|
Iraq
FOREIGN TRADE
The pattern of Iraqi foreign trade in the 1980s was shaped primarily
by the Iran-Iraq War, its resulting deficit and debt problems,
and developments in the petroleum sector. Iranian attacks on petroleum
industry infrastructure reduced oil exports sharply and Iraq incurred
a trade deficit of more than US$10 billion in 1981. The pattern
continued in 1982 as the value of Iraqi imports peaked at approximately
US$23.5 billion, while exports reached a nadir of US$11.6 billion,
leading to a record trade deficit. In 1983, however, imports were
cut roughly by half. Figures for Iraq's imports and exports from
1984 onward vary widely and cannot be considered authoritative.
Despite the partial recovery of Iraqi oil exports in 1986, exports
were valued at only about US$7.5 billion because of the plunge
in world oil prices (see Oil in the 1980s , this ch.). In 1987
imports were expected to rise to about US$10 billion. Export revenues
were also expected to rise, as Iraq compensated for low oil prices
with a higher volume of oil exports (ssee; table 8, Appendix).
Iraq had counted heavily on solving its twin debt and deficit
problems by reestablishing and eventually by augmenting its oil
export capacity. But increases in volume were insufficient to
offset lower prices, and because demand remained low, expanded
oil exports served only to glut the market and further drive down
the price of oil. The depressed price of oil and the low prices
of other raw materials that Iraq exported, coupled with higher
prices for the goods it imported, trapped the nation in the classic
dilemma of declining terms of trade. Although Iraq was cutting
the volume of its imports and was increasing the volume of its
exports, the relative values of imports and exports had shifted
fundamentally. More than 95 percent of Iraq's exports were raw
materials, primarily petroleum. Food stuffs accounted for most
additional exports. Conversely, nearly half of Iraq's imports
were capital goods and consumer durables. According to Iraqi statistics,
34.4 percent of 1984 imports were capital goods, 30 percent were
raw materials, 22.4 percent were foodstuffs, and 12.5 percent
were consumer items.
Iraq's declining imports resulted not so much from belt- tightening
or from import substitution, as from the increasing reluctance
of trading partners to extend credit. Despite its socialist orientation,
Iraq had long traded most heavily with Western Europe. Initially,
Iraq's debt accumulation worked in its favor by creating a hostage
effect. Western creditors, both governments and private companies,
continued to supply Iraq in an effort to sustain the country until
it could repay them. Additionally, the debt helped to secure outlets
for Iraqi petroleum in a tight international market through barter
agreements in which oil was exchanged for a reduction in debt.
In 1987 however, as some West European companies prepared to cut
their losses and to withdraw from the Iraqi market, and as others
curtailed sales by limiting credits, other countries were poised
to fill the vacuum by offering goods and services on concessional
terms. Companies from Brazil, South Korea, India, Yugoslavia,
and Turkey, backed by their governments' export credit guarantees,
were winning an increasing share of the Iraqi market. In 1987
the Soviet Union and East European nations were also offering
goods and services on highly concessional terms. Eventually, Iraq's
exports might also be diverted from the West toward its new trading
partners.
Iraq continued to seek Western imports when it could afford them.
In 1987 Iraq was forced to ration imports for which payment was
due in cash, although nonessential imports were purchased if the
seller offered credit. Imports contributing to the war effort
had top priority. Imports of spare parts and of management services
for the maintenance of large industrial projects were also deemed
vital, as Iraq sought to stave off the extremely high costs it
would incur if facilities were shut down, mothballed, and then
reopened in the future. Consumer goods were given lowest priority.
In 1985 Iraq purchased 14.4 percent of its total imports from
Japan. Iraq bought an array of Japanese products, ranging from
transport equipment, machinery, and electrical appliances to basic
materials such as iron and steel, textiles, and rubber goods.
In 1987, as Iraqi debt to Japan mounted to US$3 billion, the government
of Japan curtailed the export insurance it had offered Japanese
companies doing business with Iraq; nevertheless, Japanese companies
continued to trade with Iraq. Iraq bought 9.2 percent of its imports
from West Germany. Neighboring Turkey provided the third largest
source of Iraqi imports, accounting for 8.2 percent of the total.
Italy and France each accounted for about 7.5 percent, followed
by Brazil with 7 percent and Britain with 6.3 percent. Kuwait
was Iraq's most important Arab trading partner, contributing 4.2
percent of Iraq's imports (see
table 9, Appendix).
