Import Substitution

In recent years most of the countries of the Middle East have become increasingly aware of the difficulties associated with relying on export trade as the main ‘engine of growth’. The pricing and production limitations faced by the leading agricultural producers in the area have just been discussed in the previous chapter. Even in the oil-producing states, however, there is a growing realisation that overdependence on the export of one commodity makes them extremely vulnerable to changes in world market conditions. It is true of course that the oil-producing nations have been successful in organising themselves into a cartel to control supplies through OPEC in a way that no group of agricultural producers has been able to emulate.1 Without the political will to agree amongst the Arab members that the October 1973 war and its aftermath provided, it seems unlikely that OPEC would have been so successful in raising the price of oil. Throughout the decade before this war, the price of oil had been falling in real terms, and the terms of trade of the major producing nations had been deteriorating. Since the price rises of 1974 this downward trend is again apparent, as the limited price rises agreed in September 1975 have not compensated the OPEC producers for the increased prices that they have to pay for imports of industrial goods from the West.