Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.
Lebanon’s economy is in crisis. GDP contraction could top 20 percent in 2020, the local currency has lost more than 80 percent of its value on secondary exchange markets, and most banks are dollar insolvent. Since October 2019, Lebanon’s financial sector imposed ad hoc capital controls, preventing most Lebanese from transferring any money overseas or withdrawing dollars from their bank accounts, despite the fact that more than 75 percent of accounts in Lebanese banks are denominated in dollars. On March 7, 2020, Lebanon announced it would default on and restructure its nearly $31 billion in dollar-denominated debt, the first such default in Lebanon’s history. On April 30, the government published an economic plan with a focus on restructuring its financial sector and attracting foreign assistance; the next day Lebanon signed an official request for IMF assistance. As of the end of August 2020, formal negotiations had yet to begin. On August 4, an explosion at the Port of Beirut killed more than 180 people and incurred nearly $15 billion in damages in the city. The Port of Beirut was responsible for handling nearly 70 percent of Lebanon’s trade in goods. Most analysts assess that Lebanon’s near- and medium-term economic future is bleak, with likely fiscal austerity, increased inflation, continuing capital controls, further devaluation, and a potential loss of value applied to wealthy accountholders to recapitalize the banking sector. The Minister of Finance in May said Lebanon needs $28 billion in financial assistance over the next four years. The World Bank projected that the poverty rate will be higher than 50 percent of the population by the end of this year.
These developments hold consequences for Lebanon’s potential as a market for U.S. goods and services. Much depends on how Lebanon implements overdue economic and governance reforms, including in connection with its negotiation and implementation of a potential IMF program. If the country is able to implement necessary reforms, attract foreign capital, stabilize the exchange rate, and recapitalize its financial sector, opportunities remain for U.S. companies. Despite its small size, Lebanon has offered unique market opportunities for U.S. firms. U.S. products and services enjoy relatively excellent receptivity and although the market is price sensitive, when it comes to quality, Lebanese consumers enjoy name brands, exceptional quality, and after-sales support. For these reasons, several U.S. corporations chose to open offices in Beirut.
The Lebanese Customs Administration reported that Lebanon’s total imports in 2019 reached $19.239 billion, of which $1.705 billion (8.9 percent) originated in the United States. The United States was Lebanon’s largest supplier of imported goods, followed by China, Greece, Russia and Italy. According to Lebanese Customs statistics, major U.S. exports to Lebanon were mineral fuel and oil ($841 million), automotive ($253 million), chemical industrial products ($192 million), machinery and electrical instruments ($98 million), prepared foodstuffs, vegetable products ($96 million), and beverages and tobacco ($54 million).
The U.S. government has neither a bilateral investment treaty (BIT) with Lebanon, nor an agreement on the avoidance of double taxation. The U.S. government signed a Trade and Investment Framework Agreement (TIFA) with Lebanon in 2006, but the TIFA never came into force. Since 1999, Lebanon has had observer status at the World Trade Organization (WTO) but has yet to accede to the organization. In 2002, Lebanon signed an association agreement with the European Union that entered into force in 2006.