U.S. Trade and Investment in the
Middle East and North Africa:
Overview and Issues for Congress
Rebecca M. Nelson, Coordinator
Analyst in International Trade and Finance
Mary Jane Bolle
Specialist in International Trade and Finance
Shayerah Ilias Akhtar
Specialist in International Trade and Finance
February 28, 2013
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
U.S. interest in deepening economic ties with certain countries in the Middle East and North
Africa (MENA) has increased in light of the political unrest and transitions that have swept the
region since early 2011. Policymakers in Congress and the Obama Administration are discussing
ways that U.S. trade and investment can bolster long-term economic growth in the region. In May
2011, President Obama announced the MENA “Trade and Investment Partnership Initiative”
(MENA-TIP), through which various federal government agencies are engaged in efforts to
enhance trade and investment with the region. Such activities are in line with longstanding U.S.
trade policy goals and measures. Some Members of Congress have called for deeper economic
ties with MENA countries undergoing political change. However, continued political uncertainty
and changing security environments in the region have prompted greater scrutiny of U.S.
engagement. This report analyzes policy approaches that the Congress might consider concerning
U.S.-MENA trade and investment.
MENA Economies and Integration in the Global Economy
Economic performance in the MENA as a whole lags behind other regions in the world in terms
of gross domestic product (GDP) per capita (living standards), employment, and economic
diversification, despite the fact that several MENA countries are major producers of oil and
natural gas. Limited integration in the global economy is frequently cited as an obstacle to the
region’s overall economic development. 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 and intra-regional trade and investment flows are relatively low. 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.
Policy Approaches and Challenges
Current U.S. trade and investment policies with MENA countries are quite varied. The United
States has free trade agreements (FTAs) with five MENA countries (Bahrain, Israel, Jordan,
Morocco, and Oman), but more limited ties with other countries, such as Libya, which is not a
member of the World Trade Organization (WTO). Important exceptions to overall U.S. trade
policy objectives in the region are Iran and Syria, which are both subject to trade sanctions.
Analysts disagree about the merits of deepening U.S. trade and investment ties with the MENA
region. Some analysts maintain that new trade and investment agreements help anchor domestic
reforms, such as in governance and rule of law; support sound economic growth; are a cost-
effective way to support transitioning countries in an environment of budgetary constraints; and
could promote U.S. exports and investment. Others argue that the empirical record between
economic openness and democracy is weak and that it is unclear whether protesters in various
Arab countries favor more economic liberalization, which they sometimes associate with
corruption, inflation, and inequality. They also argue that political uncertainty in the region, such
as the fluidity of Egypt’s political transition, merits a “wait-and-see” approach before proceeding
with substantial policy changes.
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U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
The 113th Congress could consider a number of approaches regarding U.S. trade and investment
with the region, including:
• maintaining the status quo until the impact of the political changes in MENA
countries is clear;
• providing technical assistance to countries working towards WTO membership,
as well as trade capacity building support to countries working to implement
WTO commitments;
• negotiating new trade and/or investment agreements with countries in the region
that do not already have them, such as Egypt and Tunisia;
• utilizing existing trade frameworks for greater dialogue and progress on trade and
investment and encouraging regional integration;
• reauthorizing existing trade preferences through the Generalized System of
Preferences (GSP) program or creating a U.S. trade preference program, differing
from GSP, that grants preferential market access to exports from MENA
countries; and
• increasing assistance from federal export and investment promotion agencies to
the region.
In considering such approaches, some questions that could arise 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? To what extent should the United States
balance a regional approach of increased trade and investment with more tailored
policies to the specific needs of individual countries?
• 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. frameworks and agreements on trade and investment 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? How effective are current efforts to expand
trade and investment under the MENA-TIP initiative?
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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
U.S.-MENA Trade and Investment.......................................................................................... 10
Trade .................................................................................................................................. 10
Foreign Direct Investment (FDI) ....................................................................................... 12
Obstacles to Closer U.S. Trade and Investment Ties with MENA Countries ................... 14
U.S. Trade and Investment Policy with MENA ............................................................................. 15
Overview of U.S. Trade Policy Tools ...................................................................................... 16
MENA Trade and Investment Partnership Initiative ............................................................... 18
Formal Agreements and Discussion Frameworks to Liberalize Trade and Investment........... 19
Other Federal Programs to Promote Trade and Investment ..................................................... 22
Generalized System of Preferences (GSP) ........................................................................ 22
Qualifying Industrial Zones (QIZs) ................................................................................... 22
Government Export Finance and Promotion Programs..................................................... 23
Possible Policy Approaches for Increasing U.S.-MENA Trade and Investment ........................... 28
Unilateral Options ................................................................................................................... 28
Bilateral and Regional Options................................................................................................ 29
Multilateral Options ................................................................................................................. 32
Issues for Congress: Possible Challenges and Implementation Questions .................................... 32
Outlook .......................................................................................................................................... 35
Figures
Figure 1. Map of Middle East and North Africa (MENA) .............................................................. 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, 2010 ......................... 8
Figure 4. MENA’s Exports and Imports of Goods and Services with the World,
by Commodity or Type of Service, 2009 ...................................................................................... 9
Figure 5. MENA’s Major Trading Partners, 2011 .......................................................................... 10
Figure 6. Top U.S. Exports to and Imports from the MENA Region, 2011 ................................... 11
Figure 7. U.S. Exports to and Imports from MENA Countries/Territories, 2011 .......................... 12
Figure 8. U.S.-MENA Foreign Direct Investment (FDI), 2011 ..................................................... 13
Figure 9. U.S.-MENA Foreign Direct Investment (FDI): Country Breakdown, 2011 .................. 14
Figure A-1. U.S. Exports to MENA Countries/Territories, 2011 ................................................... 37
Figure A-2. U.S. Imports from MENA Countries/Territories, 2011 .............................................. 39
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U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Tables
Table 1. Selected Economic Indicators for MENA Countries ......................................................... 7
Table 2. U.S.-MENA Trade and Investment Agreements .............................................................. 21
Table 3. Federal Export and Investment Promotion Support in MENA ........................................ 24
Table A-1. Top U.S. Exports to MENA Countries/Territories, 2011 ............................................. 38
Table A-2. Top U.S. Imports from MENA Countries/Territories, 2011 ......................................... 40
Appendixes
Appendix. Trade Tables ................................................................................................................. 37
Contacts
Author Contact Information........................................................................................................... 41
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U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Introduction
The political unrest and transitions that have swept through several countries in the Middle East
and North Africa (MENA) since early 2011—often referred to as the “Arab Spring” or “Arab
Awakening”—have prompted the United States, along with the broader international community,
to discuss approaches and take actions to support democratic political transitions in the region.1 A
key focus is the role that economic growth can play in solidifying and supporting political
transitions in the region.
Calls for greater U.S. trade and investment with the region in support of economic growth have
come from policymakers in the Administration and Congress. In May 2011, President Obama
announced the MENA “Trade and Investment Partnership Initiative” (MENA-TIP) to facilitate
trade and investment with the region. The initiative has a primary focus on Egypt, Jordan,
Morocco, and Tunisia.2 Within Congress, some Members have called for new free trade
agreements (FTAs) with Egypt and Tunisia, and deeper economic ties with Libya.3
Presently, U.S. trade and investment policy in the region is focused on using trade and investment
to foster economic growth, promote greater economic reforms, provide support for successful and
stable democratic transitions, and generally support U.S. foreign policy objectives.4 The U.S.
government is pursuing such efforts both as part of the MENA-TIP initiative and through broader
or longstanding U.S. trade policy measures. Measures to bolster trade and investment ties are
often long-term in nature, and could build on other shorter-term measures to support transitioning
countries.5 However, continued political uncertainty and changing security environments in the
region could prompt greater scrutiny of U.S. engagement, as policymakers grapple with questions
of timing, feasibility, and political support for such efforts.6
Congress has oversight, authorization, and appropriation responsibilities related to U.S. trade and
investment policy. New U.S. trade and investment initiatives with the MENA region could require
congressional involvement. For example, legislative action would be needed to implement new
1 There is no standard definition of which countries belong to the Middle East and North Africa (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 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.
