U.S.-Middle East Free Trade Initiative
In May 2003, President Bush proposed a U.S.-Middle East Free Trade Initiative aimed at encouraging growth and opportunity in the region. The initiative will build on U.S. Free Trade Agreements with Israel, Jordan, Bahrain, Morocco and Oman.
Once bilateral FTAs are established, the United States will seek to expand them into a regional FTA encompassing all willing countries in the Middle East and Mahgreb, creating a historic Middle East Free Trade Area (MEFTA) by 2013. The Office of the U.S. Trade Representative has stated that the strategy the Bush administration is taking in regards to MEFTA "is to link (the nations who have signed FTAs with the United States) to one another, opening trade not just with the United States, but also among Middle Eastern countries."
In the summer of 2004, the 9/11 Commission recommended the United States pursue MEFTA further "to encourage development, more open societies, and opportunities for people to improve the lives of their families." Exports in the region have decreased significantly over the past twenty years. Although the region has the world's largest oil reserves, the combined economies of all the nations of the Middle East is smaller than that of France and Belgium combined. Part of the initiative will also involve supporting private organizations and businesses working to increase trade and development in the region with more than $1 billion from U.S. government agencies.
U.S.-Israel Free Trade Agreement
In 1985, President Ronald Reagan signed the U.S.-Israel Free Trade Agreement. It was the first FTA the United States entered into, and has served as a model for many future trade agreements. The FTA eliminates all custom duties between the two countries, and has resulted in a huge increase in the overall volume of bi-national trade to total $35 billion in 2007. U.S. exports account for roughly one fourth of all Israeli imports, with a value of over $13 billion. Israeli exports to the United States have also increased since the FTA’s implementation. In 2007, Israeli imports to the United States were $20.8 billion, an increase of over 300 percent since 1985. Israel is the 19th largest export market for U.S. goods and services.
California exports to Israel were up to nearly $1.7 billion, with manufactured goods accounting for the majority of these exports.
U.S.-Jordan Free Trade Agreement
The U.S.-Jordan Free Trade Agreement has brought significant benefits to both nations since its implementation in 2002. Jordan's exports to the United States increased from $228 million in 2001 to $1.36 billion in 2007. U.S. exports to Jordan grew from $343 million in 2001 to $856 million in 2007. The positive impact on some of the United States major industries has been staggering. Exports of U.S. automobiles to Jordan have risen by 1500 percent. Corn exports have increased 2300 percent and exports of TV and radio transmitters have grown by 500 percent.
On Friday, September 28, 2001 President Bush signed into law the U.S.-Jordanian Free Trade Implementation Act. The Agreement went into effect on December 17, 2001.
The JFTA eliminates duties and commercial barriers to bilateral trade in goods and services originating in the United States and Jordan. It is America's third free trade agreement, following the U.S.-Israel FTA and the North America Free Trade Agreement (NAFTA) and the first with an Arab country. The JFTA will support Jordan's domestic economic reforms, encourage efforts by other Middle East countries to open their economies and enhance regional stability. The JFTA will play a major role in fostering closer bilateral business ties between American and Jordanian firms. It also will provide benefits to consumers and businesses in the United States and Jordan by increasing choices and lowering the prices of goods and services.
The JFTA also includes, for the first time ever in the text of a trade agreement, provisions addressing trade and environment, trade and labor, and electronic commerce. Other provisions address intellectual property rights protection, balance of payments, rules of origin, safeguards and procedural matters such as consultations and dispute settlement.
U.S.-Bahrain Free Trade Agreement
On August 1, 2006, President Bush issued a proclamation making official the U.S.-Bahrain Free Trade Agreement, opening the way for tariff-free bilateral trade in all industrial and consumer goods and creating new opportunities for trade in services and agricultural goods.
The agreement will eliminate duties on all consumer and industrial products and 81 percent of U.S. agricultural exports. This FTA will be particularly beneficial to U.S. exports of aircraft, machinery, pharmaceuticals, and agricultural products.
