Middle East Free Trade Area: progress report

CRS Report for Congress
Received through the CRS Web
Order Code RL32638

Middle East Free Trade Area: Progress Report

Updated February 8, 2005

Mary Jane Bolle
Specialist in International Trade
Foreign Affairs, Defense, and Trade Division
Congressional Research Service (CRS)
Library of Congress

Summary

On May 9, 2003, the Bush Administration proposed the establishment of a U.S.
Middle East Free Trade Area (MEFTA) within a decade (by about 2013). This
proposal came a year and a half after the September 11, 2001 terrorist attacks on the
U.S. World Trade Center and the Pentagon. The MEFTA was billed as part of a plan
to fight terrorism - in this case, by supporting the growth of Middle East prosperity
and democracy - through trade. On June 23, 2003 the Bush Administration
described a six-step process for Middle East entities to become part of that MEFTA:
(1) joining the World Trade Organization; (2) possibly participating in the
Generalized System of Preferences; successively entering into (3) trade investment
framework agreements (TIFAs), (4) bilateral investment treaties (BITs), and (5) free
trade agreements (FTA) with the United States; and (6) participating in trade capacity
building.

The MEFTA would cover 20 entities in what many refer to as the Middle
East/North Africa - 16 in the Middle East: Bahrain, Cyprus, Egypt, the Gaza
Strip/West Bank, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi
Arabia, Syria, the United Arab Emirates and Yemen; and four in North Africa:
Algeria, Libya, Morocco, and Tunisia.

Although U.S.-Middle East trade is small (4-5% of total U.S. trade), oil and gas
are key imports, accounting for roughly one-tenth of all oil and gas consumed in the
United States each year. Textiles and apparel are the second most important imports
from these entities. The most important U.S. exports to these entities are machinery
and transportation equipment.

The Bush Administration’s initiative aims to help diversify and improve the
economies of the Middle East, provide jobs for the rapidly growing population,
stimulate U.S. exports, and help Middle East countries make economic reforms -
values echoed by The 9-11 Commission Report as part of a comprehensive strategy
to countering terrorism.

Since the Bush Administration first announced its trade initiative, it has made
substantial progress in working with MEFTA entities to develop TIFAs, BITs, and
FTAs and progress along the steps outlined above. Since the beginning of 2003:
TIFAS have been completed with five countries: Kuwait, Oman, Saudi Arabia, the
United Arab Emirates, and Yemen, bringing the total to 11. Other TIFA partners are
Bahrain, Egypt, Jordan, Algeria, Morocco, and Tunisia. BITs have been completed
with one country, Jordan, bringing the total to five. Other BIT partners are Bahrain,
Egypt, Morocco, and Tunisia. Finally, bilateral free trade agreements have been
implemented with Jordan, Israel, and Morocco. A signed FTA with Bahrain awaits
consideration by Congress, which would raise the FTA total to four. In addition, on
November 15, 2004, U.S. Trade Representative Robert B. Zoellick announced the
Administration’s intent to negotiate FTAs with the United Arab Emirates and Oman,
as the 5th and 6th countries to have FTAs with the United States out of the 20 in
MEFTA. This report will be updated.

Original URL of report: http://www.usembassy.it/pdf/other/RL32638.pdf