3 For example, see Prepared Remarks of Senator Joseph Lieberman, Carnegie Endowment for International Peace, July
22, 2011, http://carnegieendowment.org/files/Lieberman_Prepared_Remarks.pdf; John McCain, Lindsey Graham,
Mark Kirk, and Marco Rubio, “The Promise of a Pro-American Libya,” Wall Street Journal, October 7, 2011. In
addition, in November 2011, Representative Dreier introduced a resolution, co-sponsored by Representative Meeks,
that calls for the United States to initiate free trade agreement (FTA) negotiations with Egypt (H.Res. 472).
4 In this report, terms such as “trade policy” or “trade relations” refer to policies related to both trade and investment.
5 For examples of other approaches in the context of Egypt, see CRS Report RL33003, Egypt: Background and U.S.
Relations, by Jeremy M. Sharp.
6 CRS Report R42393, Change in the Middle East: Implications for U.S. Policy, coordinated by Christopher M.
Blanchard.
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U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
free trade agreements. Congress also may want to exercise oversight over any changes to
government programs that promote U.S. trade and investment.
The structure of this report is as follows:
• The report begins with background and analysis for policymakers considering a
re-evaluation of U.S. trade and investment in the MENA in light of political
change in the region. In particular, the report examines the economic challenges
facing many countries in the region and the area’s limited economic
integration—both in the world economy, including relatively weak economic ties
with the United States, and in the MENA regional economy.
• The report then analyzes current U.S. trade and investment policy efforts in the
region and 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 may
face.
Figure 1. Map of Middle East and North Africa (MENA)
Source: CRS.
Note: World Bank definition of the MENA. For more information, see footnote 1.
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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
As a whole, the MENA region lags behind other regions on many key economic indicators
(Figure 2). In 2011, the region accounted for 5.6% of the world’s total population, but its
economic output is disproportionately smaller, accounting for just 4.4% of the world’s gross
domestic product (GDP). Additionally, the region’s GDP per capita in 2011 ($7,831) was lower
than those of Latin America and the Caribbean ($9,754) and East Asia and the Pacific ($8,475).
The region generally has poorly developed manufacturing and service sectors; the value-added of
manufacturing and services relative to GDP in MENA in 2010 was 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. Unemployment in the region was 9.7% in 2008,
more than double the unemployment rate in East Asia and the Pacific (4.7%) in 2009.
Unemployment among youth in particular is a challenge. For example, in 2009, youth (15-24 year
olds) unemployment was 27% in Jordan, and 22% in Morocco. By contrast, youth unemployment
in Thailand, which has a similar GDP per capita to Jordan’s, was markedly lower at 4.3% in
2009.7
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 30% of the world’s oil
and 22% of the world’s natural gas in 2011.8 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 typically 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. In countries where energy resources must be imported, governments may struggle
with fiscal pressures.
7 World Bank, World Development Indicators.
8 U.S. Energy Information Administration, International Energy Statistics. Calculations based on total oil supply and
gross natural gas production, using World Bank regional grouping.
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Figure 2. The MENA Economy in Comparative Perspective: Key Indicators
Source: World Bank, World Development Indicators; U.S. Energy Information Administration, International Energy
Statistics.
Notes: Data are for the most recent year available. Population, oil production, and GDP per capita data are for
2011; unemployment data are for 2005; and service and manufacturing data are for 2010. Unemployment data
for the Sub-Saharan Africa region as a whole are not available.
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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.9 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 in some MENA countries 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;
• Subsidies and lack of government infrastructure spending, with large
portions of the budget going to defense and subsidies for basic needs, creates
distortions in the economy; and
• Women constitute 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 region.10 In 2010,
9 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; and 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.
10 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; and World Bank, “Middle East and North Africa Regional Brief,”
September 2011, http://go.worldbank.org/1JVC0DGRS0.
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the MENA had a life expectancy of 72 years and a primary education completion rate of 91%,
and an under-5 mortality rate of 31 per 1,000 births. Absolute poverty in the region is also
relatively low, with approximately 4% of the population living on $1.25 a day.11 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. However, some countries
undergoing political transition are experiencing macroeconomic instability.
Substantial diversity also exists in the region, and some countries 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 Kuwait and
Qatar ($62,664 and $92,501 respectively in 2011) than in the United States ($48,111 in 2011).
Likewise, some countries have stronger political and legal institutions than others; according to
the World Bank’s Worldwide Governance Indicators, Qatar ranked in the 74th percentile among
countries worldwide in strength of rule of law in 2011.12 Economic reforms have taken root in
some countries; in the World Bank’s Doing Business Report, Saudi Arabia is ranked as the 22th
easiest country in the world in which to do business.13 While female participation in the labor
force is low in many countries, women made up 47% of the labor force in Israel in 2010.
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 six Egyptians (15.4%) living on
less than $2 a day in 2008. The under-5 mortality rate in Yemen was 77 per 1,000 births in 2011,
more than twice than the average for the region as a whole. In terms of macroeconomic stability,
Lebanon has a high level of public debt (forecasted to be 135% of GDP in 2013), and Egypt is
running a large budget deficit (forecasted to be 9.8% of GDP in 2013).14
11 World Bank, “Middle East and North Africa Regional Brief,” September 2011, http://go.worldbank.org/
1JVC0DGRS0.
12 World Bank, Worldwide Governance Indicators, http://info.worldbank.org/governance/wgi/index.asp.
13 World Bank, Doing Business, 2012, http://www.doingbusiness.org/rankings.
14 IMF, World Economic Outlook, October 2012.
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Table 1. Selected Economic Indicators for MENA Countries
Population Oil GDP GDP Manufacturing Services Unemployment
Supply
per
capita
Thousand
Billion
Value added, %
Value
% of total labor
Millions
barrels
added, %
US$
US$
of GDP
force
per day
of GDP
Most
Most recent year
recent
Most recent year
2011 2011
2011
2011
available since
year
available since
2008
available
2008
since 2008
Oil
exporters
Algeria 36.0
1,884
189
5,244 5.6c 31.0b 11.4b
Bahrain 1.3 47
23b 18,184
–
–
–
Iran 74.8
4,234
331c 4,526
–
–
10.5d
Iraq 33.0
2,635
115
3,501
– – –
Kuwait 2.8
2,682
177
62,664 –
–
–
Libya 6.4
502
62c 9,957
4.5d 19.9d –
Oman 2.8
889
72
25,221
– –
–
Qatar 1.9
1,638
173
92,501
– –
–
Saudi
11,153
Arabia 28.1
577 20,540
9.7b 37.8b 5.4c
UAE 7.9
3,088
360
45,653
9.7b 43.6b 4.0d
Yemen 24.8 163
34
1,361 6.1b 62.9b 14.6c
Oil
importers
Djibouti 0.9 0
1c 1,203
–
–
–
Egypt 82.5
727
230
2,781
15.2a 49.3a 9.4
Israel 7.8
4
243
31,282
– – 6.6b
Jordan 6.2 0
29
4,666
19.4a 65.6a 12.9c
Lebanon 4.3 0 42
9,904 8.2a 72.4a –
Malta 0.4
0
9
21,209
13.4b 65.4a 6.9b
Morocco 20.8 4 100
3,054 15.5a 55.0a 10.0b
Syria 10.7
331
59b 2,893
–
46.5c 8.4c
Tunisia 4.0 70
46
4,297
17.6a 59.7a 14.2d
West Bank
0.9
0
–
–
–
–
24.5c
Source: World Bank, World Development Indicators, 2012; U.S. Energy Information Administration, International
Energy Statistics, 2012.
Note: “–” denotes not available. a. 2011 data; b. 2010 data; c. 2009 data; d. 2008 data.
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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.
MENA’s Trade and Investment with the World
On the surface, MENA appears to be relatively active in global trade. Relative to GDP, the region
had the highest level of exports (45% of GDP in 2010) of any major geographic region in the
world in that year, and the highest levels of imports (39% of GDP in 2010, see Figure 3).15 Net
inflows of foreign direct investment (FDI) into MENA countries were 2.0% of GDP in 2011,
slightly below the average for countries worldwide (2.3% of GDP).16
Figure 3. MENA’s Trade as a Percent of GDP Compared to Other Regions, 2010
Source: World Bank, World Development Indicators.
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 62% of the region’s total exports in
2009. MENA’s imports are also heavily concentrated on manufactured goods, which accounted
for 54% of total imports in 2009, as shown in Figure 4.17 Some lower-income countries in the
region still have relatively high levels of protectionism. Tariff rates averaged 6.1% in 2010 among
developing MENA countries, compared to an average of 4.3% among developing countries and
2.7% for countries worldwide.18
15 World Bank, World Development Indicators.
16 Foreign direct investment (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.
17 World Bank, World Development Indicators.
18 World Bank, World Development Indicators. Data are for applied tariff rates for all products (weighted mean).
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Figure 4. MENA’s Exports and Imports of Goods and Services with the World,
by Commodity or Type of Service, 2009
Source: World Bank, World Development Indicators.
For trade in goods, MENA’s biggest trading partner is the European Union (EU), although
countries in the region also trade heavily with Japan, the United States, and large emerging
markets, including China and India, as shown in Figure 5.19 Intra-MENA trade is relatively
limited, accounting for just 10% of total exports and 16% of total imports in 2011.20
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 also may restrict intra-regional trade.
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 1948.21
19 IMF, Direction of Trade Statistics.
20 Ibid.
21 For more on the Arab League, see CRS Report RL33961, Arab League Boycott of Israel, by Martin A. Weiss.
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U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
Figure 5. MENA’s Major Trading Partners, 2011
Source: International Monetary Fund (IMF), Direction of Trade Statistics.
Notes: Merchandise data only; services data not available.
U.S.-MENA Trade and Investment
Trade
Trade and investment between the MENA 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: $193 billion, about 5% of the U.S. total, in 2011. 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 73% of all U.S. imports from
the MENA in 2011 ($90 billion out of $123 billion). If Israel was removed from the list of
countries, oil’s share of all U.S. imports from the region would rise to over 90%. Despite the fact
that the MENA consists of several oil exporters, it still ranks as the second largest U.S. oil
supplier, accounting for about one-fifth (21%) of U.S. oil imports, with Canada ranking first
(24%) and Mexico third (10%). The United States exports a range of goods to the MENA region,
including motor vehicles, machinery, aircrafts, and diamonds (Figure 6).
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Figure 6. Top U.S. Exports to and Imports from the MENA Region, 2011
Source: USITC Dataweb--total exports and general imports.
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 economies varies widely (Figure 7). In
2011, U.S. trade with the MENA region was concentrated in eight countries: Saudi Arabia, Israel,
Algeria, Iraq, UAE, Egypt, Kuwait, and Qatar. Together, these eight countries accounted for more
than 90% of all U.S. trade (exports and imports) with the region. For four of these countries—
Saudi Arabia, Algeria, Iraq, and Kuwait, (designated by a red dot in Figure 7)—oil constituted
nearly all of their exports to the United States. Other countries for which oil represents more than
65% of its exports included Qatar, Oman, Tunisia, Yemen, Libya, and Syria. In contrast, Israel
exports a broader mix of products to the United States. More detailed trade data are provided in
the Appendix.
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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, 2011
Source: Global Trade Atlas.
Note: U.S. exports to MENA total $71 billion; and imports total $123 billion. See the Appendix for more
detailed data.
Foreign Direct Investment (FDI)
Closely linked to trade is FDI. Figure 8 shows that the MENA region accounts for a small share
of global FDI by U.S. firms (“outward” FDI). In 2011, the total stock of U.S. outward FDI was
$4.2 trillion.22 Of this, about only $56 billion, or 1%, was invested in the MENA region.23
22 FDI data are 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.
23 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
Ralph Lauren, Sodexo, Coca-Cola, Hertz, Ritz Carlton, Tupperware, UPS, W.R. Grace & Company, Wachovia, 3M,
(continued...)
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Likewise, the total stock of FDI in the United States (“inward” FDI), in 2011 was $2.5 trillion.
Firms located in MENA countries accounted for approximately $17 billion, or 1% of total FDI
into the United States.24
Figure 8. U.S.-MENA Foreign Direct Investment (FDI), 2011
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 are for the stock of FDI, rather than flows of FDI, and are on a
historical-cost basis.
Figure 9 shows the stock of U.S. foreign direct investment in specific MENA economies in 2011.
FDI from the United States to the 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 roughly 90% of FDI into the United States from MENA countries, with more
than $15 billion invested in the United States.
(...continued)
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.
24 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.
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Figure 9. U.S.-MENA Foreign Direct Investment (FDI): Country Breakdown, 2011
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, and totaled $56 bil ion in 2011.
U.S. “inward” FDI refers to FDI flowing from MENA countries/territories to the United States, and totaled $17
billion in 2011. Data are for the stock of FDI, rather than flows of FDI. Data are on a historical-cost basis. Note
that for inward flows to the United States, “other” includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman,
Qatar, Saudi Arabia, Syria, and Yemen.
•
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 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.25 For the region, the reports generally emphasize impediments to U.S.
firms seeking to do business in MENA countries related to lack of transparency, bureaucratic red
25 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/.
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tape, weak rule of law, corruption, and differences in business cultures. Some examples of issues
raised by these U.S. government reports in selected MENA countries are listed below.
• Egypt: corruption; ill-defined regulatory framework; generally unresponsive
commercial court system; and multiplicity of regulations and regulatory
agencies.26
• Tunisia: inconsistent procedures in customs administration and delays in
customs clearance.27
• Morocco: irregularities and lack of transparency in government procurement
procedures; corruption; and counterfeit goods.28
• Saudi Arabia: weak enforcement of arbitration of private sector disputes;
foreign visitors need to obtain a local sponsor to obtain a business visa; and
preference to local firms in government contracts.29
• UAE: difficult to dismiss non-performing local employees; difficult to sell
without a local partner; slow payments; and cumbersome dispute resolution
mechanisms.30
U.S. Trade and Investment Policy with MENA
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 support for successful and
stable democratic transitions. For example, President Obama said in his May 2011 speech on the
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
prosperity.”31
U.S. trade policy in the region is focused on using trade and investment to foster economic
growth, promote greater economic reforms, provide support for successful and stable democratic
transitions, and generally support U.S. foreign policy objectives. Such goals also fit into
longstanding and overall U.S. trade policy goals of creating and sustaining U.S. jobs by opening
26 U.S. Commercial Service, “Doing Business in Egypt: 2012 Country Commercial Guide for U.S. Companies,”
http://www.buyusainfo.net/docs/x_8534139.pdf.
27 U.S. Commercial Service, “Doing Business in Tunisia: 2012 Country Commercial Guide for U.S. Companies,”
http://photos.state.gov/libraries/tunisia/231771/PDFs/2012%20Tunisia%20Country%20Commercial%20Guide.pdf.
28 U.S. Commercial Service, “Doing Business in Morocco: 2011 Country Commercial Guide for U.S. Companies,”
http://www.buyusainfo.net/docs/x_1606158.pdf.
29 U.S. Commercial Service, “Doing Business in Saudi Arabia: 2011 Country Commercial Guide for U.S. Companies,”
http://export.gov/saudiarabia/static/CCG_Latest_eg_sa_056382.pdf.
30 U.S. Commercial Service, “Doing Business in the United Arab Emirates: 2012 Country Commercial Guide for U.S.
Companies,”
http://export.gov/unitedarabemirates/build/groups/public/@eg_ae/documents/webcontent/eg_ae_052507.pdf.
