Free Trade and Economic Liberalization in the Middle East

There has been a lot of comment on Middle Eastern affairs in the blogosphere -- most of it has focused narrowly on political and military affairs. The region's economies have excited relatively little comment, except in the precincts of the far left where everything is viewed as a capitalist conspiracy.

Economic development has long been a crucial aspect of Bush's Middle Eastern policy. Time and again he has reiterated his belief that political liberalization must be accompanied by economic liberalization.

Two years ago the Bush administration launched an ambitious plan to create a Middle East free trade zone. The President described it in these words:

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
U.S.-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." [Proposed Middle East Initiatives White House Fact Sheet, May 9,
2003]

Bush proposed a series of "graduated steps" to be taken toward this goal. These included:

-- Help reforming countries become members of the World Trade Organization;

-- Negotiate Bilateral Investment Treaties and Trade and Investment Framework Agreements with governments determined to improve their trade and investment regimes;

-- Complete our negotiations on a free trade agreement with Morocco by the end of this year;

-- Launch, in consultation with Congress, new bilateral free trade agreements with governments committed to high standards and comprehensive trade liberalization;
and

-- Provide assistance to build trade capacity and expansion so countries can benefit from integration into the global trading system.

In addition the US would work to promote economic liberalization within Middle Eastern states.
Again there were a number of concrete proposals, including:

-- Establish a Middle East finance facility to help small- and medium-sized businesses gain access to capital and generate jobs;

-- Reform commercial codes, improve the climate for trade and investment, and strengthen property rights through a new initiative for commercial law in cooperation with U.S. and Middle Eastern law schools and jurists, and business-to-business contacts; and

-- Promote transparency in public finances, help countries fight corruption, and support financial sector reforms based on international best practices.

Other proposals dealt with support for improving education, expanding women's rights, judicial reform, and other aspects of a liberal civil society.

Two years later this ambitious policy is beginning to show results.

Evelyn Iritani, writing recently in the LA Times, noted:

A U.S.-Morocco free-trade agreement, expected to take effect by early summer, will lower or eliminate tariffs on 95% of consumer and industrial products shipped between the two countries....

In Morocco and across the Middle East, freer trade is gaining traction.

Eager for more business with America, the region's governments are slashing tariffs, reducing red tape and strengthening intellectual property laws and labor protections. These measures are boosting trade in textiles and apparel, farm goods and machinery.

[T]he Bush administration has negotiated trade pacts with Bahrain and Morocco, and this month launched negotiations with the United Arab Emirates and Oman. Congress has yet to approve the Bahrain deal.

The U.S. also signed a deal with Egypt that created industrial zones in which goods produced with Israeli components could be exported to the U.S. duty-free. The U.S. already had trade pacts with Jordan and Israel. The Palestinian Authority is included in the Israeli agreement.

Saudi Arabia and Lebanon are taking steps to liberalize their economies so they can join the WTO.

Iraq... has also begun the WTO application process, which the U.S. supports as a way to bolster Iraq's reconstruction.

Under pressure from Europe, the Bush administration has agreed to drop its opposition to Iran's WTO membership with the hopes of persuading that government to abandon a nuclear enrichment program.

Algeria, Yemen and Libya also are taking steps to join the WTO.

This wave of economic reform is no less important than the much more heavily publicized political changes that have been sweeping through the region. There is a long way to go. The combined regional GNP is less than that of Spain. There are severe demographic and political problems that discourage investment in the region. But there is also burgeoning hope.

The Bush administration has wisely been negotiating bilateral agreements that reward countries that take concrete steps toward political and economic liberalization. This provides incentives for other countries to fall into line. Slowly, but surely, the "expanding circle of opportunity" is coming into being. As Bush has frequently noted, this is the work of generations and won't be accomplished overnight, but it is surely coming.