U.S. Trade and Investment in the
Middle East and North Africa:
Overview and Issues for Congress
Rebecca M. Nelson
Analyst in International Trade and Finance
Mary Jane Bolle
Specialist in International Trade and Finance
Shayerah Ilias
Analyst in International Trade and Finance
January 20, 2012
Congressional Research Service
7-5700
www.crs.gov
R42153
CRS Report for Congress
Pr
epared for Members and Committees of Congress
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Summary
In order to support democratic political transitions and stability in the Middle East and North
Africa (MENA), policymakers in Congress and elsewhere are discussing potentially using U.S.
trade and investment to bolster long-term economic growth in the region. For example, President
Obama has called for the creation of a “Trade and Investment Partnership Initiative” in the
MENA region, and some Members of Congress have called for deeper economic ties with Arab
countries undergoing profound change. This report analyzes policy approaches that the Congress
might consider concerning U.S.-MENA trade and investment.
MENA Economies
Economic performance in the MENA region as a whole lags behind other regions in the world in
terms of GDP per capita (living standards), employment, and economic diversification, despite
the fact that several MENA countries are major producers of oil and natural gas. Substantial
diversity also exists among economies within the region.
Integration in the Global Economy
The MENA region’s lack of integration in the global economy is frequently cited as an obstacle to
overall economic development in the region. MENA’s trade with the world is concentrated in a
small number of products (oil exports and imports of manufactured goods) and among a small
number of trading partners (particularly the European Union). Tariffs also remain high in some
MENA countries. With regard to the United States, the MENA region accounts for less than 5%
of U.S. total trade and 1% of U.S. foreign direct investment (FDI) outflows. U.S. businesses face
a number of non-tariff barriers, such as lack of transparency, bureaucratic red tape, corruption,
weak rule of law, and differences in business cultures. The United States has free trade
agreements (FTAs) with five MENA countries: Bahrain, Israel, Jordan, Morocco, and Oman.
Policy Approaches and Challenges
Congress and other policymakers might consider a number of approaches regarding U.S. trade
and investment in the MENA region, including
• maintaining the status quo until the impact of the political changes in MENA
countries is clear;
• creating a U.S. trade preference program that grants preferential market access in
the United States to exports from MENA countries;
• increasing assistance from U.S. federal export agencies to the region;
• negotiating new trade and/or investment agreements with countries in the region
that do not already have them. Egypt and Tunisia have been mentioned by some
U.S. policymakers as the most likely candidates for FTAs; and
• providing technical assistance to countries working towards World Trade
Organization (WTO) membership.
The link between increased economic openness and democracy is debated. Some analysts
maintain that new trade and investment agreements develop better governance and institutions
and support sound economic growth. Other analysts argue that the empirical record between
Congressional Research Service
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
economic openness and democracy is weak. Additionally, some observers question whether the
protestors in different Arab countries favor more economic liberalization, which they sometimes
associate with inequality.
If a policy agenda to promote increased U.S. trade and investment with the MENA region is
pursued, Congress will face a host of questions. A few examples include
• Should the U.S. government promote expanded trade and investment in the near-
term in order to support democratic transitions, or should it wait until the political
situation stabilizes in various countries? Does waiting risk losing commercial
opportunities for U.S. businesses in MENA to other countries? Does acting early
risk supporting governments whose compatibility with U.S. interests remains
ambiguous?
• To what extent should the United States balance, on one hand, pursuing a
regional approach of increased trade and investment, while, on the other hand,
tailoring policies to the specific needs of individual countries in the region?
• To what extent should the United States cooperate with the European Union or
others on trade and investment in the MENA region?
Are existing U.S. trade and investment agreements with MENA countries benefitting the region,
and achieving the intended objectives? What lessons can be learned from past U.S. efforts to
promote trade and investment?
Congressional Research Service
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Contents
Introduction...................................................................................................................................... 1
Economic Challenges in the MENA Region ................................................................................... 3
Weak Economic Development Despite Abundant Natural Resources ...................................... 3
Obstacles to Development......................................................................................................... 5
Important Caveats: Areas of Success, and Heterogeneity Among Countries ............................ 5
Weak Integration in the Global Economy........................................................................................ 8
MENA’s Trade and Investment with the World......................................................................... 8
U.S.-MENA Trade and Investment.......................................................................................... 10
Trade.................................................................................................................................. 10
Investment ......................................................................................................................... 12
Obstacles to Closer U.S. Trade and Investment Ties with MENA Countries ................... 14
Policy Options for Increasing U.S.-MENA Trade and Investment................................................ 15
Current Status of U.S. Trade and Investment Policy with MENA .......................................... 16
Formal Agreements to Liberalize Trade and Investment .................................................. 17
Federal Programs to Promote Trade and Investment ........................................................ 20
Possible Policy Approaches for Increasing U.S.-MENA Trade and Investment ..................... 25
Unilateral Options ............................................................................................................. 25
Bilateral and Regional Options ......................................................................................... 26
Multilateral Options .......................................................................................................... 28
Issues for Congress: Possible Challenges and Implementation Questions .................................... 28
Figures
Figure 1. Map of Middle East and North Africa.............................................................................. 2
Figure 2. The MENA Economy in Comparative Perspective: Key Indicators ................................ 4
Figure 3. MENA’s Trade as a Percent of GDP Compared to Other Regions, 2009......................... 8
Figure 4. MENA’s Exports and Imports of Goods and Services with the World,
by Commodity or Type of Service, 2008...................................................................................... 9
Figure 5. MENA’s Major Trading Partners, 2010............................................................................ 9
Figure 6. Top U.S. Exports to and Imports from the MENA Region, 2010 .................................. 11
Figure 7. U.S. Exports to and Imports from MENA Countries/Territories, 2010.......................... 12
Figure 8. U.S.-MENA Foreign Direct Investment (FDI), 2010..................................................... 13
Figure 9. U.S.-MENA Foreign Direct Investment (FDI): Country Breakdown, 2010 .................. 14
Figure A-1. U.S. Exports to MENA Countries/Territories............................................................. 32
Figure A-2. U.S. Imports from MENA Countries/Territories, 2010 .............................................. 33
Tables
Table 1. Selected Economic Indicators for MENA Countries ......................................................... 7
Congressional Research Service
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Table 2. U.S.-MENA Trade and Investment Agreements .............................................................. 19
Table 3. Federal Export and Investment Promotion Support in MENA........................................ 24
Table A-1. Top U.S. Exports to MENA Countries/Territories, 2010 ............................................. 34
Table A-2. Top U.S. Imports from MENA Countries/Territories, 2010......................................... 35
Appendixes
Appendix. Trade Tables ................................................................................................................. 32
Contacts
Author Contact Information........................................................................................................... 36
Congressional Research Service
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Introduction
In early 2011, anti-government and pro-reform demonstrations, protests, and uprisings began
sweeping through several countries in the Middle East and North Africa (MENA) region.1 The
heads of state in three countries—Tunisia, Egypt, and Libya—have been overthrown, and
political protests have occurred in a number of countries, including Yemen, Syria, Bahrain, and
Jordan, among others.2 Some commentators claim that a new wave of democratization is
sweeping through the MENA region,3 and term the recent political unrest the “Arab Spring.”
Others are less optimistic about these political changes and warn that the outcomes are still
unclear.
The U.S. government and the broader international community have begun to discuss how they
can support democratic political transitions in the region. A key focus of these discussion is the
role that economic growth can play in solidifying and supporting political transitions.
Policymakers in Congress and elsewhere have considered possible short-term measures that
might provide economic relief to transitioning countries. For example, the FY2012 State and
Foreign Operations appropriations legislation provides for increased U.S. foreign aid to Egypt,
Tunisia, and Jordan, provided certain conditions are met.4 A portion of these funds can be used to
create “enterprise funds” to invest U.S. government funds in these countries.5 Policymakers have
also discussed measures that could bolster economic growth over the longer-term, in particular
through greater trade with and investment in the region. This report focuses on these trade and
investment discussions.
Calls for greater trade and investment with MENA countries have come from the Administration
and some Members of Congress. In a speech delivered at the State Department in May 2011,
President Obama called for, among other measures, a new “Trade and Investment Partnership
Initiative” with MENA countries.6 Within Congress, some Members have called for new free
1 There is no standard definition of which countries belong to the MENA region; different organizations define the
region differently. This report primarily relies on the categorization used by the World Bank. The World Bank defines
the MENA region to include Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya,
Malta, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates (UAE), the West Bank, and
Yemen. Some may disagree with the categorization; for example, Malta, may be a particular point of contention
because it is a member of the European Union (EU). However, given the data constraints for the MENA region and the
availability of data from the World Bank, the World Bank’s categorization is used in this report.
2 For more information on the political developments in the region, see CRS Report RL33003, Egypt in Transition, by
Jeremy M. Sharp; CRS Report RS21666, Political Transition in Tunisia, by Alexis Arieff; CRS Report RL33142,
Libya: Transition and U.S. Policy, by Christopher M. Blanchard; CRS Report RL34170, Yemen: Background and U.S.
Relations, by Jeremy M. Sharp; CRS Report RL33487, Unrest in Syria and U.S. Sanctions Against the Asad Regime,
by Jeremy M. Sharp and Christopher M. Blanchard.
3 For example, see Stephen R. Grant, “Starting in Egypt: the Fourth Wave of Democratization?” Brookings, February
10, 2011, http://www.brookings.edu/opinions/2011/0210_egypt_democracy_grand.aspx.
4 P.L. 112-74. For more on U.S. foreign assistance to MENA, see CRS Report RL32260, U.S. Foreign Assistance to the
Middle East: Historical Background, Recent Trends, and the FY2011 Request, by Jeremy M. Sharp.
5 Enterprise funds seek to promote the expansion of the private sector in developing and transition countries by lending
or taking equity positions in firms. They are initially funded by the U.S. government, although additional capital may
be raised from the private sector. For more background information on enterprise funds, see Carol Lancaster
(Coordinator), Kwaku Nuamah, and Matthew Lieber, et al., Foreign Aid and Private Sector Development, Providence,
RI: Watson Institute for International Studies, Brown University, 2006.
6 Office of the Press Secretary, “Remarks by the President on the Middle East and North Africa,” The White House,
State Department, Washington, DC, May 19, 2011, http://www.whitehouse.gov/the-press-office/2011/05/19/remarks-
(continued...)
Congressional Research Service
1
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
trade agreements (FTAs) with Egypt and Tunisia, and deeper economic ties with Libya.7 In
November 2011, Representative Dreier introduced a resolution, co-sponsored by Representative
Meeks, that calls for the United States to initiate FTA negotiations with Egypt (H.Res. 472).