Two-way trade between the United States and Bahrain increased to over $1.2 billion in 2007. U.S. goods exports were $591 million, including vehicles, machinery, aircraft, toys and other manufactured products.
In 2007, California exports to Bahrain were more than $39 million.
U.S.-Morocco Free Trade Agreement
The U.S. Morocco Free Trade Agreement was implemented on January 1, 2006. The Agreement eliminates tariffs on over 95 percent of bilateral trade in consumer and industrial products, with all tariffs being phased out within 9 years. This reduction in duties will create a huge opening in Morocco's market for U.S. exports such as information technology, machinery, and agriculture.
In January 2005 the Moroccan Upper House of Parliament passed the U.S. Morocco FTA following the earlier passage by the Moroccan Lower House. The United States and Morocco will work to ensure that domestic laws comply with the terms of the agreement in order to bring the FTA into effect.
On August 17, 2004, President Bush signed the U.S.-Morocco Free Trade Agreement Implementation Act. Commenting on the legislation, the White House said, "This agreement will help create jobs and new opportunities for Americans by deepening our trade ties with an important friend in the Arab world."
The U.S. House of Representatives passed the U.S.-Morocco Free Trade Agreement by a vote of 345-76 on July 22, 2004. This came just a day after the Senate passed the Agreement, 85-13. Both California Senators, Barbara Boxer and Dianne Feinstein voted for the bill. In a statement released after the vote, U.S. Trade Representative Robert Zoellick commented that the agreement, "signals our commitment to deepening America's relationship with the Middle East and North Africa."
On April 23, 2002 President Bush announced that the United States would work to enact an FTA with Morocco. This was announced at the White House following a meeting with His Majesty King Mohammed VI of Morocco. The King had already met with U.S. Trade Representative Ambassador Robert Zoellick twice. On October 1, 2002, the USTR notified the Congress of the President’s intent to enter into trade negotiations.
The U.S.-Morocco FTA will build on the bilateral work that began in 1995 under the U.S.-Morocco Trade and Investment Framework Agreement. The U.S.- Morocco FTA eliminates duties and barriers to trade for both U.S. and Moroccan-origin goods and also address trade in services, agricultural products, trade-related aspects of intellectual property rights, government procurement, trade-related environmental and labor matters, and other issues. The FTA is expected to contribute to stronger economies, the rule of law, sustainable development, and more accountable institutions of governance. The FTA will also help to support and accelerate economic and political reforms already underway in Morocco.
The United States currently has a trade surplus with Morocco. In 2007, U.S. annual imports from Morocco totaled $610 million, with U.S. exports reaching $1.3 billion. Some of the major products the United States exports to Morocco are aircraft, corn and machinery. There are significant growth prospects for U.S. products under the Agreement in areas such as oilseeds, feed grains, and products in the energy, tourism, and environmental sectors. In 2007, California exported more than $47 million to Morocco, almost double the amount exported in 2005. California's main exports to Morocco are computers and electronic products.
The U.S.- Morocco Free Trade Agreement will send a strong signal that the United States intends to remain heavily engaged in the Middle East for a long time to come in business, economics, security and international politics. The FTA will stand as a model for other bilateral trade agreements in the region and in multilateral forums. The FTA will contribute to regional and global trade liberalization and strengthen the multilateral trading system. U.S.-Oman Free Trade Agreement
On September 26, 2006, President Bush signed legislation to implement the U.S.-Oman Free Trade Agreement, making it the fifth Middle Eastern country to have a free trade deal with the United States. Under this agreement, all bilateral trade in consumer goods and industrial products will become duty-free.
The U.S. Senate passed the agreement first in June 2006 by a vote of 60-34, then again in September 2006 by a vote of 63-31. The measure passed through the House of Representatives by a vote of 221-205 on July 20, 2006.
The U.S.-Oman FTA will benefit both the California and the United States. In 2007, California exports to Oman were more than $140 million, triple the amount of exports in 2006. The U.S.-Oman Free Trade Agreement will continue to increase our state’s exports in computers, electronics, agricultural products and manufactured goods.
