investment to produce a variety of crops and in turn increase their exports.”

Hwayek blamed the government for the misery of farmers, saying that it has done nothing to help protect the sector.

“I expect imports to go up further with time if the government does not change its policy of dealing with this sector because farmers won’t be able to invest more due to foreign competition, and their production will drop,” he said.

Hwayek also blamed the Agricultural Research Institute of Lebanon (LARI), which he said had failed to assume its full responsibilities.

“The Institute should conduct research into foreign markets to help Lebanese farmers in identifying the needs of these markets,” he said. “This would help farmers in producing the required quantity and kinds of crops for these markets and in making full profit out of their production,” he said.

“But unfortunately LARI is kind of non-existent.”

Likewise, Fadi Gemayel, president of the industrialists’ association, called upon the government to increase tariffs on imports in order to protect local production.

“We made some suggestions to officials from the Industry and Economy ministries to either increase tariffs on imports or offer some compensation for the high energy costs,” he said.

Gemayel argued that high energy costs are impeding many sectors from manufacturing properly at competitive rates. However, he added that the Industry and Economy ministries were being very responsive and understanding of the scope of the problem.

Gemayel believes that one of the main problems facing industry is its dependence on markets that are unstable such as Iraq.

“We need to take advantage of the Lebanese diaspora in Africa and Eastern Europe and shift our production to these markets,” he said.

“But we need some contribution in the extra cost incurred for opening new markets,” he said, noting a particular need for support from transportation companies in Lebanon.

Gemayel argued that Lebanon has CMA CGM, the world’s third-biggest shipping company, and it should be able to benefit from that.

“They are strong and we need them to give us some competitive rates to Africa and other traditional markets,” he said.

“This will definitely help boost our exports,” he added.

Lebanese exports suffered a drop of 29.41 percent from $1.96 billion in May 2013 to $1.39 billion in May 2014. Imports have only dropped by 4.86 percent from $9.1 billion in May 2013 to $8,71 billion in May 2014.

The trade deficit recorded an increase of 1.85 percent from $7.19 billion in May 2013 to $7.32 billion in May 2014.

Economist Ghazi Wazneh believes that the trade deficit cannot be curbed in Lebanon because 75 percent of national consumption relies on imported goods.

“Import is increasing year after year because the population is going up and internal demand is growing,” he said.

Wazneh said the trade deficit in 2014 is moving upward because of the increase in the price of oil while Lebanon imports around $6 billion worth of oil derivatives per year.

As for exports, he added, Lebanon exports around 30 percent of its products to the region and mostly to Iraq, which is suffering from severe security issues. “This is why it is normal to witness a drop in Lebanese exports,” he said.

Wazneh did not express any optimism about having competitive agricultural or industrial sectors in the coming 10 years.

“We need to have a clear agricultural policy and a proper vision for the sector,” he said.

“The agricultural sector is not even sufficiently supported by banks. Unfortunately, less than 1 percent of bank loans go to agriculture.”

“Banks have more interest to invest in commerce or real estate than in agriculture because it is a risky sector,” he added.

Wazneh argued that the government is focusing only on service sectors such as tourism and banking while sectors such as agriculture and industry are able to create more jobs.

“More focus should go to these sectors because a factory, for instance, has the capacity of providing hundreds of job opportunities while a bank usually has a specific number of vacancies,” he said.

Asked about the potential benefits of Lebanon joining the World Trade Organization, Hwayek saw no advantages at all, arguing that, on the contrary, it would contribute to a further deterioration of the agriculture sector. “We will be facing a fierce competition from other markets,” he said.

Gemayel had a different opinion regarding the WTO.

“People in Lebanon must accept the fact that WTO does not mean that we are going to the jungle or to unregulated areas,” he said. “There are also mechanisms through the WTO that would protect Lebanese industries from dumping.”

 
A version of this article appeared in the print edition of The Daily Star on July 07, 2014, on page 5.
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Summary

Industrial and agricultural experts urged the government over the weekend to take measures aimed at curbing a trade deficit that has neared $7.33 billion in the first five months of 2014, recording an increase of 1.85 percent in comparison with May 2013 .

The increase in the deficit was buoyed by a $578 million contraction in exports to around $1.39 billion, which outweighed the $445 million year-on-year drop in imports to around $8.71 billion.

Lebanese exports suffered a drop of 29.41 percent from $1.96 billion in May 2013 to $1.39 billion in May 2014 .

Economist Ghazi Wazneh believes that the trade deficit cannot be curbed in Lebanon because 75 percent of national consumption relies on imported goods.

Wazneh said the trade deficit in 2014 is moving upward because of the increase in the price of oil while Lebanon imports around $6 billion worth of oil derivatives per year.

As for exports, he added, Lebanon exports around 30 percent of its products to the region and mostly to Iraq, which is suffering from severe security issues.

Wazneh argued that the government is focusing only on service sectors such as tourism and banking while sectors such as agriculture and industry are able to create more jobs.


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