In 1985 Brazil was the main destination of Iraqi exports, accounting
for 17.7 percent of the total. France was second with 13 percent,
followed by Italy with 11 percent, Spain with 10.7 percent, Turkey
and Yugoslavia with about 8 percent each, Japan with about 6 percent,
and the United States with 4.7 percent.
In April 1987, the government attempted to streamline the trade
bureaucracy by eliminating five state trading companies that dealt
in various commodities. Although the state trading companies had
been established in the 1970s to foster increased domestic production,
they had evolved into importing organizations. In view of this
orientation, their operations were incorporated into the Ministry
of Trade. Three Ministry of Trade departments, which had administered
trade with socialist, with African, and with Arab nations, were
abolished. The responsibilities of these disbanded organizations
were centralized in a new Ministry of Trade department named the
General Establishment for Import and Export.
The Ministry of Trade implemented a national import policy by
allocating portions of a total budget among imports according
to priority. The import budget varied from year to year, depending
on export earnings and on the amount in loans that had been secured
from foreign creditors. The government's underlying intention
was gradually to replace imported manufactured products with domestic
manufactured products and then to increase export sales. In the
mid-1980s, however, the government recognized that increased domestic
production required the import of intermediate goods. In 1987
state companies were permitted for the first time to use private
agents or middlemen to facilitate limited imports of necessary
goods.
The private sector, which had long been accorded a quota of total
imports, was also deregulated to a limited extent. In 1985 the
quota was increased to 7.5 percent of total imports, and the government
gave consideration to increasing that percentage further. All
imports by the private sector had previously been subject to government
licensing. In 1985, Law No. 60 for Major Development Projects
exempted the private sector from the obligation to obtain licenses
to import basic construction materials that would be used in major
development projects. In an attempt to increase remittances from
Iraqis abroad, the government also gave special import licenses
to nonresident Iraqis, if the value of the imports was invested
in Iraq and was not transferred outside the country.
In 1987 the rules concerning private sector imports were liberalized
further when private sector manufacturers were granted special
licenses that permitted them to import raw materials, spare parts,
packaging, machinery, and equipment necessary for plant modernization
and for expansion. In some cases no ceiling was placed on such
imports, while in other cases imports were limited to 50 percent
of the value of the export earnings that the manufacturer generated.
Such imports were not subject to quotas or to foreign exchange
restrictions. Moreover, the government announced that it would
make no inquiry into the companies' sources of financing. In a
remarkably candid statement in a June 1987 speech, Saddam Husayn
promised that citizens would not be asked where they had acquired
their money, and he admitted that the private sector had not imported
any goods because of its fear of prosecution by the security services
for foreign exchange violations.
While the government permitted more imports by the private sector,
it nevertheless continued to promote exports at the same time.
Starting in 1969 it maintained an Export Subsidy Fund, which underwrote
the cost of eligible nonpetroleum exports by up to 25 percent.
The Export Subsidy Fund was financed with a tax of .5 percent
levied on imports of capital goods and .75 percent levied on imports
of consumer goods. Most imports were also charged both duty and
a customs surcharge that varied from item to item. Export licenses
were granted freely both to public and to private sector firms
with only a few exceptions. The Board of Regulation of Trade had
the authority to prohibit the export of any commodity when domestic
supplies fell short of demand, and the control over export of
certain items was reserved for the General Organization of Exports.
The degree to which government economic policies would be liberalized
in the late 1980s remained to be seen. The government had taken
several steps in that direction but state controls continued to
play a major role in the economy in 1988.
* * *
Both primary and secondary source information on the Iraqi economy
tends to be both scant and dated. The government of Iraq has regarded
data on national economic performance as a state secret, particularly
since the start of the Iran-Iraq War in 1980. The government does
not publish a budget, although it releases a yearbook, the Annual
Abstract of Statistics, which contains some economic figures.
The Iran-Iraq War has also diverted scholarly attention from economic
issues. One exception is Phebe Marr's The Modern History of
Iraq, which contains a chapter titled "Economic and Social
Changes under the Revolutionary Regime." The most detailed and
authoritative periodic reports on the Iraqi economy are produced
by the Wharton Econometric Forecasting Associates in their semiannual
Middle East Economic Outlook. The Economist Intelligence
Unit's Country Report: Iraq, a quarterly, contains much
useful information and analysis. Another good source of up-to-date
information is the Middle East Economic Digest. (For
further information and complete citations, see Bibliography.)
Data as of May 1988
|
