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Oman 2014 | ECONOMY | FOCUS: US FTA

The free trade agreement between the US and Oman has boosted bilateral trade between the two countries as well as increased consumer confidence.

On January 1, 2009, Oman and the US entered into a free trade agreement (FTA) providing 100% duty-free access on almost all industrial and consumer products effective immediately. For more sensitive products in this category, the tariffs are to be phased out over a 10-year period. The FTA also covers agricultural products, where the US provides Oman immediate tariff free access to its exports on all products, while the US receives duty free access on 87% of its products, which will be increased to 100% over a decade. In regard to textiles, there is full market access for each country and the elimination of tariffs decided on a product-by-product basis. All in all, the majority of products will be tariff-free after five years. However, the agreement only covers products that contain either US or Omani yarn or fabric.

In 2006, during the Bush Administration, a bilateral trade agreement was signed between Oman and the US to open up trade between the two countries, which had a value of around $1.2 billion; this came in the wake of Oman's 2005 trade deficit of $15.7 million. Following the agreement, bilateral trade grew to $1.7 billion with a higher trade surplus of $80 million for Oman. On the strength of the FTA, the trade balance stood at $2.1 billion at the end of 2009 with an Omani deficit of $218 million. This figure remained steady through 2010 until 2011 when the US began importing more from Oman and bilateral trade hit $3.6 billion with a surplus for Oman of $774 million. However, in 2012, the US began to increase its own domestic production of shale gas and oil and Oman registered lower exports, and the US import increase switched the surplus to a $392 million deficit as total trade declined to around $3 billion. As of August 2013, a similar trading partner was shaping out, with two-way trade at $1.8 billion and Oman recording a $297 million deficit.

As the US continues to increase its domestic production of shale oil and gas, exports from Oman are likely to fall; however, if the Sultanate is able to diversify its economy adequately and move up the value chain to create more value-added products, it may be able to claw back some of the deficit.