Any new U.S. trade and investment initiatives with the MENA region will almost certainly
require congressional involvement. For example, legislative action would be needed to implement
any new trade and investment agreements. Congress may also want to exercise oversight over any
changes to government programs that promote U.S. trade and investment.
This report provides background and analysis for policymakers considering re-evaluating U.S.
trade and investment in the MENA region in light of recent political developments. In particular,
the report examines the economic challenges facing many countries in the region and the area’s
limited integration in the world economy, including relatively weak economic ties with the United
States. It also analyzes various policy options for increasing trade and investment with MENA
countries. The report concludes by discussing: 1) the premise of the policy agenda, specifically
whether increased trade and investment can support or lead to successful democratic transitions
and political stability; and 2) if such a policy agenda is pursued, possible implementation
questions that policymakers in Congress and the Administration may face.
Figure 1. Map of Middle East and North Africa
Source: CRS.
Note: World Bank definition of the Middle East and North Africa. For more information, see footnote 1.
(...continued)
president-middle-east-and-north-africa.
7 For example, see Prepared Remarks of Senator Joseph Liberman, Carnegie Endowment for International Peace, July
22, 2011, http://carnegieendowment.org/files/Lieberman_Prepared_Remarks.pdf; and John McCain, Lindsey Graham,
Mark Kirk, and Marco Rubio, “The Promise of a Pro-American Libya,” Wall Street Journal, October 7, 2011.
Congressional Research Service
2
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Economic Challenges in the MENA Region
Weak Economic Development Despite Abundant
Natural Resources
The Middle East and North Africa (MENA) region lags behind other regions on many key
economic indicators (Figure 2). The region has a relatively small population, 383 million in
2010, accounting for nearly 6% of the world’s total population, but its economic output is
disproportionately smaller.8 The region’s share of world economic output, measured by gross
domestic product (GDP), was just 3.7% in 2009. Additionally, the region’s GDP per capita in
2009 ($5,728) was lower than in Latin America and the Caribbean ($7,200) and East Asia and the
Pacific ($6,441). The region generally has poorly developed manufacturing and service sectors;
the value added, or net output, of manufacturing and services relative to GDP in MENA is the
smallest in the world. Weak economic opportunities combined with one of the fastest growing
populations in the world have resulted in high levels of unemployment.9 Unemployment averaged
11.8% between 2004 and 2007 in the MENA region, more than double the unemployment rate in
East Asia and the Pacific (4.8%) during the same time period. Unemployment among youth in
particular is a problem in the MENA region. For example, youth (15-24 year olds) unemployment
in Egypt was 25% in 2007, and 28% in Jordan. Thailand’s similar GDP per capita is similar to
Jordan’s, but its youth unemployment rate in 2007 only 4.5%.10
While several countries in the region are rich in natural resources, especially oil and natural gas,
the revenues from these resources have been poorly utilized and the development of other
production and export industries has lagged. MENA countries produced 35% of the world’s oil
and nearly 20% of the world’s natural gas in 2010.11 Oil production is concentrated in Algeria,
Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, the United Arab Emirates (UAE),
and Yemen. Other countries in the region import more oil than they produce, or do not produce
any oil at all. The mismatch between endowments of natural resources and weak economic
development is frequently called a “resource curse, since endowments of natural resources like oil
seem to have deterred, rather than jumpstarted, broad economic development in many countries
and potentially exacerbated inequality In some countries, notably in the oil-rich Gulf region,
governments are now actively seeking to leverage state oil export revenues to support the
development of non-hydrocarbon economic sectors and the expansion of employment
opportunities.
8 Data in this section “Economic Challenges in the MENA Region” are from the World Bank, World Development
Indicators, 2011, unless otherwise noted.
9 Population growth in MENA countries averaged 2.0% per year during the 2000s, second only to Sub-Saharan Africa
(2.5%). In contrast, population growth averaged 1.5% in South Asia and 1.3% in Latin America and the Caribbean in
the same time frame.
10 2010 GDP per capita in Jordan was $4,560, and $4,608 in Thailand.
11 U.S. Energy Information Administration, International Energy Statistics, 2011. World Bank regional grouping used
in calculation. Data for total oil supply and dry natural gas production used.
Congressional Research Service
3
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Figure 2. The MENA Economy in Comparative Perspective: Key Indicators
Source: World Bank, World Development Indicators, 2011; U.S. Energy Information Administration, International
Energy Statistics, 2011.
Notes: Data are for the most recent year available. Population and oil production data are for 2010; GDP per
capita data are for 2009; unemployment data is for 2005; and service and manufacturing data are for 2007.
Unemployment data for the Sub-Saharan Africa region as a whole is not available.
•
As noted above, unemployment data is for 2005; more recent data for comparing unemployment levels
across a number of regions is not available. However, the reader should note that the global financial crisis
of 2008-2009 and ensuing recession had substantial impacts on employment levels in some countries and
regions. The World Bank reports that unemployment in the United States, for example, rose from 5.1% in
2005 to 9.3% in 2009.
Congressional Research Service
4
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Obstacles to Development
Numerous explanations have been put forward to explain why economic development in the
MENA region has lagged behind other regions.12 For example, it has been argued that
• Weak integration in the global economy has prevented the region from reaping
the opportunities of globalization;
• “Easy money” from natural resources has provided few incentives to develop
sound economic policies or other productive industries, with the benefits of
natural resources going to a few and not the public at large;
• Non-democratic political institutions have stifled innovation and economic
competition, leading to slow growth and distortions in the economy;
• A weak business environment, stemming from heavy government involvement
in the economy, red tape, corruption, and weak rule of law, has deterred foreign
investment;
• A weak educational system has not equipped youth in the region with the skills
demanded by the private sector in a competitive global environment;
• Lack of government social spending, with large portions of the budget going to
defense and subsidies for basic needs, creates distortions in the economy; and
• Women make-up a low proportion of the labor force, preventing the region
from tapping all its productive potential.
Important Caveats: Areas of Success, and Heterogeneity
Among Countries
Despite the economic challenges faced by the region as a whole, it is important to note that there
have been some areas of economic success. Appreciating economic diversity among the MENA
economies may have implications for the types of economic policies that might be pursued to
bolster growth in the region, and suggests that policy solutions may need to be tailored to the
specific circumstances of each economy.
For example, the World Bank and the International Monetary Fund (IMF) have applauded success
on various social indicators of well-being and macroeconomic stability for the MENA region.13 In
2009, the MENA had a life expectancy of 72 years, a primary education completion rate of 88%,
12 For example, see Marcus Noland and Howard Pack, “The Arab Economies in a Changing World,” Peterson Institute
for International Economics, June 2007, http://bookstore.piie.com/book-store/3931.html; United Nations, “Arab
Human Development Report 2002: Creating Opportunities for Future Generations,” 2002, http://www.arab-hdr.org/
publications/other/ahdr/ahdr2002e.pdf; Howard Schneider, “Arab Nations Lag Behind Rest of World Economically,
Despite Oil and Natural Gas,” Washington Post, February 23, 2011; Arvind Subramanian, “Arab Spring Will Not See
an Economic Boom,” Financial Times, February 21, 2011, http://www.iie.com/publications/opeds/oped.cfm?
ResearchID=1770.
13 For example, see International Monetary Fund (IMF), “IMF Note on Economic Transformation in MENA:
Delivering on the Promise of Shared Prosperity,” May 27, 2011, Prepared for the G-8 Summit in Deauville, France,
http://www.imf.org/external/np/g8/052611.htm; World Bank, “Middle East and North Africa Regional Brief,”
September 2011, http://go.worldbank.org/1JVC0DGRS0.
Congressional Research Service
5
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
and an under-5 mortality rate of 32 per 1,000 births. Absolute poverty in the region is also
relatively low, with less than 4% of the population living on $1.25 a day.14 Additionally, the IMF
has noted that over the past two decades, the region has generally been successful in reining in
inflation, improving trade balances, and reducing public debt levels.
Substantial diversity also exists among economies within the region, and some economies have
achieved greater levels of economic success than others (Table 1). For example, some of the
region’s small, oil-exporting countries are among the richest countries in the world; GDP per
capita is higher in Qatar ($61,532 in 2009) than in the United States ($45,745 in 2009).
Additionally, Israel had a GDP per capita of $26,102 in 2009.
Likewise, some countries have stronger political and legal institutions than others; according to
the World Bank’s Worldwide Governance Indicators, Qatar ranked in the 75th percentile among
countries worldwide in strength of rule of law in 2010.15 Economic reforms have taken root in
some countries; in the World Bank’s Doing Business Report, Saudi Arabia is ranked as the 12th
easiest country in the world in which to do business.16 Tunisia was also noted as a top regional
economic reformer in the 2009 Doing Business report. While female participation in the labor
force is low in many countries, women made up 47% of the labor force in Israel in 2009.
Finally, some countries in the region continue to grapple with various social challenges and
macroeconomic stability, areas where the region as a whole is viewed as having succeeded. For
example, poverty in Egypt is relatively high, with nearly one in five Egyptians (18%) living on
less than $2.00 a day in 2005. The under-5 mortality rate in Yemen was 79 per 1,000 births in
2009, about three times higher than the average for the region as a whole. In terms of
macroeconomic stability, Lebanon has a high level of public debt (forecasted to be 134% of GDP
in 2010), and Iraq is running a large budget deficit (expected to have topped 9% of GDP in
2010).17
14 World Bank, “Middle East and North Africa Regional Brief,” September 2011, http://go.worldbank.org/
1JVC0DGRS0.
15 World Bank, Worldwide Governance Indicators, 2010, http://info.worldbank.org/governance/wgi/index.asp.
16 World Bank, Doing Business, 2011, http://www.doingbusiness.org/rankings.
17 International Monetary Fund, World Economic Outlook, September 2011.
Congressional Research Service
6
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Table 1. Selected Economic Indicators for MENA Countries
GDP
Oil
per
Population
Production GDP capita Manufacturing Services Unemployment
Million
Billion
Value added, %
Value
% of total labor
Millions
barrels per
added, %
US$
US$
of GDP
force
day
of GDP
2010 2010
2009
2009
2007 2007 2008
Oil exporters
Algeria 35.5
2,078
141
4,022
5.3
30.7
11.3
Bahrain 1.3
46
21
17,609
n.a.
n.a.
n.a.
Iran
74.0 4,252
331
4,526
10.6 45.3 10.5
Iraq 32.0
2,408
65
2,097
n.a.
n.a.
n.a.
Kuwait 2.7
2,450
109
41,365
n.a.
n.a.
n.a.
Libya
6.4 1,789
62
9,957
4.5 21.5 n.a.
Oman 2.8
868
47
17,280
n.a.
n.a.
n.a.
Qatar 1.8
1,437
98
61,532
n.a.
n.a.
n.a.
