Yemen Observer Newspaper
U.S. encourages trade expansion with Arab World
By Observer Staff
May 24, 2005 - Vol.VIII Issue 20
WASHINGTON - The combined exports of the entire Arab World in 2004 amounted to $379 billion, slightly more than the exports of the Netherlands ($359 billion), according to a new report by the U.S. Department of State. More than three-quarters of Arab exports were oil, the report said.
Figures from the World Trade Organization (WTO) indicate that the countries occupying a broad swath of the earth from the Atlantic to the Indian Ocean accounted for a paltry 4% of global exports.
“The Arab World has a great cultural tradition, but is largely missing out on the economic progress of our time,” President Bush said at the University of South Carolina in May 2003. “So I propose the establishment of a U.S.-Middle East Free Trade Area within a decade, to bring the Middle East into an expanding circle of opportunity, to provide hope for the people who live in that region."
Since then, the Office of the U.S. Trade Representative (USTR) has engaged in intensive negotiations with a number of Arab countries to develop bilateral trade agreements which it intends to knit together into a Middle East Free Trade Area by 2013.
The United States now has a Free Trade Agreement in effect with Jordan, an agreement with Morocco scheduled to come into force July 1, an agreement with Bahrain awaiting congressional approval and agreements under negotiation with Oman and the United Arab Emirates.
"The Free Trade Agreement and the obligations that are in it are very, very comprehensive,” said Assistant USTR for Europe and the Mediterranean, Catherine Novelli, at a recent press briefing. “They cover all products. Everything goes to zero. We get rid of all non-tariff barriers."
"The negotiations are rigorous and the legal and economic demands are extensive, but the result of the process is that exporters from the partner countries have unlimited access to the U.S. market, the world’s largest," Novelli pointed out.
Novelli is optimistic about future progress on the Middle East Free Trade Area initiative, saying that the leaders of countries in the Middle East and North Africa are showing greater economic ambitions.
“Leaders have to provide good jobs for their people,” she said. “And there are a lot of young people who are going to be coming into the work force across the board in the Middle East who are going to need good jobs. And I think that is fueling the decision-making that one needs to have an economic system that’s going to provide those kinds of jobs."
"A Free Trade Agreement symbolizes the top rung of a ladder of ascending degrees of market openness." Novelli said her office engages with each country at its particular point of market liberalization and works with it through graduated steps to increase the amount of free trade.
The first step in the process is to help countries enter the WTO.
"Our Free Trade Agreements use the WTO obligations as a basis, and then they go beyond the WTO,” Novelli said. “You have to sort of be at step one before you can be at step 10."
The USTR has pledged to lobby the WTO and its member nations on behalf of candidates from the Middle East and North Africa that demonstrate a commitment to participating in the global trading system.
Second, the United States provides incentives for trade liberalization to low- and middle-income countries through the Generalized System of Preferences. This congressionally mandated program allows duty-free access to the U.S. market for more than 4,650 products. Eligibility for the program is based on a country’s level of economic development, its commitment to the principles of free trade, its respect for intellectual property rights and its respect for workers’ rights.
Third, the United States negotiates Bilateral Investment Treaties (BITs) to ensure equal treatment of foreign and domestic investors and respect for international laws and norms on investment. BITs are designed to create an environment in which foreign investors feel comfortable investing, Novelli said.
Fourth, the United States offers Trade and Investment Framework Agreements, under which the bulk of the bilateral trade negotiations take place. These are short agreements that establish binational committees that identify trade and investment opportunities and impediments.
"Those agreements allow us to have very intense dialogues about trade and investment policy; about the goals... that the individual government might have for making further progress; how we can help and bring our technical assistance to bear, if that’s something that’s desired, to help countries get where they want to go; and also to discuss how we can move from bilateral dialogue to a situation where we could have a bilateral free trade agreement,” Novelli said.
Once the two countries decide they are in a position to pursue a Free Trade Agreement, as many as 13 separate groups begin working simultaneously on different aspects of the economy, commercial law, trade policies and investment regulations. Through multiple rounds of discussions, the groups address trade barriers and draft the text of the final agreement, which typically runs several hundred pages.
When the USTR has concluded an agreement, it sends the text to the U.S. Congress for ratification. Novelli said the Congress has a long list of criteria it expects to see addressed in the agreement, including protections for foreign investment, open government procurement procedures, protection for intellectual property rights and respect for workers’ rights.
She noted, however, that Congress has been very receptive to Free Trade Agreements with Middle East and North African countries. Congress approved the Morocco Free Trade Agreement, Novelli said, with the largest affirmative vote of any Free Trade Agreement in recent history.
The USTR is studying a mechanism to allow what it calls “cumulation” between two or more free trade partners in the region. Normally, a product must be produced entirely in a given partner country to be eligible for duty-free status. However, a cumulation clause would allow multiple partner countries to contribute to the content of products, thereby stimulating intraregional trade, Novelli said.