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United States pursues more free-trade agreements in the Middle East

Washington is trying to entrench its economic and political ties in the region

Trying to entrench its economic and political ties in the region, and blaming the Gulf Cooperation Council's slowness in devising region-wide economic measures, the United States is aggressively pursuing a number of free-trade agreements in this part of the Middle East.

The latest chapter in this effort started in March when Washington initiated free-trade agreement (FTA) 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 and Morocco have 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. Other countries in "serious discussions'' with the United States are Kuwait and Qatar. Many in the Middle East argue - and some in the U.S. 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 U.S. from the six Middle Eastern countries - U.A.E., Kuwait, Qatar, Bahrain, Oman and Jordan - amounted to $6.6 billion. Total imports from the U.S. were estimated at $7.2 billion.

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

Khaled al-Bustani, assistant undersecretary for budget and revenue at U.A.E.'s Finance and Industry Ministry says his country is pursuing the FTA talks based on their economic merits, not possible political fallouts.

"We look at the FTA from the macro level. We both [U.A.E. 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,'' Bustani, who is involved in the U.S.-U.A.E. negotiations, said.

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 to $1.1 billion.

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 and because the nature of their economic ties have changed since talks started between GCC members.

The six Arab countries that constitute the 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 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,'' said Youssef Ibrahim, a Dubai-based Middle East energy and economics analyst.

"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 toward 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 U.A.E. 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 U.S. 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.

Amman,05 02 2005
Peyman Pejman
The Daily Star
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