FTA Insights
Jordan’s Free Trade Agreements
A Free Trade Agreement (FTA) is an international economic agreement that establishes an improved (preferential) market access between its members (two or more) on a reciprocal basis. As a building block in modern World Trade Order, FTA can be bilateral (e.g. Jordan-US FTA) or regional (e.g. Jordan-EU FTA).
An FTA removes/ reduces barriers to international trade (particularly tariff and quantitative restrictions) and offers better access to foreign markets. In addition to trade in goods, modern FTAs usually cover trade in services and investment provisions. They can also include a range of provisions on intellectual property, customs cooperation and trade facilitation as well as harmonize standards and encourage regulatory cooperation.
Mostly signed in the third millennium, Jordan has concluded 18 reciprocal Free Trade Agreements, over and above several (partial scope) trade & cooperation agreements (see: Jordan Customs website). This network exceeds the average number of Preferential Trade Agreements that a WTO member is party to (about 13 agreements per country).
Sources: ITC Rules of Origin Facilitator; Jordan Customs (Jordan Trade Facilitation Portal); and Ministry of Industry, Trade and Supply.
Note: A MoU was signed on 14th March 2007 at the Common Market for Eastern & Southern Africa (COMESA) Secretariat in Lusaka, Zambia. COMESA covers: Egypt, Libya, Kenya, Ethiopia, Zimbabwe, Mauritius, Madagascar, Burundi, Zambia, Comoros, Eswatini, Congo, Djibouti, Uganda, Rwanda, Malawi, Seychelles, and Eritrea. In 2020, Egypt, Libya, and Kenya constitute over 95% of Jordanian exports to COMESA countries. The MoU covers cooperation in the sectors of trade, tourism, housing skills development and technology transfer. It is noteworthy that COMESA requires 35% Rules of Origin value addition criterion.
Two approaches for analyzing Jordan’s FTAs
-FTA-Specific Analysis: Focusing on unique features and market access conditions & opportunities for 15 Free Trade Agreements signed by Jordan. No attempt to conduct an in-depth side-by-side (legal) content comparison of Jordan’s FTAs.
-Comparative FTA Analysis: Mapping “Jordan's FTA Integrated Matrix” (see: Jordan FTA Network Matrix: A Comparative Analysis), covering the most important trade agreements. Comparison is undertaken under key criteria, such as: market size and dynamics, sectoral covered, trade complementarity, and benefit to business.
Probably the two largest and promising FTAs for leveraging Jordan's export performance are: Jordan-US FTA and Jordan-EU FTA. USA and the EU are two of the largest economic powers of the world. With other trade partners, including the Arab world, this wide FTA network allows gaining access to over 1 billion consumers worldwide.
Jordan-U.S. Free Trade Agreement (FTA)
ü A bilateral Agreement signed in 2000, went into force in 2001, and fully implemented in 2010.
ü Market size: US$ 2.9 T (2021).
ü Market growth: 3% (2017-2021).
ü World market share: 13%.
ü Ranking in world imports: Number one (1st).
ü The first free trade agreement between the United States and an Arab country (and the United States' fourth FTA).
ü The agreement grants duty-free status to nearly all Jordanian exports to the United States.
ü It covers both Goods and Services trade.
ü It eliminates duties and commercial barriers to bilateral trade in goods and services.
ü Rules of origin require that goods be composed of a minimum of 35 percent Jordanian content to be eligible for duty-free entry.
ü It includes separate sets of substantive provisions addressing trade and the environment, trade and labor, and electronic commerce. Other provisions address intellectual property rights protection, balance of payments, rules of origin, safeguards and procedural matters such as consultations and dispute settlement.
ü Export Potential: The products with greatest export potential from Jordan to United States are: Jerseys & similar of man-made fibers, knit/crochet, Men's shirts of man-made fibers, knit/crochet, and Men's trousers & shorts of synthetic fibers, knit/crochet. “Medicaments consisting of mixed or unmixed products, for retail sale” shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$ 97 M.
Jordan-EU Association Agreement (AA)
Aim: To establish the conditions for the progressive liberalization of trade in goods, services and capital.
Market size: US$ 6.3 T (2021).
World market share: 29%.
Brief: The Jordan-EU Association Agreement entered into force in May 2002. In 2006, the EU and Jordan concluded an additional Agreement on Trade in Agricultural and Processed Agricultural Products and, by now, the EU has granted Jordan duty-free market access for nearly all agricultural products (except virgin olive oil and cut flowers, which are subject to quotas (TRQs).
Export Potential: The products with greatest export potential from Jordan to Europe are: Jerseys & similar of man-made fibres, knit/crochet, Potassium chloride for use as fertilizer, and Phosphoric acid; poly-phosphoric acids. Jerseys & similar of man-made fibres, knit/crochet shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$ 46 M.
