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Cash-strapped Jordan aims high

AME Info | Jordan | 11 December 2004

Cash-strapped Jordan aims high

The cash-strapped kingdom is lobbying the world to invest in its economic growth.

After spending several years carefully negotiating free-trade agreements with the United States, Europe and fellow Arab countries, Jordan is determined to gain a competitive advantage for Jordanian industries in world markets. And Washington appears eager to help them achieve success.

Why? Because the administration hopes that economic reforms and trade liberalization in Jordan will spur change throughout the region.

King Abdullah was one of the first heads of state to travel to Washington in the weeks following the September 11th terror attacks; his visit was welcomed as a gesture of support for Americans - at a time when they needed support the most.

It was indeed a gesture of support, but it also served another purpose: the trip was the final step in cementing an agreement to cut tariffs on nearly all goods and services exchanged between the two countries by 2010. President Bush signed into law the legislation needed to implement the Jordan-United States Free-Trade Agreement (JUSFTA).

First bilateral US FTA

The agreement was the first of its kind between the United States and an Arab country, and was years in the making. The deal gave both men what they wanted. It provided Abdullah with an important tool needed to shape Jordan - a country with limited natural resources, staggering internal debt, and high rates of poverty and unemployment - into a central trading depot in the region. The deal gave Bush a prototype for expanding trade partnerships throughout the Middle East.

Three years later, though, international trade specialists say JUSFTA’s potential has not been fulfilled because the private sector has still not taken advantage of it.

’Neither side is happy with the level of trade and investment between Jordan and the US since the signing of the agreement,’ said Rasim Abderrahim, chief executive officer at the Export Expert Program and a former economic and commercial specialist at the American embassy in Jordan.

Nevertheless, commercial ties between the two countries have flourished. Exports from Jordan to the United States have jumped from $31 million in 1999 to $673 million in 2003. By 2003, Jordanian industries shipped 30 percent of their exports to the United States.

But this increase in trade has more to do with agreements the United States negotiated in the late 1990s with Israel and Jordan to promote relations between the two countries. The agreements allow goods that are partially produced in Jordanian qualifying industrial zones (QIZs) and Israel to qualify for duty-free tariffs in the United States. Textile exports produced in QIZs account for 90 percent ($587 million in 2003) of all Jordanian exports to the United States.

Abderrahim says the JUSFTA rules provide greater flexibility and opportunity. JUSFTA will eliminate all tariff and non-tariff barriers to bilateral trade in nearly all industrial goods and agricultural products; it provides intellectual property rights that will - among other things - require Jordan to provide copyright protection on the Internet and adhere to World Intellectual Property Organization treaties; and it includes requirements that the two countries maintain labor and environmental protections.

Public relations

As JUSFTA enters its third stage of tariff elimination in January, the Jordanian government is devoting more resources to publicizing the benefits of the agreement to US businesses.

’Not many people know about the arrangements that Jordan and the US enjoy in terms of the QIZs, in terms of the FTA, in terms of the bilateral investment treaty,’ says Maher Matalka, director of the economic and commerce bureau at the Jordanian embassy in Washington. ’We see our role as to capitalize on all those mechanisms or agreements that are in place.’

Matalka said the embassy is expanding its commerce department in Washington, establishing a Jordanian business network in nearly a dozen key US cities to promote exports, and is also recruiting corporate executives from companies like Cisco Systems and Intel to a new US-Jordan Business Alliance. The alliance will brainstorm fresh ideas for international trade and participate in Jordan’s World Economic Forum meeting next spring.

Several other public-private coalitions already exist. Members of the TIJARA Coalition in Jordan hope to increase exports to US markets to $900 million and bilateral trade to $1.8 billion by the end of 2004. The coalition provides Jordanian exporters with support for marketing, pricing and distribution.

Another group encourages small and medium-sized businesses in the same industry to pool together to create a competitive advantage for exports of olive oil, jewelry, soap, automotive parts and marble.

The Jordan-US Business Partnership, a project managed by the International Executive Service Corps and funded by the United States Agency for International Development, helps Jordanian firms participate in US trade shows and form coalitions that enable them to pool their resources to promote and protect their products abroad.

’Jordan has a very active Jordanian-American business community that has worked very hard to match make opportunities between American companies and Jordanians so that trade flows can go both ways,’ said Catherine Novelli, an assistant US trade representative who helped negotiated JUSFTA. ’And King Abdullah himself is probably the best advocate for trade in the whole region.’

Bilateral trade

Novelli claims that the results of the agreement with Jordan have been ’incredibly positive’ in that they have encouraged other countries to take up economic reforms and consult with the United States about their bilateral trade objectives.

Washington completed trade negotiations with Morocco and Bahrain earlier this year and is in the process of discussing investment agreements with Lebanon, Saudi Arabia, Iraq and Libya. ’Countries are looking at that,’ says Novelli, ’and they are asking, ’How can I replicate this in my own country?’’

Novelli is now is managing the initiative to create a US-Middle East free-trade area for the region by 2013. She says Jordan’s experience provides a good example of how trade agreements can promote economic growth, rule of law, and domestic reforms.

The Jordanians agree that JUSFTA can serve as a model for the region, but they also like to point out that Jordan’s lead in the process will give it a strategic advantage because its products will face zero tariffs by 2010 - three years earlier than exports produced in neighboring countries.

 source: AME Info