Made in the USA: A Plan for Middle Eastern Economics

Thursday 3 July 2003, by Daphnée DION-VIENS

Photo: Josée Lambert

Although America’s "road map to peace" is looking more and more uncertain, the other component of the Bush Administration’s Middle East strategy is moving forward. The president has moved one step closer to creating a free trade zone between the United States and the countries of the Middle East. But not everyone is convinced of the benefits of U.S.-style economic integration.

In early June, President George W. Bush met with Arab leaders to discuss establishing a Middle Eastern free trade zone by 2013. Such an economic accord "would provide new opportunities and hope to the people of the region," affirmed Bush. The promises of the agreement were reiterated during a special Middle Eastern meeting of the World Economic Forum, held in Jordan between June 21 and 23.

Contrary to the approach used in the negotiations for the Free Trade Area of the Americas-the hemisphere’s 34 countries (except Cuba) convened and negotiated around the same table-the U.S. has been conducting negotiations with Arab states one by one. American officials insist that these bilateral negotiations are the only way to build the "critical mass" necessary for a free-trade zone in the Middle East. The U.S. already has accords with Israel and Jordan. Negotiations with Bahrain have been going on since May, and an agreement with Morocco will likely be finalized before the end of the year.

The American strategy

The Bush administration insists that free markets encourage economic growth, and thereby encourage development and democracy. U.S. Trade Representative Robert Zoellick has regularly touted free international trade as a generator of social change and an antidote to terrorism and violence. The project is also presented as a step towards "reconciliation" between the U.S. and the Arab world.

Yet many analysts are critical of this new American initiative and fear negative impacts on the region, believing that this strategy demonstrates the inherent flaws of American development policy. University of Miami political analyst Peter Moore believes that it is illusory to think that postitive social change is spurred by foreign trade. He points out that the private sector is more likely to exploit new social and economic institutions rather than transform them.

American foreign policy expert Phyllis Bennis points out the devastating consequences of free trade around the world, especially those NAFTA has wrought on the Mexican population. The Middle Eastern initiative "could have only been conceived to reinforce American interests in the region and create a new economy for American investors." She holds that it is "oil that controls the Middle East." Fueled by oil profits, free trade with the Arab world would bring 300 million consumers into an American-dominated market.

Jordan’s example

Yale University scholars Peter Moore and Andrew Shrank reviewed the repercussions that two years of free trade with the U.S. have had on Jordan. Their model can be used to examine the consequences of free trade for the entire region.

An industrial free trade agreement between Jordan and the U.S. was signed in 2000. The accord provided Jordanian investors access to American markets, as well as tariff breaks on capital imports. Despite an 84 percent increase in Jordanian exports to the U.S. between 2001 and 2002, the Jordanian people got nothing. "The creation of this zone did not improve the country’s economy or strengthen the roots of democracy," says Moore. "There have been no developmental benefits. The money that does come back to the country only benefits the handful of men who manage these zones, not your average Jordanian." Of the 47 firms operating in the free trade zones, only nine are Jordanian. Nearly half of the 20 000-person labour force employed by these firms is comprised of immigrant workers who earn a minimum wage of US$3.50 a day.

According to the American strategy, the liberalization of trade should encourage the decentralization of political power. In Jordan, it has had the opposite effect. According to Moore, "trade with the United States helped concentrate power in the hands of the regime." The Americans are now prepared to apply the same model across a region whose countries are considered by many to be the most protectionist on the planet.

Too little, too late

It is for this reason that Jordanian economist Fahd Fanek thinks that the Middle East is not yet ready for free trade. "In certain Arab countries," says Fanek, "industry cannot survive in a competitive market." Moore shares this opinion, adding that it is typically the owners and workers in heavily protected economies that suffer the most from the liberalization of trade.

Arab leaders do not seem overly concerned by the possible fallout from free trade with the U.S. In general, they believe that the profits generated by a free trade agreement will likely help keep their regimes in place. Bennis says "Arab countries depend on the United States for their military strength. They have no choice but to sign." Washington recently rewarded Amman with US$700 million for their cooperation in the war against Iraq.

But the American model of prosperity has found few followers in the populations of Middle Eastern countries. Moore feels that Bush’s approach will only deepen the anti-American sentiment already prevalent throughout the Arab world, undoing any progress that has been made in the war against terrorism and slowing the spread of democracy.

These warning signs do not seem to faze George W. Bush. While a resolution to the Israeli-Palestinian conflict seems a long way away, American economic domination of the region seems close at hand.

Daphnée Dion-Viens, Coordinator and Editor, Alternatives Newspaper

Translation : Jeremy Gans

Despite almost three years of free trade with the U.S., average Jordanians have seen no benefits from an agreement that exploits their low wages aand poor working conditions. Meanwhile, the U.S. has rewarded their government with a US$700 million aid package announced this year for the cooperation in the war against Iraq.

À propos de Daphnée DION-VIENS

Assistante à la rédaction, Journal Alternatives

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