Structure of the Agreement: The Jordan-E Association Agreement contains eight titles as well as seven annexes and four protocols:
Title I: Political dialogue
Title II: Free movements of goods
Basic principles
Chapter 1 Industrial products
Chapter 2 Agricultural products
Chapter 3 Common provisions
Title III Right of establishment and services
Chapter 1 Right of establishment
Chapter 2 Cross-border supply of services
Chapter 3 General provisions
Title IV Payments, capital movements and other economic matters
Chapter 1 Payments and capital movements
Chapter 2 Competition and other economic matters
Title V Economic cooperation
Objectives
Scope
Methods and modalities
Regional cooperation
Education and training
Scientific and technological cooperation
Environment
Industrial cooperation
Investment and promotion of investments
Standardization and conformity assessment
Approximation of laws
Financial services
Agriculture
Transport
Information infrastructures and telecommunications
Energy
Tourism
Customs
Cooperation on statistics
Money laundering
Fight against drugs
Title VI Cooperation in social and cultural matters
Chapter 1 Social dialogue
Chapter 2 Social cooperation actions
Chapter 3 Cultural cooperation and exchange of information
Title VII Financial cooperation
Title VIII Institutional, general and final provisions
Agreement on Simplifying the EU Rules of Origin
Jordan’s exports to the EU 27 have been and remain rather low, constituting only 3% of total Jordanian exports in 2020 (US$ 228 million)[i]. Several steps have been taken to expand Jordan’s export potential to the EU sizable market.
First, the EU and Jordan have developed their FTA further through additional agreements on agricultural, agri-food and fisheries products which entered into force in 2007.
To exploit the export potential of Jordan-EU AA through the ease of the restrictive rules of origin (RoO), the EU and Jordan agreed in July 2016 to simplify the rules of origin that Jordanian exporters use in their trade with the EU. Both sides reviewed and improved this initiative in December 2018. The RoO are a set of guidelines derived during FTA negotiations to determine product origin (or nationality).
This new RoO agreement granted Jordanian industries preferential treatment in accessing the European market by reducing the origin requirements for the Kingdom’s exported products.
The initiative is part of the EU’s support for Jordan in the ongoing Syrian refugee crisis and intends to make it easier for Jordan to export to the EU.
For exporters to be able to use these alternative rules of origin, production must involve a minimum 15% of Syrian refugee labor in the production facilities.
This initiative is valid until 21 December 2030 and covers a range of manufactured products in 52 chapters of the Harmonized System (HS).
Following a review in 2018, the EU and Jordan have agreed that once Jordan grants 60,000 active work permits to Syrian refugees, the company-specific minimum employment requirement for Syrian refugees is lifted. After that, all Jordanian companies which manufacture industrial goods covered by the scheme will be free to benefit from the simplified Rules of Origin.
For more details, see:
(1) Relaxing the Rules of Origin for Jordanian Industries (2016), Jordan Strategy Forum.
(2) EU-Jordan Relaxed Rules of Origin (2019) Jordan Chamber of Industry, ILO and Government of Netherland.
The Agadir Agreement
ü An FTA initially among four Arab Mediterranean partners: Egypt, Jordan, Morocco and Tunisia, which was signed in February 2004 and entered into force in March 2007. Lebanon and Palestine joined the Agreement in 2020.
ü It covers trade in industrial goods, agricultural products, and services.
ü As an EU-supported regional integration initiative, the Agadir Agreement adopts the European (cumulative) Rules of Origin (RoO) to have better access to the EU lucrative market. The EU allows its Mediterranean FTA partner countries to "cumulate" value added using inputs from other EU partners.
ü RoO are set of technical criteria that determine how and where goods originate, i.e. whether the product qualifies for EU preferential market access. For example, "packaging" Chinese apparel without sufficient "local" processing and "local" content disqualifies this product from being "made in Jordan".
ü The Agadir Technical Unit (located in Amman) is the institution responsible for coordinating and following up the implementation of the Agadir process in the member countries.
Jordan-Canada Free Trade Agreement
ü A bilateral FTA that has been signed in 2009 and came into force in 2012.
ü Market size: US$ 0.5 T (2021).
ü Market growth: 1% (2017-2021).
ü World market share: 2%.
ü Ranking in world imports: 14.
ü The first FTA between Canada and an Arab country.
ü The Agreement eliminates tariffs on the vast majority of traded goods between the two countries and expands businesses opportunities in both countries.
ü It covers both Goods and Services Trade.
ü Export Potential: The products with greatest export potential from Jordan to Canada are: Jerseys & similar of man-made fibres; Women's trousers & shorts of synthetic fibres; and Phosphoric acid, polyphosphoric acids. Phosphoric acid; polyphosphoric acids shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$5.1 M.
