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US eyes bilateral FTAs in Gulf

IPS News

U.S. Eyes Bilateral FTAs in Gulf

Peyman Pejman

29 March 2005

DUBAI, Mar 29 (IPS) - With free trade agreements, come political leverage. Realising this, the United States is moving fast to sign bilateral FTAs with Gulf countries - in the hope that Washington would be able to fill a vacuum because of the slowness of these Arab states in starting any regional trading mechanisms of their own.

The latest chapter in this effort started in March when Washington initiated negotiations with the United Arab Emirates and Oman, two politically moderate countries in the region considered to be U.S. allies in the Middle East.

So far only Jordan has signed an FTA with Washington, although the U.S. Congress is likely to ratify soon a similar agreement the United States has signed with Bahrain. In North Africa, Morocco, too, has signed an FTA with the U.S.

Other countries in ’’serious discussions’’ with the United States are Kuwait and Qatar.

Many in the Middle East argue - and some in the United States agree - that FTAs with governments here are more a matter of politics, although no one denies that in the long term they can be a powerful tool for the countries that sign them.

In 2004, total exports to the United States from the six Middle Eastern countries - UAE, Kuwait, Qatar, Bahrain, Oman and Jordan - amounted to 6.6 billion U.S. dollars. Total imports from the United States were estimated at 7.2 billion U.S. dollars.

Even without an FTA, bilateral trade with those six countries has increased in the past few years, jumping about 30 percent since 2002, although most of that have been U.S. exports rather than imports.

U.S. officials in the region emphasise the worthiness of FTAs from an economic perspective but quickly add that if they result in political freedom and transparency in the Middle East, those in themselves are valuable end-results.

’’FTAs open a number of doors. They increase the confidence level, be that from the perspective of (North) Americans or Europeans, for investment in a country. Second, they require a certain degree of reform and operational transparency that is good for everyone,’’ a U.S. official in the region who could not be named told IPS.

’’They also open the door for host countries to compete for 250 billion U.S. dollars worth of (US) federal procurement contracts and allow them to import technology and foreign investment that might not be available otherwise,’’ he said.

Khaled al-Bustani, assistant undersecretary for budget and revenue at UAE’s ministry of finance and industry, agrees.

’’We look at the FTA from the macro level. We both (UAE and U.S.) believe that an FTA would deepen and strengthen economic and trade relations by opening up and removing all barriers and facilitating the moving of capital and technology,’’ al-Bustani, who is involved in the U.S.-UAE negotiations, told IPS.

And there is some historical data to back up that claim. Jordan, the first Arab country to sign an FTA agreement with the U.S. in 2000, has seen its exports increase from 31 million U.S. dollars to 1.1 billion U.S. dollars.

Many analysts, however, believe that if the countries in the Middle East are now rushing to open FTA negotiations with Washington, it is because they could not reach such an agreement between themselves.

The six Arab countries that constitute the Gulf Cooperation Council (GCC) and the 22 members of the Arab League have for years talked about removing trade barriers, adopting a single currency, giving up customs tariff and moving toward the kind of economic and political union created by the North American Free Trade Agreement (NAFTA) between the United States, Mexico, Canada, as well as between the European Union nations.

’’I think the U.S. has decided that the GCC is moving too slowly and has not shown enough economic reform and, therefore, has decided to sign its own bilateral agreements,’’ Youssef Ibrahim, a Dubai-based Middle East energy and economics analyst told IPS.

’’Also, the dynamics of the region’s economy are changing and the GCC countries are looking after their own interests, exploring new markets and avenues and those economic realities point many of these countries toward the United States and Asia, rather than between themselves,’’ added Ibrahim.

But not everyone is in favor of inching towards Washington. Many analysts, business persons and ordinary people see the speeded efforts towards signing an FTA as yet another tool in the hands of the world’s only remaining superpower to dictate terms to a part of the world that sees itself incapable of saying ’’no’’.

A number of editorials in the UAE have openly challenged the wisdom of proceeding with the talks.

’’During the talks with a nation that dominates our globe with a clear strategy and agenda and has the might to rehabilitate all environments, there are points ... that also include negative aspects and obstacles that we should warn would (have an) impact (on) all of us,’’ the pan-Arab ’al-Khaleej’ newspaper said in an editorial recently.

Most editorial objections have been that an FTA with the United States could hurt ties with Saudi Arabia.
Saudi Arabia, considered one of Washington’s main strategic allies in the region, too, has expressed concerns about GCC countries signing FTAs with Washington, although analysts like Ibrahim say that is because Saudi rulers are afraid of losing control over the GCC.

The Saudis are Washington’s largest trading partners in the Middle East but until lately had shown no interest in even starting FTA talks with the United States. Riyadh still remains ambivalent about the whole thing.

Khaled Abdullah, a trade and economic advisor in Dubai, said FTA agreements do not make sense for countries in the Middle East because their economies are too small in comparative terms to be able to benefit from having access to the U.S. market.

’’The U.S. market is too huge compared to any country in this region and that relative size incompatibility makes the availability and variety of goods that can go into the U.S. market so insignificant that the United States will end up having all the advantage,’’ he added. (END/2005)