Oman is a potential market for U.S. oil equipment and services, transportation equipment, water and environmental technology, medical equipment, electrical and mechanical equipment, and many other competitive U.S. product and services. Bilateral trade between the United States and Oman totaled over $2.1 billion in 2007. U.S. goods exports to Oman rose to $1.1 billion last year, with significant growth in sales of aircraft and machinery.
Bilateral Agreements Between the United States and Other Middle Eastern Nations
Egypt expects to begin negotiations for an FTA with the United States soon, according to Egyptian Foreign Trade and Industry Minister Rashid Mohammed. "Egypt is committed to political and economic reform and sees an FTA with the United States as a tool for accelerating that process," Minister Rashid said while in Washington to meet with then U.S. Trade Representative Rob Portman in December 2005. Egyptian Minister of Finance, Yousef Boutros-Ghali, commented on his country's progress in simplifying the tariff structure and its privatization of banks in recent years which put Egypt in a good position to negotiate an FTA with the United States in the near future. In a November 2006 visit to Egypt, California Congressman Bill Thomas stated that the reforms in Egypt would convince the U.S. House and Senate of the benefits of the proposed U.S.-Egypt FTA.
The United States held Trade and Investment Framework Agreements (TIFA) consultations with Tunisia in June 2005 - one of the first steps towards Free Trade Agreement negotiations. Representatives from the Office of the U.S. Trade Representative had a productive discussion with the Tunisian business community regarding market opening measures, the potential value of free trade agreements, and detailed talks on what the country must do to position themselves for an FTA with the United States.
Other Middle Eastern Countries that have expressed interest in starting FTA negotiations include Algeria, Qatar and Kuwait.
Membership of the World Trade Organization for Nations of the Middle East
The World Trade Organization gave Saudi Arabia approval to join the international trading body in November 2005, after over a decade of talks. The nation is the largest oil producer in the world and a powerful voice in the Organization of Petroleum Exporting Countries (OPEC). The decision to approve membership, according to a Saudi official, stemmed from structural reform and a pledge that Saudi Arabia will champion the needs of poor countries. Some of the commitments taken by Saudi Arabia as part of their WTO membership include:
- Saudi Arabia will not maintain any export subsidies on agricultural products.
- Within ten years, average bound tariff levels will decrease to 12.4 and 10.5 percent for agricultural and non-agricultural products respectively.
- Foreign insurance companies will be permitted to open and operate direct branches in Saudi Arabia.
- Commercial presence of banks will be permitted in the form of a locally incorporated joint-stock company or as a branch of an international bank.
- Within three years from accession, Saudi Arabia's commitments will allow up to 70 percent foreign equity ownership in the telecommunications sector.
- While Saudi Arabia will maintain some restrictions on the distribution of goods inside the country, these restrictions will be phased out over a three-year transition period.
The United States is working with other nations in the region who desire to join the WTO in order to speed up their accession to the international trading body. Some of these countries include: Lebanon, Algeria and Yemen. Once these nations put in place measures to reform and open their economies, the United States will expand the Generalized System of Preferences (GSP) program to provide duty-free entry for thousands of products from the developing world, including six countries in the West Bank and Middle East.
Iran, a nation not currently involved in free trade negotiations with the United States, was recently given "observer" status to the World Trade Organization. In May 2005, WTO members approved a measure allowing Iran to begin talks that may potentially lead to their accession to the international trade body.
CalChamber Position
The CalChamber, in keeping with long-standing policy, enthusiastically supports free trade worldwide, expansion of international trade and investment, fair and equitable market access for California products abroad and elimination of disincentives that impede the international competitiveness of California business. New multilateral, sectoral and regional trade agreements ensure that the United States may continue to gain access to world markets, resulting in an improved economy and additional employment of Americans.
Reasons for Position:
The U.S.- Middle East Free Trade Agreement will send a strong signal that the United States intends to remain heavily engaged in the Middle East for a long time to come in business, economics, security and international politics.
The FTA will contribute to regional and global trade liberalization and strengthen the multilateral trading system.
Additional Information: