Middle East Trade Initiatives: S. 1121/H.R. 2267 and the Administration’s Plan
Order Code RL32335
CRS Report for Congress
Received through the CRS Web
Middle East Trade Initiatives: S. 1121/H.R. 2267
and the Administration’s Plan
Updated April 26, 2004
Mary Jane Bolle
Specialist in International Trade
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress
Middle East Trade Initiatives: S. 1121/H.R. 2267 and
the Administration’s Plan
Summary
On May 9, 2003, the Administration proposed the establishment of a U.S.
Middle East Free Trade Area (MEFTA) within a decade (by about 2013). This
proposal came a year and a half after the September 11, 2001 terrorist attacks on the
U.S. World Trade Center and the Pentagon, and after the wars in Afghanistan and
Iraq. The MEFTA was billed as part of a plan to fight terrorism — in this case, by
supporting the growth of Middle East prosperity and democracy — through trade.
On June 23, 2003, the Administration described a six-step process for Middle East
countries to become part of that MEFTA: (1) joining the World Trade Organization;
(2) possibly participating in the Generalized System of Preferences; successively
entering into (3) trade investment framework agreements (TIFAs), (4) bilateral
investment treaties (BITs), and (5) free trade agreements with the United States; and
(6) participating in trade capacity building.
Meanwhile, on May 22, 2003, Senators Max Baucus and John McCain, and
Representatives Adam Smith and Calvin Dooley introduced the bipartisan S.
1121/H.R. 2267, to authorize a “short-run” trade preference program to serve as a
“stepping stone” for Middle East countries desiring free trade agreements with the
United States. The “short-run” trade preference program would expire at the end of
2011 — two years before the aimed-for completion of the Administration’s initiative.
It would be based on and similar to the partial duty-free programs of the Caribbean
Basin Economic Recovery Act (CBERA), the Andean Trade Preference Act (ATPA),
and the African Growth and Opportunity Act (AGOA).
Both the Administration’s plan and S. 1121/H.R. 2267 would cover 16 countries
in common located in what many refer to as the Middle East and North Africa:
Bahrain, Egypt, Iraq, Israel, Jordan, the Gaza Strip and the West Bank (Palestine),
Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Yemen,
Algeria, Morocco, and Tunisia. Each initiative would also include several countries
not on the common list. The Administration’s plan would include four such
countries: Cyprus, Iran, Syria, and Libya. S. 1121/H.R. 2267 would include five such
countries: Afghanistan, Azerbaijan, Bangladesh, Pakistan, and Turkey.
Although U.S.-Middle East trade is small (4-5% of total U.S. trade), oil and gas
are key imports, accounting for roughly one-tenth of all oil and gas consumed in the
United States each year. Textiles and apparel are the second most important imports
from these countries. The most important U.S. exports to these countries are
machinery and transportation equipment.
Sponsors of S. 1121/H.R. 2267 argue that their initiative would help diversify
and improve the economies of the Middle East, provide jobs for the rapidly growing
population, stimulate U.S. exports, and help Middle East countries make economic
reforms. The Administration has been ambivalent in its support of S. 1121/H.R.
2267, calling it a “good initiative,” yet stressing that its own plan would be more
likely to make Middle East countries “sustainable trading partners.” This report will
be updated as events warrant.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Impetus for the Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Major Elements of the Two Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Definition of “Middle East” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Some Key Indicators of U.S. Economic Ties to the Middle East . . . . . . . . . . . . . 6
Comparison of the Two Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Trade Preference Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administration’s Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
S. 1121 / H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Steps or Activities Leading Toward Free Trade Agreements . . . . . . . . . . . . 8
The Administration’s Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
S. 1121 / H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Requirements for Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Administration’s Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
S. 1121/H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Time Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Differences in Approach and Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
List of Figures
Figure 1. Countries Included in the Administration’s Definition of
“Middle East / North Africa” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 2. Countries Included in the S. 1121/H.R. 2267 Definition of
“Middle East” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 3. Sources of Total U.S. Oil and Gas Imports, 2003 . . . . . . . . . . . . . . . . . 6
Figure 4. Key U.S. Imports from the Middle East, 2003 (as a % of all imports
from the Middle East) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Figure 5. Top U.S. Exports to the Middle East, 2003 (as a % of all U.S.
exports to the Middle East) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
List of Tables
Table 1. Countries Covered by: (a) USTR Definition of MENA; (b)
S. 1121/H.R. 2267; and (c) Steps toward and Including a Bilateral
Free Trade Agreement with the U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 2. Brief Comparison of the Administration’s Middle East Initiative and
S. 1121 / H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 3. Top U.S. Imports (and % of total that they represent) from
25 Middle East Countries, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Table 4. Top U.S. Exports (and % of total that they represent) from
25 Middle East Countries (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table 5. Foreign Direct Investment in Middle East Countries:
Stock of Investment by the World, 2000 and by the United States, 2002 . . 20
Middle East Trade Initiatives: S. 1121/
H.R. 2267 and the Administration’s Plan
Introduction
After the terrorist attacks against the New York World Trade Center and the
Pentagon on September 11, 2001, and the initial combats in Afghanistan and Iraq, a
U.S. objective became, in the words of U.S. Trade Representative Robert B. Zoellick,
to fight terrorism by “spreading the message of prosperity and democracy throughout
the world.”1 One way the Administration chose to spread that message was through
a proposed Middle East Free Trade Agreement (MEFTA).
The MEFTA Initiative was proposed by President Bush on May 9, 2003, and
was slated for completion within a decade (i.e., by around 2013). More detail on the
Administration’s plan was revealed on June 23, 2003 at the World Economic Forum
in Jordan, when U.S. Trade Representative Zoellick spoke on the conceptual details.
Mr. Zoellick outlined six steps for Middle East countries wishing to enter into a free
trade agreement with the United States.
Meanwhile, on May 22, 2003, Senators Max Baucus and John McCain, and
Representatives Adam Smith and Calvin Dooley, introduced bipartisan legislation,
S. 1121/H.R. 2267, the Middle East Trade and Engagement Act. This legislation was
drafted to help stimulate economies of the Middle East through a “short-run” trade
preference program for countries that meet eligibility requirements. The preference
program would serve as a “stepping stone” to free trade agreements with the United
States.2 The bill also requires: (1) a presidential plan for negotiating and entering
into trade agreements with interested beneficiary countries; and (2) the creation of a
U.S.-Middle East Trade and Economic Cooperation Forum. The proposed “short-
run” trade preference program would expire at the end of 2011 — two years before
the Administration’s initiative aims to be completed.
The purpose of this report is to compare and contrast the Administration’s
Initiative with the legislative proposal in terms of (1) the impetus for the initiatives;
(2) the major elements of each plan; (3) the definition of “Middle East”; (4)
background trade data; (5) details of the two initiatives; and (6) summary differences
in their approaches and the arguments for each. At the back of this report are five
tables. Table 1 identifies five steps each of the 25 countries has taken toward a
bilateral free trade agreement with the United States: WTO membership, eligibility
1 A Man of Many Missions. Business Week. March 31, 2003, p. 94-95.
2 U.S. Senator Max Baucus, Speech: Middle East Trade and Engagement Act of 2003,
“Rebuilding the Silk Road,” at the Progressive Policy Institute, September 30, 2003.
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for the Generalized System of Preferences, and achievement of three types of
agreements — trade investment framework agreements, bilateral investment treaties,
and free trade agreements. Table 2 compares basic elements of the Administration’s
plan and S. 1121/H.R. 2267. Tables 3 and 4 list for each country U.S. import and
export totals and shares of key commodities traded. Table 5 shows the current value
and share of world and U.S. foreign direct investment, respectively, in various
countries.
Impetus for the Initiatives
Both Middle East trade initiatives captured an idea that was already being
debated in Washington — using trade as a tool to fight terrorism. For example, in
February 2003, a report by policy analyst Edward Gresser argued that the Muslim
world had been the “blank spot” on the U.S. trade agenda, a fact that risked
“undermining rather than supporting the war on terrorism.” Gresser pointed to an
economic crisis affecting almost all of the western Muslim states, which have “seen
their share of world trade and investment collapse since 1980,” resulting in “stagnant
growth, [and] falling income,” with social consequences of “unemployment, political
tension, and rising appeal for religious extremists.”3
Gresser argued that, “A strategic initiative for the Muslim4 world could end —
or at least ease — the tilt.” Gresser called for an initiative “analogous to the programs
now available for Central America, the Andean Nations, and Africa” in order to
possibly spark “growth and creation, and so reduce the attraction of radicalism and
religious fundamentalism.”
Another article written by policy analyst Brink Lindsey of the CATO Institute
argued for two concepts. The first was an additional shorter-term program to include
“temporary duty-free, quota-free access to the U.S. market for exports of selected
Muslim countries.” The shorter term program, he declared, would give tangible,
dramatic proof of U.S. commitment to the region, thereby providing an impetus for
the longer, arduous process of negotiating free trade agreements. The second concept
Lindsey called for was the expansion of the definition of “Middle East” beyond the
traditional geographic area to include other countries with “geopolitical
significance.”5
3 Gresser, Edward. Blank Spot on the Map: How Trade Policy is Working Against the War
on Terror. Public Policy Institute. February 2003. Unemployment in the Middle East in
1999 averaged roughly 25%. Source: The Economic Research Forum for the Arab
Countries, Iran and Turkey. Economic Trends in the MENA Region, 2002.
4 All but two of the countries that would be covered by the initiatives (Israel and Cyprus)
are at least two-thirds Muslim.
5 Lindsey, Brink. The Trade Front: Combating Terrorism with Open Markets. CATO
Institute. August 5, 2003.
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Major Elements of the Two Plans
Both the Administration’s plan and the Baucus/McCain/Smith/Dooley plan (S.
1121/H.R. 2267), in aiming to support economic development, job creation, and
political, and humanitarian changes, reflect elements of the two articles referred to
above, but differ in the specifics and in emphasis:
Primary Focus
! While the primary focus of the Administration’s plan would be on
the long-term establishment of a Middle East Free Trade Area by
around 2013, the primary focus of S. 1121/H.R. 2267 would be on
a “short run” trade preference program that would expire at the end
of 2011.
! The Administration’s short-run trade preference component would
be to continue the Generalized System of Preferences (GSP)
currently available to some Middle East countries.
Administration’s Plan
! The Administration’s long-term plan would be for eligible countries
to: (1) join the World Trade Organization and then sequentially enter
into (2) trade investment framework agreements (TIFAs), (3)
bilateral investment treaties (BITs), and (4) free trade agreements
(FTAs) with the United States. Once a country has entered into an
FTA with the United States, other neighboring countries could
achieve some FTA tariff benefits by “cooperatively producing” (with
two or more countries contributing to the same product) with that
country.
S. 1121/H.R. 2267
! S. 1121/H.R. 2267’s trade preference plan is billed as a “short-run”
trade preference program. It is based on and similar to the partial
duty-free programs of the Caribbean Basin Economic Recovery Act
(CBERA), the Andean Trade Preference Act (ATPA) and the
African Growth and Opportunity Act (AGOA).6
! S. 1121/H.R. 2267 also calls for (1) a presidential plan for
negotiating and entering into trade agreements with interested
beneficiary countries, and (2) the creation of a U.S.-Middle East
Trade and Economic Cooperation Forum to foster closer economic
ties with and expand trade and investment relations among
government, nongovernment and business organizations.
6 The Caribbean Basin Economic Recovery Act (CBERA), the Andean Trade Preference Act
(ATPA) and the African Growth and Opportunity Act (AGOA) offer trade preferences to
a total of 91 nations. The benefits go beyond tariff reductions offered to certain developing
countries under the Generalized System of Preferences (GSP) because they include tariff
reductions on some goods (including some textiles) for which tariff reductions are
prohibited under GSP law (19 U.S.C. 2461).
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Definition of “Middle East”
! The Administration’s plan does not define the term “Middle East”
but the definition used by the Office of the U.S. Trade
Representative includes countries traditionally identified as in the
Middle East or North Africa.
! S. 1121/H.R. 2267 omits four countries from the USTR definition
and adds five countries outside the USTR definition of “Middle
East.”
Eligibility Requirements
! The Administration’s plan specifies very few eligibility requirements
for countries wishing to join the MEFTA.
! S. 1121/H.R. 2267 is much more specific in its eligibility
requirements. Based on the requirements of AGOA, it lists political
and economic reforms that would be required in order for countries
to be eligible for the trade preference program and for participation
in the U.S.-Middle East Cooperative Forum.
Definition of “Middle East”
The “Middle East” does not have a simple definition. Figures 1 and 2 are maps
showing (shaded areas) countries included in the Administration’s plan and the S.
1121/H.R. 2267 plan, respectively.7
! The two initiatives (See Figures 1 and 2 below) have 16
“countries”8 in common: Bahrain, Egypt, Iraq, Israel, Jordan, the
Gaza Strip and the West Bank, Kuwait, Lebanon, Oman, Qatar,
Saudi Arabia, the United Arab Emirates, Yemen, Algeria, Morocco,
and Tunisia.
Each initiative also includes countries not on the other’s list.
! The Administration’s plan (Figure 1) includes four such countries:
Cyprus, Iran, Syria, and Libya, while
! S. 1121/H.R. 2267 (Figure 2) includes five such countries:
Afghanistan, Azerbaijan, Bangladesh, Pakistan, and Turkey.9
7 On June 12, 2003, Representatives Smith and Dooley co-sponsored H.R. 2467 — identical
to H.R. 2267 except it adds two more countries to the eligibility list: Armenia and Georgia.
8 For purposes of this report, the word “countries” or any references to the “25 countries,”
shall mean 24 countries plus what is alternately referred to as “the West Bank and the Gaza
Strip” (Administration’s plan) or “Palestine” (S. 1121 / H.R. 2267).
9 Iran, Libya, and Syria are countries the United States has considered as state sponsors of
(continued...)
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Figure 1. Countries Included in the Administration’s Definition of
“Middle East / North Africa”
Figure 2. Countries Included in the S. 1121/H.R. 2267 Definition of “Middle East”
9 (...continued)
terrorism. The five countries included in S. 1121/H.R. 2267 but not in the Administration’s
definition are considered by the Administration to be outside the “Middle East.” Sources:
Baucus Middle East Bill Authorizes Zero Duties for Sensitive Products. Inside U.S. Trade.
May 30, 2003; and Office of the U.S. Trade Representative. Transcript of Background
Press Conference Call to Discuss Proposed Mideast Free Trade Area Announced by
President Bush, May 9, 2003.
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Some Key Indicators of U.S. Economic Ties to the
Middle East
U.S. trade with the Middle East is small. U.S. trade with the 25 Middle East
countries covered in this report accounted for less than 4% of all U.S. exports and
less than 5% of all U.S. imports in 2003. An important U.S. economic interest in the
Middle East, however, is oil and gas. More than one-tenth of all oil and gas
consumed in the United States each year is imported from the Middle East.
Said another way, less than half of all U.S. gas and oil consumed in 2003 (44%)
was produced domestically. The rest (56%) was imported,10 and of that close to one-
fifth (19%) come from Middle East countries. Of the total share of oil and gas
imported from the Middle East, nearly half (11%) come from Saudi Arabia. Other
major contributors to the 19% of all U.S. oil and gas imports from the Middle East
are Iraq (3%), Algeria (3%), and Kuwait (1%). (See Figure 3 below.)
Figure 3. Sources of Total U.S. Oil and Gas Imports, 2003
All other 1%
100%
Kuwait 1%
80%
Algeria 3%
Middle
Rest of
60%
Iraq 3%
East 19%
World 81%
40%
Saudi Arabia 11%
20%
0%
Data Source: USITC Dataweb
Figure 4. Key U.S. Imports from the
In turn, U.S. oil and gas
Middle East, 2003 (as a % of all imports
imports constitute a little more
from the Middle East)
than half (53%) of the total U.S.
imports from the Middle East.
Oil and Gas
53
(See Figure 4.) After gas and oil,
Textiles and apparel
15
the next most important imports
Nonmetal Minerals
3
from Middle East countries are
Electronics
2
textiles and apparel, which
STNEC
2
together account for another 15%
Organic Chemicals
2
of U.S. imports from the Middle
Pharmaceuticals
1
East. Other key import categories
Telecom. Equip.
1
are diverse — nonmetallic
Scientific Instruments
1
minerals (3%), electronics (2%),
0
10
20
30
40
50
60
organi c chem i c a l s ( 2 % ),
Data source: USITC Dataweb; STNEC: military items returned to U.S.
10 U.S. Energy Information Administration, U.S. Department of Energy. Monthly Energy
Review, February, 2004.
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pharmaceuticals (1%), telecommunications equipment (1%), and scientific
instruments (1%).
U.S. exports to Middle East
Figure 5. Top U.S. Exports to the
countries are also heavily
Middle East, 2003 (as a % of all U.S.
concentrated — in two industries:
exports to the Middle East)
machinery and transportation
Machinery
24
equipment.11 One quarter (24%)
Transport. equip.
21
of U.S. exports to Middle East
countries is machinery of various
Nonnmetal Minerals
8
t yp e s : general i n d u s t r i a l
Cereals
6
machinery, machinery specialized
Scientific Instruments
4
for particular industries, power
generating machinery, electrical
Telecom. equipment
3
machinery, and office machinery.
Textile Fibers
3
An additional one-fifth (21%) of
0
5
10
15
20
25
30
U.S. exports to Middle East
Data source: USITC Dataweb
countries is transportation
equipment including various types of road vehicles. Other key exports include
nonmetallic minerals (8%), cereals (6%), scientific instruments (4%),
telecommunications equipment (3%) and textile fibers (3%). (See figure 5.)
Tables 3 and 4 at the back of this report detail U.S. imports from and exports
to each of the 25 Middle East countries covered by this report. Those tables include,
for each country (a) the total value of U.S. imports or exports, (b) the main items
imported or exported, and (c) the percent of total imports/exports represented by each
key commodity.
U.S. investment in the Middle East is limited. The stock of U.S. foreign direct
investment (FDI) in Middle East countries in 2002 totaled $17.1 billion, or 1.1% of
total U.S. FDI. However, U.S. FDI represents nearly one-quarter of world FDI in the
Middle East. (See Table 5 for world and U.S. FDI totals in the various countries.)
Half of the U.S. total is in two key sectors: mining 26% (primarily oil and gas), and
manufacturing (25%). The remaining 49% of U.S. foreign direct investment in the
Middle East is distributed throughout the service sector — especially the information
sector (13%), and professional, scientific and technical services (7%).12 In addition,
Americans may have considerable portfolio investment in Israel including Israeli
bonds.
11 The Middle East, in general, has high barriers to trade. While the “weighted mean tariffs”
(the mean tariffs after the proportion of goods imported for each category is factored in) of
some countries are under 10%, they average more than 20% for many other countries,
including Afghanistan (22%), Egypt (21%), Algeria (22%), Morocco (32%), Tunisia (31%),
Bangladesh (22%), and Pakistan (21%). Source: The World Bank. World Development
Indicators, p. 327.
12 Data source: U.S. Bureau of Economic Analysis. Economics and Statistics
Administration. U.S. Department of Commerce. Survey of Current Business, September,
2003, p. 121.
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Comparison of the Two Plans
The next six pages compare the two Middle East Trade Initiatives, the
President’s Plan and S. 1121/H.R. 2267, in detail. Each plan has four basic
components: (a) trade preferences, (b) steps or activities leading toward free trade
agreements, (c) requirements for country eligibility, and (d) time lines for each
initiative. An overview chart comparing the two initiatives is included as Table 2,
below.
Trade Preference Components
Both the Administration’s proposal and S. 1121/H.R. 2267 have trade
preference components. They can be described as follows:
Administration’s Plan. In the short run, the Administration would continue
the Generalized System of Preferences (GSP) which includes duty-free entry to the
U.S. market for at least 3,500 products from 140 developing countries. The
following Middle East countries are currently eligible for GSP benefits: Bahrain,
Egypt, Lebanon, Oman, Yemen, Algeria, Morocco, Tunisia, Pakistan, and Turkey.
Remaining countries covered by this report are not eligible for GSP benefits. Some
are no longer considered “developing.” Others do not meet the Administration’s
eligibility requirements.
S. 1121 / H.R. 2267. S. 1121/H.R. 2267 (Sec. 10 of the bill) would authorize
the President to establish new trade preferences. He could designate articles as
eligible for duty-free treatment by Executive Order or presidential proclamation, with
advice from the International Trade Commission. All eligible articles would have
to meet GSP rules-of-origin requirements for a 35% domestic content requirement.
S. 1121/H.R. 2267 would limit trade preferences for agricultural products in
excess of the quota portion of established Tariff Rate Quotas (including beef, cotton,
dairy, peanuts, sugar and tobacco.). The President would also be prohibited from
extending duty-free access for products while they are subject to section 201
safeguard or other trade actions.13 This “short-term” trade preference program would
be patterned after African Growth and Opportunity Act (AGOA), Andean Trade
Partnership Act (ATPA) and Caribbean Basin Economic Recovery Act (CBERA)
programs which offer tariff-free trade preferences for some articles excluded under
GSP. This program would expire at the end of 2011.
Steps or Activities Leading Toward Free Trade Agreements
Both the Administration’s program and S. 1121/H.R. 2267 include steps or
activities that could help integrate the Middle East more fully into the world trading
system:
13 Additional background on the bill can be found in Baucus Middle East Bill Authorizes
Zero Duties for Sensitive Products. Inside U.S. Trade, May 30, 2003.
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The Administration’s Plan.14 The Administration’s proposed program
consists of six consecutive steps which each country may take, culminating in a free
trade agreement with the United States. The second step, GSP participation, was
discussed above as the trade preference component. Table 1 lists each country
included in the USTR or S. 1121/H.R. 2267 definition of Middle East, and for each
country indicates which steps it has already fulfilled. The other five steps are:
First. World Trade Organization (WTO) membership for beginning integration
with the world trading system. Eleven Middle East entities are not yet members of
the WTO: the Gaza Strip and the West Bank, Iran, Iraq, Lebanon, Saudi Arabia,
Syria, Yemen, Algeria, Libya, Afghanistan, and Azerbaijan.
Second. The continuation of GSP, discussed above.
Third. Trade and investment framework agreements (TIFAs) that establish a
framework for expanding trade and for resolving outstanding disputes. Eleven
Middle East entities do not have TIFAs with the United States: Cyprus, the Gaza
Strip and the West Bank, Iran, Iraq, Lebanon, Oman, Syria, Libya, Afghanistan,
Azerbaijan, and Bangladesh.
Fourth. Bilateral investment treaties (BITs) which oblige governments to treat
foreign investors fairly and to offer them legal protections equal to those afforded
domestic investors. BITs make the business climate more attractive to U.S.
companies. The following 16 Middle East entities do not have BITs with the United
States: Cyprus, the Gaza Strip and the West Bank, Iran, Iraq, Kuwait, Lebanon,
Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen, Algeria, Libya,
Afghanistan, and Pakistan.
Fifth. Free trade agreements (FTAs), which typically remove tariff and non-
tariff barriers to trade across all sectors. Currently two countries in the Middle East
— Israel and Jordan — have congressionally-approved free trade agreements with
the United States. In addition, the United States completed negotiations on a free
trade agreement with Morocco on March 2, 2004. Negotiations with Bahrain are
ongoing.
The Administration is considering including “cumulation clauses” which would
afford sub-regional groups within the Middle East some eligibility to export goods
to the United States tariff-free or at reduced tariffs. Stipulations would likely require
that (1) those goods be produced in concert with a neighboring country which already
has a free trade agreement, and that (2) the exported products meet rules of origin
14 These steps are taken from Office of the U.S. Trade Representative (USTR). Trade Facts,
June 23, 2003. Additional explanatory material is taken from Office of the USTR.
Transcript of Background Press Conference Call to Discuss Proposed Mideast Free Trade
Area Announced by President Bush, May 9, 2003 (hereafter referred to as “Transcript of
May 9, 2003”). This transcript specifies that the USTR official holding the press briefing
be identified only as a “senior administration official.”
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requirements.15 Under the Administration’s initiative, once FTAs are completed
with Morocco and Bahrain, for example, other North African countries might be able
to “dock” with and co-produce with Morocco; and other Gulf countries could “dock”
with and co-produce with Bahrain. So, for example, to qualify for tariff benefits
under a U.S.-Bahrain FTA, products could be jointly produced by Bahrain and Qatar
or Oman or the United Arab Emirates, or a combination of the named countries.16
Sixth. The final step in the Administration’s plan is trade-capacity building
to help countries realize more fully the benefits of open markets (e.g., build the “legal
entrepreneurial infrastructure.”) The Middle East Partnership Initiative would help
allocate structural adjustment funding to partner countries to help ease the burden of
free trade’s impact on local industries. The initiative would also be aimed at
increasing educational opportunities, strengthening civil society and rule of law, and
supporting small business.17 The Middle East Partnership Initiative would help target
more than $1 billion of annual funding from various Government agencies and spur
partnerships with private organizations and businesses that support trade and
development. For 2003, funding for U.S. Trade Capacity Building totaled $752
million, of which $174 million, or 23% went to Middle East countries.18
S. 1121 / H.R. 2267. S. 1121/H.R. 2267 (Sec. 6 and 7) outlines three main
activity areas which could lead eventually to bilateral free trade agreements and a
Middle East Free Trade Area.
First, under these bills, the President shall develop a “plan” for negotiating and
entering into trade agreements with beneficiary countries. That plan shall include (a)
U.S. objectives for negotiation and a suggested timetable; (b) benefits of the FTA to
the United States and relevant beneficiary countries; (c) subjects anticipated to be
covered by the negotiations, and (d) laws of participating eligible countries and
existing agreements. The plan shall also include procedures to ensure (1) adequate
consultations: (a) with Congress and the private sector during negotiations; (b) with
Congress relating to implementation; and (c) with relevant Middle East governments
during negotiation; and (2) approval by Congress of the agreement. The President
shall transmit to Congress a report of his plan no later than 12 months after
enactment [Sec. 7(d)].
Second, the President shall establish a U.S.-Middle East Trade and Economic
Cooperation Forum, patterned after a Forum created for Sub-Saharan Africa under
15 U.S. Department of State. Middle East Trade Initiative. Office of the USTR, February
27, 2003.
16 Office of the USTR. Transcript of Joint Press Conference: Secretary of State Colin L.
Powell, Jordanian Foreign Minister Marqan Muasher, Robert B. Zoellick, U.S. Trade
Representative, Jordanian Minister of Trade Salah Bashir, Movenpick Hotel, Dead Sea,
June 23, 2003.
17 See U.S. Library of Congress. Congressional Research Service. The Middle East
Partnership Initiative: An Overview, by Jeremy M. Sharp. CRS Report RS21457.
18 U.S. Agency for International Development. U.S. Contributions to Trade Capacity
Building, September, 2003, p. 2.
CRS-11
AGOA.19 It shall host meetings to foster close economic ties and expand trade and
investment relations for those countries “taking substantial positive steps toward
meeting eligibility requirements,” plus Israel and Jordan, which already have FTAs
with the United States. (“Eligibility requirements” are defined in the section below.)
Separate annual meetings shall be held for appropriate government officials,
nongovernment organizations, and representatives of the private sector. Every two
years, meetings shall take place between the President and heads of various eligible
governments, to the extent practicable (Sec. 6).
Third, bilateral free trade agreements shall be negotiated with interested
countries to serve as the catalyst for increasing U.S.-Middle East trade and private
sector investment. For FTA eligibility, a country shall be a member of the WTO or
be “working diligently” toward membership and to satisfy the eligibility criteria of
this act [Sec. 7(a) and (b)].
Requirements for Eligibility
While the Administration’s plan specifies few eligibility requirements, S. 1121/
H.R. 2267 includes a long list of requirements for eligibility to participate, which are
taken primarily from AGOA and from the Trade Act of 1974.
Administration’s Plan. The Administration’s plan is open to those
“peaceful” countries that seek an increased trade relationship with the United States
and “open, ultimately, to all those countries that are prepared to participate in
economic reform and liberalization.” Eligible countries must among other things: (1)
“be prepared to participate in economic reform and liberalization,” and (2) not
participate in a primary, secondary, or tertiary boycott of Israel.20
S. 1121/H.R. 2267. S. 1121/H.R. 2267 (Sec. 4) has a much longer list of
eligibility requirements, which are similar to those in Subtitle B, Sec. 111 of AGOA,
except for the latter part of item 8 and items 11-13 below which are specific to the
Middle East. For eligibility, countries must be taking “substantial positive steps
toward meeting” the following eligibility requirements:
19 The language in Sec. 6 of S. 1121/H.R. 2267 creating the Forum is virtually identical to
that in Sec. 105 of AGOA.
20 Office of the USTR. Transcript of May 9, 2003; and Global Trade and the Middle East:
Reawakening a Vibrant Past, Robert B. Zoellick, USTR, Remarks at the World Economic
Forum, Dead Sea, Jordan, June 23, 2003. The primary boycott of Israel banned all trade
relationships with Israeli companies; the secondary boycott prohibited any entity in the
League of Arab States* from doing business with other firms that contribute to Israel’s
military or economic development; the tertiary boycott was the injunction on Arab countries
from doing business with foreign companies that had been blacklisted because of their ties
with Israel. Source: U.S. Government to Enforce Laws in Face of Arab League Threat to
Israeli Trade, Global Business Magazine. Oct 10, 2002.
* The 22 members of the League of Arab States are Bahrain, Egypt, Iraq, Jordan, Kuwait,
Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen, Algeria,
Libya, Morocco, Tunisia, Comoros, Djibouti, Mauritania, Palestine, Somalia, and Sudan.
CRS-12
1.
a market-based economy that protects private property, incorporates rules-based
trading, and minimizes government interference in the private sector;
2.
a judicial process incorporating the rule of law, the right to due process, a fair
trial, and equal protection;
3.
a political climate free of political intimidation and restrictions on peaceful
activity, and which includes political pluralism and democratic elections;
4.
the elimination of barriers to U.S. trade and investment, the protection of
intellectual property, and a dispute resolution mechanism;
5.
economic policies that reduce poverty, expand physical infrastructure, promote
development of private enterprise and encourage the formation of capital
markets;
6.
a system to combat corruption and bribery; and
7.
policies to protect the environment and internationally recognized worker
rights: (a) the right of association; (b) the right to organize and bargain
collectively; (c) prohibition of forced labor; (d) minimum age for the
employment of children; and (e) acceptable conditions of work.
On international matters, a country may be eligible if it:
8.
does not engage in activities that undermine U.S. national security or foreign
policy interests and supports a peaceful resolution to the Israeli-Palestinian
conflict;
9.
is a signatory to the U.N. declaration on Internationally Recognized Human
Rights, does not engage in gross violations, and is making continuing and
verifiable progress in adopting such rights;
10. is not listed by the U.S. State Department as a state sponsor of terrorism, and
cooperates fully in international efforts to combat terrorism;
11. does not participate in primary, secondary, or tertiary boycott of Israel;
12. meets GSP eligibility requirements in Sec. 502(b)(2) of the Trade Act of 1974
[19U.S.C. 2462(b)(2)].21
21 The basis for GSP eligibility under this section of the Trade Act of 1974 includes:
engages in no terrorist activity; is taking steps toward internationally recognized worker
rights; provides reasonable access to its markets; offers effective protection of intellectual
property rights; and is taking action to reduce trade-distorting investment practices. S.
1121/H.R. 2267 would exempt otherwise eligible countries from the GSP eligibility
requirement in Sec. 502(b)(2)(B) which excludes Organization of the Exporting Petroleum
Countries (OPEC) countries from GSP eligibility.
CRS-13
In addition:
13. Palestine’s eligibility is dependent on all of the above factors plus its acceptance
of Israel’s right to exist in peace within secure borders.
Time Line
The Administration aims for a Middle East Free Trade Area within 10 years (by
about 2013). S. 1121 /H.R. 2267 provides for a trade preference program which the
sponsors refer to as “short-term,” which would expire at the end of 2011.
Requirements for the President’s annual report, which shall include information on
each country’s progress in meeting eligibility requirements, would also expire at that
time.
Differences in Approach and Arguments
The main difference between the Administration’s Middle East Initiative and
S. 1121/H.R. 2267 is that the latter is intended as a short-term trade preference
“stepping stone” to a Middle East Free Trade Area (MEFTA). The Administration’s
plan, on the other hand, would specifically create the MEFTA. In this respect, the
two initiatives may be viewed as complementary.
To summarize the differences in approach: The Administration would continue
its efforts to negotiate TIFAs, BITs, and FTAs with Middle East countries to create
a MEFTA by 2013.
S. 1121/H.R. 2267, on the other hand, patterned after AGOA, would offer
intermediate short-term preferences that would expire in 2011, two years before the
Administration’s target completion date for MEFTA. The trade preferences of S.
1121/H.R. 2267, with eligible articles and eligible countries to be determined by the
President in consultation with the International Trade Commission, would go beyond
those currently available under GSP. GSP limits country participation on the basis
of: (a) per-capita income, and (b) participation in the Organization of Petroleum
Exporting Countries (OPEC). It also limits product preferences on the basis of
import sensitivity.22
Each initiative would aim to address political, economic, and humanitarian
objectives. Sponsors of S. 1121/H.R. 2267 argue that their initiative would help
diversify and improve economies of the Middle East and provide jobs for the rapidly
22 Only ten out of the 25 countries covered by the two Middle East Trade Initiatives are
already eligible for GSP (as indicated in Table 1.) GSP provisions [U.S. Trade Act of 1974
as amended (19U.S.C. 2461)] specifically exclude from tariff preferences certain textiles
and apparel (the second most important export category from these Middle East countries),
watches, footwear, handbags, luggage, flat goods (e.g. wallets and briefcases), work gloves,
and other leather wearing apparel, steel, glass, and electronics. As a result, for the 25
Middle East countries covered by this report, imports under GSP represent only a fraction
(2% for 2003) of all imports from these countries.
CRS-14
growing population as well as stimulate U.S. exports. In addition, the sponsors
argue, the legislation would help Middle East countries make significant economic
reforms that would serve as a necessary precursor to a free trade agreement.23
Although the Administration is committed to its own initiative, it has been
ambivalent in its support of S. 1121/H.R. 2267. USTR Zoellick argued in testimony
on March 9, 2004, that it is a “good initiative.” On March 10, 2004, however,
representatives from the Departments of State and Commerce argued that the
Administration would prefer to follow its own “country-by-country approach.”24
They argued that this approach was more likely to help Middle East countries to
become “sustainable trading partners,”25 because each of the successive steps
involved in negotiating TIFAs, BITs, and FTAs could help induce internal changes
in the laws and regulations of the various countries.
Conclusion
Both Middle East trade proposals would aim to help stimulate greater economic
development in the Middle East. Shorter term goals from these stimuli would be (a)
for the region to grow enough to begin absorbing some of the unemployment (which
averages around 22%)26 — arguably the region’s most pressing economic problem;
and (b) for the region to begin attracting more foreign investment to help diversify
output beyond oil and gas, textiles and apparel, and a few other commodities. As the
shorter term stretches into the longer term, goals would be for the Middle East to
develop alternative economic resources and industries that could help ease and even
reverse its declining share of world economic growth and investment, its
unemployment, and perhaps some of the conditions in the Middle East that support
terrorism.
23 U.S. Congress. Senate Finance Committee. Baucus to Introduce Comprehensive Middle
East Trade Initiative: Welcomes President’s Proposal to Expand Trade to the Region.
Press Release, May 9, 2003.
24 Testimony of USTR Zoellick before the Senate Finance Committee on March 9, 2004,
and testimony of Undersecretary of State for Economic Business and Economic Affairs Alan
Larson and Commerce Department Undersecretary for International Trade Grant Aldonas
before the same committee on March 10, 2003. Pursuing Free Trade in the Middle East.
Washington Trade Daily, March 11, 2004.
25 Transcript of Background Press Conference Call to Discuss Proposed Mideast Free Trade
Area Announced by President Bush, May 9, 2003.
26 Galal, Ahmed and Bernard Hoekman, editors. Arab Economic Integration: Between
Hope and Reality. Egyptian Center for Economic Studies, 2003. p. 29. (The data were
based on The World Bank. World Development Indicators ‘01 CD-ROM. This
unemployment estimate is slightly smaller than that included in footnote 3. This different
estimate is included here to show a range of estimates on a subject: (a) that is difficult to
quantify, (b) that suffers from statistical problems, and (c) whose numbers may vary from
year to year and may also depend on the countries included in the various estimates.)
CRS-15
Table 1. Countries Covered by:
(a) USTR Definition of MENA;
(b) S. 1121 / H.R. 2267; and
(c) Steps toward and Including a Bilateral Free Trade Agreement with the U.S.
CRS-16
Table 2. Brief Comparison of the Administration’s Middle East Initiative and
S. 1121 / H.R. 2267
Administration’s
Plan
S. 1121 / H.R. 2267
“Middle East”
Both initiatives: Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia,
— Countries
United Arab Emirates, Yemen, Algeria, Morocco, Tunisia, West Bank and Gaza Strip/Palestine plus:
— Plus
Cyprus, Iran, Syria,
Afghanistan, Azerbaijan, Bangladesh, Pakistan, Turkey (Sec. 4).
Libya
Trade
Generalized System
For eligible countries: Similar to AGOA, ATPA, and CBERA. The President
Preferences
of Preferences (GSP)
is authorized to designate articles as eligible for duty-free treatment by
for eligible
Executive Order or Presidential proclamation, with advice from the
countries*
International Trade Commission (Sec. 5).
Efforts
Steps for each
A Presidential Plan for negotiating and entering into trade agreements with
Toward a
country:*
beneficiary countries shall be developed and shall include [Sec. 7(c)]:
Middle East
Free Trade
1. World Trade
! U.S. objectives for negotiation and a suggested timetable;
Agreement or
Organization
Area
Membership;
!
Benefits of the FTA to the U.S. and relevant beneficiary countries;
2. GSP (see above);
!
Subjects anticipated to be covered by the negotiations, as well as
laws of participating eligible countries and existing agreements; and
3. Trade Investment
Framework
!
Procedures to ensure: (1) adequate consultations: (a) with Congress
Agreement (TIFA);
and the private sector during negotiations, (b) with Congress
relating to implementation, and (c) with relevant Middle East
4. Bilateral
governments during negotiation; and (2) approval by Congress of
Investment Treaty
the agreement(s).
(BIT);
A U.S.-Middle East Trade and Economic Cooperation Forum shall host
5. Free Trade
meetings to foster close economic ties and expand trade and investment
Agreement (FTA) to
relations for countries “taking substantial positive steps toward meeting
which other eligible
eligibility requirements “ plus Israel and Jordan (Sec. 6).
countries may
“dock”; and
!
Separate annual meetings shall be for appropriate government
officials, nongovernment organizations, and representatives of the
6. Trade capacity
private sector.
building (through
various U.S.
!
Every two years meetings shall take place between the President
assistance efforts.)
and heads of government, to the extent practicable [Sec.
6(c)(2)(B)].
Bilateral free trade agreements should be negotiated with interested countries
to serve as the catalyst for increasing U.S.-Middle East trade and private sector
investment. For eligibility, countries shall be a member of the WTO or be
“working diligently” toward membership and to satisfy the eligibility criteria of
this act (see below) [Sec. 7 (a) and (b)].
Reporting
None
Reporting requirements: The President shall transmit to Congress a report of
requirements
his plan no later than 12 months after enactment [Sec. 7(d)].
for plan
Time line of
Aim for MEFTA
Trade preferences and reporting requirements expire December 31, 2011. [Sec.
the initiative
“within 10 years”
8(b) and Sec. 10].
(i.e., by 2013.)
* See Table 1 for the status of various countries.
CRS-17
Administration’s
Plan
S. 1121 / H.R. 2267
Requirements
The Administration
Domestically, countries must have established or be making continual progress
for country
has indicated that the
toward establishing (Sec. 4 — similar to AGOA):
eligibility
countries need:
!
a market-based economy that protects private property,
! to be
incorporates rules-based trading; and minimizes government
“peaceful”;
interference in the private sector;
! to be
!
the rule of law, the right to due process, a fair trial, and equal
prepared to
protection;
undertake
economic
!
political pluralism, a political climate free of intimidation and
reform and
restrictions on peaceful activity, and democratic elections;
liberalization
;
!
the elimination of barriers to U.S. trade and investment, the
protection of intellectual property, and a dispute resolution
! to not
mechanism;
participate in
a primary,
!
economic policies that reduce poverty, expand physical
secondary,
infrastructure, promote development of private enterprise and
or tertiary
encourage the formation of capital markets;
boycott of
Israel.
!
a system to combat corruption and bribery (i.e. sign and
implement the OECD Convention on Combating Bribery); and
!
policies to protect the environment and internationally recognized
worker rights: (a) the right of association; (b) the right to organize
and bargain collectively; (c) prohibition of forced labor; (d)
minimum age for the employment of children; and (e) acceptable
conditions of work.
International Matters:
!
Does not engage in activities that undermine U.S. national
security or foreign policy interests and supports a peaceful
resolution to the Israeli-Palestinian conflict;
!
On Internationally Recognized Human Rights (IRHR) is a
signatory to the U.N. declaration, does not engage in gross
violations, and is making continuing and verifiable progress;
!
Is not listed by the U.S. State Department as a state sponsor of,
and cooperates fully in international efforts to combat, terrorism;
!
Does not participate in a primary, secondary, or tertiary boycott of
Israel;
!
Meets GSP eligibility requirements in the 1974 Trade Act, Sec.
502(b)(2)**
!
Palestine must accept Israel’s right to exist peacefully within
secure borders.
Reporting
None
Reporting requirements: Presidential report annually through 2011 on each
Requirements
country’s progress in meeting eligibility requirements, a comprehensive
for country
discussion of the implementation of this Act and an analysis of the trade and
eligibility
investment policy of the U.S. toward “Middle East” countries (Sec. 8).
** For eligibility: no terrorist activity, reasonable access to its markets; effective protection of intellectual property rights, and
taking steps toward internationally recognized worker rights and reducing trade-distorting practices.
CRS-18
Table 3. Top U.S. Imports (and % of total that they represent) from
25 Middle East Countries, 2003
Value of
U.S.
Imports
Main U.S. imports and % of all U.S. imports from these countries that they
Country
($million)
represent
Saudi Arabia
18,047
petroleum (96%), chemicals (3%)
= 99%
Israel
11,823
apparel (86%), misc. mfg.(8%) STNC* (4%)
= 98%
Iraq
4,574
petroleum (100%)
= 100%
Algeria
4,753
petroleum (86%), natural gas (13%)
= 99%
Turkey
3,405
apparel (34%), textiles (13%), misc. mfg. (8%)
= 55%
Pakistan
2,509
textiles (46%), apparel, (44%), misc. mfg. (3%)
= 93%
Kuwait
2,276
petroleum (93 %) , STNC* (2%), apparel (2%)
= 97%
Bangladesh
2,072
apparel (89%), textiles (5%), fish (4%)
= 98%
United Arab Emirates
1,102
apparel (23%), petroleum (21%), STNC* (13%)
= 63%
Egypt
1,096
apparel (34%), petroleum (15%), textiles (13%)
= 62%
Oman
695
petroleum (57%), apparel (19%), STNC* (10)
= 86%
Jordan
670
apparel (86%), misc. (8%), STNC*(4%)
= 98%
Bahrain
378
apparel (43%), STNC* (22%), non-ferrous metals (10%)
= 75%
Morocco
369
electronics (23%),apparel (20%), fertilizer (18%), petrol. (15%)**
= 61%
Qatar
331
apparel (26%), gas (18%), fertilizer (17%)
= 61%
Syria
258
petroleum (77%), apparel (12%), misc. mfg. (4%)
= 93%
Iran
161
textiles (80%), Misc. mfg. (12%), fish (5%)
= 92%
Tunisia
96
apparel (34%),petroleum (24%), iron & steel (9%)
= 67%
Lebanon
88
misc manufacturing (22%), tobacco (22), furniture (12%)
= 56%
Yemen
66
petroleum (90%), coffee, tea (7%)
= 97%
Afghanistan
56
petroleum (77%), STNC* (11%), misc. mfg. (6%)
= 94%
Cyprus
24
STNC* (42%), apparel (14%),dairy (6%)
= 62%
Azerbaijan
9
chemicals (60%), animal/veg. (28%) misc. mfg. (3%)
= 91%
Libya
0
Palestine
—
TOTAL
56,341
* “STNC” refers to “special transactions not classified” According to the Department of Commerce, these exports are typically
military items that are returned to the United States.
** petroleum is not counted in the top three exports.
No data are available for the West Bank/Gaza Strip, or Libya.
Source of Data: U.S. International Trade Commission (USITC) Dataweb.
CRS-19
Table 4. Top U.S. Exports (and % of total that they represent) from
25 Middle East Countries (2003)
Value of
U.S.
exports
Main U.S. Exports and % of all U.S. exports to these countries that they
Country
( $million)
represent
Israel
6,878
nonmetals (30%), transport equip (11%), electronics (8%)
= 49%
Saudi Arabia
4,596
machinery (28%), transport equip. (25%)
= 53%
United Arab Emirates
3,510
transport equip. (30%), machinery (29%)
= 59%
Turkey
2,904
machinery (16%), textile fibers (14%), transport equip. (16%)
= 31%
Egypt
2,660
cereals (29%), transport equip. (14%), machinery (16%)
= 59%
Kuwait
1,509
transport equip. (38%), machinery (21%), telecom. equip. (4%)
= 44%
Pakistan
840
textile fibers (22%), machinery (26%), transport equip. (10%)
= 58%
Bahrain
509
transport vehicles (55%), machinery (11%)
= 66%
Jordan
492
transport equip. (32%), cereals (9%), telecom. equip. (7%)
= 48%
Algeria
487
cereals (29%), machinery (26%), animal food (8%)
= 63%
Morocco
465
Transport equip. (28%), cereals & seeds (28%), machinery (7%)
= 63%
Qatar
408
Machinery (50%), transport. equip. (17%), scientific inst. (7%)
= 74%
Cyprus
327
transport equip. (74%), cereals (3%), tobacco (3%)
= 80%
Iraq
316
machinery (57%), food (25%)
= 82%
Oman
323
machinery (34%),Transport. equip (29%)
= 63%
Lebanon
314
transport equip. (14%), tobacco (13%), cereal % seeds (15%)
= 42%
Bangladesh
227
textile fibers (27%), machinery (18%), pulp & waste paper (6%)
= 51%
Syria
214
cereals (32%), machinery (22%), tobacco (7%)
= 61%
Azerbaijan
121
machinery (42%), meat (12%)(, tobacco (8%)
= 62%
Yemen
195
cereals (36%), machinery (35%)
= 71%
Tunisia
171
cereals (24%), veg. oils (19%), transport. equip. (6%)
= 49%
Iran
99
oil seeds (44%), tobacco (34%), pharmaceuticals (6%)
= 84%
Afghanistan
61
machinery (32%) veg. oils (22%), scientific instruments (11%)
= 65%
Palestine
—
Libya
0
cereals (92%), electronics (6%)
= 98%
TOTAL
27,627
No data are available for the West Bank/Gaza Strip, or Libya.
Source of Data: USITC Dataweb.
CRS-20
Table 5. Foreign Direct Investment in Middle East Countries:
Stock of Investment by the World, 2000 and by the United States, 2002
($ Millions)
Stock of World Foreign Direct
Stock of U.S. Foreign Direct
Investment, 2000
Investment, 2002
Value in $
% of world
Value in $
Entity
millions
total
millions
% of U.S. total
World
6,314,271
100
1,520,965
100
Total Middle East
96,700
1.38
17,113
1.11
Algeria
1,407
0.02
Bahrain
5,908
0.09
Egypt
19,005
0.30
2,959
0.19
Iran
2,115
0.02
Israel
NA
5,207
0.34
Jordan
1,771
0.02
Kuwait
527
0.01
Lebanon
998
0.02
Morocco
5,848
0.02
Oman
2,517
0.01
Qatar
1,987
0.03
Saudi Arabia
28,845
0.46
3,687
0.24
Syria
1,338
0.02
Tunisia
11,566
0.18
Turkey
9,335
0.15
United Arab Emirates
2,645
0.04
1,398
0.09
Yemen
888
0.01
Other Middle East (non-
3,862
0.25
identified)
NA: Not available
Data source: For World: Economic Research Forum. Economic Trends in the MENA Region, p. 52; For the United
States: Survey of Current Business, September, 2003, p. 121.
CRS Report for Congress
Received through the CRS Web
Middle East Trade Initiatives: S. 1121/H.R. 2267
and the Administration’s Plan
Updated April 26, 2004
Mary Jane Bolle
Specialist in International Trade
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress
Middle East Trade Initiatives: S. 1121/H.R. 2267 and
the Administration’s Plan
Summary
On May 9, 2003, the Administration proposed the establishment of a U.S.
Middle East Free Trade Area (MEFTA) within a decade (by about 2013). This
proposal came a year and a half after the September 11, 2001 terrorist attacks on the
U.S. World Trade Center and the Pentagon, and after the wars in Afghanistan and
Iraq. The MEFTA was billed as part of a plan to fight terrorism — in this case, by
supporting the growth of Middle East prosperity and democracy — through trade.
On June 23, 2003, the Administration described a six-step process for Middle East
countries to become part of that MEFTA: (1) joining the World Trade Organization;
(2) possibly participating in the Generalized System of Preferences; successively
entering into (3) trade investment framework agreements (TIFAs), (4) bilateral
investment treaties (BITs), and (5) free trade agreements with the United States; and
(6) participating in trade capacity building.
Meanwhile, on May 22, 2003, Senators Max Baucus and John McCain, and
Representatives Adam Smith and Calvin Dooley introduced the bipartisan S.
1121/H.R. 2267, to authorize a “short-run” trade preference program to serve as a
“stepping stone” for Middle East countries desiring free trade agreements with the
United States. The “short-run” trade preference program would expire at the end of
2011 — two years before the aimed-for completion of the Administration’s initiative.
It would be based on and similar to the partial duty-free programs of the Caribbean
Basin Economic Recovery Act (CBERA), the Andean Trade Preference Act (ATPA),
and the African Growth and Opportunity Act (AGOA).
Both the Administration’s plan and S. 1121/H.R. 2267 would cover 16 countries
in common located in what many refer to as the Middle East and North Africa:
Bahrain, Egypt, Iraq, Israel, Jordan, the Gaza Strip and the West Bank (Palestine),
Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Yemen,
Algeria, Morocco, and Tunisia. Each initiative would also include several countries
not on the common list. The Administration’s plan would include four such
countries: Cyprus, Iran, Syria, and Libya. S. 1121/H.R. 2267 would include five such
countries: Afghanistan, Azerbaijan, Bangladesh, Pakistan, and Turkey.
Although U.S.-Middle East trade is small (4-5% of total U.S. trade), oil and gas
are key imports, accounting for roughly one-tenth of all oil and gas consumed in the
United States each year. Textiles and apparel are the second most important imports
from these countries. The most important U.S. exports to these countries are
machinery and transportation equipment.
Sponsors of S. 1121/H.R. 2267 argue that their initiative would help diversify
and improve the economies of the Middle East, provide jobs for the rapidly growing
population, stimulate U.S. exports, and help Middle East countries make economic
reforms. The Administration has been ambivalent in its support of S. 1121/H.R.
2267, calling it a “good initiative,” yet stressing that its own plan would be more
likely to make Middle East countries “sustainable trading partners.” This report will
be updated as events warrant.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Impetus for the Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Major Elements of the Two Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Definition of “Middle East” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Some Key Indicators of U.S. Economic Ties to the Middle East . . . . . . . . . . . . . 6
Comparison of the Two Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Trade Preference Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administration’s Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
S. 1121 / H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Steps or Activities Leading Toward Free Trade Agreements . . . . . . . . . . . . 8
The Administration’s Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
S. 1121 / H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Requirements for Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Administration’s Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
S. 1121/H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Time Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Differences in Approach and Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
List of Figures
Figure 1. Countries Included in the Administration’s Definition of
“Middle East / North Africa” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 2. Countries Included in the S. 1121/H.R. 2267 Definition of
“Middle East” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 3. Sources of Total U.S. Oil and Gas Imports, 2003 . . . . . . . . . . . . . . . . . 6
Figure 4. Key U.S. Imports from the Middle East, 2003 (as a % of all imports
from the Middle East) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Figure 5. Top U.S. Exports to the Middle East, 2003 (as a % of all U.S.
exports to the Middle East) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
List of Tables
Table 1. Countries Covered by: (a) USTR Definition of MENA; (b)
S. 1121/H.R. 2267; and (c) Steps toward and Including a Bilateral
Free Trade Agreement with the U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 2. Brief Comparison of the Administration’s Middle East Initiative and
S. 1121 / H.R. 2267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 3. Top U.S. Imports (and % of total that they represent) from
25 Middle East Countries, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Table 4. Top U.S. Exports (and % of total that they represent) from
25 Middle East Countries (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table 5. Foreign Direct Investment in Middle East Countries:
Stock of Investment by the World, 2000 and by the United States, 2002 . . 20
Middle East Trade Initiatives: S. 1121/
H.R. 2267 and the Administration’s Plan
Introduction
After the terrorist attacks against the New York World Trade Center and the
Pentagon on September 11, 2001, and the initial combats in Afghanistan and Iraq, a
U.S. objective became, in the words of U.S. Trade Representative Robert B. Zoellick,
to fight terrorism by “spreading the message of prosperity and democracy throughout
the world.”1 One way the Administration chose to spread that message was through
a proposed Middle East Free Trade Agreement (MEFTA).
The MEFTA Initiative was proposed by President Bush on May 9, 2003, and
was slated for completion within a decade (i.e., by around 2013). More detail on the
Administration’s plan was revealed on June 23, 2003 at the World Economic Forum
in Jordan, when U.S. Trade Representative Zoellick spoke on the conceptual details.
Mr. Zoellick outlined six steps for Middle East countries wishing to enter into a free
trade agreement with the United States.
Meanwhile, on May 22, 2003, Senators Max Baucus and John McCain, and
Representatives Adam Smith and Calvin Dooley, introduced bipartisan legislation,
S. 1121/H.R. 2267, the Middle East Trade and Engagement Act. This legislation was
drafted to help stimulate economies of the Middle East through a “short-run” trade
preference program for countries that meet eligibility requirements. The preference
program would serve as a “stepping stone” to free trade agreements with the United
States.2 The bill also requires: (1) a presidential plan for negotiating and entering
into trade agreements with interested beneficiary countries; and (2) the creation of a
U.S.-Middle East Trade and Economic Cooperation Forum. The proposed “short-
run” trade preference program would expire at the end of 2011 — two years before
the Administration’s initiative aims to be completed.
The purpose of this report is to compare and contrast the Administration’s
Initiative with the legislative proposal in terms of (1) the impetus for the initiatives;
(2) the major elements of each plan; (3) the definition of “Middle East”; (4)
background trade data; (5) details of the two initiatives; and (6) summary differences
in their approaches and the arguments for each. At the back of this report are five
tables. Table 1 identifies five steps each of the 25 countries has taken toward a
bilateral free trade agreement with the United States: WTO membership, eligibility
1 A Man of Many Missions. Business Week. March 31, 2003, p. 94-95.
2 U.S. Senator Max Baucus, Speech: Middle East Trade and Engagement Act of 2003,
“Rebuilding the Silk Road,” at the Progressive Policy Institute, September 30, 2003.
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for the Generalized System of Preferences, and achievement of three types of
agreements — trade investment framework agreements, bilateral investment treaties,
and free trade agreements. Table 2 compares basic elements of the Administration’s
plan and S. 1121/H.R. 2267. Tables 3 and 4 list for each country U.S. import and
export totals and shares of key commodities traded. Table 5 shows the current value
and share of world and U.S. foreign direct investment, respectively, in various
countries.
Impetus for the Initiatives
Both Middle East trade initiatives captured an idea that was already being
debated in Washington — using trade as a tool to fight terrorism. For example, in
February 2003, a report by policy analyst Edward Gresser argued that the Muslim
world had been the “blank spot” on the U.S. trade agenda, a fact that risked
“undermining rather than supporting the war on terrorism.” Gresser pointed to an
economic crisis affecting almost all of the western Muslim states, which have “seen
their share of world trade and investment collapse since 1980,” resulting in “stagnant
growth, [and] falling income,” with social consequences of “unemployment, political
tension, and rising appeal for religious extremists.”3
Gresser argued that, “A strategic initiative for the Muslim4 world could end —
or at least ease — the tilt.” Gresser called for an initiative “analogous to the programs
now available for Central America, the Andean Nations, and Africa” in order to
possibly spark “growth and creation, and so reduce the attraction of radicalism and
religious fundamentalism.”
Another article written by policy analyst Brink Lindsey of the CATO Institute
argued for two concepts. The first was an additional shorter-term program to include
“temporary duty-free, quota-free access to the U.S. market for exports of selected
Muslim countries.” The shorter term program, he declared, would give tangible,
dramatic proof of U.S. commitment to the region, thereby providing an impetus for
the longer, arduous process of negotiating free trade agreements. The second concept
Lindsey called for was the expansion of the definition of “Middle East” beyond the
traditional geographic area to include other countries with “geopolitical
significance.”5
3 Gresser, Edward. Blank Spot on the Map: How Trade Policy is Working Against the War
on Terror. Public Policy Institute. February 2003. Unemployment in the Middle East in
1999 averaged roughly 25%. Source: The Economic Research Forum for the Arab
Countries, Iran and Turkey. Economic Trends in the MENA Region, 2002.
4 All but two of the countries that would be covered by the initiatives (Israel and Cyprus)
are at least two-thirds Muslim.
5 Lindsey, Brink. The Trade Front: Combating Terrorism with Open Markets. CATO
Institute. August 5, 2003.
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Major Elements of the Two Plans
Both the Administration’s plan and the Baucus/McCain/Smith/Dooley plan (S.
1121/H.R. 2267), in aiming to support economic development, job creation, and
political, and humanitarian changes, reflect elements of the two articles referred to
above, but differ in the specifics and in emphasis:
Primary Focus
! While the primary focus of the Administration’s plan would be on
the long-term establishment of a Middle East Free Trade Area by
around 2013, the primary focus of S. 1121/H.R. 2267 would be on
a “short run” trade preference program that would expire at the end
of 2011.
! The Administration’s short-run trade preference component would
be to continue the Generalized System of Preferences (GSP)
currently available to some Middle East countries.
Administration’s Plan
! The Administration’s long-term plan would be for eligible countries
to: (1) join the World Trade Organization and then sequentially enter
into (2) trade investment framework agreements (TIFAs), (3)
bilateral investment treaties (BITs), and (4) free trade agreements
(FTAs) with the United States. Once a country has entered into an
FTA with the United States, other neighboring countries could
achieve some FTA tariff benefits by “cooperatively producing” (with
two or more countries contributing to the same product) with that
country.
S. 1121/H.R. 2267
! S. 1121/H.R. 2267’s trade preference plan is billed as a “short-run”
trade preference program. It is based on and similar to the partial
duty-free programs of the Caribbean Basin Economic Recovery Act
(CBERA), the Andean Trade Preference Act (ATPA) and the
African Growth and Opportunity Act (AGOA).6
! S. 1121/H.R. 2267 also calls for (1) a presidential plan for
negotiating and entering into trade agreements with interested
beneficiary countries, and (2) the creation of a U.S.-Middle East
Trade and Economic Cooperation Forum to foster closer economic
ties with and expand trade and investment relations among
government, nongovernment and business organizations.
6 The Caribbean Basin Economic Recovery Act (CBERA), the Andean Trade Preference Act
(ATPA) and the African Growth and Opportunity Act (AGOA) offer trade preferences to
a total of 91 nations. The benefits go beyond tariff reductions offered to certain developing
countries under the Generalized System of Preferences (GSP) because they include tariff
reductions on some goods (including some textiles) for which tariff reductions are
prohibited under GSP law (19 U.S.C. 2461).
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Definition of “Middle East”
! The Administration’s plan does not define the term “Middle East”
but the definition used by the Office of the U.S. Trade
Representative includes countries traditionally identified as in the
Middle East or North Africa.
! S. 1121/H.R. 2267 omits four countries from the USTR definition
and adds five countries outside the USTR definition of “Middle
East.”
Eligibility Requirements
! The Administration’s plan specifies very few eligibility requirements
for countries wishing to join the MEFTA.
! S. 1121/H.R. 2267 is much more specific in its eligibility
requirements. Based on the requirements of AGOA, it lists political
and economic reforms that would be required in order for countries
to be eligible for the trade preference program and for participation
in the U.S.-Middle East Cooperative Forum.
Definition of “Middle East”
The “Middle East” does not have a simple definition. Figures 1 and 2 are maps
showing (shaded areas) countries included in the Administration’s plan and the S.
1121/H.R. 2267 plan, respectively.7
! The two initiatives (See Figures 1 and 2 below) have 16
“countries”8 in common: Bahrain, Egypt, Iraq, Israel, Jordan, the
Gaza Strip and the West Bank, Kuwait, Lebanon, Oman, Qatar,
Saudi Arabia, the United Arab Emirates, Yemen, Algeria, Morocco,
and Tunisia.
Each initiative also includes countries not on the other’s list.
! The Administration’s plan (Figure 1) includes four such countries:
Cyprus, Iran, Syria, and Libya, while
! S. 1121/H.R. 2267 (Figure 2) includes five such countries:
Afghanistan, Azerbaijan, Bangladesh, Pakistan, and Turkey.9
7 On June 12, 2003, Representatives Smith and Dooley co-sponsored H.R. 2467 — identical
to H.R. 2267 except it adds two more countries to the eligibility list: Armenia and Georgia.
8 For purposes of this report, the word “countries” or any references to the “25 countries,”
shall mean 24 countries plus what is alternately referred to as “the West Bank and the Gaza
Strip” (Administration’s plan) or “Palestine” (S. 1121 / H.R. 2267).
9 Iran, Libya, and Syria are countries the United States has considered as state sponsors of
(continued...)
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Figure 1. Countries Included in the Administration’s Definition of
“Middle East / North Africa”
Figure 2. Countries Included in the S. 1121/H.R. 2267 Definition of “Middle East”
9 (...continued)
terrorism. The five countries included in S. 1121/H.R. 2267 but not in the Administration’s
definition are considered by the Administration to be outside the “Middle East.” Sources:
Baucus Middle East Bill Authorizes Zero Duties for Sensitive Products. Inside U.S. Trade.
May 30, 2003; and Office of the U.S. Trade Representative. Transcript of Background
Press Conference Call to Discuss Proposed Mideast Free Trade Area Announced by
President Bush, May 9, 2003.
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Some Key Indicators of U.S. Economic Ties to the
Middle East
U.S. trade with the Middle East is small. U.S. trade with the 25 Middle East
countries covered in this report accounted for less than 4% of all U.S. exports and
less than 5% of all U.S. imports in 2003. An important U.S. economic interest in the
Middle East, however, is oil and gas. More than one-tenth of all oil and gas
consumed in the United States each year is imported from the Middle East.
Said another way, less than half of all U.S. gas and oil consumed in 2003 (44%)
was produced domestically. The rest (56%) was imported,10 and of that close to one-
fifth (19%) come from Middle East countries. Of the total share of oil and gas
imported from the Middle East, nearly half (11%) come from Saudi Arabia. Other
major contributors to the 19% of all U.S. oil and gas imports from the Middle East
are Iraq (3%), Algeria (3%), and Kuwait (1%). (See Figure 3 below.)
Figure 3. Sources of Total U.S. Oil and Gas Imports, 2003
All other 1%
100%
Kuwait 1%
80%
Algeria 3%
Middle
Rest of
60%
Iraq 3%
East 19%
World 81%
40%
Saudi Arabia 11%
20%
0%
Data Source: USITC Dataweb
Figure 4. Key U.S. Imports from the
In turn, U.S. oil and gas
Middle East, 2003 (as a % of all imports
imports constitute a little more
from the Middle East)
than half (53%) of the total U.S.
imports from the Middle East.
Oil and Gas
53
(See Figure 4.) After gas and oil,
Textiles and apparel
15
the next most important imports
Nonmetal Minerals
3
from Middle East countries are
Electronics
2
textiles and apparel, which
STNEC
2
together account for another 15%
Organic Chemicals
2
of U.S. imports from the Middle
Pharmaceuticals
1
East. Other key import categories
Telecom. Equip.
1
are diverse — nonmetallic
Scientific Instruments
1
minerals (3%), electronics (2%),
0
10
20
30
40
50
60
organi c chem i c a l s ( 2 % ),
Data source: USITC Dataweb; STNEC: military items returned to U.S.
10 U.S. Energy Information Administration, U.S. Department of Energy. Monthly Energy
Review, February, 2004.
CRS-7
pharmaceuticals (1%), telecommunications equipment (1%), and scientific
instruments (1%).
U.S. exports to Middle East
Figure 5. Top U.S. Exports to the
countries are also heavily
Middle East, 2003 (as a % of all U.S.
concentrated — in two industries:
exports to the Middle East)
machinery and transportation
Machinery
24
equipment.11 One quarter (24%)
Transport. equip.
21
of U.S. exports to Middle East
countries is machinery of various
Nonnmetal Minerals
8
t yp e s : general i n d u s t r i a l
Cereals
6
machinery, machinery specialized
Scientific Instruments
4
for particular industries, power
generating machinery, electrical
Telecom. equipment
3
machinery, and office machinery.
Textile Fibers
3
An additional one-fifth (21%) of
0
5
10
15
20
25
30
U.S. exports to Middle East
Data source: USITC Dataweb
countries is transportation
equipment including various types of road vehicles. Other key exports include
nonmetallic minerals (8%), cereals (6%), scientific instruments (4%),
telecommunications equipment (3%) and textile fibers (3%). (See figure 5.)
Tables 3 and 4 at the back of this report detail U.S. imports from and exports
to each of the 25 Middle East countries covered by this report. Those tables include,
for each country (a) the total value of U.S. imports or exports, (b) the main items
imported or exported, and (c) the percent of total imports/exports represented by each
key commodity.
U.S. investment in the Middle East is limited. The stock of U.S. foreign direct
investment (FDI) in Middle East countries in 2002 totaled $17.1 billion, or 1.1% of
total U.S. FDI. However, U.S. FDI represents nearly one-quarter of world FDI in the
Middle East. (See Table 5 for world and U.S. FDI totals in the various countries.)
Half of the U.S. total is in two key sectors: mining 26% (primarily oil and gas), and
manufacturing (25%). The remaining 49% of U.S. foreign direct investment in the
Middle East is distributed throughout the service sector — especially the information
sector (13%), and professional, scientific and technical services (7%).12 In addition,
Americans may have considerable portfolio investment in Israel including Israeli
bonds.
11 The Middle East, in general, has high barriers to trade. While the “weighted mean tariffs”
(the mean tariffs after the proportion of goods imported for each category is factored in) of
some countries are under 10%, they average more than 20% for many other countries,
including Afghanistan (22%), Egypt (21%), Algeria (22%), Morocco (32%), Tunisia (31%),
Bangladesh (22%), and Pakistan (21%). Source: The World Bank. World Development
Indicators, p. 327.
12 Data source: U.S. Bureau of Economic Analysis. Economics and Statistics
Administration. U.S. Department of Commerce. Survey of Current Business, September,
2003, p. 121.
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Comparison of the Two Plans
The next six pages compare the two Middle East Trade Initiatives, the
President’s Plan and S. 1121/H.R. 2267, in detail. Each plan has four basic
components: (a) trade preferences, (b) steps or activities leading toward free trade
agreements, (c) requirements for country eligibility, and (d) time lines for each
initiative. An overview chart comparing the two initiatives is included as Table 2,
below.
Trade Preference Components
Both the Administration’s proposal and S. 1121/H.R. 2267 have trade
preference components. They can be described as follows:
Administration’s Plan. In the short run, the Administration would continue
the Generalized System of Preferences (GSP) which includes duty-free entry to the
U.S. market for at least 3,500 products from 140 developing countries. The
following Middle East countries are currently eligible for GSP benefits: Bahrain,
Egypt, Lebanon, Oman, Yemen, Algeria, Morocco, Tunisia, Pakistan, and Turkey.
Remaining countries covered by this report are not eligible for GSP benefits. Some
are no longer considered “developing.” Others do not meet the Administration’s
eligibility requirements.
S. 1121 / H.R. 2267. S. 1121/H.R. 2267 (Sec. 10 of the bill) would authorize
the President to establish new trade preferences. He could designate articles as
eligible for duty-free treatment by Executive Order or presidential proclamation, with
advice from the International Trade Commission. All eligible articles would have
to meet GSP rules-of-origin requirements for a 35% domestic content requirement.
S. 1121/H.R. 2267 would limit trade preferences for agricultural products in
excess of the quota portion of established Tariff Rate Quotas (including beef, cotton,
dairy, peanuts, sugar and tobacco.). The President would also be prohibited from
extending duty-free access for products while they are subject to section 201
safeguard or other trade actions.13 This “short-term” trade preference program would
be patterned after African Growth and Opportunity Act (AGOA), Andean Trade
Partnership Act (ATPA) and Caribbean Basin Economic Recovery Act (CBERA)
programs which offer tariff-free trade preferences for some articles excluded under
GSP. This program would expire at the end of 2011.
Steps or Activities Leading Toward Free Trade Agreements
Both the Administration’s program and S. 1121/H.R. 2267 include steps or
activities that could help integrate the Middle East more fully into the world trading
system:
13 Additional background on the bill can be found in Baucus Middle East Bill Authorizes
Zero Duties for Sensitive Products. Inside U.S. Trade, May 30, 2003.
CRS-9
The Administration’s Plan.14 The Administration’s proposed program
consists of six consecutive steps which each country may take, culminating in a free
trade agreement with the United States. The second step, GSP participation, was
discussed above as the trade preference component. Table 1 lists each country
included in the USTR or S. 1121/H.R. 2267 definition of Middle East, and for each
country indicates which steps it has already fulfilled. The other five steps are:
First. World Trade Organization (WTO) membership for beginning integration
with the world trading system. Eleven Middle East entities are not yet members of
the WTO: the Gaza Strip and the West Bank, Iran, Iraq, Lebanon, Saudi Arabia,
Syria, Yemen, Algeria, Libya, Afghanistan, and Azerbaijan.
Second. The continuation of GSP, discussed above.
Third. Trade and investment framework agreements (TIFAs) that establish a
framework for expanding trade and for resolving outstanding disputes. Eleven
Middle East entities do not have TIFAs with the United States: Cyprus, the Gaza
Strip and the West Bank, Iran, Iraq, Lebanon, Oman, Syria, Libya, Afghanistan,
Azerbaijan, and Bangladesh.
Fourth. Bilateral investment treaties (BITs) which oblige governments to treat
foreign investors fairly and to offer them legal protections equal to those afforded
domestic investors. BITs make the business climate more attractive to U.S.
companies. The following 16 Middle East entities do not have BITs with the United
States: Cyprus, the Gaza Strip and the West Bank, Iran, Iraq, Kuwait, Lebanon,
Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen, Algeria, Libya,
Afghanistan, and Pakistan.
Fifth. Free trade agreements (FTAs), which typically remove tariff and non-
tariff barriers to trade across all sectors. Currently two countries in the Middle East
— Israel and Jordan — have congressionally-approved free trade agreements with
the United States. In addition, the United States completed negotiations on a free
trade agreement with Morocco on March 2, 2004. Negotiations with Bahrain are
ongoing.
The Administration is considering including “cumulation clauses” which would
afford sub-regional groups within the Middle East some eligibility to export goods
to the United States tariff-free or at reduced tariffs. Stipulations would likely require
that (1) those goods be produced in concert with a neighboring country which already
has a free trade agreement, and that (2) the exported products meet rules of origin
14 These steps are taken from Office of the U.S. Trade Representative (USTR). Trade Facts,
June 23, 2003. Additional explanatory material is taken from Office of the USTR.
Transcript of Background Press Conference Call to Discuss Proposed Mideast Free Trade
Area Announced by President Bush, May 9, 2003 (hereafter referred to as “Transcript of
May 9, 2003”). This transcript specifies that the USTR official holding the press briefing
be identified only as a “senior administration official.”
CRS-10
requirements.15 Under the Administration’s initiative, once FTAs are completed
with Morocco and Bahrain, for example, other North African countries might be able
to “dock” with and co-produce with Morocco; and other Gulf countries could “dock”
with and co-produce with Bahrain. So, for example, to qualify for tariff benefits
under a U.S.-Bahrain FTA, products could be jointly produced by Bahrain and Qatar
or Oman or the United Arab Emirates, or a combination of the named countries.16
Sixth. The final step in the Administration’s plan is trade-capacity building
to help countries realize more fully the benefits of open markets (e.g., build the “legal
entrepreneurial infrastructure.”) The Middle East Partnership Initiative would help
allocate structural adjustment funding to partner countries to help ease the burden of
free trade’s impact on local industries. The initiative would also be aimed at
increasing educational opportunities, strengthening civil society and rule of law, and
supporting small business.17 The Middle East Partnership Initiative would help target
more than $1 billion of annual funding from various Government agencies and spur
partnerships with private organizations and businesses that support trade and
development. For 2003, funding for U.S. Trade Capacity Building totaled $752
million, of which $174 million, or 23% went to Middle East countries.18
S. 1121 / H.R. 2267. S. 1121/H.R. 2267 (Sec. 6 and 7) outlines three main
activity areas which could lead eventually to bilateral free trade agreements and a
Middle East Free Trade Area.
First, under these bills, the President shall develop a “plan” for negotiating and
entering into trade agreements with beneficiary countries. That plan shall include (a)
U.S. objectives for negotiation and a suggested timetable; (b) benefits of the FTA to
the United States and relevant beneficiary countries; (c) subjects anticipated to be
covered by the negotiations, and (d) laws of participating eligible countries and
existing agreements. The plan shall also include procedures to ensure (1) adequate
consultations: (a) with Congress and the private sector during negotiations; (b) with
Congress relating to implementation; and (c) with relevant Middle East governments
during negotiation; and (2) approval by Congress of the agreement. The President
shall transmit to Congress a report of his plan no later than 12 months after
enactment [Sec. 7(d)].
Second, the President shall establish a U.S.-Middle East Trade and Economic
Cooperation Forum, patterned after a Forum created for Sub-Saharan Africa under
15 U.S. Department of State. Middle East Trade Initiative. Office of the USTR, February
27, 2003.
16 Office of the USTR. Transcript of Joint Press Conference: Secretary of State Colin L.
Powell, Jordanian Foreign Minister Marqan Muasher, Robert B. Zoellick, U.S. Trade
Representative, Jordanian Minister of Trade Salah Bashir, Movenpick Hotel, Dead Sea,
June 23, 2003.
17 See U.S. Library of Congress. Congressional Research Service. The Middle East
Partnership Initiative: An Overview, by Jeremy M. Sharp. CRS Report RS21457.
18 U.S. Agency for International Development. U.S. Contributions to Trade Capacity
Building, September, 2003, p. 2.
CRS-11
AGOA.19 It shall host meetings to foster close economic ties and expand trade and
investment relations for those countries “taking substantial positive steps toward
meeting eligibility requirements,” plus Israel and Jordan, which already have FTAs
with the United States. (“Eligibility requirements” are defined in the section below.)
Separate annual meetings shall be held for appropriate government officials,
nongovernment organizations, and representatives of the private sector. Every two
years, meetings shall take place between the President and heads of various eligible
governments, to the extent practicable (Sec. 6).
Third, bilateral free trade agreements shall be negotiated with interested
countries to serve as the catalyst for increasing U.S.-Middle East trade and private
sector investment. For FTA eligibility, a country shall be a member of the WTO or
be “working diligently” toward membership and to satisfy the eligibility criteria of
this act [Sec. 7(a) and (b)].
Requirements for Eligibility
While the Administration’s plan specifies few eligibility requirements, S. 1121/
H.R. 2267 includes a long list of requirements for eligibility to participate, which are
taken primarily from AGOA and from the Trade Act of 1974.
Administration’s Plan. The Administration’s plan is open to those
“peaceful” countries that seek an increased trade relationship with the United States
and “open, ultimately, to all those countries that are prepared to participate in
economic reform and liberalization.” Eligible countries must among other things: (1)
“be prepared to participate in economic reform and liberalization,” and (2) not
participate in a primary, secondary, or tertiary boycott of Israel.20
S. 1121/H.R. 2267. S. 1121/H.R. 2267 (Sec. 4) has a much longer list of
eligibility requirements, which are similar to those in Subtitle B, Sec. 111 of AGOA,
except for the latter part of item 8 and items 11-13 below which are specific to the
Middle East. For eligibility, countries must be taking “substantial positive steps
toward meeting” the following eligibility requirements:
19 The language in Sec. 6 of S. 1121/H.R. 2267 creating the Forum is virtually identical to
that in Sec. 105 of AGOA.
20 Office of the USTR. Transcript of May 9, 2003; and Global Trade and the Middle East:
Reawakening a Vibrant Past, Robert B. Zoellick, USTR, Remarks at the World Economic
Forum, Dead Sea, Jordan, June 23, 2003. The primary boycott of Israel banned all trade
relationships with Israeli companies; the secondary boycott prohibited any entity in the
League of Arab States* from doing business with other firms that contribute to Israel’s
military or economic development; the tertiary boycott was the injunction on Arab countries
from doing business with foreign companies that had been blacklisted because of their ties
with Israel. Source: U.S. Government to Enforce Laws in Face of Arab League Threat to
Israeli Trade, Global Business Magazine. Oct 10, 2002.
* The 22 members of the League of Arab States are Bahrain, Egypt, Iraq, Jordan, Kuwait,
Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen, Algeria,
Libya, Morocco, Tunisia, Comoros, Djibouti, Mauritania, Palestine, Somalia, and Sudan.
CRS-12
1.
a market-based economy that protects private property, incorporates rules-based
trading, and minimizes government interference in the private sector;
2.
a judicial process incorporating the rule of law, the right to due process, a fair
trial, and equal protection;
3.
a political climate free of political intimidation and restrictions on peaceful
activity, and which includes political pluralism and democratic elections;
4.
the elimination of barriers to U.S. trade and investment, the protection of
intellectual property, and a dispute resolution mechanism;
5.
economic policies that reduce poverty, expand physical infrastructure, promote
development of private enterprise and encourage the formation of capital
markets;
6.
a system to combat corruption and bribery; and
7.
policies to protect the environment and internationally recognized worker
rights: (a) the right of association; (b) the right to organize and bargain
collectively; (c) prohibition of forced labor; (d) minimum age for the
employment of children; and (e) acceptable conditions of work.
On international matters, a country may be eligible if it:
8.
does not engage in activities that undermine U.S. national security or foreign
policy interests and supports a peaceful resolution to the Israeli-Palestinian
conflict;
9.
is a signatory to the U.N. declaration on Internationally Recognized Human
Rights, does not engage in gross violations, and is making continuing and
verifiable progress in adopting such rights;
10. is not listed by the U.S. State Department as a state sponsor of terrorism, and
cooperates fully in international efforts to combat terrorism;
11. does not participate in primary, secondary, or tertiary boycott of Israel;
12. meets GSP eligibility requirements in Sec. 502(b)(2) of the Trade Act of 1974
[19U.S.C. 2462(b)(2)].21
21 The basis for GSP eligibility under this section of the Trade Act of 1974 includes:
engages in no terrorist activity; is taking steps toward internationally recognized worker
rights; provides reasonable access to its markets; offers effective protection of intellectual
property rights; and is taking action to reduce trade-distorting investment practices. S.
1121/H.R. 2267 would exempt otherwise eligible countries from the GSP eligibility
requirement in Sec. 502(b)(2)(B) which excludes Organization of the Exporting Petroleum
Countries (OPEC) countries from GSP eligibility.
CRS-13
In addition:
13. Palestine’s eligibility is dependent on all of the above factors plus its acceptance
of Israel’s right to exist in peace within secure borders.
Time Line
The Administration aims for a Middle East Free Trade Area within 10 years (by
about 2013). S. 1121 /H.R. 2267 provides for a trade preference program which the
sponsors refer to as “short-term,” which would expire at the end of 2011.
Requirements for the President’s annual report, which shall include information on
each country’s progress in meeting eligibility requirements, would also expire at that
time.
Differences in Approach and Arguments
The main difference between the Administration’s Middle East Initiative and
S. 1121/H.R. 2267 is that the latter is intended as a short-term trade preference
“stepping stone” to a Middle East Free Trade Area (MEFTA). The Administration’s
plan, on the other hand, would specifically create the MEFTA. In this respect, the
two initiatives may be viewed as complementary.
To summarize the differences in approach: The Administration would continue
its efforts to negotiate TIFAs, BITs, and FTAs with Middle East countries to create
a MEFTA by 2013.
S. 1121/H.R. 2267, on the other hand, patterned after AGOA, would offer
intermediate short-term preferences that would expire in 2011, two years before the
Administration’s target completion date for MEFTA. The trade preferences of S.
1121/H.R. 2267, with eligible articles and eligible countries to be determined by the
President in consultation with the International Trade Commission, would go beyond
those currently available under GSP. GSP limits country participation on the basis
of: (a) per-capita income, and (b) participation in the Organization of Petroleum
Exporting Countries (OPEC). It also limits product preferences on the basis of
import sensitivity.22
Each initiative would aim to address political, economic, and humanitarian
objectives. Sponsors of S. 1121/H.R. 2267 argue that their initiative would help
diversify and improve economies of the Middle East and provide jobs for the rapidly
22 Only ten out of the 25 countries covered by the two Middle East Trade Initiatives are
already eligible for GSP (as indicated in Table 1.) GSP provisions [U.S. Trade Act of 1974
as amended (19U.S.C. 2461)] specifically exclude from tariff preferences certain textiles
and apparel (the second most important export category from these Middle East countries),
watches, footwear, handbags, luggage, flat goods (e.g. wallets and briefcases), work gloves,
and other leather wearing apparel, steel, glass, and electronics. As a result, for the 25
Middle East countries covered by this report, imports under GSP represent only a fraction
(2% for 2003) of all imports from these countries.
CRS-14
growing population as well as stimulate U.S. exports. In addition, the sponsors
argue, the legislation would help Middle East countries make significant economic
reforms that would serve as a necessary precursor to a free trade agreement.23
Although the Administration is committed to its own initiative, it has been
ambivalent in its support of S. 1121/H.R. 2267. USTR Zoellick argued in testimony
on March 9, 2004, that it is a “good initiative.” On March 10, 2004, however,
representatives from the Departments of State and Commerce argued that the
Administration would prefer to follow its own “country-by-country approach.”24
They argued that this approach was more likely to help Middle East countries to
become “sustainable trading partners,”25 because each of the successive steps
involved in negotiating TIFAs, BITs, and FTAs could help induce internal changes
in the laws and regulations of the various countries.
Conclusion
Both Middle East trade proposals would aim to help stimulate greater economic
development in the Middle East. Shorter term goals from these stimuli would be (a)
for the region to grow enough to begin absorbing some of the unemployment (which
averages around 22%)26 — arguably the region’s most pressing economic problem;
and (b) for the region to begin attracting more foreign investment to help diversify
output beyond oil and gas, textiles and apparel, and a few other commodities. As the
shorter term stretches into the longer term, goals would be for the Middle East to
develop alternative economic resources and industries that could help ease and even
reverse its declining share of world economic growth and investment, its
unemployment, and perhaps some of the conditions in the Middle East that support
terrorism.
23 U.S. Congress. Senate Finance Committee. Baucus to Introduce Comprehensive Middle
East Trade Initiative: Welcomes President’s Proposal to Expand Trade to the Region.
Press Release, May 9, 2003.
24 Testimony of USTR Zoellick before the Senate Finance Committee on March 9, 2004,
and testimony of Undersecretary of State for Economic Business and Economic Affairs Alan
Larson and Commerce Department Undersecretary for International Trade Grant Aldonas
before the same committee on March 10, 2003. Pursuing Free Trade in the Middle East.
Washington Trade Daily, March 11, 2004.
25 Transcript of Background Press Conference Call to Discuss Proposed Mideast Free Trade
Area Announced by President Bush, May 9, 2003.
26 Galal, Ahmed and Bernard Hoekman, editors. Arab Economic Integration: Between
Hope and Reality. Egyptian Center for Economic Studies, 2003. p. 29. (The data were
based on The World Bank. World Development Indicators ‘01 CD-ROM. This
unemployment estimate is slightly smaller than that included in footnote 3. This different
estimate is included here to show a range of estimates on a subject: (a) that is difficult to
quantify, (b) that suffers from statistical problems, and (c) whose numbers may vary from
year to year and may also depend on the countries included in the various estimates.)
CRS-15
Table 1. Countries Covered by:
(a) USTR Definition of MENA;
(b) S. 1121 / H.R. 2267; and
(c) Steps toward and Including a Bilateral Free Trade Agreement with the U.S.
CRS-16
Table 2. Brief Comparison of the Administration’s Middle East Initiative and
S. 1121 / H.R. 2267
Administration’s
Plan
S. 1121 / H.R. 2267
“Middle East”
Both initiatives: Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia,
— Countries
United Arab Emirates, Yemen, Algeria, Morocco, Tunisia, West Bank and Gaza Strip/Palestine plus:
— Plus
Cyprus, Iran, Syria,
Afghanistan, Azerbaijan, Bangladesh, Pakistan, Turkey (Sec. 4).
Libya
Trade
Generalized System
For eligible countries: Similar to AGOA, ATPA, and CBERA. The President
Preferences
of Preferences (GSP)
is authorized to designate articles as eligible for duty-free treatment by
for eligible
Executive Order or Presidential proclamation, with advice from the
countries*
International Trade Commission (Sec. 5).
Efforts
Steps for each
A Presidential Plan for negotiating and entering into trade agreements with
Toward a
country:*
beneficiary countries shall be developed and shall include [Sec. 7(c)]:
Middle East
Free Trade
1. World Trade
! U.S. objectives for negotiation and a suggested timetable;
Agreement or
Organization
Area
Membership;
!
Benefits of the FTA to the U.S. and relevant beneficiary countries;
2. GSP (see above);
!
Subjects anticipated to be covered by the negotiations, as well as
laws of participating eligible countries and existing agreements; and
3. Trade Investment
Framework
!
Procedures to ensure: (1) adequate consultations: (a) with Congress
Agreement (TIFA);
and the private sector during negotiations, (b) with Congress
relating to implementation, and (c) with relevant Middle East
4. Bilateral
governments during negotiation; and (2) approval by Congress of
Investment Treaty
the agreement(s).
(BIT);
A U.S.-Middle East Trade and Economic Cooperation Forum shall host
5. Free Trade
meetings to foster close economic ties and expand trade and investment
Agreement (FTA) to
relations for countries “taking substantial positive steps toward meeting
which other eligible
eligibility requirements “ plus Israel and Jordan (Sec. 6).
countries may
“dock”; and
!
Separate annual meetings shall be for appropriate government
officials, nongovernment organizations, and representatives of the
6. Trade capacity
private sector.
building (through
various U.S.
!
Every two years meetings shall take place between the President
assistance efforts.)
and heads of government, to the extent practicable [Sec.
6(c)(2)(B)].
Bilateral free trade agreements should be negotiated with interested countries
to serve as the catalyst for increasing U.S.-Middle East trade and private sector
investment. For eligibility, countries shall be a member of the WTO or be
“working diligently” toward membership and to satisfy the eligibility criteria of
this act (see below) [Sec. 7 (a) and (b)].
Reporting
None
Reporting requirements: The President shall transmit to Congress a report of
requirements
his plan no later than 12 months after enactment [Sec. 7(d)].
for plan
Time line of
Aim for MEFTA
Trade preferences and reporting requirements expire December 31, 2011. [Sec.
the initiative
“within 10 years”
8(b) and Sec. 10].
(i.e., by 2013.)
* See Table 1 for the status of various countries.
CRS-17
Administration’s
Plan
S. 1121 / H.R. 2267
Requirements
The Administration
Domestically, countries must have established or be making continual progress
for country
has indicated that the
toward establishing (Sec. 4 — similar to AGOA):
eligibility
countries need:
!
a market-based economy that protects private property,
! to be
incorporates rules-based trading; and minimizes government
“peaceful”;
interference in the private sector;
! to be
!
the rule of law, the right to due process, a fair trial, and equal
prepared to
protection;
undertake
economic
!
political pluralism, a political climate free of intimidation and
reform and
restrictions on peaceful activity, and democratic elections;
liberalization
;
!
the elimination of barriers to U.S. trade and investment, the
protection of intellectual property, and a dispute resolution
! to not
mechanism;
participate in
a primary,
!
economic policies that reduce poverty, expand physical
secondary,
infrastructure, promote development of private enterprise and
or tertiary
encourage the formation of capital markets;
boycott of
Israel.
!
a system to combat corruption and bribery (i.e. sign and
implement the OECD Convention on Combating Bribery); and
!
policies to protect the environment and internationally recognized
worker rights: (a) the right of association; (b) the right to organize
and bargain collectively; (c) prohibition of forced labor; (d)
minimum age for the employment of children; and (e) acceptable
conditions of work.
International Matters:
!
Does not engage in activities that undermine U.S. national
security or foreign policy interests and supports a peaceful
resolution to the Israeli-Palestinian conflict;
!
On Internationally Recognized Human Rights (IRHR) is a
signatory to the U.N. declaration, does not engage in gross
violations, and is making continuing and verifiable progress;
!
Is not listed by the U.S. State Department as a state sponsor of,
and cooperates fully in international efforts to combat, terrorism;
!
Does not participate in a primary, secondary, or tertiary boycott of
Israel;
!
Meets GSP eligibility requirements in the 1974 Trade Act, Sec.
502(b)(2)**
!
Palestine must accept Israel’s right to exist peacefully within
secure borders.
Reporting
None
Reporting requirements: Presidential report annually through 2011 on each
Requirements
country’s progress in meeting eligibility requirements, a comprehensive
for country
discussion of the implementation of this Act and an analysis of the trade and
eligibility
investment policy of the U.S. toward “Middle East” countries (Sec. 8).
** For eligibility: no terrorist activity, reasonable access to its markets; effective protection of intellectual property rights, and
taking steps toward internationally recognized worker rights and reducing trade-distorting practices.
CRS-18
Table 3. Top U.S. Imports (and % of total that they represent) from
25 Middle East Countries, 2003
Value of
U.S.
Imports
Main U.S. imports and % of all U.S. imports from these countries that they
Country
($million)
represent
Saudi Arabia
18,047
petroleum (96%), chemicals (3%)
= 99%
Israel
11,823
apparel (86%), misc. mfg.(8%) STNC* (4%)
= 98%
Iraq
4,574
petroleum (100%)
= 100%
Algeria
4,753
petroleum (86%), natural gas (13%)
= 99%
Turkey
3,405
apparel (34%), textiles (13%), misc. mfg. (8%)
= 55%
Pakistan
2,509
textiles (46%), apparel, (44%), misc. mfg. (3%)
= 93%
Kuwait
2,276
petroleum (93 %) , STNC* (2%), apparel (2%)
= 97%
Bangladesh
2,072
apparel (89%), textiles (5%), fish (4%)
= 98%
United Arab Emirates
1,102
apparel (23%), petroleum (21%), STNC* (13%)
= 63%
Egypt
1,096
apparel (34%), petroleum (15%), textiles (13%)
= 62%
Oman
695
petroleum (57%), apparel (19%), STNC* (10)
= 86%
Jordan
670
apparel (86%), misc. (8%), STNC*(4%)
= 98%
Bahrain
378
apparel (43%), STNC* (22%), non-ferrous metals (10%)
= 75%
Morocco
369
electronics (23%),apparel (20%), fertilizer (18%), petrol. (15%)**
= 61%
Qatar
331
apparel (26%), gas (18%), fertilizer (17%)
= 61%
Syria
258
petroleum (77%), apparel (12%), misc. mfg. (4%)
= 93%
Iran
161
textiles (80%), Misc. mfg. (12%), fish (5%)
= 92%
Tunisia
96
apparel (34%),petroleum (24%), iron & steel (9%)
= 67%
Lebanon
88
misc manufacturing (22%), tobacco (22), furniture (12%)
= 56%
Yemen
66
petroleum (90%), coffee, tea (7%)
= 97%
Afghanistan
56
petroleum (77%), STNC* (11%), misc. mfg. (6%)
= 94%
Cyprus
24
STNC* (42%), apparel (14%),dairy (6%)
= 62%
Azerbaijan
9
chemicals (60%), animal/veg. (28%) misc. mfg. (3%)
= 91%
Libya
0
Palestine
—
TOTAL
56,341
* “STNC” refers to “special transactions not classified” According to the Department of Commerce, these exports are typically
military items that are returned to the United States.
** petroleum is not counted in the top three exports.
No data are available for the West Bank/Gaza Strip, or Libya.
Source of Data: U.S. International Trade Commission (USITC) Dataweb.
CRS-19
Table 4. Top U.S. Exports (and % of total that they represent) from
25 Middle East Countries (2003)
Value of
U.S.
exports
Main U.S. Exports and % of all U.S. exports to these countries that they
Country
( $million)
represent
Israel
6,878
nonmetals (30%), transport equip (11%), electronics (8%)
= 49%
Saudi Arabia
4,596
machinery (28%), transport equip. (25%)
= 53%
United Arab Emirates
3,510
transport equip. (30%), machinery (29%)
= 59%
Turkey
2,904
machinery (16%), textile fibers (14%), transport equip. (16%)
= 31%
Egypt
2,660
cereals (29%), transport equip. (14%), machinery (16%)
= 59%
Kuwait
1,509
transport equip. (38%), machinery (21%), telecom. equip. (4%)
= 44%
Pakistan
840
textile fibers (22%), machinery (26%), transport equip. (10%)
= 58%
Bahrain
509
transport vehicles (55%), machinery (11%)
= 66%
Jordan
492
transport equip. (32%), cereals (9%), telecom. equip. (7%)
= 48%
Algeria
487
cereals (29%), machinery (26%), animal food (8%)
= 63%
Morocco
465
Transport equip. (28%), cereals & seeds (28%), machinery (7%)
= 63%
Qatar
408
Machinery (50%), transport. equip. (17%), scientific inst. (7%)
= 74%
Cyprus
327
transport equip. (74%), cereals (3%), tobacco (3%)
= 80%
Iraq
316
machinery (57%), food (25%)
= 82%
Oman
323
machinery (34%),Transport. equip (29%)
= 63%
Lebanon
314
transport equip. (14%), tobacco (13%), cereal % seeds (15%)
= 42%
Bangladesh
227
textile fibers (27%), machinery (18%), pulp & waste paper (6%)
= 51%
Syria
214
cereals (32%), machinery (22%), tobacco (7%)
= 61%
Azerbaijan
121
machinery (42%), meat (12%)(, tobacco (8%)
= 62%
Yemen
195
cereals (36%), machinery (35%)
= 71%
Tunisia
171
cereals (24%), veg. oils (19%), transport. equip. (6%)
= 49%
Iran
99
oil seeds (44%), tobacco (34%), pharmaceuticals (6%)
= 84%
Afghanistan
61
machinery (32%) veg. oils (22%), scientific instruments (11%)
= 65%
Palestine
—
Libya
0
cereals (92%), electronics (6%)
= 98%
TOTAL
27,627
No data are available for the West Bank/Gaza Strip, or Libya.
Source of Data: USITC Dataweb.
CRS-20
Table 5. Foreign Direct Investment in Middle East Countries:
Stock of Investment by the World, 2000 and by the United States, 2002
($ Millions)
Stock of World Foreign Direct
Stock of U.S. Foreign Direct
Investment, 2000
Investment, 2002
Value in $
% of world
Value in $
Entity
millions
total
millions
% of U.S. total
World
6,314,271
100
1,520,965
100
Total Middle East
96,700
1.38
17,113
1.11
Algeria
1,407
0.02
Bahrain
5,908
0.09
Egypt
19,005
0.30
2,959
0.19
Iran
2,115
0.02
Israel
NA
5,207
0.34
Jordan
1,771
0.02
Kuwait
527
0.01
Lebanon
998
0.02
Morocco
5,848
0.02
Oman
2,517
0.01
Qatar
1,987
0.03
Saudi Arabia
28,845
0.46
3,687
0.24
Syria
1,338
0.02
Tunisia
11,566
0.18
Turkey
9,335
0.15
United Arab Emirates
2,645
0.04
1,398
0.09
Yemen
888
0.01
Other Middle East (non-
3,862
0.25
identified)
NA: Not available
Data source: For World: Economic Research Forum. Economic Trends in the MENA Region, p. 52; For the United
States: Survey of Current Business, September, 2003, p. 121.