31 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.
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international markets and through rules-based trade, as well as by monitoring and enforcing U.S.
rights under trade agreements.
Important exceptions to overall U.S. trade policy objectives in the region are 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.32 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.33 Should fundamental political change occur in Syria, Congress may revisit
longstanding restrictions in consultation with the Administration.
Overview of U.S. Trade Policy Tools
The United States uses policy tools to promote trade and investment, both with the MENA and
globally, that may be grouped into two broad categories: (1) formal agreements and discussion
frameworks to liberalize trade and investment and advance rules-based trade, such as free trade
agreements and bilateral investment treaties; and (2) U.S. federal government programs that aim
to encourage international trade and investment, such as export assistance and financing. Details
on selected policy tools are provided in the text box below.
32 For more on Iran sanctions, see CRS Report RS20871, Iran Sanctions, by Kenneth Katzman.
33 State Department, “Background Note: Syria,” March 18, 2011, http://www.state.gov/r/pa/ei/bgn/3580.htm; CRS
Report RL33487, Armed Conflict in Syria: U.S. and International Response, by Jeremy M. Sharp and Christopher M.
Blanchard.
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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 and rules-based
trade through negotiations; implements a rules-based system for trade in goods and services and other trade-
related matters; and adjudicates disputes under the rules. Accession to the WTO includes implementation of
WTO agreements, the establishment of 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. The WTO has 159 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, do not involve changes to U.S. law, and therefore, do not require
congressional approval. TIFAs may lead to free trade agreement negotiations (see below).
Bilateral Trade and Investment Agreements
•
Free Trade Agreements (FTAs) are reciprocal agreements in which member countries agree to eliminate
tariff and non-tariff barriers on trade in goods, services, and agriculture between or among countries covered by
the agreement, and to establish rules in trade-related areas, such as investment, intellectual property rights (IPR),
labor, and the environment. FTAs also can enhance and “lock in” domestic economic reform in partner
countries, such as on transparency of regulatory policies, IPR protection, and customs procedures. U.S. FTAs
generally are comprehensive and “high-standard” agreements and, in certain cases, go beyond WTO
commitments. Congress must approve implementing legislation for FTAs in order for U.S. commitments under
the agreements to enter into force. The United States has entered into 14 FTAs with 20 countries.
•
Bilateral Investment Treaties (BITs) establish 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 41 BITs in-force.
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 and provides appropriations for export
promotion-related 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 eligible 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. Certain “import sensitive” products are specifical y excluded from
preferential treatment. These include most textile and apparel goods, watches, footwear and other accessories,
most electronics, steel and glass products, and certain agricultural products subject to tariff-rate quotas.
•
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 their respective countries and from Israel.
Note: Congress has oversight, authorization, and appropriation responsibilities related to U.S. trade and investment
policies and programs.
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U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
MENA Trade and Investment Partnership Initiative
The U.S. government has organized much of its trade policy response to the political change in
the region through the MENA “Trade and Investment Partnership” (MENA-TIP). Announced by
President Obama in May 2011, the objectives of the initiative are to facilitate trade within the
region; promote greater trade and investment with the United States and with other global
markets; and “open the door to willing and able MENA partners—particularly those adopting
high standards of reform and trade liberalization—to construct a regional trade arrangement.”34
Under this initiative, the United States has engaged primarily with Egypt, Jordan, Morocco, and
Tunisia, focusing cooperation initially on investment, trade facilitation, support for small- and
medium-sized enterprises (SMEs), and regulatory practices and transparency.35 The United States
also has engaged, to a lesser extent, with Libya.
The Office of the U.S. Trade Representative (USTR), which formulates, coordinates, and
implements U.S. trade policy, takes the lead on implementing the MENA-TIP initiative. Other
government agencies, including the Departments of Commerce, State, and the Treasury, also
participate in the initiative.
Efforts under the MENA-TIP initiative include:
• Egypt: In January 2012, the United States and Egypt announced their intention to
develop an “Action Plan” to enhance the bilateral trade relationship. The two sides have
outlined possible steps to achieve objectives in three main areas. Actions to: (1) boost
exports could include enhancing Egypt’s utilization of the Generalized System of
Preferences and Qualifying Industrial Zones programs; (2) promote investment could
include business missions and investment conferences, the development of a joint
statement on investment and services, and technical assistance; and (3) strengthen Egypt’s
SME sector could include sharing best practices, establishing SME business centers in
Egypt, and providing Overseas Private Investment Corporation financing to encourage
lending by Egyptian banks to Egyptian small businesses.36
• Morocco: In December 2012, the United States announced the completion of two
bilateral agreements with Morocco to stimulate bilateral and regional trade and
investment. The non-binding “Joint Principles for International Investment” is intended
to signal commitment to adopt and maintain an open, stable investment environment.
Similarly, the non-binding “Joint Principles for Information and Communication
Technology (ICT) Services” is intended to demonstrate commitment to the global
34 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. Office of the United States Trade Representative (USTR), "Remarks by
Ambassador Miriam Sapiro on Trade and Investment with the Middle East and North Africa," press release, September
15, 2011, http://www.ustr.gov/about-us/press-office/speeches/transcripts/2011/september/remarks-ambassador-miriam-
sapiro-trade.
35 USTR, "Agreed Summary: Initial Meeting on Building a New Trade & Investment Partnership," press release, April
2012, http://www.ustr.gov/webfm_send/3348.
36 USTR, “Egypt-U.S. Trade and Investment Partnership Promotion Opportunity & Job Creation,” January 2012,
http://www.ustr.gov/about-us/press-office/press-releases/2012/january/egypt-–-us-trade-and-investment-partnership-
promot.
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development of ICT services. Both sets of principles are modeled after U.S.-EU
agreements. The United States and Morocco also are discussing a third, possibly binding
agreement on trade facilitation, modeled after negotiations in the World Trade
Organization. The agreement could include new commitments reflecting electronic and
other developments in trade facilitation since the U.S.-Morocco free trade agreement
(FTA) was signed in 2004.37
• Jordan: In January 2013, the United States announced the completion of two bilateral
agreements with Jordan, a “Joint Principles for International Investment” and “Joint
Principles for Information and Communications Technology (ICT) Services.” These
agreements are the same as the December 2012 agreements signed between the United
States and Morocco (discussed above). In addition, the United States and Jordan
concluded an “Implementation Plan Related to Working and Living Conditions of
Workers,” which reaffirms Jordan’s commitment to protect internationally recognized
worker rights and to enforce its labor laws. Follow-up cooperation on labor issues is
planned, including through the Labor Subcommittee established as part of the U.S.-
Jordan FTA.38
The United States may negotiate similar sets of agreements on principles with other countries in
the region, such as Egypt.39
Formal Agreements and Discussion Frameworks to Liberalize
Trade and Investment
Current U.S. trade and investment initiatives with MENA countries are the result of previous
efforts 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 currently 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 region are
37 USTR, "United States and Morocco Reach Agreement on Trade Facilitation, Joint Investment Principles and Joint
Information and Communication Technology (ICT) Principles," press release, December 7, 2012,
http://www.ustr.gov/about-us/press-office/press-releases/2012/december/us-morocco-reach-agreement.
38 USTR, “U.S. Trade Representative Ron Kirk Announces Agreements Between the United States and Jordan to Boost
Investment and Economic Growth, Enhance Labor Cooperation,” press release, January 28, 2013,
http://www.ustr.gov/about-us/press-office/press-releases/2013/january/ustr-kirk-announces-us-jordan-agreements.
Electronic communication with USTR official, January 30, 2013.