Saudi Arabia
27.4
10,521
373
13,901
9.5
31.6
5.0
United Arab
7.5 2,813
230
33,183
12.4 37.6 4.0
Emirates
Yemen 24.1
259
26
1,130
n.a.
n.a.
15.0
Oil importers
Djibouti 0.9
0
1
1,203
2.5
79.3
n.a.
Egypt 81.1
663
189
2,371
15.7
49.6
8.7
Israel 7.6
4
195
26,102
n.a.
n.a.
6.1
Jordan 6.0
0
25
4,242
20.4
67.0
12.7
Lebanon 4.2
0
35
8,321
10.4
71.0
n.a.
Malta 0.4
0
8
19,326
16.3
59.4
5.8
Morocco 32.0
4
91
2,842
15.0
59.0
9.6
Syria 20.4
401
54
2,692
11.7
46.9
n.a.
Tunisia 10.5
84
44
4,169
16.9
60.7
14.2
West Bank
4.2
0
n.a.
n.a.
n.a.
n.a.
26.0
Source: World Bank, World Development Indicators, 2011; U.S. Energy Information Administration, International
Energy Statistics, 2011.
Note: n.a. = not available.
Congressional Research Service
7
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Weak Integration in the Global Economy
With some exceptions, MENA countries face serious economic challenges despite some
countries’ large oil and gas production. Weak integration in the global economy, including weak
integration within the region, is frequently cited by economists as a factor impeding economic
development in the region. This section highlights the relatively limited nature of MENA’s trade
and investment relations in the global economy, including with the United States.
MENA’s Trade and Investment with the World
On the surface, MENA appears to be relatively active in global trade. Relative to GDP, the
MENA region had the highest level of exports (41% of GDP in 2009) of any major geographic
region in the world in that year, and the highest levels of imports (38% of GDP in 2009, see
Figure 3).18 Net inflows of foreign direct investment (FDI) into MENA countries were 3.5% of
GDP in 2010, one of the highest in the world (second to Sub-Saharan Africa, at 3.6% of GDP),
and well above the average for countries worldwide (2.1% of GDP).19
Figure 3. MENA’s Trade as a Percent of GDP Compared to Other Regions, 2009
Source: World Bank, World Development Indicators, 2011.
Note: Includes trade in goods and services.
Delving deeper, however, reveals the limitations of MENA’s interactions in the global economy.
First, MENA’s trade tends to be highly concentrated in a few key products. Figure 4 shows that
oil dominates the region’s exports, with fuel accounting for 58% of the region’s total exports in
2008. In some countries, export concentration is even more significant. Fuel accounted for more
than 90% of total merchandise exports in Algeria, Iraq, Kuwait, and Yemen in 2009. MENA’s
imports are also heavily concentrated on manufactured goods, which accounted for 50% of total
imports in 2008 as shown in Figure 4.20
18 World Bank, World Development Indicators, 2011.
19 FDI refers to a company expanding its operations overseas by created a subsidiary, branch, factory, or similar
enterprise in a different country. World Bank, World Development Indicators, 2011.
20 World Bank, World Development Indicators, 2011.
Congressional Research Service
8
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Figure 4. MENA’s Exports and Imports of Goods and Services with the World,
by Commodity or Type of Service, 2008
Source: World Bank, World Development Indicators, 2011.
MENA’s major merchandise export markets in 2010 were the EU, Japan, the United States, and
India, accounting for 46% of MENA’s merchandise exports. Likewise, nearly 50% of MENA’s
merchandise imports came from the EU, China, and the United States in 2010, as shown in
Figure 5.21 Intra-MENA trade is relatively limited, accounting for just 11% of total exports and
15% of total imports in 2010.22
Figure 5. MENA’s Major Trading Partners, 2010
Source: International Monetary Fund (IMF), Direction of Trade Statistics, 2012.
Notes: Merchandise data only; services data not available.
21 International Monetary Fund (IMF), Direction of Trade Statistics, May 2010.
22 Ibid.
Congressional Research Service
9
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
There are a number of economic and political explanations for why trade within the region is
limited. Some of the countries in the region produce similar products, limiting the opportunities
for intra-regional trade. Political tensions among countries may also restrict trade among MENA
countries. For example, the Arab League, an umbrella organization of more than 20 Middle
Eastern and African countries and entities, has maintained an official boycott of Israeli companies
and Israeli-made goods since the founding of Israel in 1948.23
Finally, some lower-income countries in MENA still have relatively high levels of protectionism.
Tariff rates averaged 7.4% in 2009 among developing MENA countries, compared to an average
of 5.1% among developing countries and 3.1% for countries worldwide.24
U.S.-MENA Trade and Investment
Trade
Trade and investment between the MENA region and the United States is relatively limited,
suggesting scope for deeper economic ties. U.S. trade with MENA countries accounts for a small
share of total U.S. trade: $155 billion, less than 5% of the U.S. total, in 2010. U.S.-MENA trade
primarily consists of exchanging a wide variety of U.S. goods for crude oil, which is then
processed and refined into such petroleum end-products as gasoline, diesel fuel, heating oil,
kerosene, and liquefied petroleum gas. As shown in Figure 6, oil accounted for 70% of all U.S.
imports from the MENA region in 2010 ($67 billion out of $95 billion). If Israel were removed
from the list of countries, oil’s share of all U.S. imports from the region rises to 90%. Despite the
fact that the MENA region consists of several oil exporters, it still ranks second as a U.S. oil
supplier, accounting for nearly one-fifth (19%) of U.S. oil imports, with Canada first (24%) and
Mexico third (9%). The United States exports a range of goods to the MENA region, including
motor vehicles, machinery, aircrafts, and diamonds (Figure 6).
23 For more on the Arab League, see CRS Report RL33961, Arab League Boycott of Israel, by Martin A. Weiss.
24 World Bank, World Development Indicators, 2011. Data are for applied tariff rates for all products (weighted mean).
Congressional Research Service
10
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Figure 6. Top U.S. Exports to and Imports from the MENA Region, 2010
Source: Global Trade Atlas.
Notes: NEOSI = Not elsewhere specified or included. See the Appendix for more detailed data.
Within the region, the value of U.S. trade with individual MENA economies varies widely
(Figure 7). In 2010, U.S. trade with the MENA region was concentrated in nine countries: Saudi
Arabia, Israel, Algeria, Iraq, UAE, Egypt, Kuwait, Qatar, and Libya. Together, they account for
more than 90% of all U.S. trade (exports and imports) with the region. For five of these
countries—Saudi Arabia, Algeria, Iraq, Kuwait, and Libya—oil constituted nearly all of their
exports to the United States. For three, Egypt, Oman, Qatar, oil exports represented 34%, 50%,
and 55% of all such exports respectively. In contrast, Israel exports a broader mix of products to
the United States. More detailed trade data are provided in the Appendix.
Congressional Research Service
11
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Figure 7. U.S. Exports to and Imports from MENA Countries/Territories, 2010
Source: Global Trade Atlas.
Note: See the Appendix for more detailed data.
Investment
Closely linked to trade is foreign direct investment (FDI). Figure 8 shows that the MENA region
accounts for a small share of global FDI by U.S. firms (“outward” FDI). In 2010, the total stock
of U.S. outward FDI was $3.9 trillion.25 Of this, about only $54 billion, or 1%, was invested in
the MENA region.26 Likewise, the total stock of FDI in the United States (“inward” FDI), in 2010
25 FDI data is from the Department of Commerce, Bureau of Economic Analysis (BEA). BEA defines FDI as a
business enterprise that is owned 10% or more, directly or indirectly, by a foreign person or company.
26 Includes FDI from the United States to Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, UAE, and Yemen. Uniworld, a privately-held
publishing firm, maintains a database on overseas investments by private firms. Its listings show that many of the
investors in the MENA countries/territories are familiar U.S. corporations, including Starbucks, Pitney Bowes, Polo
(continued...)
Congressional Research Service
12
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
was $2.3 trillion. Firms located in MENA countries accounted for approximately $15 billion, or
0.6% of total FDI into the United States.27
Figure 8. U.S.-MENA Foreign Direct Investment (FDI), 2010
Source: Department of Commerce, Bureau of Economic Analysis (BEA).
Notes: BEA classification of countries by region, with the exception of Egypt, Algeria, Djibouti, Libya, Morocco,
and Tunisia re-classified to be in the MENA region rather than the African region. U.S. “outward” FDI refers to
U.S. FDI into MENA countries/territories. U.S. “inward” FDI refers to FDI flowing from MENA
countries/territories to the United States. Data is for the stock of FDI, rather than flows of FDI, and is on a
historical-cost basis.
Figure 9 shows the stock of U.S. foreign direct investment in specific MENA economies in 2010,
as well as the stock of FDI from MENA countries to the United States. FDI from the United
States to the MENA region was concentrated in a small number of countries, including Egypt,
Qatar, Israel, Saudi Arabia, Algeria, and the UAE. Figure 9 also shows that Israel accounted for
nearly half of FDI into the United States from MENA countries, with more than $7 billion
invested in the United States.
(...continued)
Ralph Lauren, Sodexo, Coca-Cola, Hertz, Ritz Carlton, Tupperware, UPS, W.R. Grace & Company, Wachovia, 3M,
Century 21, Curves, Dale Carnegie, Hewlett Packard, Johnson & Johnson, McDonalds, Microsoft, Motorola, Office
Depot, Dun & Bradstreet, Estee Lauder, and Xerox, as well as numerous oil and drilling companies including Chevron,
Exxon Mobil, Conoco Phillips, Occidental Petroleum, and Schlumberger.
27 Includes FDI to the United States from Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco,
Oman, Qatar, Saudi Arabia, Syria, UAE, and Yemen.
Congressional Research Service
13
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Figure 9. U.S.-MENA Foreign Direct Investment (FDI): Country Breakdown, 2010
Source: U.S. Department of Commerce, Bureau of Economic Analysis (BEA).
Notes: U.S. “outward” FDI refers to U.S. FDI into MENA countries/territories. U.S. “inward” FDI refers to FDI
flowing from MENA countries/territories to the United States. Data is for the stock of FDI, rather than flows of
FDI. Data is on a historical-cost basis. Note that for U.S. outward flows of FDI, “other” includes Oman, Yemen,
and Iran. For inward flows to the United States, “other” includes Bahrain, Jordan, Qatar, Iran, and Syria.
•
Negative positions can occur when a parent company’s liabilities to the foreign affiliate are greater than its
equity in and loans to the foreign affiliate.
