Bilateral gains implied by US-Bahrain FTA
Gulf News (UAE) 08/05/2006
Bilateral gains implied by US-Bahrain FTA
By Jasim Ali, Special to Gulf News
The US-Bahrain Free Trade Agreement (FTA) is now in full swing. The FTA went into effect at the start of the month, nearly two years after the two countries finalised the deal.
This marks the first time that the US has implemented such a deal with a member state of the Gulf Cooperation Council.
Recently the US Congress endorsed the US-Oman FTA, but it is yet to be executed. The fact is Bahrain had to go a long way before meeting US requirements for implementing the agreement.
In retrospect, formal FTA negotiations started in Bahrain in January 2004. Representatives of the two countries succeeded in working out details of the agreement in just five months. The deal was formally signed in Washington in September.
Yet, legal experts spent several months translating the text from English into Arabic.
For its part, Bahrain completed the endorsement process of the deal in July 2005. Still, the US Congress only endorsed the deal late last year.
Nevertheless, the FTA deal proved popular in the House of Representatives by virtue of obtaining an overwhelming majority (327 for to 95 against).
Speaking to members of the United States Trade Representatives (USTR) in Washington last month, I learned that Congress supported the FTA with Bahrain partly because it posed no threat to American farm industry.
President George Bush signed the agreement into law in January. However, no date was fixed for implementing the deal.
Bahrain had to transform laws governing intellectual property rights (IPR) as a prelude to activating the accord. Its authorities had to struggle against time to develop eight laws dealing with specifics of IPR such as copyrights, patents and trade marks.
Bahrain’s government approved the new legislations only in July, which were then published in the official gazette.
As a result of these delays, the two countries agreed that the start of August was the closest date possible to put the agreement into force.
With few exceptions, the FTA provides exporters of both countries unrestricted access to each other’s markets. Bahrain is particularly interested in getting access to the world’s largest economy and import market.
The US gross domestic product (GDP) amounts to more than $12 trillion. By contrast, Bahrain’s GDP is less than one per cent of that of the US.
The US is the largest importer in the world of goods and services. In 2005, the import bill amounted to $1.7 trillion and $318 billion for goods and services, respectively.
Last year, the two-way trade amounted to $782 million, with Bahrain enjoying a surplus of $81 million. Clearly, any increase of exports from Bahrain would not have a material effect on the US’s import bill.
Additionally, Bahrain officials hope that improved IPR laws will help attract sustained American investment.
According to UNCTAD, the US accounted for 31 per cent or $229 billion of $730 billion of outbound foreign direct investment (FDI) in the world in 2004.
In fact, Bahrain stands the chance of wooing some American firms to use Manama as a base for doing business throughout the region.
Increased exports, together with stronger FDI, should help Bahrain officials addressing some outstanding economic challenges, notably unemployment.
The jobless rate amongst nationals amounts to nearly 11 per cent.
Also, demographics add to complications population growth stands at 2.5 per cent, with more than one third of locals under 15 years old.
For the US, the FTA with Bahrain reinforces the cause of achieving regional free trade by 2013. Already, the US has in place separate FTAs with Arab countries, namely Jordan and Morocco.
Only time will tell whether FTA with US would boost or hinder economic development in Bahrain.
The writer is head of the Economic Research Unit, University of Bahrain.