39 Meeting with USTR officials, January 10, 2013.
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members of the WTO. The MENA countries that are not—Algeria, Iran, Iraq, Lebanon, Libya,
Syria, and Yemen—have “observer status,” which enables them to follow discussions on matters
of direct interest to them. With the exception of Syria, all of these countries are in various stages
of the process to join the WTO.40 The United States has supported some of these efforts, for
example, providing technical support to Iraq, Lebanon, and Yemen for their WTO accession
efforts.41
Presently, the United States has Trade and Investment Framework Agreements (TIFAs) with most
MENA countries, and bilateral investment treaties (BITs) with five MENA countries: Bahrain,
Egypt, Jordan, Morocco, and Tunisia. It also has 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 questions about Egypt’s willingness to negotiate a
comprehensive FTA, the adequacy of Egypt’s intellectual property rights regime, and import
duties for certain apparel and textile products.42 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.
Elements of this network of trade agreements and policy initiatives serve as additional
components of U.S. economic engagement with the MENA. For instance, in support of Tunisia’s
political transition, in October 2011, the United States and Tunisia “re-launched” talks under the
TIFA, originally established in 2002.43 In March 2012, they met under the bilateral TIFA Council
to explore options for bolstering bilateral and intra-regional trade and investment ties.44 The
United States also seeks to enforce U.S. rights under existing trade and investment agreements
with MENA countries.
40 See World Trade Organization (WTO), “Accessions,” http://www.wto.org/english/thewto_e/acc_e/acc_e.htm.
41 USTR, 2012 Trade Policy Agenda and 2011 Annual Report, Annex II, http://www.ustr.gov/about-us/press-
office/reports-and-publications/2012-0.
42 Barbara Kotschwar and Jeffrey J. Schott, Reengaging Egypt: Options for US-Egypt Economic Relations, Peterson
Institute for International Economics, January 2010.
43 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.
44 USTR, “United States and Tunisia Discuss New Approaches to Foster Trade and Investment,” March 2012,
http://www.ustr.gov/about-us/press-office/press-releases/2012/march/united-states-and-tunisia-discuss-new-
approaches-fos.
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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. FTA includes investment chapters with updated investment provisions.
d. FTA includes investment chapter modeled after BIT provisions.
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Other Federal Programs to Promote Trade and Investment
In addition to formal agreements to liberalize trade and investment and advance rules-based trade,
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. Certain
elements of such programs are a part of the MENA-TIP Initiative.
Generalized System of Preferences (GSP)
The United States grants preferential treatment to imports from certain developing countries
under the GSP program.45 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.46 The United States first authorized the program in 1974. In October 2011, President
Obama signed legislation authorizing GSP through July 31, 2013 (P.L. 112-40).
Overall, GSP program utilization among beneficiary developing countries, including in the
MENA region, remains low. In 2011, 0.8% of total U.S. imports from beneficiary developing
countries in the MENA constituted goods entering the United States under GSP.47 One reason for
this is that oil accounts for more than 70% 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)
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.48 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 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 about $159,000 in 1999 to about $95 million in 2011. However, the QIZ
share of Jordan’s total exports to the United States has declined in recent years,
45 For more information on the GSP program, see CRS Report RL33663, Generalized System of Preferences:
Background and Renewal Debate, by Vivian C. Jones.
46 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.
47 Ibid.
48 Section 9 of P.L. 99-47, as amended by P.L. 104-234; 19 USC § 2112 note.
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from a high of about 90% in 2002 to about 9% in 2011. This is because most
imports from Jordan increasingly enter the United States duty-free under the
U.S.-Jordan FTA rather than the QIZ program.
• Egypt: Exports from Egypt to the United States under the QIZ program have
grown from about $266 million in 2005 to about $1 billion in 2011. The QIZ
share of Egypt’s total exports to the United States also has grown during this time
period, from about 13% in 2005 to about 52% in 2011.49
Certain issues have emerged 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 (see previous discussion on engagement with
Jordan under the MENA-TIP initiative).50
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 has directed U.S. export
promotion efforts. Most recently, such efforts have been focused through the National Export
Initiative (NEI), the Obama Administration’s plan to double exports to support U.S. jobs.51 The
NEI does not have a specific emphasis on the MENA, but federal agencies’ efforts to boost U.S.
exports worldwide under the NEI, such as through more trade missions and greater levels of
export financing, may nevertheless contribute to MENA-specific U.S. trade policy goals.
Key export promotion agencies that may play a key role in promoting U.S. commercial ties with
MENA countries include the Department of Commerce, Export-Import Bank (Ex-Im Bank),
Overseas Private Investment Corporation (OPIC), and Trade and Development Agency (TDA).
Taken together, these agencies have representation and/or provide support for U.S. exports and
investments for most countries in the region (see Table 3). 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.52
49 CRS analysis of data from the USITC, Interactive Tariff and Trade Data Web.
50 USTR, 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.
51 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.
52 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.
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Table 3. Federal Export and Investment Promotion Support in MENA
Department of
Commercea OPICb TDAc Ex-Im
Bankd
Commercial Service
Posts and
Representation in-
Availability of
Availability of
Availability of
Country
Country
Support
Support
Support
Algeria
√
√
√
√
Bahrain
Represented through
the State Department
√ X √
“Partner Post”
Djibouti X
√
√
√
Egypt
√
√
√
√
Iran
X X X X
Iraq
√
√
√
√
Israel
√
√ X √
Jordan
√
√
√
√
Kuwait
√
√ X √
Lebanon
√
√
√
√
Libya
√ X X √
Malta
Represented through
the State Department
√ X √
“Partner Post”
Morocco
√
√
√
√
Oman
Represented through
the State Department
√ X √
“Partner Post”
Qatar
√
Suspended (worker
X
√
rights concerns)
Saudi Arabia
√
Suspended (worker
X
√
rights concerns)
Syria
X X X X
Tunisia
√
√ X √
United Arab
√
Suspended (worker
Emirates
rights concerns)
X
√
West Bank
√
√
√
√e
Yemen X
√
√
√
Source: Department of Commerce, OPIC, TDA, and Ex-Im Bank agency websites and annual reports;
http://www.export.gov; U.S. Government Accountability Office (GAO), National Export Initiative: U.S. and Foreign
Commercial Service Should Improve Performance and Resource Allocation Management, GAO-11-090, September
2011, p. 57, http://www.gao.gov/new.items/d11909.pdf; and International Trade Administration (ITA) response to
CRS inquiry, February 8, 2013.
a. Department of Commerce: A check (√) denotes countries in which there is Commercial Service presence;
a cross (X) denotes countries in which the Commercial Service does not have a presence, nor is
represented through a “partner post” via the Department of State.
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b. OPIC: A check (√) denotes countries in which OPIC support is available; a cross (X) denotes countries in
which OPIC support is not 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 Qatar, Saudi
Arabia, and the UAE in 1995 over concerns about worker rights; see 2013 Investment Climate Statements
for the countries (http://www.state.gov/e/eb/rls/othr/ics/2013/index.htm).
c. TDA: A check (√) denotes countries in which TDA support is available; a cross (X) denotes countries in
which TDA support is not available. Information on TDA project activity in the MENA region is available at
http://www.ustda.gov/program/regions/mena&europe/.
d. Ex-Im Bank: A check (√) denotes countries in which Ex-Im Bank support is available; a cross (X) denotes
countries in which Ex-Im Bank support is not available 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.
e. 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.
Department of Commerce
The Department of Commerce, through its International Trade Administration (ITA), is the lead
agency providing export promotion services for non-agricultural U.S. businesses. With respect to
the MENA , ITA’s major objectives are to expand U.S. exports, engage in commercial diplomacy
(such as through government-to-government advocacy) in support of U.S. business interests,
remove market access barriers, and to promote and facilitate inward investment to the United
States. ITA’s activities include a focus on supporting SMEs in the region. ITA supports USTR’s
implementation of the MENA-TIP initiative. 53
The U.S. and Foreign Commercial Service unit of the ITA has a domestic and international
network of trade specialists, along with high-level representation at certain U.S. foreign missions,
who provide export assistance and advocacy services to U.S. companies seeking foreign business
opportunities. The Commercial Service has a presence in many MENA countries (see Table 3).