Obstacles to Closer U.S. Trade and Investment Ties with MENA Countries
What factors have limited U.S.-MENA trade and investment ties? Some countries in the MENA
region have undertaken efforts to improve their regulatory and business environments. However,
serious challenges remain to international firms, including U.S. firms, looking to do business in
the region. One source of information about obstacles to doing business in various countries
overseas is the Country Commercial Guides published by the U.S. Commercial Service, part of
the Department of Commerce.28 For the MENA region, the reports generally emphasize
impediments to U.S. firms seeking to do business in MENA countries related to lack of
transparency, bureaucratic red tape, weak rule of law, corruption, and differences in business
28 The Country Commercial Guides are available at http://export.gov/worldwide_us/index.asp. The State Department’s
Investment Climate Statements are included as part of the FCS’s Country Commercial Guides. The State Department
publishes their Investment Climate Statements on their website at http://www.state.gov/e/eeb/rls/othr/ics/.
Congressional Research Service
14
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
cultures. Some examples of issues raised by these U.S. government reports in some specific
MENA countries are listed below.
• Egypt: corruption; ill-defined regulatory framework; generally unresponsive
commercial court system; multiplicity of regulations and regulatory agencies;
and need to partner with local firms in order to successfully penetrate the
market.29
• Libya: corruption; arbitrary regulatory changes; lack of transparency in
government decision-making; clash of business culture; restrictive visa policies
for U.S. citizens traveling to Libya; weak and opaque regulatory environment;
and lack of skilled labor.30
• Tunisia: cumbersome and slow bureaucracy; lack of coherence and consistency
in the regulatory environment; and opaque decision-making within the
government.31
• Morocco: irregularities and lack of transparency in government procurement
procedures; corruption; and counterfeit goods.32
• Saudi Arabia: weak enforcement of arbitration of private sector disputes;
foreign visitors need to obtain a local sponsor to obtain a business visa; delayed
payments; and preference to local firms in government contracts.33
• UAE: difficult to dismiss non-performing local employees; difficult to sell
without a local partner; slow payments.34
Policy Options for Increasing U.S.-MENA Trade
and Investment
Given the economic and governance challenges, recent political upheaval, and the MENA
region’s limited integration into world markets, policymakers, both domestically and
internationally, have discussed how trade and investment could foster growth among the MENA
countries, promote greater economic reforms, and provide support for successful and stable
democratic transitions. For example, President Obama said in his May 2011 speech on the MENA
region that, “just as democratic revolutions can be triggered by a lack of individual opportunity,
successful democratic transitions depend upon an expansion of growth and broad-based
29 U.S. Commercial Service, “Doing Business in Egypt: 2010 Country Commercial Guide for U.S. Companies,”
http://www.buyusainfo.net/docs/x_5991895.pdf.
30 Drawn from the 2008 Commercial Guide available from the U.S. Embassy in Libya, http://libya.usembassy.gov/
uploads/images/Ctlb_B9GauiYq1ai9cp4AQ/021108_-_2008_Country_Commercial_Guide.pdf.
31 U.S. Commercial Service, “Doing Business in Tunisia: 2011 Country Commercial Guide for U.S. Companies,”
http://www.buyusainfo.net/docs/x_2600129.pdf.
32 U.S. Commercial Service, “Doing Business in Morocco: 2011 Country Commercial Guide for U.S. Companies,”
http://www.buyusainfo.net/docs/x_1606158.pdf.
33 U.S. Commercial Service, “Doing Business in Saudi Arabia: 2011 Country Commercial Guide for U.S. Companies,”
http://www.buyusainfo.net/docs/x_1357949.pdf.
34 U.S. Commercial Service, “Doing Business in the United Arab Emirates: 2010 Country Commercial Guide for U.S.
Companies,” http://www.buyusainfo.net/docs/x_3648632.pdf.
Congressional Research Service
15
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
prosperity.”35 Government initiatives that foster U.S. private sector trade and investment in
MENA countries may be attractive policy options compared to others under discussion, such as
debt relief and foreign aid, in a time of tight U.S. budget constraints. Government initiatives to
foster trade and investment in MENA may also provide new opportunities for U.S. businesses
overseas and generate stronger economic growth. However, the effects of trade and investment
initiatives may be borne out over the long-term, and they may not provide immediate economic
relief that foreign aid or debt relief could produce for countries undergoing political transitions.
The section below provides an overview of the current U.S. trade and investment policy in the
region, and analyzes policy options for increasing U.S. trade with and investment in MENA
economies.
Current Status of U.S. Trade and Investment Policy with MENA
The United States uses policy tools globally to promote trade and investment that may be grouped
into two broad categories: 1) formal agreements to liberalize trade and investment and advance
rules-based trade; and 2) U.S. federal government programs that aim to encourage international
trade and investment. Details on selected policy tools are provided in the text box below.
Background on Selected U.S. Trade and Investment Policy Tools
Multilateral Trade Agreements
•
The World Trade Organization (WTO) is a multilateral body that establishes liberalized trade through
negotiations and implements a multilateral system of rules on trade in goods and services and other trade-
related matters. The WTO also adjudicates disputes under the rules. Countries must negotiate the terms of
their accession to the WTO with current WTO members. Accession to the WTO includes a focus on the
implementation of WTO provisions, the establishment of a stable and predictable market access for goods and
services, and the development of a proven framework for adopting policies and practices that promote trade,
investment, growth, and development.36 The WTO has 153 members.
Bilateral Trade and Investment Discussions
•
Trade and Investment Frameworks (TIFAs) are agreements between the United States and another
country or a group of countries to consult on issues of mutual interest in order to facilitate trade and
investment. TIFAs are non-binding agreements, do not involve changes to U.S. law, and therefore, do not require
congressional approval. TIFAs may lead to FTA negotiations.
Bilateral Trade and Investment Agreements
•
Bilateral Investment Treaties (BITs) and investment chapters in free trade agreements (FTAs) constitute
binding rules for the reciprocal protection of investment in each other’s territories. Most BITs contain provisions
that assure U.S. and foreign partner country investors of non-discriminatory treatment of investments by the
host country, place limits on expropriation of investments, and provide for due process to settle investment-
related disputes with host governments, among other things. As treaties, U.S. BITs are ratified by the Senate.
The United States has 40 BITs, including five with MENA countries (Bahrain, Egypt, Jordan, Morocco, and
Tunisia).
35 Office of the Press Secretary, “Remarks by the President on the Middle East and North Africa,” The White House,
State Department, Washington, DC, May 19, 2011, http://www.whitehouse.gov/the-press-office/2011/05/19/remarks-
president-middle-east-and-north-africa.
36 Office of the United States Trade Representative, “WTO Accessions,” http://www.ustr.gov/trade-agreements/wto-
multilateral-affairs/wto-accessions. For more on current WTO negotiations, see CRS Report RL32060, World Trade
Organization Negotiations: The Doha Development Agenda, by Ian F. Fergusson.
Congressional Research Service
16
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
•
Free Trade Agreements (FTAs) are reciprocal trading arrangements in which member countries agree to
eliminate tariff and non-tariff barriers on trade in goods and services between or among countries covered by
the agreement. FTA partners also may agree to reduce barriers or establish rules and standards related to other
economic activities, such as investment, intellectual property rights (IPR), worker rights, and environmental
protection. In addition to helping to reduce trade and investment barriers, these agreements can enhance
domestic economic reform in partner countries, such as on transparency of regulatory policies, intellectual
property rights protection, and customs procedures. Congress must approve and implement reciprocal trade
agreements. The United States has 17 FTAs, including five with MENA countries (Bahrain, Israel, Jordan,
Morocco, and Oman).
U.S. Federal Government Programs to Encourage Trade and Investment
•
Export promotion constitutes a wide variety of functions that may directly or indirectly support the expansion
of U.S. exports, including providing information, counseling, and export assistance services; funding feasibility
studies; financing and insuring U.S. trade; conducting government-to-government advocacy; and negotiating new
trade agreements and enforcing existing ones. Congress authorizes export promotion programs.
•
Trade preference programs provide preferential treatment, usual y in the form of lower tariffs or duty-free
treatment, to a range of imports from developing countries to promote their economic development and growth
by stimulating exports and investment. Congress authorizes trade preference programs. The Generalized
System of Preferences (GSP) is the most comprehensive of all U.S. trade preference programs. Specifically,
GSP provides non-reciprocal, duty-free tariff treatment to certain products imported from designated beneficiary
developing countries.
•
Qualifying industrial zones (QIZs), established by Congress in 1996, permit Jordan and Egypt to export
duty-free certain products manufactured in designated zones in their countries to the United States, provided
that they contain a certain percentage of inputs from Israel.
Formal Agreements to Liberalize Trade and Investment
Current U.S. trade and investment agreements with MENA countries are the result of previous
initiatives undertaken to expand economic and political ties with the region. The Bush
Administration in 2003 launched a plan to create a U.S. Middle East Free Trade Area (MEFTA)
by 2013. MEFTA aimed to support economic growth and prosperity in the Middle East through
liberalizing trade and investment regionally and bilaterally with the United States, as part of a
broader plan to fight terrorism. The plan included actively supporting membership in the World
Trade Organization (WTO) for countries in the region who were not yet members, negotiating
formal bilateral investment treaties (BITs) with interested countries, and negotiating
comprehensive free trade agreements (FTAs), among other provisions. The initiative, carried out
over several years, fell short of creating a regional free trade area, but did result in the completion
of new FTAs with four countries in the region: Bahrain, Jordan, Morocco, and Oman. FTAs were
also explored with the UAE and Egypt. Before MEFTA, the only FTA that the United States had
in the region was with Israel, completed in 1985.
The United States has a network of trade and investment agreements in the MENA region that
vary dramatically across countries (Table 2). Most of the countries in the MENA region are
members of the WTO. The MENA countries that are not—Algeria, Iran, Iraq, Libya, Syria, and
Yemen—have “observer status,” which enables them to follow discussions on matters of direct
interest to them. Several of them are also in the process of joining the WTO, and the United States
has supported some of these efforts. For example, the United States has provided technical
support to Iraq, Lebanon, and Yemen for their WTO accession efforts.37
37 Ibid.
Congressional Research Service
17
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Presently, the United States has Trade and Investment Framework Agreements with most MENA
countries, and bilateral investment treaties (BITs) with five MENA countries: Bahrain, Egypt,
Jordan, Morocco, and Tunisia. It also has free trade agreements (FTAs) with five countries in the
region: Bahrain, Israel, Jordan, Morocco, and Oman. U.S. FTA negotiations with some MENA
countries have experienced complications. For example, discussions on a potential FTA between
the United States and Egypt were put on hold in 2005 due to concerns over election results and
human rights. Issues of particular concern included adequacy of Egypt’s intellectual property
rights regime and import duties for certain apparel and textile products.38 As another example,
negotiations between the United States and the UAE on an FTA were placed on hold in 2007,
complicated by differing views on issues related to labor, market access for services, and
government procurement.
