VZCZCXYZ0000
RR RUEHWEB

DE RUEHAM #0672/01 0751226
ZNR UUUUU ZZH
R 161226Z MAR 09
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 4650
INFO RUEHAS/AMEMBASSY ALGIERS 0215
RUEHGB/AMEMBASSY BAGHDAD 6194
RUEHBJ/AMEMBASSY BEIJING 0179
RUEHLB/AMEMBASSY BEIRUT 3026
RUEHRL/AMEMBASSY BERLIN 0363
RUEHEG/AMEMBASSY CAIRO 3963
RUEHDM/AMEMBASSY DAMASCUS 4118
RUEHNE/AMEMBASSY NEW DELHI 0320
RUEHRH/AMEMBASSY RIYADH 2117
RUEHTV/AMEMBASSY TEL AVIV 1615
RUEHJI/AMCONSUL JEDDAH 0857
RUEHJM/AMCONSUL JERUSALEM 5417
RUEHBS/USEU BRUSSELS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS AMMAN 000672 
 
SENSITIVE 
SIPDIS 
 
STATE PLEASE PASS TO USTR (SFRANCESKI) 
STATE FOR EEB AND NEA/ELA 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EAGR WTRO JO
SUBJECT: Jordan's Trade Deficit Hit High of $9.1 Billion in 2008, 
Nearly One-Half of GDP 
 
Refs:  A) Amman 472 
       B) Amman 460 
       C) Amman 433 
       D) Amman 226 
 
¶1.  (U) Summary:  Jordan's trade deficit hit a historic high of $9.1 
billion in 2008, compared to $8 billion in 2007 and $2.7 billion in 
2000 when Jordan joined the World Trade Organization (WTO) and 
signed the U.S.-Jordan Free Trade Agreement.  The upward trend is 
attributed to strong import growth that has outpaced exports.  Some 
view this as in line with significant economic and population growth 
over the past few years, which has led to greater need for imported 
energy products, food, and manufactured goods.  As a percentage of 
GDP, the trade deficit has hovered between 42-49% since 2005. 
 
¶2.  (U) In 2008, export growth of 36% led to total exports of $7.8 
billion but this was still not sufficient to balance imports of 
$16.1 billion.  Significant increases in the value of some exports 
(i.e., potash and phosphates) and imports (i.e., crude oil and 
cereals) were due mainly to spikes in global commodity prices, 
rather than increases in production or volume.  Jordan's top three 
import markets in 2008 were Saudi Arabia, the EU (particularly 
Germany), and China.  Leading export markets were India, the U.S. 
and Iraq.  The worldwide economic slump contributed to a 15% 
decrease in Jordan's top export of apparel, which represents the 
majority of total Jordanian exports to the United States.  As a 
result, total U.S. trade with Jordan dropped slightly for the first 
time in a decade to $1.825 billion in 2008, despite a 22% increase 
in Jordanian imports of U.S. goods, according to GOJ statistics. 
The GOJ has predicted that export growth will be restrained in 2009 
due to falling commodity prices and weaknesses in Jordan's main 
export markets (ref A).  As long as oil prices remain low, Jordan's 
import bill may also contract in 2009, possibly helping to narrow 
the trade deficit.  Detailed trade statistics are provided in 
paragraph 13.  End Summary. 
 
Trade Deficit Continues to Grow 
------------------------------- 
 
¶3.  (U) Jordan's Department of Statistics reported strong export 
growth of 35.9% that led to total Jordanian exports of $7.8 billion 
in 2008, compared to $5.7 billion in 2007 and $1.9 billion in 2000. 
Apparel still ranked as Jordan's top export at $1.012 billion in 
2008, primarily to the U.S., but this represented a 15% decrease 
from 2007 due to a decline in American demand for garments (ref D). 
Significant increases in the value of Jordan's exports of potash, 
phosphates, and fertilizers were largely due to skyrocketing 
worldwide prices during the first three quarters of 2008 rather than 
increases in production or volume.  Pharmaceutical exports also grew 
18.1% to $498 million, primarily to Saudi Arabia and Algeria, 
although pharmaceutical manufacturers had hoped for larger export 
figures in 2008.  Vegetable exports rose 5.4% to $391 million. 
 
¶4.  (U) Jordan's imports totaled $16.91 billion in 2008, compared to 
$13.73 billion in 2007 and $4.6 billion in 2000.  Due to the 
increase in worldwide fuel prices during the first three quarters of 
2008, the value of crude oil imports mostly from Saudi Arabia rose 
31.3% and cost Jordan $2.716 million, representing about 16% of 
Jordan's total imports.  Other leading imports included machinery 
and electrical appliances, vehicles, iron, and cereals, which also 
tripled prices during the first three quarters of 2008. 
 
