Economy & Trade, Headlines, North America

TRADE: ‘Prize’ Deal for Mideast Might Not be Free – Analysts

Emad Mekay

WASHINGTON, May 9 2003 (IPS) - A free trade deal for the Middle East announced here Friday would occur too slowly and is likely to cost the region significantly, say analysts.

President George W. Bush unveiled the plan to set up a trade agreement with countries from the region by 2013 as a means to push peace and fight violence in the troubled area.

In a speech at the University of South Carolina, Bush said the new economic strategy will accompany the push for political change and the ”roadmap to peace” now being considered by Palestinians and Israelis. He described the plan as a prize for nations of the region that take steps to fight terrorism.

"If the Palestinian people take concrete steps to crack down on terror, continue on a path of peace, reform and democracy, they and all the world will see the flag of Palestine raised over a free and independent nation,” Bush said.

While lauding the move to bring the region into the U.S. economic orbit, one analyst said the 10-year timeframe is too long.

”This is quite slow. We need to do something soon. The economic problems are (so) severe and urgent that we shouldn’t be fixing (them) over 10 years,” said Edward Gresser of the Washington-based Progressive Policy Institute (PPI).

Like Bush administration officials, Gresser thinks that lack of trade in the area has lead to sluggish growth and declining income, and created social costs of unemployment, political anxiety and growing fascination with religious extremists.

”What this kind of programme could do, if done well, is create a lot more jobs and particularly for urban people,” he said. ”This way you could drain out or shrink up the pool from which people could sign up for terrorist groups.”

Part of the plan would involve dispatching Secretary of State Colin Powell and U.S. Trade Representative Robert Zoellick to business meetings to be held in Jordan in June under the auspices of the pro-business, Geneva-based World Economic Forum (WEF).

Both officials are likely to hold meetings with leaders in the region to push for trade liberalisation. ”Progress will require increased trade, the engine of economic development,” said Bush.

But another expert says the region is likely to pay a price for the economic liberalisation that inevitably accompanies increased trade.

For instance, while trade deals can provide some jobs in certain sectors, they can also take away jobs in others, said Dean Baker, co-director of the Centre of Economic and Policy Research in Washington.

”They (such agreements) often, almost universally, make it more difficult for countries to protect domestic industries, even though they could be growing,” he said.

”Every country that has industrialised has done so by protecting its industry for a significant period of time. In general, these trade agreements make that more difficult.”

They often also lead to higher barriers on patents and copyrights, which can pose hefty costs to some nations, Baker added. In Egypt, for example, ”the pharmaceutical industry could be really nailed, if they were to respect the U.S. patent copy law”.

”That’s a downside to it,” Baker said.

The United States’ current free trade partners are Canada and Mexico (within the North America Free Trade Agreement, NAFTA), Israel and Jordan, a tiny kingdom of 4.5 million people and limited natural resources.

But regional and bilateral trade initiatives planned for 2003-2005 include deals with Singapore, Chile, Central America, the Southern Africa Customs Union, Australia and Morocco, renewal of the African Growth and Opportunity Act, the Enterprise for ASEAN Initiative in Southeast Asia and the signing of the Free Trade Agreement for the Americas (FTAA).

Critics of trade agreements say they often limit nations’ abilities to enact environmental or health safety regulations, which are seen to hinder multinational companies.

NAFTA has also been criticised for giving private companies the right to sue governments at all levels for passing regulations not consistent with corporate priorities.

Bush said the United States will devote resources to help Middle Eastern countries reform their economies to prepare for the agreement, for example by joining the World Trade Organisation (WTO).

”We will work with our partners to ensure that small and mid-sized businesses have access to capital, and support efforts in the region to develop central laws on property rights and good business practices,” said Bush.

”By replacing corruption and self-dealing with free markets and fair laws, the people of the Middle East will grow in prosperity and freedom,” he said.

The announcement signals a change in U.S. trade policy towards the region and Muslim countries, seen increasingly as the focus of U.S. foreign policy.

Washington’s trade policy was previously criticized for isolating Muslim nations, deepening poverty and increasing social dissatisfaction.

”It (the Middle East) has been a blank spot in the American trade agenda,” Gresser said. ”More recently with other trade initiatives we began unintentionally to tilt against the Muslim countries. This will correct this imbalance.”