At U.S. diplomatic posts where Commercial Service Officers are not present, U.S. Foreign
Service Economic Officers of the State Department often conduct U.S. government commercial
outreach functions, including through “partnership posts.”54
Examples of ITA’s activity in the region include the following:
• Trade missions: In March and April 2011, the Commercial Service led trade
missions to Tunisia (focused on investment opportunities); Morocco (energy and
port logistics projects); and Saudi Arabia (information technology sector).55 In
2012, the ITA led a trade mission to Israel (focused on the oil and gas sector). A
2013 trade mission is planned to Egypt and Kuwait, focused on the energy,
infrastructure and safety, and security technology sectors.56
53 ITA response to CRS inquiry, February 8, 2013.
54 U.S. Government Accountability Office (GAO), National Export Initiative: U.S. and Foreign Commercial Service
Should Improve Performance and Resource Allocation Management, GAO-11-909, September 2011, p. 4,
http://www.gao.gov/new.items/d11909.pdf.
55 U.S. Commercial Service, 2011 Annual Report: Powering Export Growth.
56 "Trade Mission to Egypt and Kuwait," press release, June 13, 2012, http://export.gov/trademissions/egyptkuwait/.
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• Trade shows: In January 2013, Commercial Service staff in the UAE supported
200 U.S. exhibitors at the “Arab Health 2013” trade show, the second largest
medical equipment sector show in the world.
• Business development conferences: ITA assisted in organizing and promoting
the first U.S.-Morocco Business Development Conference in December 2012,
which included approximately 200 U.S. participants from the private sector.
• Advocacy: ITA is working to ensure that U.S. companies can compete for
infrastructure projects in Qatar. 57
Export-Import Bank (Ex-Im Bank)
The 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. While MENA is not a specific focus for the agency, Ex-Im Bank authorizations for
financing in the region increased markedly between FY2011 and FY2012, from $443 million to
$8.9 billion. The share of Ex-Im Bank authorizations for the region also grew, from about 1% in
FY2011 (of $32.7 billion in Ex-Im Bank financing worldwide) to about 25% in FY2012 (of $35.8
billion in Ex-Im Bank financing worldwide).
The increase in financing for the region was driven in part by large authorizations to Saudi
Arabia, including for U.S. exports for power and petrochemical projects (totaling $5.5 billion in
FY2012), and the UAE, for U.S. exports of commercial aircraft and nuclear power plant
components and services (totaling $3.3 billion in FY2012).58
Overseas Private Investment Corporation (OPIC)
OPIC provides political risk insurance and finance to support U.S. investment in developing
countries, which may contribute to U.S. exports and employment. Governed by the Foreign
Assistance Act of 1961 (P.L. 87-195), as amended, OPIC’s activities are intended to support U.S.
foreign policy goals. In FY2011, OPIC committed $108.7 million for new investment projects in
MENA countries, close to 4% of OPIC’s commitments for new investment projects worldwide in
that year ($2.8 billion). The largest destinations for new OPIC commitments in the region were
the West Bank and Gaza Strip ($40 million), followed by Iraq ($20.5 million) and Jordan ($3.2
million). In FY2011, OPIC’s portfolio exposure in MENA totaled $2.6 billion, close to one-fifth
of OPIC’s total exposure worldwide in that year ($14.5 billion).59 OPIC’s support in the MENA
historically has focused on four key areas: support for SMEs, infrastructure development
(including housing, energy, and telecommunications), agriculture and food security, and
humanitarian assistance.60
57 ITA response to CRS inquiry, February 8, 2013.
58 Export-Import Bank (Ex-Im Bank) activity levels are based on CRS analysis of data from Ex-Im Bank annual
reports, applying the World Bank definition of the MENA region.
59 Overseas Private Investment Corporation (OPIC) activity levels are based on CRS analysis of data reported in
OPIC’s FY2011 annual report and FY2013 congressional budget justification. CRS analysis uses the World Bank
definition of the MENA region.
60 OPIC, FY2013 congressional budget justification.
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In response to the political change in the region, OPIC has targeted up to $3 billion in support of
investment in the region, based on 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 region
to spur economic growth and job creation. Eligible countries include Egypt, Tunisia,
Morocco, Iraq, Jordan, Lebanon, and the Palestinian Territories (and potentially
Algeria, Oman, and Yemen). The initiative aims to prioritize investments in 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 rights.61
• 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.62
Following the 2011 announcements, OPIC approved $500 million in lending to Egypt and Jordan
($250 million to each country) to support small businesses in those countries. Under the facility,
OPIC will guarantee loans by local banks in Egypt and Jordan to small businesses, microfinance
institutions, non-banking financial institutions, and other approved borrowers. OPIC is
collaborating on the loan guarantee facility with the U.S. Agency for International Development
(USAID), which will provide grant funding and technical assistance to the initiative.63 The Egypt
loan guarantee facility currently is not operational; the U.S. project sponsors reportedly are
awaiting the required permits from the Egyptian government.64 In comparison, implementation of
the Jordan loan guarantee facility reportedly is further along.
Trade and Development Agency (TDA)
TDA, authorized under the Foreign Assistance Act of 1961, as amended, operates under a dual
mission of promoting economic development and U.S. commercial interests in developing and
middle-income countries. TDA connects U.S. businesses to export opportunities for priority
development projects by funding feasibility studies, pilot projects, reverse trade missions, and
other activities. In some cases, TDA projects can lead to follow-on financing by OPIC and Ex-Im
Bank. The Middle East is one of TDA’s major focus areas, and TDA has identified Egypt and
Morocco as among 18 “key markets” in which it will focus its programs in FY2013.65 TDA
projects span sectors such as transportation and trade logistics, ICT, energy supply, and water
supply management. In FY2012, TDA program funding for the region totaled $5.6 million and
constituted about 13% of worldwide TDA funding ($43.9 million), similar to FY2011.66
Examples of projects include:
61 OPIC, “OPIC to Provide Up to $2 Billion for Investment in Middle East and North Africa,” press release, March 11,
2011.
62 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.
63 OPIC, “OPIC Board Approves $500 Million for Small Business Lending in Egypt and Jordan,” press release, July 1,
2011.
64 Electronic and telephone communication with CHF International official, January 23, 2013.
65 Electronic communication with TDA official, February 13, 2013.
66 Trade and Development Agency (TDA) funding levels are based on CRS analysis of data from TDA annual reports,
(continued...)
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• In September 2012, TDA concluded two grant agreements to expand Egypt’s
information communication technology (ICT) infrastructure, one for technical
assistance to support implementation of an integrated airport ICT system in
Cairo, Egypt ($622,225) and the other for a feasibility study to support building a
data center in Katameya, Egypt ($351,000).67
• In June 2011, TDA sponsored an Egypt: Forward initiative, bringing together
250 U.S. company representatives and 50 Egyptian public and private sector
leaders in the energy, ICT, transportation, and agribusiness sectors, in an effort to
foster greater commercial and economic ties.68
Possible Policy Approaches for Increasing U.S.-
MENA Trade and Investment
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. They also may 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. 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.
This section analyzes policy options for increasing U.S. trade with and investment in MENA
economies.
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. For
example, under the MENA-TIP initiative, the U.S. government is pursuing efforts
(...continued)
applying the World Bank definition of the MENA region. TDA’s funding for regional programs are not included in the
MENA funding amount because TDA groups the MENA and Europe in one region.
67 TDA, "USTDA Supporting Expanded ICT Infrastructure in Egypt," press release, September 10, 2012,
http://www.ustda.gov/news/pressreleases/2012/MENAEurope/Egypt/EgyptICTInfrastructure_091012.asp.
68 TDA, U.S. Trade and Development Agency 2011 Annual Report. Also, see TDA, Egypt: Forward,
http://egyptforward.ustda.gov/.
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to expand Egypt’s utilization of the GSP program. Additionally, Congress could
revise provisions of the GSP program to facilitate and expand use by MENA
beneficiary countries, such as by expanding product coverage. Such issues could
be examined in the context of possible debate in the 113th Congress on extending
the authority of the GSP program, which currently expires July 31, 2013.
