The US and Middle East have seen strong development in economic relations in the past couple of years with booming trade and the implementation of a number of Free Trade Agreements (FTAs). Going forward, it is likely that commercial relations will remain strong although further FTAs are perhaps unlikely in the medium term.
In the United States the political battlefield for the November elections have been partially clarified in the past month. The Republican candidate will be Senator John McCain, while the Democratic side is still being contested by Senators Hillary Clinton and Barack Obama.
During the election debates and campaigning, discussion on the Middle East has been almost entirely focused on Iraq. This is not unusual given the US military involvement in Iraq, but more surprising is the lack of discussion on other issues pertaining to the Middle East, particularly in regards to Israel/Palestine.
Although not during an electoral debate, the latest non-Iraq mention of engagement in the region was made by Senator Obama on Lebanon, and said while addressing the Senate on February 4, 2008, “the continued deadlock over Lebanon’s presidency brings further instability to an important country in the Middle East. We cannot idly stand by as an emerging democracy, whose people have long ties to the United States, teeters on the verge of collapse.”
Perceptions of the upcoming election
He added that “it is time to engage in diplomatic efforts to help build a new Lebanese consensus. These efforts should focus on the need for electoral reform, an end to the current corrupt patronage system, and the development of the economy, so as to provide for a fair distribution of services, opportunities, and employment.”
Commenting on the perception of the US elections in the Middle East and North Africa (MENA), James Zogby, founder and president of the Arab-American Institute, thinks that an important factor for people in the MENA region regarding the upcoming elections is firstly the end of the Bush Administration. In regard to the current candidates, Zogby said that people in the region are following the Democratic candidates with great interest. “People in the region question ‘Can Obama really win?’, can an African-American, son of a Muslim really win in America? Obama as President of the United States would send a very different message about America. This is the America that they have dreamed of when they think about American values. I have had people in the region tell me, I wish I were American so I could vote for Obama!”
There is also strong support for Hillary Clinton, whose candidacy people in the region see as the return of the Clintons to the White House. Mentioning Bill Clinton’s overseeing of the Peace Process and travels to the region, both while president and after, Zogby said that Clinton had created a lot of good feelings towards America in the region.
For MENA, the US is an important commercial partner. In 2006, the US represented the most important import market for the region, comprising 9.4% of total imports. The US was also the second largest export market for the region (10.6%) behind Japan (15.4%). Of course, the regional exports are dominated by oil and gas and the leading exporters are Saudi Arabia, the UAE and Iran, who by themselves account for more than 50% of the total exports of the region.
In Lebanon, which signed a Trade and Investment Framework Agreement (TIFA) with the US in 2006, American exports have been growing steadily. In 2006, the US represented 9.2% of Lebanese imports placing it third behind Syria (11.4%) and Italy (9.6%). This was a strong increase from the previous year when the US had only represented 5.3% of Lebanese imports.
Since 2003, the US has put forward a plan to increase trade between the Middle East with the United States, entitled the Middle East Free Trade (MEFTA) Initiative. This led to the signing of a number of FTAs, and some other agreements such as TIFAs which are usually seen as a step towards FTAs.
Bringing the region together under FTAs
The US has TIFAs with Algeria, Egypt, Iraq, Kuwait, Lebanon, Qatar, Saudi Arabia, Tunisia, the UAE and Yemen, and FTAs with Israel, Jordan, Morocco, Bahrain and Oman, which in 2006 was the latest country to sign.
The MEFTA initiative aims to bring all countries of the region into FTAs with the US by 2013. Explaining the reason for US-MEFTA, President George W. Bush said in May 2003, “Across the globe, free markets and trade have helped defeat poverty, and taught men and women the habits of liberty. So I propose the establishment of a US-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.”
Looking at the impact of the Bush administration on commercial relations between the US and the Middle East, David Hamod, president of the National US Arab Chamber of Commerce notes a number of positive aspects.
Firstly, he noted “with support from the US Congress, pushed through three FTAs with the Arab World — Morocco, Bahrain, and Oman. This is a significant accomplishment, and there is good reason to believe that more FTAs with Arab nations will be signed in the years ahead.”
Looking at the booming US exports towards the region Hamod also gives some credit to the current administration. “There are many reasons for this, the most obvious being the surge in oil prices and the concomitant liquidity and purchasing power that this surge has created. For its part, the Bush administration has played a role in this boom by ‘talking up’ US goods and services and by undervaluing the US dollar, thereby making US exports more competitive in world markets” he said.
And the final positive note, according to Hamod, is the president’s stand against the protectionist sentiments expressed by US Congress in the Dubai Ports World issue. “President Bush threatened to veto Congressional legislation that would preclude investment by the UAE in several US ports.”
On a less positive note, Hamod also noted that the raised security concerns in the US have been detrimental to American-Arab business ties, saying “As a result of visa difficulties and concerns about ethnic profiling in the US, many of our best friends in the Arab World are no longer interested in doing business here.” This is not a good situation especially when India, China, and other Asian markets are aggressively rolling out the red carpet for Arab investors.
In the upcoming US elections all three potential remaining candidates voted in favor of the US-Oman FTA in the Senate, implying that they will likely continue the policy of encouraging FTAs between the US and Middle Eastern countries.
But there is less certainty as to the interest of Arab countries to enter into more FTAs with the US. The UAE was supposed to be next, as they officially begun discussions in March 2005, but negotiations have stalled. There were also rumors for Egypt beginning negotiations but that also appears to have been shelved.
James Zogby shares this bleaker outlook on future FTAs with the US. “The countries that signed FTAs have them, but I don’t expect any more. The Bush administration went for the easier countries. I don’t expect any others in the making.”
