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French Version

Can Trade Be a Lever for Reforms in the Arab World ?

Testimony by David L. Mack in Hearings of the United States Senate Finance Committee
This testimony is the second of a two-part series. The Daily Star published the first part on May 27.

Subsequently, we went through a similar exercise on issues of intellectual property. Once again, it was partly a matter of educating the emirate authorities. But it also involved the embassy in local politics as we mobilized the often-influential UAE businessmen who were the partners and agents for American companies.

Deadlines were useful but had to be packaged in ways that encouraged the UAE to take pride in being respectable. Federal ministers admitted to me that they never could have wrested meaningful authority away from the individual emirates without the Sword of Damocles of potential US trade sanctions. So far, the newly empowered federal ministries are exercising their authority in a generally positive way and not evolving into obstructionist bureaucrats.

Beginning in May 1990, I became deputy assistant secretary of state for Near East affairs. Following the liberation of Kuwait, we agreed to begin in 1993 the first of what became annual economic dialogues with the six states of the Arab Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. We had already developed close political and security relations with these governments. Economic relations, especially in the development and marketing of oil and gas, as well as the sale of US goods and services to rapidly developing petroleum-related industries, was longstanding and formed the base for other relations.

We were, however, beginning to lose ground to competitors from Europe and the Far East, especially in industries like aviation and consumer goods. Moreover, it was clear that the dominant oil and gas sectors of these economies were not creating jobs at anything close to the pace required to absorb the increasing numbers of young men graduating from high schools and universities, to say nothing of the women graduating in roughly equal numbers. Our intention was to inject new life into US relations with our Arab Gulf political and economic partners by encouraging economic and regulatory reforms.

Results of this first annual dialogue were disappointing. From my perspective, they were characterized by resounding affirmations of shared interests, but a lack of serious self-examination. Many presentations by speakers from the region were long on assertions of opportunity for US firms, but avoided commitments to the kind of reforms we suggested were necessary.

In my luncheon address to the conferees, I reiterated the legal and administrative reforms by their governments that seemed necessary to us, but I made no commitments about what we might be prepared to do in response. My cautious call for gradual and orderly political reforms was met by a chilly silence, even though I knew that I was partly echoing the views of businessmen and intellectuals from the region.

In the years that have followed, I visited the region nearly each year and have noted that members of the Arab business communities are increasingly vocal themselves in expressing the need for economic reforms. They understand that this is the price for entry into the global economy, either as members of the World Trade Organization or as partners with the United States in bilateral agreements. While they often complain about specific details of US negotiating positions, they understand that the discipline provided by this process may be a necessary catalyst for internal changes that have been stalled by inertia and tradition.

Opposition to reforms is partly based on the narrow self-interest of the few business families that enjoy the closest relations with government leaders, but there is also a broader fear that change will upset a familiar cultural order. Increasingly, however, there is a shared effort by reforming political leaders and the more dynamic members of the business community to assure greater transparency and rule of the law in commercial affairs. Partly because of US prodding, but also on their own initiative, they are adopting new laws and improving the enforcement of measures against international crime and terrorist activities, including money laundering. They are trying to do this in a manner that does not stifle free market competition, but is consistent with emerging global standards.

The example of the Free Trade Agreement (FTA) with Jordan has had a strong, positive effect. It is not so much the great percentage increase in US-Jordanian trade since the FTA went into effect. It is understood that this resulted partly from a very low base and that the actual volume remains modest. Far more important are the nonquantifiable reforms that the Jordanian government adopted to meet the preconditions for the agreement. In effect, Jordanian leaders took advantage of this instrument, using it as leverage to take internal measures that were long overdue. Eventual implementation of FTAs with Morocco and Bahrain will encourage the proponents of reform elsewhere in the region to take steps on their own to keep pace. From the US perspective, trade negotiations are a businesslike and nonsanctimonious way for us to promote reform in Arab countries.

There are no guarantees in this process, but there is now a keener understanding by governments and business establishments in the region of the connection between economic and social reform, especially educational reform, and their long-term security.

Moreover, there is an understanding that this has implications for the traditional political order, although commitment to change in that regard will be more cautious. It requires vision to take risks and make uncomfortable adjustments. Resistance to high profile US pressure for political reforms is almost certain.

Fortunately, some Arab leaders are initiating cautious measures in the directions of greater transparency in governance and wider participation in the political process. The success of such measures depends in part on their emergence as an authentic expression of local aspirations. In the meantime, Washington's renewed interest in bilateral economic cooperation will encourage the leaders from both the governments and the business communities that share these aspirations.

David L. Mack is vice-president of the Middle East Institute, a non-profit educational institution that does not take substantive policy positions. His remarks are his own, based on experiences which include service as the US ambassador to the United Arab Emirates and as deputy assistant secretary of state for Near East affairs.

Beirut,06 08 2004
Davil L Mack
The Daily Star
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