¶5.  (SBU) Jordanian imports ended up far outweighing exports and 
resulted in a $9.1 billion trade deficit in 2008, 14% larger than 
$7.8 billion in 2007.  Given strong economic growth over the past 
few years, the trade deficit as a percentage of GDP has hovered 
between 42 - 49% since 2005, compared to 31% in 2000.  One official 
at the Ministry of Industry and Trade (MOIT) highlighted that 
imports of machinery and capital products are important inputs for 
growing industrial sectors which Jordan cannot produce.  She added 
 
that the rise in Jordan's population in part due to large numbers of 
Iraqi refugees has also increased the need for imported energy and 
food products.  Despite the negative trade balance, MOIT has made 
the case that Jordan has maintained a sustainable balance of 
payments from services exports (tourism), Jordanian expat 
remittances and private financial flows, namely foreign direct 
investments. 
 
Trading Markets:  Arab Region Remains on Top 
-------------------------------------------- 
 
¶6.  (U) The Greater Arab Free Trade Area (GAFTA) countries continue 
to provide Jordan's strongest import-export market.  Saudi Arabia, 
which is part of the GAFTA, was Jordan's top bilateral trading 
partner in 2008.  Jordan imported $3.65 billion from Saudi Arabia, 
about two-thirds of which was crude oil.  Jordan exported over $477 
million to Saudi Arabia, which provides a market for Jordanian 
pharmaceuticals, paper products, and building stone. 
 
¶7.  (SBU) Having faltered in 2003 due to the Iraq war, Jordanian 
domestic exports to Iraq continued to rebound in 2008 by growing 
51.4% to $809 million, compared to $534 million in 2007 and $462 
million in 2006.  According to MOIT, primary exports to Iraq in 2008 
included aluminum containers, tomatoes, bottled mineral and aerated 
water, cables in electric conductors, sanitary towels and napkins, 
cigarettes, and other food and vegetable products.  The quantity of 
Iraqi crude oil that has reached Jordan remains minimal (ref C). 
The Iraqi-Jordanian Land Transportation Company, which had 
historically transported most of the oil from Iraq into Jordan, has 
been under liquidation since 2008 due to losses attributed to the 
security situation in Iraq.  Other Jordanian companies have also 
claimed that security continues to present significant logistical 
issues and increase shipping costs, thereby hindering bilateral 
trade.  The Jordanian government has been exploring other ways to 
encourage business with Iraq, in part by easing entry and residency 
regulations for Iraqi business people and investors (ref B). 
 
Importing More from EU and China 
-------------------------------- 
 
¶8.  (U) Even though European products were relatively expensive in 
2008 due to the strength of the Euro compared to the dollar (against 
which the Jordanian dinar is pegged), Europe's proximity to Jordan 
and longstanding business relationships led to a 5.9% increase in 
Jordanian imports from the EU totaling $3.54 billion.  In 
particular, imports from Germany reached over $1 billion.  Jordanian 
exports to the EU remained minimal at $257 million, which the GOJ 
has attributed in part to unfavorable terms in the EU Association 
Agreement with Jordan. 
 
¶9.  (U) Jordan also increased its imports from China 33.8% to reach 
$1.75 billion in 2008, compared to $1.3 billion in 2007.  Around 
one-quarter of Jordan's imports from China have been textiles and 
fabrics for the garment industry.  Other primary imports from China 
include industrial appliances, furniture, vehicles and parts 
thereof, organic chemicals, and toys.  When combined with Jordanian 
exports to China of $110 million, bilateral trade between Jordan and 
China totaled $1.867 billion, just surpassing Jordan's bilateral 
trade of $1.825 billion with the U.S., according to GOJ statistics. 
NOTE: GOJ figures differ slightly from USITC figures, which show 
total U.S.-Jordan trade to be $2.079 billion in 2008.  END NOTE. 
 
