Gulf News | 23 December 2007
US benefits most from free trade pact with Bahrain
By Dr Jasim Ali, Special to Gulf News
The US-Bahrain Free Trade Agreement (FTA) has proven to be beneficial to the American side. The deal came into effect at the start of August 2006. Available statistics indicate that American exports have increased a hefty 28 per cent during the first year of FTA’s implementation. Still, Bahrain’s exports dropped by 10 per cent in the same period.
According to the US Census Bureau, the value of American exports to Bahrain amounted to $529 million from August 2006 to July 2007, up from a mere $414 million in the same period prior to FTA execution. Conversely, Bahrain’s exports to the US stood at $638 million from August 2006 to July 2007, down from $710 million in the same period prior to FTA coming into effect.
Nevertheless, trade balance continued to tilt towards Bahrain’s advantage though at a lower level. The trade surplus stood at $109 million in 12 months following FTA’s implementation versus $296 million in the earlier year.
Bahrain’s goods exports to the US centre on apparel and clothing accessories, aluminum, fertilisers, organic chemicals, mineral fuels and oils and plastics. Conversely, US exports to Bahrain focus on aircraft, machinery, vehicles, pharmaceutical products, toys, games and sports equipment. Also, the US exports agricultural produce notably poultry, snack foods, cotton, and processed fruit and vegetables.
The US is Bahrain’s largest trading partner outside the oil sector. Saudi Arabia is Bahrain’s largest trading partner by virtue of exporting crude oil, which is then processed into petroleum products at the country’s sole refinery.
Searching for an answer, I learned that the matter is related to the American side having readily available exportable products. The same is not true with Bahrain. An American diplomat once told this writer that it would be a while before Bahraini establishments learn how to do business in the US appreciating the nature of American consumers. These consumers care about value of the product and more importantly after sale service.
The US-Bahrain FTA removes trade barriers related to goods and services and encourages investments between the two countries. However, the US has insisted that the FTA could not come in force unless the Bahrain enacts legislation extending protection to intellectual property rights together with specific penalties against violators.
Clearly aware of FTA’s potential in attracting American investments, Bahraini authorities opted to accept American conditions. Bahrain hopes that US firms would use Manama as a gateway for doing business in regional markets, notably the Gulf Cooperation Council (GCC) states.
In fact, the FTA provides numerous benefits to Bahrain including getting access to the world’s largest GDP and import market. The US’s gross domestic product (GDP) stands at $14,000 billion. In turn, Bahrain’s GDP amounts to less than one per cent of the US’s GDP. Still, according to the US Census Bureau, American imports of goods and services amounted to $2,201 billion in 2006.
It seems Bahrain is now interested in investment potentials. American firms seem to be interested in grabbing investment opportunities in Bahrain. For one, Kraft of the US is close to commissioning a $40 million facility capable of producing dairy products for local and regional markets. Two American firms have expressed interest in constructing the planned causeway between Bahrain and Qatar. By and large, the FTA proved rewarding to the US and Bahrain in terms of trade and investments, respectively.
The writer is a Member of Parliament, Bahrain.