ü Structure of the Agreement:
Preamble
Chapter 1: Initial Provisions and General Definition
Chapter 2: National Treatment and Market Access for Goods
Chapter 3: Electronic Commerce
Chapter 4: Rules of Origin
Annex 4-1: Specific Rules of Origin
Chapter 5: Customs Procedures
Chapter 6: Trade Facilitation
Chapter 7: Sanitary and Phytosanitary Measures
Chapter 8: Emergency Action
Chapter 9: Monopolies and State Enterprises
Chapter 10: Environment
Chapter 11: Labour
Chapter 12: Transparency
Chapter 13: Administration of the Agreement
Chapter 14: Dispute Settlement
Chapter 15: Exceptions
Chapter 16: Final Provisions
Annex I: Schedule of Canada - List of Products Excluded from Tariff Elimination
Jordan- EFTA Free Trade Agreement
The Free Trade Agreement between the EFTA States and Jordan was signed in Liechtenstein, on 21 June 2001. The Agreement entered into force in 2002. The European Free Trade Association (EFTA) covers 4 European countries: Switzerland, Norway, Iceland, and Liechtenstein. Only Switzerland is large enough to be listed under Top 20 global world markets in terms of imports (above US$ 300 billion in 2021), with an average growth of 4% during 2017-2021.
The Agreement covers trade in industrial products as well as fish and marine products and processed agricultural products. The transitional period ends in 2014 (12 years after entry into force of the Agreement).
Compared to Jordan-EU AA, market access for agricultural products is more restricted and negotiated bilaterally by each EFTA Member: bilateral agricultural agreements between the individual EFTA countries and Jordan have been concluded which form part of the instruments creating the free trade area.
Navigating the Agreement
The Agreement consists of a total of 41 Articles, 7 Annexes, 4 Protocols, and one Record of Understanding:
Ø General provisions
Ø Trade in Goods
Ø Public Procurement
Ø Intellectual Property
Ø Competition
Ø State Aid
Ø Dispute settlement
Ø Institutional Provisions
Ø Final clauses
The Greater Arab Free Trade Area (GAFTA)
GAFTA is the first, far-reaching, regionally active, FTA signed by Jordan. Its scope is wide in terms of numbers of Arab states and sectoral coverage.
Signed in 1997 and fully implemented in 2005.
Focus: Trade in Goods: industry and Agriculture.
Not only includes the removal of tariffs, but also monetary, administrative and quantitative NTBs (i.e. quotas). It also provides for the trade liberalization in agriculture (despite a transition period) as well as a precise set out of rules of origins.
In 1997, the Arab League decided to create an Arab Free Trade Area, also known as the Greater Arab Free Trade Area (GAFTA) or the Pan-Arab Free Trade Area (PAFTA), by 2008. This would be achieved through an annual 10% reduction in custom fees as gradual ease of trade barriers. Eighteen of the 22 Arab League states signed this Agreement, which came into force on January 1998.
In March 2001, it was decided to speed up the trade liberalization process, and on 1 January 2005 the elimination of most tariffs among the GAFTA members was enforced.
Currently, the 18 Arab states that are members of GAFTA are: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen.
Jordan's bilateral free trade agreements with Arab countries
Jordan is linked to a number of Arab countries by preferential trade agreements and bilateral free trade agreements aimed at strengthening economic and trade relations with Arab countries. These bilateral treaties work alongside the Greater Arab Free Trade Agreement (GAFTA), noting that this regional Agreement gives more preferential treatment than the majority of bilateral Arab agreements, and the importer/exporter has the freedom to choose for the agreement s/he wishes to export or import accordingly.
The bilateral free trade agreements (FTAs) between Jordan and a number of Arab countries are as follows:
Free Trade Agreement with Arab Republic of Egypt
Signing date: 10/12/1998
Entry into force: 28 December 1999
Exemption from customs duties and taxes with similar effect on all traded goods of Jordanian and Egyptian origin, except textiles, garments and rebar products (Table 1 of the Convention).
Export Potential: The products with greatest export potential from Jordan to Egypt are: Potassium chloride for use as fertilizer, Phosphoric acid; poly-phosphoric acids and Medicaments consisting of mixed or unmixed products, for retail sale. Jordan has the highest supply capacity in Derivatives containing only halogen substitutes. “Medicaments consisting of mixed or unmixed products, for retail sale” is the product that faces the strongest demand potential in Egypt.
Which agreement should I use in exporting to Egypt?