Important exceptions to a more liberalized U.S. trade and investment policy in the region include
Iran and Syria. There is broad international support, including from the United States, to support
progressively strict economic sanctions on Iran to try to compel it to verifiably confine its nuclear
program to purely peaceful uses.39 Likewise, the State Department has designated Syria as a state
sponsor of terrorism, making Syria subject to a number of legislatively mandated penalties,
including export sanctions and ineligibility to receive most forms of U.S. aid or to purchase U.S.
military equipment.40
38 Barbara Kotschwar and Jeffrey J. Schott, Reengaging Egypt: Options for US-Egypt Economic Relations, Peterson
Institute for International Economics, January 2010.
39 For more on Iran sanctions, see CRS Report RS20871, Iran Sanctions, by Kenneth Katzman.
40 State Department, “Background Note: Syria,” March 18, 2011, http://www.state.gov/r/pa/ei/bgn/3580.htm; CRS
Report RL33487, Unrest in Syria and U.S. Sanctions Against the Asad Regime, by Jeremy M. Sharp and Christopher
M. Blanchard.
Congressional Research Service
18
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Table 2. U.S.-MENA Trade and Investment Agreements
Bilateral Free
Bilateral
Trade
Trade and
Investment
Agreement with
Investment
Treaty with the
the United
WTO
Framework
United States
States
membership
Generalized
Agreements
System of
(year entered into
(year entered into
(year joined)a
Preferencesb
(year signed)
force)
force)
Algeria (Observer) √
√ 2001
Bahrain
√ 1995
√ 2002
√ 2001
√ 2006
Djibouti
√ 1995
√
Egypt
√ 1995
√
√ 1999
√ 1992
Iran (Observer)
Iraq (Observer)
√
√ 2005
Israel
√ 1995
√ 1985
Jordan
√ 2000
√
√ 2003
√ 2010
Kuwait
√ 1995
√ 2004
Lebanon (Observer) √
√ 2006
Libya (Observer)
√ 2010
Malta
√ 1995
Morocco
√ 1995
√ 1991c
√ 2006
Oman
√ 2000
√
√ 2004
√ 2009d
Qatar
√ 1996
√ 2004
Saudi Arabia
√ 2005
√ 2003
Syria (Observer)
Tunisia
√ 1995
√
√ 2002
√ 1993
United Arab
√ 1996
√ 2004
Emirates
West Bank /
√
Gaza Strip
Yemen (Observer) √
√ 2004
Source: CRS Report RL32638, Middle East Free Trade Area: Progress Report, by Mary Jane Bol e; CRS Report
RL33663, Generalized System of Preferences: Background and Renewal Debate, by Vivian C. Jones.
Notes: Countries listed are based on the World Bank’s classification of countries in the region (excluding West
Bank).
a. The purpose of observer status for international intergovernmental organizations in the WTO is to enable
these organizations to fol ow discussions therein on matters of direct interest to them.
b. Based on Generalized System of Preferences (GSP) eligibility criteria, some countries on the table are
ineligible for GSP because, for example, they are developed (e.g., Bahrain, Israel, UAE) or are designated as
state sponsors of terrorism (e.g., Iran, Syria).
c. FTAs include investment chapters with updated investment provisions
d. FTA includes investment chapter modeled after BIT provisions.
Congressional Research Service
19
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Federal Programs to Promote Trade and Investment
In addition to formal agreements to liberalize trade and investment, the United States relies on
federal programs to encourage and support international trade and investment. For the MENA
countries, the most important of these programs include the Generalized System of Preferences
(GSP), Qualifying Industrial Zones (QIZ), and export finance and other export promotion
programs run by various federal government agencies, including the Export-Import Bank of the
United States (Ex-Im Bank), Overseas Private Investment Corporation (OPIC), and United States
Trade and Development Agency (USTDA).
Generalized System of Preferences (GSP)
The United States grants preferential treatment to imports from certain developing countries
under the U.S. Generalized System of Preferences (GSP).41 GSP beneficiary countries in MENA
include Algeria, Djibouti, Egypt, Iraq, Jordan, Lebanon, Oman, Tunisia, the West Bank/Gaza
Strip, and Yemen. Specifically, GSP allows certain products from designated developing countries
to enter the United States duty-free. In order to be eligible for GSP, countries must comply with
trade, investment, labor, and other conditions.42 The United States first authorized the program in
1974. In October 2011, President Obama signed legislation authorizing GSP through 2013 (P.L.
112-40).
Overall, GSP program utilization among beneficiary developing countries, including in the
MENA region, remains low. The percentage of goods entering the United States duty-free under
the GSP program, relative to total U.S. imports from beneficiary developing countries, has
remained relatively flat—at around 10% of total imports from beneficiary developing countries.43
The utilization rate is even lower for the MENA region; it peaked at 2.02% in 2006 and declined
to 0.79% in 2010.44 One reason for this is that oil accounts for 71% of all MENA exports to the
United States, but oil from most MENA countries is not eligible for GSP tariff benefits.
Additionally, some of the region’s other major exports, including apparel, iron, and steel, are
goods that are excluded from preferential treatment under the GSP program.
Qualifying Industrial Zones (QIZs)
Qualifying industrial zones (QIZs), established by Congress in 1996, permit the West Bank, the
Gaza Strip, and qualifying zones in Egypt and Jordan to export certain products to the United
States duty-free.45 Products eligible for duty-free export to the United States must be
manufactured in the West Bank, the Gaza Strip, or specified designated zones within Jordan or
Egypt and must contain a certain percentage of inputs from Israel. The purpose of the QIZ
legislation is to support the Middle East peace process and to build closer economic ties between
41 For more information on the GSP program, see CRS Report RL33663, Generalized System of Preferences:
Background and Renewal Debate, by Vivian C. Jones.
42 Certain “import sensitive” products are specifically excluded from preferential treatment. These include most textiles
and apparel goods, watches, footwear and other accessories, most electronics, steel and glass products, and certain
agricultural products subject to tariff-rate quotas.
43 CRS Report RL33663, Generalized System of Preferences: Background and Renewal Debate, by Vivian C. Jones.
44 CRS analysis of data from U.S. International Trade Commission (USITC) Interactive Tariff and Trade Data Web.
45 Section 9 of P.L. 99-47, as amended by P.L. 104-234; 19 USC § 2112 note.
Congressional Research Service
20
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Israel and its Arab neighbors. U.S. imports under the QIZ programs in both Egypt and Jordan are
dominated by apparel products.
• Jordan: Exports from Jordan to the United States under the QIZ program grew
from $159,000 in 1999 to about $200 million in 2010. However, the QIZ share of
Jordan’s total exports to the United States has declined in recent years, from a
high of 90% in 2002 to about 20% in 2010.46 This is because most imports from
Jordan increasingly enter the United States duty-free under the FTA rather than
the QIZ program.
• Egypt: Exports from Egypt to the United States under the QIZ program have
grown from $266 million in 2005 to $956 million in 2010. The QIZ share of
Egypt’s total exports to the United States also has grown during this time period,
from 13% in 2005 to 43% in 2010.47
Certain issues have risen in the QIZ programs. For example, in Jordan’s QIZ facilities, labor
issues related to working conditions, particularly for migrant laborers, have emerged; the United
States is working with Jordan to resolve these issues.48
Government Export Finance and Promotion Programs
The U.S. government plays an active role in promoting U.S. exports of goods and services by
administering various forms of export assistance through federal government agencies. A
combination of congressional mandates and executive branch actions have directed U.S. export
promotion efforts. Most recently, such efforts have been focused through the National Export
Initiative, the Obama Administration’s plan to double exports to $3.14 trillion in 2015, as a way
to generate and support U.S. jobs.49 A range of federal government agencies are involved in U.S.
export promotion activities.50 Key agencies that may play a key role in promoting U.S.
commercial ties with MENA countries include the following:
The Export-Import Bank of the United States (Ex-Im Bank) provides direct loans, guarantees,
and insurance to help finance U.S. exports, when the private sector is unable or unwilling to do
so, with the goal of contributing to U.S. employment. In FY2011, Ex-Im Bank authorized $443.2
million in loans, guarantees, and insurance to support U.S. exports to the MENA region, about
1% of Ex-Im Bank’s support for exports worldwide ($32.7 billion). In that year, Ex-Im Bank’s
total exposure for its credit and insurance activities in the region amounted to $9.2 billion, about
10% of its total worldwide exposure ($89.2 billion).51 Ex-Im Bank financing has supported a
46 Ibid.
47 CRS analysis of data from USITC, Interactive Tariff and Trade Data Web; QIZ Egypt, http://www.qizegypt.gov.eg/
About_QIZ.aspx.
48 Office of the United States Trade Representative, 2011 Trade Policy Agenda and 2010 Annual Report. In addition,
a 161 page report released by the National Labor Committee in 2006: U.S.-Jordan Free Trade Agreement Descends
into Human Trafficking and Involuntary Servitude, is a compilation of stories from over 100 guest workers in Jordan.
49 Report to the President on the National Export Initiative: The Export Promotion Cabinet’s Plan for Doubling U.S.
Exports in Five Years, Washington, D.C., September 2010. Trade Promotion Coordinating Committee (TPCC), 2011
National Export Strategy: Powering the National Export Initiative, June 2011.
50 For more information on U.S. export promotion activities, see CRS Report R41495, U.S. Government Agencies
Involved in Export Promotion: Overview and Issues for Congress, coordinated by Shayerah Ilias.
51 Ex-Im Bank, Export-Import Bank of the United States 2011 Annual Report. Ex-Im Bank’s annual report does not list
authorization information by regional groupings. While the annual report does provide exposure data by regional
(continued...)
Congressional Research Service
21
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
range of U.S. export sales to the countries in the MENA region. Examples of such transactions
are
• In 2011, Ex-Im Bank extended two loan guarantees, one for $272 million and the
other for $137 million, to support the sale of commercial aircraft by the Boeing
Company to the UAE.52
• In 2010, Ex-Im Bank extended a loan guarantee of $7 million to support the sale
of equipment by Morrison Textile Machinery Co., a U.S. small business in South
Carolina, to Egypt to establish a denim production plant.53
• In 2009, Ex-Im Bank supported the export of General Electric gas and steam
turbines to Bahrain for a combined cycle power plant through a $230 million
direct loan.54
The Overseas Private Investment Corporation (OPIC) provides political risk insurance and
finance to support U.S. investment in developing countries, which may contribute to U.S. exports
and employment. In FY2011, OPIC committed $3.2 billion for investment projects worldwide. In
response to the Arab Spring, OPIC has targeted up to $3 billion in support for investments in the
Middle East. OPIC’s commitment stems from two separate announcements by the
Administration:
• In March 2011, Secretary of State Clinton announced that OPIC would provide
up to $2 billion in financial support “to catalyze private sector development” in
the MENA region in order to spur economic growth and job creation. Countries
eligible to receive this OPIC-supported investment are Egypt, Tunisia, Morocco,
Iraq, Jordan, Lebanon, and the Palestinian Territories (and potentially Algeria,
Oman, and Yemen). The OPIC initiative aims to prioritize investments in small-
and medium-sized enterprises (SMEs), infrastructure (especially renewable
resources), and other key sectors. It will also include “fast-track” approval, to
ensure “rapid deployment” of capital, while maintaining “OPIC investment
policy standards” related to the environment and worker/human rights.55
• In May 2011, President Obama announced that OPIC would provide up to
$1 billion in financing to support infrastructure and job creation specifically in
Egypt.56
(...continued)
groupings, it does not provide a specific breakdown for the MENA region. MENA values for authorizations and
exposure come from CRS analysis of Ex-Im Bank’s 2011 annual report.
