|
Select feature articles Articles, by topic Articles, by publication Articles, by date |
. . . US-Bahrain FTA moves ahead by Mark Wallace Gulf States Newsletter No. 727, Friday, February 6, 2004 Talks between Bahrain and the United States to set terms of a free trade agreement (FTA) between the two countries got under way in Manama on 26 January. While the agreement will no doubt mean a substantial boost in US/Bahraini trade, it could have broader implications, both political and economic, for the Gulf region as well as for Bahrain. Direct benefits could be substantial. After Jordan struck an FTA with the USA in 2000, trade between the countries shot up from about $20m to 25 times that – more than $500m – in just three years. The Jordanian government attributes the creation of some 30,000 jobs to effects of the agreement (which benefitted from the Hashemite kingdom's proximity to Israel, whose companies saw it as a gateway to new markets). With a GDP of about $8.1bn and a population of only some 750,000 (versus Jordan's $10.4bn and 5.5m), Bahrain's non-oil trade with the US is already over $500m. It is hard to see how the economy could absorb 25 times the $100m/yr of imports the US sends (although the agreement also covers services). But part of Washington's rationale for the pact is in Bahrain's strategic potential as a freight entrepôt, an hour or two's flight from most Gulf capitals and just a four-hour drive from Riyadh across the 25km King Fahd Causeway to Saudi Arabia. One potential problem is the League of Arab States boycott of Israel: the USA would not strike a trade pact with a country boycotting Israel. Bahraini Finance and National Economy Minister Abdallah Hassan Saif said last year that the boycott was "almost on the last stage at the Arab League", and that soon enough "the boycott will become totally irrelevant". As US Trade Representative Robert Zoellick pointed out at the time, "The WTO does not permit boycotts like that. And so we hope and expect that's not an issue." Arab politics retains the potential to upset this one reason why Washington is interested in political gains from a Gulf FTA. Zoellick has acknowledged that US trade initiatives in the region will help support political as well as economic reform. But if the GCC countries are to take full advantage of any such pact, they will have to find the political will to implement their own regional initiatives. The much-heralded GCC customs union, which took effect 1 January 2003, is still an imperfect system one year on, with countries squabbling over the proper distribution of customs duties collections. But local and international shippers tell GSN that facilitating regional cross-border trade would mean a big boost for business in the Gulf – and, if institutions like the World Bank are to be believed, a big boost for economic growth. Long an eager ally of the West, home to both the US Navy's Fifth Fleet and to significant recent political reform, Bahrain makes a logical starting point for the US plan, proposed by President George W. Bush on 9 May 2003, to establish a Middle East Free Trade Area (MEFTA) by 2013. Besides the Jordanian agreement, an FTA with Morocco will soon be completed. The US already has an FTA with Israel. A trade and investment framework agreement (TIFA) is already in place between Bahrain and the US. Such agreements put Washington policy-makers in closer contact with their foreign counterparts. The TIFA covers cross-border investment, among other things, and will be a factor in Bahrain's continuing liberalisation of its financial and other sectors. Assistant US Trade Representative for Europe and the Mediterranean Cathy Novelli – who negotiated the Jordan pact – is heading up the 30-member US delegation; Finance Minister Saif is her counterpart in the talks. Subsequent rounds will alternate between the two countries. An expected early February visit to the White House by Bahrain's Crown Prince Sheikh Salman Bin Hamad Al-Khalifa – fresh from Davos, where he is now an established figure is expected to help speed things along. FTA talks are due to be completed by end-2004. -30- |
|