Economy & Trade, Headlines, Middle East & North Africa, North America | Analysis

TRADE: U.S. Sets First Piece of Mideast Trade ‘Mosaic’ in Morocco

Analysis - By Emad Mekay

WASHINGTON, Mar 3 2004 (IPS) - Building on a spree of "free" trade deals across the world, the United States has announced an agreement with Morocco that it says could be used as a model for the proposed U.S.-Middle East Free Trade Area (MEFTA).

The agreement strips away most barriers to U.S. trade into Morocco and gives Washington trade privileges that have mostly been rejected by other developing nations interested in doing deals with the United States.

U.S. Trade Representative (USTR) Robert B. Zoellick and Moroccan Minister-delegate of Foreign Affairs and Cooperation Taib Fassi-Fihri made the joint announcement Tuesday.

"This is the best market access package negotiated yet with a developing country in a U.S. bilateral free trade agreement," said a statement from the USTR office.

"This agreement cuts tariffs and opens markets for American workers, farmers, investors and consumers," added Zoellick. "It’s a ground-breaking FTA that not only slashes tariffs, but sets a new high standard for the protection of intellectual property rights (and) opens markets for services".

Zoellick says the U.S.-Morocco agreement will be an integral part of President George W. Bush’s strategy to create a free trade area in the Middle East by 2013. Bush announced the ambitious plan in May 2003.

"Our agreement with Morocco is not just a single announcement, but a vital step in creating a mosaic of U.S. free agreements across the Middle East and North Africa," Zoellick said.

In the Middle East, the United States has free trade agreements only with Israel and Jordan, as regional heavyweights like Egypt and Saudi Arabia continue to balk at U.S. demands.

Washington also launched negotiations with the small emirate of Bahrain early this year and is expected to reach a deal later in 2004.

Zoellick contends the agreements could help fight terrorism and ease anger, simmering over U.S. foreign policy in the region, particularly Washington’s unwavering support for Israel.

"This FTA sends a powerful signal that the United States is firmly committed to supporting tolerant, open and more prosperous Muslim societies," said Zoellick.

"I hope other nations in the Middle East and North Africa will à view it as a model to advance their economic relationships with the United States."

Outside of the Middle East, the deal with Morocco is the latest in a string of U.S. trade pacts with smaller countries around the world.

Morocco joins Australia, and four Central American countries as nations with which Washington has completed negotiations in recent months.

The talks need to be ratified by Congress before they can become final.

The United States is also negotiating free trade agreements with the Southern African Customs Union (South Africa, Botswana, Namibia, Lesotho and Swaziland) and is working to bring the Dominican Republic into the recent Central American FTA.

Washington has also announced it intends to begin talks with Thailand, Colombia, Peru, Ecuador, Bolivia and Panama.

"Our new and pending FTA partners, taken together, would constitute America’s third largest export market and the sixth largest economy in the world," said Zoellick.

Other developing countries considering trade deals either with the United States alone or within the multilateral setting of the World Trade Organisation (WTO) complain that Washington and other industrialised nations push them to open up their markets without giving them equal access to markets in rich nations.

A proposed Free Trade Area of the Americas (FTAA), which would encompass all countries in the western hemisphere except Cuba, is slowing down over the resistance of some countries, led by Brazil, to open their economies to U.S. companies.

Among their other complaints, the countries also argue that Washington should modify its huge agriculture subsidies system, which places their own farmers at a disadvantage when they compete with the U.S. agricultural industry.

But the agreement with Morocco appears to have given the United States almost everything it demanded.

The deal will remove a tariff that averages 20 percent on most U.S. products entering Morocco.

More than 95 percent of U.S. trade in consumer and industrial products becomes tariff-free immediately, with all remaining tariffs to be eliminated within nine years.

U.S. poultry, beef and wheat will benefit from greater access under tariff-rate quotas, while tariffs on corn, sorghum and soybeans will be cut drastically or eliminated immediately. This will allow U.S. exporters to compete with the European Union (EU) and Canada, which dominate the Moroccan market..

The agreement also gives U.S. service companies unchecked access to the Moroccan market of 31 million people.

U.S. banks, insurance, telecommunications, express delivery, distribution and construction companies will all benefit from the deal.

The agreement also includes strong provisions to protect U.S. software, music, text and videos, among other intellectual property rights.

Morocco’s export market is small at only 11 billion dollars. Currently the United States exports an average of 475 million dollars worth of products to Morocco each year. These include aircraft, corn, machinery and, more recently, fabrics and pharmaceuticals.

Morocco exports around 450 million dollars worth of products to the United States, including phosphates and other minerals. They largely enter the market duty-free.

The proposed deal also gives U.S. investors what the USTR said is "a secure, predictable legal framework".

According to a fact sheet, it would allow traders and investors from the other country to "obtain prompt and fair review of final administrative decisions" affecting their interests.

Some countries and civil society groups have objected to similar clauses in the past saying they give virtual veto rights to major companies on local government’s decisions.

The U.S.-Morocco pact includes landmark measures in government contracting, allowing U.S. firms to compete unhampered with local companies to sell goods and services directly to the Moroccan government.

Monitors of the U.S. global trade march say the rules of this deal belong to a template that Washington is spreading around the world, and warn the deal could put Moroccans at a disadvantage vis-à-vis U.S. businesses interests.

"The investors’ rules are problematic and do provide U.S. companies with substantial opportunities to challenge legitimate environmental and other public interests laws and regulations that the Moroccans may want to put in place," said David Waskow, international policy analyst with Friends of the Earth in Washington.

Giving U.S. companies the veto rights could also impede Washington’s own goal of promoting democracy in the region, he added.

"If the U.S. continues to move forward with that kind of investment rules, that could actually hamper the ability of governments to enact appropriate public-interest policy, if there’s democratisation in the region."