52 Ex-Im Bank, Export-Import Bank of the United States 2011 Annual Report.
53 Ex-Im Bank, “South Carolina Small Business Grows by Exporting to Egypt Backed by Ex-Im Bank Loan
Guarantee,” press release, May 4, 2010, http://www.exim.gov/pressrelease.cfm/63D715C4-A6E3-A8F4-
328FACCB92FE08FB/.
54 Ex-Im Bank, “Ex-Im Bank Supports Export of GE Gas Turbines to Bahrain,” press release, August 28, 2009,
http://www.exim.gov/pressrelease.cfm/628E1012-B4D1-79CD-F251D81AED8FB82F/.
55 OPIC, “OPIC to Provide Up to $2 Billion for Investment in Middle East and North Africa,” press release, March 11,
2011.
56 Office of the Press Secretary, “Remarks by the President on the Middle East and North Africa,” The White House,
State Department, Washington, DC, May 19, 2011, http://www.whitehouse.gov/the-press-office/2011/05/19/remarks-
president-middle-east-and-north-africa.
Congressional Research Service
22
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Since announcing the goal, OPIC has approved $657 million in transactions for the MENA
region, primarily in support of investments in small businesses.57
The United States Trade and Development Agency (USTDA), which operates under a dual
mission of promoting economic development and U.S. commercial interests in developing and
middle-income countries, connects U.S. businesses to export opportunities for priority
development projects by funding feasibility studies, pilot projects, reverse trade missions, and
other activities. In FY2011, USTDA program funding for MENA activities totaled $7.98 million,
nearly one-fifth of total USTDA program funding ($41.1 million). USTDA projects in the MENA
region have focused on a range of economic sectors.58 Examples of projects include
• In June 2011, USTDA sponsored an Egypt: Forward initiative, bringing together
250 U.S. company representatives and 50 Egyptian public and private sector
leaders in the energy, information and communication technology (ICT),
transportation, and agribusiness sectors, in an effort to foster greater commercial
and economic ties.59
• In 2011, USTDA funded three technical assistance grants and one reverse trade
mission to position U.S. firms to play an active role in Morocco’s deployment of
renewable energy resources. 60
Taken together, Ex-Im Bank, OPIC, and USTDA provide support for U.S. exports and
investments for most countries in the MENA region (see Table 3). Exceptions are Iran and Syria,
countries which are legally prohibited from receiving federal support. Should fundamental
political change come to Syria, Congress may revisit longstanding restrictions in consultation
with the Administration. The specific countries in which these agencies provide support may vary
according to factors such as their missions, mandated policy criteria, or availability of resources.61
57 OPIC, “OPIC Records Net Income of $269 Million in FY2011, Helping to Reduce U.S. Budget Deficit for 34th
Consecutive Year,” press release, January 3, 2012.
58 USTDA, U.S. Trade and Development Agency 2011 Annual Report. MENA data are based on USTDA’s
categorization of countries in the MENA region.
59 Ibid.
60 Ibid.
61 For more information, see CRS Report RL31502, Nuclear, Biological, Chemical, and Missile Proliferation
Sanctions: Selected Current Law, by Dianne E. Rennack and CRS Report RS20871, Iran Sanctions, by Kenneth
Katzman.
Congressional Research Service
23
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Table 3. Federal Export and Investment Promotion Support in MENA
OPICa USTDAb Ex-Im
Bankc
Recent or Ongoing
Availability of
Country
Availability of Support
Project Activity
Support
Algeria
√
√
√
Bahrain
√ —
√
Djibouti
√ —
√
Egypt
√
√
√
Iran X
X
X
Iraq
√
√
√
Israel
√ —
√
Jordan
√
√
√
Kuwait
√ —
√
Lebanon
√
√
√
Libya —
—
√
Malta
√ —
√
Morocco
√
√
√
Oman
√ —
√
Saudi Arabia
Suspended (worker concerns)
—
√
Syria X
X
X
Tunisia
√ —
√
United Arab Emirates
Suspended (worker concerns)
—
√
West Bank
√
√
√d
Yemen
√
√
√
Source: OPIC, USTDA, and Ex-Im Bank agency websites and annual reports.
a. OPIC: A check (√) denotes countries in which OPIC support is available; a cross (X) denotes countries in
which OPIC support is legally prohibited; and a dash (—) refers to countries in which OPIC support is not
legally prohibited, but is not currently available. A list of countries which are eligible for OPIC support is
available at http://www.opic.gov/doing-business/investor-screener. OPIC operations were suspended in
Saudi Arabia and UAE in 1995 over concerns about worker rights; see the Foreign Commercial Service
Saudi Arabia and UAE Country Commercial Guides (http://www.buyusainfo.net/docs/x_1357949.pdf;
http://www.buyusainfo.net/docs/x_216958.pdf).
b. USTDA: A check (√) denotes countries in which USTDA reports having recent and ongoing projects; a
cross (X) denotes countries in which USTDA support is legally prohibited and is not provided; and a dash
(—-) represents countries in which USTDA support is not legally prohibited, but in which USTDA does not
report recent or ongoing projects. Information on USTDA project activity in the MENA region is available
at http://www.ustda.gov/program/regions/mena&europe/.
c. Ex-Im Bank: A check (√) denotes countries in which Ex-Im Bank support is available, and a cross (X)
denotes countries in which Ex-Im Bank support is legally prohibited and not provided. For information on
the specific types of Ex-Im Bank financing for which countries are eligible (such as short-term or long-term),
see Ex-Im Bank’s Country Limitation Schedule: http://www.exim.gov/tools/country/country_limits.cfm.
d. Ex-Im Bank financing for U.S. exports to the West Bank is available, provided that the obligor or guarantor
of the transaction is located in a country in which Ex-Im Bank currently has programs available, such as
Jordan.
Congressional Research Service
24
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Possible Policy Approaches for Increasing U.S.-MENA Trade
and Investment
A range of potential options—at the unilateral, bilateral/regional, and multilateral levels—are
available to Congress, as well as the executive branch, for increasing U.S. trade and investment
ties with countries in the MENA region, should there be interest in doing so.
Unilateral Options
Congress could consider a number of unilateral trade policy tools to support and expand U.S.
economic relations with countries in transition and other economies in the MENA region. Such
policy tools constitute non-reciprocal trade benefits that would not necessarily require
negotiations with MENA trading partners, and thus might be easier to implement in the short-
term. Countries that receive such trade benefits often have to meet certain criteria (such as worker
rights and intellectual property protection requirements) in order to be designated as beneficiaries
and to maintain such status. Thus, the U.S. extension of non-reciprocal trade benefits to MENA
countries may provide a mechanism to encourage improvement on potential issues of concern.
• Trade preference programs: The U.S. government could work with MENA
governments to increase their use of existing trade preference programs. The U.S.
Embassy in Egypt, for example, has announced that it intends to help Egyptian
businesses increase and diversify their exports to the United States under existing
GSP provisions.62 Additionally, Congress could revise provisions of the GSP
program to facilitate and expand use by MENA beneficiary countries, such as by
expanding product coverage.
Congress also could create a regional trade preference program for the MENA
region using existing agreements elsewhere as possible models. Currently,
Congress has established five regional or targeted trade preference programs: 1)
the Andean Trade Preference Program; 2) the Caribbean Basin Economic
Recovery Act (CBERA); 3) the Caribbean Trade Partnership Act (CBTPA); 4)
the African Growth and Opportunity Act (AGOA); and 5) the Haitian
Opportunity through Partnership Encouragement (HOPE) Act.63
• QIZ program: Congress could consider revising the QIZ program. One option
could be to expand existing QIZs in Jordan and Egypt by approving additional
zones in these countries. Another option may be to encourage a MENA-wide
QIZ, or create QIZs in other countries. Egypt and Jordan were targeted initially
for the QIZ program, because they were two Arab countries that had signed peace
treaties with Israel. Proposing new Israeli content requirements for QIZ programs
may draw criticism from groups opposed to trade with Israel in some MENA
countries.
• Export finance and promotion programs: Congress could consider boosting
U.S. export assistance, financing, and other efforts targeted toward the MENA
62 Embassy of the United States in Cairo, Egypt, “U.S. Offers Egyptian Companies Duty-Free Access to American
Market,” Press Release, January 9, 2012, http://egypt.usembassy.gov/pr010912.html.
63 For more information on the role of Congress in establishing these programs, see CRS Report R41429, Trade
Preferences: Economic Issues and Policy Options, coordinated by Vivian C. Jones.
Congressional Research Service
25
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
region, or encouraging the executive branch to do so. For instance, with the end
of U.S. combat operations and the formation of a governing political coalition in
Iraq, economic development in that country could arguably represent export and
investment opportunities for U.S. businesses in areas such as transportation and
infrastructure, which could require U.S. export financing and political risk
insurance. As another example, assuming the political situation in Libya
stabilizes, commercial opportunities may emerge in areas such as energy,
housing, and infrastructure. U.S. exporters and investors may benefit from
federal assistance in pursuing such opportunities.
Bilateral and Regional Options
Bilateral and regional policy options also may present avenues for congressional efforts to
facilitate U.S. trade and investment with MENA partners. Initiatives for trade and investment
agreements may be viewed as longer-term policy options, given the timeframes most agreements
take to finalize. However, the broader scope of most agreements creates opportunities to affect
multiple sectors, foster important economic and governance reforms, and support greater regional
integration. To reduce and eliminate tariff and non-tariff barriers to U.S. exports, trade
negotiations would allow the United States to gain greater market access to MENA countries,
which could assuage U.S. political opposition from import-sensitive sectors of the economy.64 On
the other hand, increased U.S. and other foreign import penetration of regional economies may be
opposed by regional economic actors seeking protection from international competitors. In the
past, Middle East countries have pursued FTAs with the United States in part to help lock in and
advance domestic economic reforms and diversify their economies by building economic ties
with the United States, among other objectives.