Total U.S. Trade with Jordan Decreased in 2008 
--------------------------------------------- - 
¶10.  (U) The GOJ reported that U.S.-Jordan two-way trade dropped 3% 
from $1.873 billion in 2007 to $1.825 billion in 2008.  This was the 
first time our bilateral trade had fallen since 1998, when it was a 
mere $393 million according to GOJ figures.  The decline is 
attributed to the 15.9% decrease in Jordanian exports to the U.S., 
which totaled $1.05 billion in 2008, compared to $1.24 billion in 
 
¶2007.  As a result, India surpassed the U.S. as Jordan's largest 
export market in 2008.  NOTE: Exports to India increased 173% mostly 
due to increases in prices (not volume) of fertilizer, potash and 
phosphates.  END NOTE.  Over 85% of Jordanian exports to the U.S. 
were garments, highlighting the need for greater diversification of 
Jordanian exports to the United States.  Other top Jordanian exports 
to the U.S. included jewelry, air conditioners and machinery, and 
pharmaceuticals. 
¶11.  (U) Although bilateral trade suffered from the drop in 
Jordanian exports to the U.S., the GOJ recorded a 22% increase in 
imports of American goods which reached $776 million in 2008.  Top 
U.S. imports included vehicles, electrical machinery, and cereals. 
American agricultural exports to Jordan totaled $181 million, 
including rice ($77 million), corn ($29 million), soybean oil ($16 
million), almonds ($5.4 million), and poultry products ($5 million). 
 Cheese also jumped from historic zero levels to $3 million. 
Future Predictions 
------------------ 
 
¶12.  (SBU) The GOJ has predicted that export growth will be 
restrained significantly in 2009 due to the effects of the global 
economic slowdown (ref A).  Continued weakness in the garment sector 
and falling commodity prices, which will hit the value of Jordan's 
potash and phosphate exports, will most likely contribute to the 
decline of exports.  Potential increased trade with Iraq might help 
off-set this slightly.  Although Jordan has viewed its 
pharmaceutical industry as a rising export star, the recent closure 
of the Algerian market to foreign drug manufacturers has caused more 
conservative export growth estimates for this sector in 2009. 
Jordan's import bill may also contract in 2009 as long as crude oil 
prices remain low.  As a result, some economists have argued that 
Jordan's trade deficit could narrow slightly in 2009, but it would 
be more a result of shifts in global commodity prices rather than 
economic reform or increases in export production. 
 
¶13.  (U) Jordan 2008 Trade Statistics 
         Source: GOJ Department of Statistics 
 
                                             Growth 
 
                       JD          USD       Average 
                    ---------    ---------  -------- 
Trade Balance:      -6.451 BN     -9.1 BN    14.0% 
 
IMPORTS 
------- 
 
Total Imports:      11.974 BN    16.91 BN    23.2% 
 
Types of Imports: 
- Crude Oil:         1.923 BN     2.72 BN    31.3% 
- Machinery/Parts:   1.019 MN     1.44 BN    23.1% 
- Machinery, 
Electrical Appliances: 897 MN     1.27 BN     6.8% 
- Vehicles, 
Motorcycles, Parts:    834 MN     1.18 BN    20.2% 
- Iron and Products:   789 MN     1.11 BN    51.9% 
- Cereals:             634 MN      895 MN    17.9% 
 
Markets for Imports: 
- GAFTA:              3.994 BN    5.64 BN    24.4% 
  - incl Saudi Arabia 2.584 BN    3.65 BN    28.3% 
- Asian countries:    3.458 BN    4.88 BN    28.6% 
  - incl China:       1.242 BN    1.75 BN    33.8% 
- EU:                 2.505 BN    3.54 BN     5.9% 
  - incl Germany:       717 MN    1.01 BN    -1.0% 
- NAFTA:                618 MN     873 MN    23.5% 
  - incl U.S.           549 MN     776 MN    22.3% 
 
EXPORTS 
 
------- 
 
Total Exports:       5.523 BN      7.8 BN    35.9% 
- of which National  4.384 BN     6.19 BN    37.7% 
- of which Re-export 1.139 BN     1.61 BN    29.4% 
 
Types of Exports: 
- Apparel:             716 MN    1.012 BN   -15.0% 
- Fertilizers:         598 MN      845 MN   117.2% 
- Crude Potash:        545 MN      770 MN   139.8% 
- Crude Phosphates:    369 MN      522 MN   167.0% 
- Pharmaceutical       353 MN      498 MN    18.1% 
- Vegetables           277 MN      391 MN     5.4% 
 
Markets for Exports: 
- GAFTA:              1.723 BN    2.43 BN    29.8% 
  - incl Iraq           573 MN     809 MN    51.4% 
- Asian countries:    1.467 BN    2.07 BN   116.4% 
  - incl India:         908 MN    1.28 BN   173.2% 
- NAFTA                 745 MN    1.05 BN   -15.8% 
  - incl U.S.           736 MN    1.04 BN   -15.9% 
- EU:                   182 MN     257 MN    64.9% 
- Algeria:               94 MN     132 MN    44.1% 
 
Visit Amman's Classified Web Site at 
http://www.state.gov.sgov.gov/p/nea/amman/ 
 
BEECROFT