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.69
• QIZ program: Congress could consider revising the QIZ program. One option,
as currently being discussed by the U.S. and Egyptian governments, could be to
expand existing QIZs in Egypt by approving additional zones in these
countries.70 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
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 and the readiness of trading partners to negotiate specific commitments. 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
69 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.
70 Department of State, “Joint Statement on Egypt-U.S. Trade and Investment Partnership,” press release, January 27,
2012,
http://iipdigital.usembassy.gov/st/english/texttrans/2012/01/20120127173834su0.2903057.html#axzz2KcXIiB1Q.
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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.71 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.72 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.73
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
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.74 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.75 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
71 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.
72 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.
73 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.
74 Barbara Kotschwar and Jeffrey J. Schott, Reengaging Egypt: Options for US-Egypt Economic Relations, Peterson
Institute for International Economics, “In Brief”, January 2010.
75 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.
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Egyptian society, and not contribute to general improvement of Egypt’s
economic conditions and living standards.76 Some industries, firms, and workers
could be adversely affected if increased foreign competition results from an FTA
or if particular provisions of the FTA disadvantage their interests.
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.
Negotiating new FTAs may be complicated by the fact that Trade Promotion
Authority (TPA) expired in 2007.77 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. The President could request and the
113th Congress could consider the renewal of TPA. Negotiating new BITs may
have more momentum given the Obama Administration’s conclusion of its
review of the U.S. Model BIT in April 2012. The United States negotiates BITs
on the basis of a model, which has been subject to periodic reviews and revisions.
The Administration is resuming BIT negotiations previously halted during the
Model BIT review.78
• 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 has been revised periodically, most recently in 2012. The Model
BIT also serves as the template 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.79
• Conducting 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.
76 Ibid.
77 See CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, by J. F.
Hornbeck and William H. Cooper.
78 U.S. Department of State, "Model Bilateral Investment Treaty," press release, April 20, 2012,
http://www.state.gov/r/pa/prs/ps/2012/04/188198.htm. See CRS Report RL33978, The U.S. Bilateral Investment Treaty
Program: An Overview, by Martin A. Weiss and Shayerah Ilias Akhtar.
79 Edward Gresser, Update the Israel Free Trade Agreement, The New Democratic Leadership Council, April 2010.
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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 through unilateral or bilateral actions. 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 work with countries to fully implement their
WTO accession commitments, such as through enhanced trade capacity building efforts. The
United States could also cooperate more closely with the EU and other countries in international
forums.
In May 2011, the G-8 launched the “Deauville Partnership with Arab Countries in Transition,” a
forum for coordinating assistance to “transitioning” MENA countries, currently defined by the
Partnership to include Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen. The Partnership also
includes the G-8 countries, other countries from the region (Saudi Arabia, the United Arab
Emirates, Qatar, Kuwait, Turkey), and several international financial institutions (IFIs). The
Partnership is pursuing a number of policy tools to bolster sustainable, inclusive, growing
economies in the region, and could be a fruitful avenue for coordinating with other countries
on efforts to increase trade and investment with MENA countries. The current MENA-TIP
initiative can be viewed as part of the U.S. contribution to international efforts under the trade and
investment “track” of the Deauville Partnership.80
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. 81 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.82
80 Meeting with USTR officials, January 10, 2013.
81 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.
82 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.
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Others argue that the links between trade, investment, and democracy are not straightforward.83
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 enabled
corruption and exacerbated economic inequality.84
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
express concern 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 and OPIC
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 and OPIC financing.
Third, if an agenda of increased trade and investment is further pursued, 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 continue
to 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?
83 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.
84 James V. Grimaldi and Robert O’Harrow Jr., “In Egypt, corruption cases had an American root,” Washington Post,
October 19, 2011; and, Economist Intelligence Unit, “Country Report: Egypt,” November 2011.
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• 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
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. Such cooperation efforts are underway,
and questions arise about the scope, and depth of the cooperation. 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 FTAs 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.
U.S.-EU cooperation on the MENA region could expand should the United States
and the EU launch negotiations on a Transatlantic Trade and Investment
Partnership. As an example of the potential for future collaboration, the “Joint
Principles for International Investment” and the “Joint Principles for Information
and Communication Technology (ICT) Services”—agreed to bilaterally by the
United States with Morocco and Jordan—were modeled after U.S.-EU
agreements.85
• 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.86 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) and a potential Transatlantic Trade
85 Discussion with USTR official, January 10, 2013.
86 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.
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U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues
and Investment Partnership?87 How should Congress prioritize countries within
the MENA region for FTAs? Trade promotion authority (TPA) likely will play a
major role in any future FTA negotiation with MENA countries.
Outlook
U.S. trade policy responses to political change in the MENA can be characterized as incremental
and long-term—focused on creating “building blocks” that could potentially lead to larger-scale
trade and investment agreements in the future. For example, present USTR engagement with
Egypt is centered on making the country’s business environment more conducive to trade and
investment. Such efforts could pave the way for FTA negotiations in the future, though this is not
necessarily a current goal for the Administration. 88
Going forward, any trade policy agenda pursued by U.S. policymakers in the region could be
affected by a host of external factors, including the following:
• U.S. trade and investment relationships in the region are diverse, resulting in
different “starting points” for engagement. 89 At one end of the spectrum, Libya is
not yet a member of the WTO, which many view as a starting point for further
U.S. engagement. At the other end of the spectrum, the United States has well-
established trade relationships with Morocco and Jordan—which include a
bilateral FTA with each country—that serve as a foundation for the recent
bilateral agreements on principles on investment and ICT services under the
MENA-TIP.
• Countries in the region have markedly diverse economic situations and priorities.
Some countries, such as Egypt, are more focused on maintaining macroeconomic
stability over the short-term, delaying longer-term initiatives, including trade and
investment liberalization. Other countries with more stable economic conditions
may be able to engage more effectively with the United States on trade policy
issues. 90
• Ongoing political uncertainty in some countries can make it challenging to
negotiate on trade policy—or even, more fundamentally, know with whom to
negotiate. For instance, despite the longstanding U.S.-Egyptian bilateral
relationship, it is difficult for U.S. trade negotiators to know with whom to
negotiate on the Egyptian side, giving the fluid nature of Egypt’s political
situation. As another example, political uncertainty also can make it more
difficult for Foreign Commercial Service staff to operate in the region.91 In
contrast, Tunisia’s relatively “smoother” transition has facilitated U.S.
engagement with Tunisia under the re-invigorated TIFA process. 92
87 For more on TPP, CRS Report R42694, The Trans-Pacific Partnership Negotiations and Issues for Congress,
coordinated by Ian F. Fergusson.
88 Meeting with USTR officials, January 10, 2013.
89 Ibid.
90 Ibid.
91 ITA response to CRS inquiry, February 8, 2013.
92 Meeting with USTR officials, January 10, 2013.
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• U.S. trade policy responses are affected by the demand of U.S. companies for
doing business in certain areas of the world. While agencies such as OPIC, Ex-Im
Bank, and TDA can choose to make supporting U.S. commercial activity in the
region a top priority and make resources available for this purpose, U.S.
businesses will take advantage of the financing and funding only if they have
sufficient commercial incentives to do so.
Depending on the type of trade policy responses pursued in the region, questions may
arise about the effectiveness of policy tools used to promote increased trade and
investment, as well as their impact on political transitions, and how quickly their benefits
would be borne out. Additionally, how these policies are designed could have substantial
implications for U.S. interests. However, in a constrained budgetary environment, trade
and investment may be attractive policy tools compared to other options, such as foreign
aid, for supporting economic development in MENA countries—as well as encouraging
transparency, governance, and other reforms in the region—while also potentially
creating new economic opportunities for U.S. businesses.
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Appendix. Trade Tables
Figure A-1. U.S. Exports to MENA Countries/Territories, 2011
Source: Global Trade Atlas.