• Launching and re-launching TIFAs: The United States has TIFAs with most
“developing countries” in the MENA region, Iran and Syria notwithstanding. In
2011, the United States re-launched discussions under the 2002 TIFA with
Tunisia to support bilateral trade and investment and regional economic
integration.65 In the same vein, the United States could re-launch TIFAs with
other MENA countries. One candidate could be Egypt, in order to reinvigorate
potential FTA discussions, although it is worth noting that the United States and
Egypt conduct trade and economic dialogues through other mechanisms as
well.66
• Negotiating new trade and investment agreements, bilaterally or regionally:
Longer-term, the United States could choose to focus its negotiations on trade
and investment agreements with selected countries currently undergoing political
transitions, such as Egypt or Tunisia. According to some experts, expanding the
U.S. partnership with Egypt through an FTA could help to promote economic
64 Andrew H. Card and Thomas A. Daschle, Chairs and Edward Alden and Matthew J. Slaughter, Project Directors,
U.S. Trade and Investment Policy, Council on Foreign Relations, Independent Task Force Report No. 67, 2011.
65 Office of the USTR, “United States and Tunisia Re-Launch Bilateral Trade and Investment Talks in Support of
Tunisia’s Democratic Transition,” press release, October 2011, http://www.ustr.gov/about-us/press-office/press-
releases/2011/october/united-states-and-tunisia-re-launch-bilateral-trad.
66 Office of the USTR, “United States and Egypt Advance Bilateral Trade and Investment Talks in Support of Egypt’s
Democratic Transition,” press release, October 2011, http://www.ustr.gov/about-us/press-office/press-releases/2011/
october/united-states-and-egypt-advance-bilateral-trade-an.
Congressional Research Service
26
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
development, support political reform, contribute to rising living standards for
Egyptians, and serve as an incentive for Egypt to play a constructive role in the
region and strengthen its ties with economic partners.67 An FTA with Egypt could
also potentially advance other reforms, such as those related to transparency,
governance, regulatory standards, and privatization that support economic growth
more broadly.68 However, it is worth noting that under a potential U.S.-Egypt
FTA, economic benefits of greater trade and investment for Egypt likely would
occur in the longer-term; they would not necessarily help to directly address
Egypt’s short-term economic problems, such as pressures on the country’s public
debt. In addition, there is concern that, unless complementary reforms are
undertaken, the benefits of an FTA may be limited to a narrow section of
Egyptian society, and not contribute to general improvement of Egypt’s
economic conditions and living standards.69
Separately, the United States could focus on countries that currently are not
undergoing political transitions. For example, the United States could renew FTA
negotiations with the UAE. Additionally, the United States may consider
negotiating regional investment and trade agreements, in order to bolster regional
economic ties in addition to U.S.-MENA trade and investment.
• Updating existing FTAs and BITs: Congress could consider updating the U.S.
BITs with Egypt and Tunisia. Since these BITs came into effect, the U.S. model
BIT framework was revised (in 2004) in areas such as coverage, intellectual
property rights (IPR), and dispute settlement. It also serves as the model for
investment provisions in current U.S. FTAs. Congress could also consider
revising and “updating” the U.S.-Israel FTA. The U.S.-Israel FTA, signed and
entered into force in 1985, was the first FTA ever entered into by the United
States. Since then, the scope of issues discussed in trade negotiations has
expanded. For example, the U.S.-Israel FTA does not contain provisions on
electronic commerce and technical barriers to trade, has limited coverage of
services and IPR, and has had limited effect on trade in agricultural products.70
Negotiating new FTAs, or updating existing FTAs, may be complicated by the
fact that Trade Promotion Authority (TPA, formerly fast track) expired in 2007.71
TPA is the authority Congress grants to the President to enter into certain FTAs
and to have their implementing bills considered under expedited legislative
procedures, provided they meet certain statutory obligations in negotiating them.
Additionally, the United States negotiates BITs on the basis of a model, and the
Administration is currently conducting an interagency review of the model BIT.
67 Barbara Kotschwar and Jeffrey J. Schott, Reengaging Egypt: Options for US-Egypt Economic Relations, Peterson
Institute for International Economics, “In Brief”, January 2010.
68 For example, see Meredith Broadbent, “The Role of FTA Negotiations in the Future of U.S.-Egypt Relations,”
Center for Strategic and International Studies, December 2011, http://csis.org/files/publication/
111212_Broadbent_USEgyptTrade_Web.pdf; Ahmed Galal and Robert Z. Lawrence, “Anchoring Reform with a U.S.-
Egypt Free Trade Agreement,” Policy Analyses in International Economics 74, Peterson Institute for International
Economics, May 2005, http://bookstore.piie.com/book-store/3683.html.
69 Ibid.
70 Edward Gresser, Update the Israel Free Trade Agreement, The New Democratic Leadership Council, April 2010.
71 See CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, by J. F.
Hornbeck and William H. Cooper.
Congressional Research Service
27
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Negotiating new BITs, or updating existing BITs, may be difficult until the model
BIT review process is completed.
• Oversight of existing FTAs: Congress could examine existing U.S. FTAs in the
region. In particular, it may be interested in examining how well they have
achieved their objectives, and their impact on increasing and diversifying
bilateral trade flows.
Multilateral Options
Congress additionally has multilateral tools at its disposal to foster economic ties with MENA
countries. Trade policy at the multilateral level may yield benefits, such as requiring countries to
adopt international rules, not available under other levels. Congress could encourage the United
States to intensify existing efforts to support WTO accession for MENA countries such as Iraq,
Libya, and Yemen, and provide technical assistance for countries working towards WTO
accession. The United States could also work with countries to fully implement their WTO
accession commitments. The United States could also cooperate more closely with the European
Union (EU) and other countries in international forums, such as the G-8 or the G-20, in advancing
economic growth and stability in the MENA region. The United States holds the rotating
presidency of the G-8 in 2012, and could use this forum to focus multilateral efforts on MENA
trade and investment issues.
Issues for Congress: Possible Challenges and
Implementation Questions
Congress may face a number of issues if it addresses policy options to facilitate greater U.S. trade
and investment with the MENA region.
First, some analysts question whether increased trade and investment can support
democratic political transitions. Current discussions for increasing trade and investment with
the MENA region are rooted in the belief that these policy tools will bolster economic growth and
help support the democratic political transitions occurring in the region. However, the link
between trade and investment, on the one hand, and democracy, on the other, is contentious.
Some experts argue that trade and investment promote governance; increase the size of the
middle class; facilitate the flow of ideas; and develop institutions related to protection of property
and rule of law, which in turn, it is argued, create popular pressure for democracy. 72 Additionally,
some analysts argue that pursuing FTAs and BITs in particular with various MENA countries
could help anchor reforms, such as related transparency, governance, and rule of law, that can
provide foundations for democratic political transitions and institutions.73
72 For example, see Quan Li and Rafael Reuveny, “Economic Globalization and Democracy: An Empirical Analysis,”
Working Paper, 2000, http://www.international.ucla.edu/cms/files/GLODEM39.pdf.
73 For example, see Ahmed Galal and Robert Z. Lawrence, “Anchoring Reform with a U.S.-Egypt Free Trade
Agreement,” Policy Analyses in International Economics 74, Peterson Institute for International Economics, May 2005,
http://bookstore.piie.com/book-store/3683.html.
Congressional Research Service
28
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Others argue that the links between trade, investment, and democracy are not straightforward.74
They argue that governments can gain legitimacy by opening their economies and securing
economic growth, without reforming or opening politically. They cite a number of economies that
have opened to the world economically while sustaining governments that are not fully
democratic; China is often cited as an example in this context. This raises questions about
whether trade and investment could be effective in helping Arab countries transition to more
democratic political systems. Additionally, some analysts question whether protestors in various
MENA countries want greater trade and investment ties. In Egypt, for example, public opinion
indicates that many believe that the economic liberalization pursued under the old regime
exacerbated economic inequality.75
Second, questions abound about whether U.S. trade policy tools could be effective in
overcoming the obstacles to greater U.S. trade and investment in the MENA region. Some
analysts question whether trade and/or investment liberalizing agreements will result in increased
U.S. trade and investment to the MENA region. According to the U.S. Commercial Service, some
of the greatest obstacles to U.S. firms hoping to do business in MENA countries relate to
corruption, transparency, governance, rule of law, and bureaucratic red tape, among others. Some
argue that completing FTAs or BITs, or encouraging countries to join the WTO, could help
MENA governments push through reforms that address many of these impediments. Others worry
that even if such reforms are pursued in the context of FTA, BIT, or WTO negotiations, there
could be implementation problems, and that U.S. trade and investment with MENA countries and
the region could remain limited. Additionally, a number of factors affect investment and trade
flows beyond government policies, including the market size, economic growth, labor force,
endowment of natural resources, political stability, and infrastructure, among others, which raise
questions about how effective policy options could be at dramatically increasing trade and
investment flows.
In addition, the capacity of federal export finance and other promotion agencies to support U.S.
trade and investment in the MENA may be limited. For instance, while Ex-Im Bank could work
to incentivize exports to the MENA region, U.S. firms’ interest in doing business the MENA
region will drive their demand for Ex-Im Bank financing.
Third, if an agenda of increased trade and investment is pursued, there are a host of
questions arise that may be considered in implementing this policy agenda. For
example:
• Timing: The political situation in some MENA countries is highly uncertain.
Should the United States wait to enhance its trade and investment ties in the
region until the political situation stabilizes? Or should the United States enhance
trade and investment ties sooner, in order to facilitate political outcomes it views
as favorable? If the United States delays engagement, will others—such as EU
countries, Turkey, and China—take advantage of business opportunities in the
region sooner, depressing opportunities for U.S. businesses?
• Region-Wide Policies vs. Country-Specific Policies: Current U.S. trade and
investment policy is quite diverse across countries in the MENA region, and the
74 For example, see Catharin E. Dalpino, “Does Globalization Promote Democracy?: An Early Assessment,”
Brookings, Fall 2001, http://www.brookings.edu/articles/2001/fall_democracy_dalpino.aspx.
75 Economist Intelligence Unit, “Country Report: Egypt,” November 2011.
Congressional Research Service
29
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
MENA economies themselves are quite heterogeneous. Should the United States
pursue a region-wide agenda of increasing trade and investment, while tailoring
policies to fit the individual needs of specific countries? For example, some argue
that Egypt and Tunisia are better positioned than, say, Libya, to enter FTA
negotiations with the United States, because they are members of the WTO and
have BITs with the United States, while Libya only has WTO observer status and
is experiencing political upheaval. While WTO accession is not explicitly
required for the United States to negotiate BITs or FTAs with a country, U.S.
trade agreements generally build on WTO commitments, and WTO membership
is viewed as a stepping stone to a FTA.