A case study for Jordanian exporters
The definite answer depends on the product/ sector under consideration (e.g. pharmaceuticals), but the following factors, among others (such as Non-Tariff Barriers), are important to consider:
Under Jordan-Egypt bilateral Agreement: RoO require a minimum 40% of local value added, the same as GAFTA; but COMESA offers a lower minimum of 35%.
Under Agadir: Allowance for regional (diagonal) cumulation in EU rules of origin for EU market access[ii].
Under GAFTA: GAFTA regional Agreement in general provides more preferential treatment than the majority of bilateral Arab agreements (Source: Website of the Ministry of Industry, Trade and Supply).
Free Trade Agreement with the Kingdom of Morocco
Signing date: 16 June 1998
Entry into force: 3/10/1999
- Exemption from customs duties and taxes of similar effect on all goods of Jordanian and Moroccan origin contained in Annex (1) of the Convention totaled 56 goods, and goods within customs categories (0-25%).
- Goods with customs categories above 25% are subject to annual reduction in customs duties and taxes with similar effect for 5 years from the date of entry into force, according to the reduction rates contained in the Agreement in schedule (2) for the Jordanian side and schedule (3) for the Moroccan side to reach eventually to (25%) of customs duties and other taxes of similar effect.
- The Moroccan goods excluded from the reductions contained in Annex (4) of the Agreement and the Jordanian goods excluded from the reductions are listed in Annex (5) of the Convention.
Free Trade Area Agreement with the Republic of Tunisia
Signing date: 22 April 1998
Entry into force: 16 June 1999
- Exemption from duties and other taxes with similar effect on goods with Tunisian origin listed in Annex (1) and goods with Jordanian origin contained in the Annex (2) from the date of the entry into force of the Agreement.
- Except in paragraph (1and 2) of the Agreement, goods of Jordanian and Tunisian origin are gradually reduced by 10% from the date the Agreement entered into force.
- Excluded from the gradual liberalization the Tunisian goods originating in Annex (3) of the Convention and the Jordanian goods of origin listed in Annex (4) so that the reduction is postponed.
Free Trade Area Agreement with the United Arab Emirates
Signing date: 21 May 2000
Entry into force: 24 November 2001
Exemption from customs duties and taxes of similar effect from January 1, 2003 on all goods of Jordanian and UAE origin.
Free Trade Agreement with the Algerian Republic
Signing date: 19 May 1997
Entry into force: 31 January 1999
Exemption of products of Jordanian and Algerian origin from customs duties and other taxes of similar effect, excluding goods listed in Annex (1) of the Convention.
Free Trade Agreement with the State of Kuwait
Signing date: 25 December 2001
Entry into force: 9 April 2005
Exemption from customs duties and taxes with similar effect on all industrial and agricultural products originating from one of the contracting parties.
Export Potential: The products with greatest export potential from Jordan to Kuwait are: Live sheep, Tomatoes, fresh and Jewellery, of precious metal, nes. Jordan has the highest supply capacity in Monumental/building stone, nes. Jewellery of precious metal, nes is the product that faces the strongest demand potential in Kuwait.
Free Trade Area Agreement with Sudan
Signing date: 6 February 2003
Entry into force: 29 August 2003
Exemption from customs duties and other taxes with similar effect to all Sudanese-origin products exported directly to Jordan from the date of entry into force.
Customs duties and taxes with similar effects on Jordanian-origin goods exported to Sudan will be gradually reduced by 25% on January 1, 2005; by 40% on January 1, 2006; 70% on January 1, 2007; and 100% on January 1, 2008.
Free Trade Area Agreement with the Kingdom of Bahrain
Signing date: 21 July 2001
Entry into force: 29 May 2005
Exemption from customs duties and taxes with similar effects on all Jordanian and Bahraini goods, whether industrial or agricultural, originated between the two countries, excluding:
§ Tobacco and tobacco substitution, and its manufactures (Chapter 24).
§ Alcoholic beverages
§ Tractors and vehicles (Chapter 87).
[i] This is related to the broader question of why the performance of Jordanian exports to the EU is modest vis-à-vis the US under their respective FTAs. Jordanian exports to the US have grown more rapidly than exports to the EU over the last 15 years, reflecting lower utilization of tariff preferences in the EU than in the US, especially in Textiles and Apparel in spite of non-negligible preferences. The three contributing factors are: (i) higher adjusted preferences for apparel in the US than in the EU; (ii) greater competition from other suppliers (mostly from LDCs) in the EU market than in the US market; (iii) simpler origin requirements in the case of the Jordan–US FTA. See: Brunelin, S. et al. (2018) How Much Market Access? A Case Study of Jordan’s Exports to the EU.
[ii] Free trade agreements may allow materials originating and/or processing in a country other than the exporting party to count towards meeting the specific rules of origin (RoO) for preferential treatment. This allowance is known as “cumulation”.