Notes: Harmonized Tariff Schedule (HTS) numbers in parentheses in legend. NEOSI = Not elsewhere specified
or included.
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Table A-1. Top U.S. Exports to MENA Countries/Territories, 2011
Total
Exports
Major U.S. Exports and Shares of Total
Country
($ Millions)
(with Harmonized Tariff Schedule [HTS] Numbers)
Aircraft Parts, 30% (88) Machinery, 15% (84); Electrical Machinery, 13% (85);
Algeria
1,595
and Oil, 10% (27)=68%
Machinery 23%, (84); Aircraft Parts, 20% (88); NESOI, 15% (98); Motor
Bahrain
1,213
Vehicles 13% (87)=71%
Fats and Oils, 28% (15); Cereals, 24% (10); Machinery, 12% (84); Electrical
Djibouti
128
Machinery, 7% (85) =71%
Cereals, 24% (10); Oil, 10% (27); Machinery, 9% (84); Aircraft Parts, 8%
Egypt
6,222
(88)=51%
Woodpulp, 25% (47); Pharmaceutical Products, 17% (30); Plastics, 13% (39);
Iran
229
Optical, Medical Instruments, 10% (90)=65%
Machinery, 24% (84); Cereals, 23%, (10); Electrical Machinery, 10% (85);
Iraq
2,411
Motor Vehicles, 9% (87)=66%
Israel
13,936
Precious Stones (Diamonds), 43% (71); Electrical Machinery, 10% (85);
Machinery, 9% (84); Aircraft Parts, 5% (88)=67%
Jordan
1,454
Motor Vehicles, 21% (87); Cereals, 18% (10); Machinery, 9% (84); Arms and
Ammunition, 6% (93)=54%
Kuwait
2,726
Motor Vehicles, 36% (87); Machinery, 16% (84); Electrical Machinery, 8%
(85); Aircraft Parts, 5% (88)=65%
Lebanon
1,806
Oil, 46% (27); Motor Vehicles, 23% (87); Machinery, 6% (84); Cereals, 4%
(10)=79%
Libya
307
Cereals, 56% (10); Motor Vehicles, 16% (87); Machinery, 8% (84); Fats and
Oils, 5% (15)=85%
Malta
752
Oil, 86% (27); Aircraft Parts, 3% (88); Optical/Medical Instruments, 3% (90);
NESOI (Military Equipment) 2% (98)=94%
Morocco
2,822
Oil, 32% (27); Aircraft Parts, 16% (88); Fats and Oils, 12% (15); Food Waste,
10%, (23)=70%
Oman
1,434
Machinery, 23% (84); Motor Vehicles, 22% (87); Electrical Machinery, 10%
(85); Aircraft Parts, 9% (88)=64%
Qatar
2,799
Aircraft Parts, 43% (88); Machinery, 12% (84); Motor Vehicles, 12% (87);
Electrical Machinery, 6% (85)=73%
Motor Vehicles, 32% (87); Machinery, 22% (84); Electrical Machinery, 7%
Saudi Arabia
13,829
(85); Medical, Surgical Instruments, 4% (90); =65%
Cereals, 64% (10); Grain, Seeds, 26% (12); Optical/Medical Instruments, 3%
Syria
230
(90) Food Waste, 3% (23); =97%
Fats and Oils, 22% (15); Grain, Seeds, 21% (12); Machinery, 8% (84); Cereals,
Tunisia
588
5% (10) =56%
United Arab
Aircraft Parts, 23% (88); Machinery, 16% (84); Motor Vehicles, 14% (87);
15,900
Emirates
Electrical Machinery, 8% (85)=61%
Machinery, 62% (84); Furniture and Bedding, 14% (94); Seeds, Grain, 8% (12);
West Bank
1
Motor Vehicles, 7% (87)=91%
Machinery, 89% (84);Electrical Machinery, 6% (85); Aircraft Parts, 5%
Gaza Strip
.05
(88)=100%
Cereals, 47%, (10); Motor Vehicles, 23% (87); Machinery, 8% (84);
Yemen
390
Pharmaceuticals 4% (30)=82%
TOTAL 70,772
Source: Global Trade Atlas.
Note: NEOSI = Not elsewhere specified or included.
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Figure A-2. U.S. Imports from MENA Countries/Territories, 2011
Source: Global Trade Atlas.
Notes: Harmonized Tariff Schedule (HTS) numbers in parentheses in legend. NEOSI = Not elsewhere specified
or included.
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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, 2011
Total
Imports
Major U.S. Imports and Shares of Total
Country
($ Millions)
(with Harmonized Tariff Schedule [HTS] Numbers)
Algeria
14,609 Oil,
100% (27)
Textiles and Apparel, 34% (61-63), Fertilizers, 29% (31); Aluminum, 19%
Bahrain
518
(76))=82%
NESOI (military equipment) 77% (98 -99); Spices, Coffee, Tea, 20% (09);
Djibouti
4
Vegetables and roots, 1% (07)=98
Egypt
2,059
Textiles and Apparel, 43% (61-63); oil, 17% (27); Fertilizers, 13% (31)=73%
Art and Antiques, 80%, (97); Preserved food, 11% (20); Printed Materials, 6%
Iran
1
(49); Nuts and Fruit 2% (08)=99%
Iraq
16,960
Oil 100% (27)
Precious Stones (Diamonds), 41% (71); Pharmaceuticals, 25% (30); Electrical
Israel
23,039
Machinery, 6% (85); Medical, Surgical Instruments, 5% (90)=77%
Apparel, 85% (62-63); Precious Stones (Gold Jewelry), 5% (71); NESOI
Jordan
1,061
(military equipment, 4% (98)=94%
Kuwait
7,809
Oil, 97% (27); Fertilizers, 2% (31);=99%
Precious Stones (Gold and diamonds),15% (71); Preserved Food, 15% (20);
Lebanon
79
Machinery, 14% (84); NESOI (returned machinery)10% (98)=54%
Libya
645
Oil, 96% (27); Fertilizers, 4% (31)=100%
Malta
244
Electrical Machinery, 73% (85); Pharmaceuticals, 9% (30); Machinery 5% (84);
Fabrics 2% (60)= 89%
Morocco
996
Salt, Sulfur (Calcium), 30% (25); Electrical Machinery,13% (85); Fertilizers,
12% (31); Apparel, 7% (62)=62%
Oman
2,208
Oil, 76% (27); Precious Stones, 8% (71); ); Plastic, 7% (39);Fertilizers, 7% (31)
=98%
Qatar
1,234
Oil, 67% (27); Aluminum, 14% (76); Fertilizers, 13% (31); NESOI (military
equipment being returned to the United States for repair), 2% (98)=96%
Saudi Arabia
47,476
Oil, 97% (27); Chemicals, 1% (29); Fertilizers, 1% (31)=99%
Syria
393
Oil, 93% (27); Spices, Coffee, Tea, 3% (09) Art and Antiques, 1% (97);
Apparel, 1% (61) =100%
Tunisia
352
Fats and Oils, 21% (15); Apparel, 20% (62); Electrical Machinery, 14% (85);
Machinery, 11% (84)=66%
United Arab
Aluminum, 27% (76); NESOI (Military equipment returned to the United
2,439
States for repair), 26% (98); Oil, 16% (27); Iron and Steel Products, 8%
Emirates
(73);=77%
NESOI (Military Equipment returned to the United States for repair), 38%
West Bank
5
(99); Fats and Oils, 28% (15); Grains and Seeds, 18% (12); Vegetables and
roots 6% (07)=84%
Gaza Strip
3
Woven Apparel, 99% (61)
Yemen
562 Oil,
100% (27)
TOTAL $122,696
Source: Global Trade Atlas.
Notes: NEOSI = Not elsewhere specified or included.
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Author Contact Information
Rebecca M. Nelson, Coordinator
Shayerah Ilias Akhtar
Analyst in International Trade and Finance
Specialist 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
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