The Syrian-Lebanese free trade agreement was supposed to stimulate trade. Why has it failed to do that?
Lebanon’s total imports are down 25%, as are Syria’s. It’s not just a problem between Syria and Lebanon. It’s a problem relating to the economic possibilities in Lebanon and Syria. There is stagnation and recession. We also have to take into consideration the price of oil. Last year, the price was $8 or $9 a barrel. The biggest imports (50% to 60%) from Syria are oil, gas and fuel oil. The quantity is still the same, but the price has gone down. Another point, Lebanon imports about $25 million in truffles from Syria. Last year, there were no truffles, no production in Syria. At the same time, we’re still trying to resolve problems concerning the formalities of trade. We have to facilitate the formalities. We also have to find a solution to the problem with letters of credit (L/C).
You mentioned letters of credit. If a Syrian wants to import goods from Lebanon, he must pay 100% up front for an L/C. That’s not the case with other countries. What are you doing to solve this problem?
KHOURY There was a meeting between representatives of the Commercial Bank of Syria and about five or six private banks here. They decided that the first step towards a solution was to open a credit line between the Commercial Bank of Syria and the association of banks in Lebanon to facilitate the method of payment. About six banks here have this agreement and we hope that all other banks follow. But the issue is still under discussion. I hope that in four or six months, many of these problems will be solved.
This agreement makes exceptions for a number of items. Can you really call this free trade?
KHOURY This week an agreement was ratified for porcelain, reducing tariffs by 50%. With beverages, the problem is with customs duties. Other items, like marble, juice concentrate, mineral water and certain beverages such as Pepsi are kept out of the agreement. We are discussing these items. At the same time, there are about 20 industrial items that cannot be imported into Syria by the private sector. For example, Chiclets, who have a lot of factories in Syria, go through a public sector company. If the market needs it, they import it. If it doesn’t need it, they don’t import it. So we are discussing the possibilities of permitting the private sector to import these types of items from Lebanon. I think they are going to cancel this rule within a month. The private sector responds better to the market.
Agricultural products were also not included. The two sides negotiated a separate agreement in October. What was that agreement and why hasn’t it been implemented?
It calls for an immediate 50% reduction in tariffs on 22 items that are grown in both countries and a further I 0% reduction each year for the next five years. It was signed at the end of October, but not ratified. I expect it to be ratified at the end of this month.
Farmers here are worried that they will not be able to compete with Syrian produce. What do you think?
A commission from both countries was formed two months ago and is discussing how to coordinate agricultural policy, increase complementarity and specialization in regards to what both countries grow. When the plan is finished we will have an idea of what should be done in Lebanon and Syria.
Traders complain that the agreement is arbitrarily enforced at the border. One day something is allowed, the other it is not. Tariffs change on the whims of the customs agent.
KHOURY Both sides complain about this. Sometimes customs agents change the price. Sometimes you find an agent who changes the tariff code as he likes. You have a certificate of origin and you arrive at customs and they say that it’s not correct. We have a commission for Syria and Lebanon. You can sometimes complain to this commission and they will check up on the problem.
Fadi Abboud, president of the North Metn Industrialists’ Association, recently called the agreement “no more than an exercise in public relations.” Others have expressed similar feelings. What’s your response?
KHOURY I know Fadi Abboud very well. I think he believes deeply in the relationship between Syria and Lebanon. He is for a common market. He wants to promote it. That’s why he complains all the time. He is in a hurry all the time. But you cannot take everything as you see it. You have rules, you have an economic situation. You have a lot of things to take into consideration when you implement an agreement.