• Cooperation with the EU: In his May 2011 speech on MENA, President Obama
suggested that U.S. efforts to increase trade and investment in the region would
be pursued cooperatively with the EU. Will this cooperation take place, and how
deep should any cooperation be? In the past, the United States and the EU have
adopted different approaches in the MENA. For example, under the MEFTA
effort during the Bush Administration, the United States negotiated
comprehensive free trade agreements with individual countries with the goal that
such efforts would expand into a region-wide free trade area agreement. In
contrast, the EU adopted a more regional approach to economic integration from
the start. Other factors may complicate cooperation. For example, the United
States and the EU have differing views on regulatory policy and standards, and
some view U.S. and EU businesses as competitors in the MENA region. Finally,
some of these countries already have strong economic ties with the EU and want
to develop closer economies ties with the United States, as was the case with the
U.S.-Morocco FTA.
• Congressional Interest: In October 2011, Congress approved the implementing
legislation for FTAs with Colombia, South Korea, and Panama, years after the
agreements were formally negotiated.76 Will their approval provide momentum
for further FTA negotiations, or does their lengthy approval point to the
polarization in Congress regarding future FTAs? How should Congress prioritize
FTAs in the MENA region with ongoing trade negotiations, including with
regards to the Trans-Pacific Partnership (TPP)?77 How should Congress prioritize
countries within the MENA region for FTAs?
In sum, there are a number of factors that policymakers in Congress and elsewhere may
want to weigh when considering using trade and investment policy tools to support
transitioning MENA countries. There are questions about the effectiveness of these policy
tools in promoting increased trade and investment, as well as their impact on political
transitions, and how quickly the benefits of these policy options would be borne out.
Additionally, how these policies are designed could have substantial implications for U.S.
interests. However, in a tight budget environment, trade and investment may be attractive
76 For more on these FTAs, see CRS Report RL34470, The U.S.-Colombia Free Trade Agreement: Background and
Issues, by M. Angeles Villarreal; CRS Report R41534, The EU-South Korea Free Trade Agreement and Its
Implications for the United States, by William H. Cooper et al.; and CRS Report RL32540, The U.S.-Panama Free
Trade Agreement, by J. F. Hornbeck.
77 For more on TPP, see CRS Report R40502, The Trans-Pacific Partnership Agreement, by Ian F. Fergusson and
Bruce Vaughn.
Congressional Research Service
30
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
policy tools for supporting MENA economies compared to other options, such as foreign
aid, while also potentially creating new economic opportunities for U.S. businesses.
Congressional Research Service
31
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Appendix. Trade Tables
Figure A-1. U.S. Exports to MENA Countries/Territories
Source: Global Trade Atlas.
Notes: Harmonized Tariff Schedule (HTS) numbers in parentheses in legend. NEOSI = Not elsewhere specified
or included.
Congressional Research Service
32
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Figure A-2. U.S. Imports from MENA Countries/Territories, 2010
Source: Global Trade Atlas.
Notes: Harmonized Tariff Schedule (HTS) numbers in parentheses in legend. NEOSI = Not elsewhere specified
or included.
Congressional Research Service
33
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Table A-1. Top U.S. Exports to MENA Countries/Territories, 2010
Total
Exports
Major U.S. Exports and Shares of Total
Country
($ Millions)
(with Harmonized Tariff Schedule [HTS] Numbers)
Algeria
1,195
Machinery, 33% (84); Aircraft Parts, 19% (88); Electrical Machinery, 8% (85);
and Fats and Oils, 7%=67%
Bahrain
1,250
Aircraft, 20% (88); Machinery 20%, (84); Ships and Boats 16% (89); Motor
Vehicles 13% (87)=69%
Djibouti
123
Fats and Oils, 20% (15); Baking Related, 17% (19); Machinery, 12% (84);
Cereals, 10% (10)=56%
Egypt
6,835
Aircraft, 16% (88); Cereals, 16% (10); Machinery, 11% (84); Oil, 10%
(27)=53%
Iran
208
Grain Seeds, 30% (12); Pharmaceutical Products, 19% (30); Woodpulp, 17%
(47); Optical, Medical Instruments, 11% (90)=77%
Iraq
1,642
Machinery, 32% (84); Cereals, 13%, (10); Aircraft Parts, 11% (88); Electrical
Machinery, 11% (85)=67%
Israel
11,294
Precious Stones (Diamonds), 40% (71); Electrical Machinery, 9% (85);
Machinery, 8% (84); Aircraft Parts, 7% (88)=64%
Jordan
1,174
Motor Vehicles, 34% (87); Machinery, 9% (84); Aircraft Parts, 9% (88);
Cereals, 8% (10)=60%
Kuwait
2,774
Motor Vehicles, 31% (87); Machinery, 26% (84); Electrical Machinery, 8%
(85); Optical/Medical Instruments, 4% (90)=69%
Lebanon
2,009
Oil, 34% (27); Motor Vehicles, 29% (87); Machinery, 7% (84); NESOI (Military
Equipment), 3% (98)
Libya
666
Motor Vehicles, 26% (87); Machinery, 26% (84); Cereals, 10% (10);
Optical/Medical Instruments, 8% (90)=70%
Malta
457
Oil, 79% (27); Machinery, 5% (84); Optical/Medical Instruments, 3% (90);
Electrical Machinery, 2% (85)=89%
Morocco
1,947
Oil, 22% (27); Aircraft Parts, 15% (88); Fats and Oils, 11% (15); Food Waste,
10%, (23)=58%
Oman
1,105
Motor Vehicles, 23% (87); Machinery, 22% (84); Electrical Machinery, 16%
(85); Chemicals, 7% (29)=68%
Qatar
3,160
Aircraft Parts, 54% (88); Machinery, 11% (84); Motor Vehicles, 8% (87);
Electrical Machinery, 4% (85)=77%
Saudi Arabia
11,556
Motor Vehicles, 33% (87); Machinery, 20% (84); Aircraft Parts, 8% (88);
Electrical Machinery, 7% (85)=68%
Syria
503
Cereals, 57% (10); Grain, Seeds, 34% (12); Food Waste, 5% (23);
Optical/Medical Instruments, 1% (90)=97%
Tunisia
571
Grain, Seeds, 21% (12); Cereals, 15% (10); Machinery, 6% (84); Fats and Oils,
6% (15)=48%
United Arab
11,673
Machinery, 18% (84); Motor Vehicles, 15% (87); Aircraft Parts, 15% (88);
Emirates
Electrical Machinery, 10% (85)=58%
West Bank
1
Furniture and Bedding, 32% (94); Motor Vehicles, 32% (87); Plastic, 10%
(39)=74%
Gaza Strip
2
Electrical Machinery, 45% (85); Machinery, 33% (84); Optical/Medical
Instruments, 10% (90)=88%
Yemen
391
Cereals, 27%, (10); Motor Vehicles, 25% (87); Machinery, 22% (84); Electrical
Machinery, 6% (85)=80%
TOTAL 60,536
Source: Global Trade Atlas.
Note: NEOSI = Not elsewhere specified or included.
Congressional Research Service
34
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Table A-2. Top U.S. Imports from MENA Countries/Territories, 2010
Total
Imports
Major U.S. Imports and Shares of Total
Country
($ Millions)
(with Harmonized Tariff Schedule [HTS] Numbers)
Algeria
14,518 Oil,
100% (27)
Bahrain
420
Textiles and apparel, 39% (62, 63, 52, 55, and 61); Fertilizers, 20% (31);
Aluminum, 13% (76)=72%
Djibouti
3
NESOI (military equipment returned to the United States for repairs, 34%
(98); Electrical Machinery, 33% (85); Spices, Coffee, Tea, 21% (09)=88%
Egypt
2238
Textiles and Apparel, 45% (62, 61, 57, 63,); Oil, 34% (27); Fertilizers, 9%
(31)=84%
Iran
95
Textile Floor Coverings, 84% (57); Art and Antiques, 6% (97); Preserved
Food, 5% (20)=95%
Iraq
12,143
Oil 100% (27)
Israel
20,982
Precious Stones (Diamonds), 38% (71); Pharmaceuticals, 25% (30); Electrical
Machinery, 25% (30); Machinery, 6% (84)=94%
Jordan
974
Textiles and Apparel, 83% (61, 62, 63); Precious Stones (Gold Jewelry), 8%
(71)=91%
Kuwait
5,382
Oil, 96% (27); Fertilizers, 3% (31)=99%
Lebanon
84
Precious Stones (Gold and diamonds),18% (71); Preserved Food, 13% (20);
Machinery, 13% (84); Fertilizers, 10% (31)=54%
Libya
2,117
Oil, 98% (27)
Malta
262
Electrical Machinery, 69% (85); Pharmaceuticals, 9% (30); Chemicals, 9% (29);
Machinery, 4% (84)=91%
Morocco
685
Salt, Sulfur (Calcium), 27% (25); Electrical Machinery,17% (85); Fertilizers,
10% (31); Apparel, 9% (62, 61)=63%
Oman
773
Oil, 50% (27); Fertilizers, 20% (31); Plastic, 15% (39); Precious Stones, 8%
(71)=93%
Qatar
466
Oil, 55% (27); Fertilizers, 29% (31); NESOI (military equipment being
returned to the United States for repair),11% (98); Aluminum, 4% (76)=99%
Saudi Arabia
31,413
Oil, 97% (27); Chemicals, 1% (29)=98%
Syria
429 Oil, 93% (27); Art and Antiques, 2% (97); Spices, Coffee, Tea, 2% (09) =97%
Tunisia
405
Oil, 21% (27); Fats and Oils, 20% (15); Textiles and Apparel, 19% (62, 61,
63)=60%
United Arab
NESOI (Military equipment returned to the United States for repair), 27%
1,145
(98); Aluminum, 17% (76); Iron and Steel Products, 13% (73); Oil, 7%
Emirates
(27)=64%
Grains and Seeds, 27% (12); NESOI (Military Equipment returned to the
West Bank
3
United States for repair), 26% (99); Fats and Oils, 25% (15); Toys, 6%
(95)=84%
Gaza Strip
3
Woven Apparel, 98% (62)
Yemen
181 Oil, 96% (27); Spices, Coffee, Tea, (2%)=98%
TOTAL $94,691
Source: Global Trade Atlas.
Notes: NEOSI = Not elsewhere specified or included.
Congressional Research Service
35
U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Author Contact Information
Rebecca M. Nelson
Shayerah Ilias
Analyst in International Trade and Finance
Analyst in International Trade and Finance
rnelson@crs.loc.gov, 7-6819
silias@crs.loc.gov, 7-9253
Mary Jane Bolle
Specialist in International Trade and Finance
mjbolle@crs.loc.gov, 7-7753
Congressional Research Service
36