U.S.-Jordan Free Trade Agreement

Publication Date: December 2001

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

Type:

Abstract:

On June 6, 2000, President Bill Clinton and King `Abdullah II announced that the United States and Jordan would begin negotiations for a bilateral free trade agreement (FTA). The two sides signed the FTA on October 24, 2000, and President Clinton submitted the FTA to the 107th Congress on January 6, 2001. Bills to implement the FTA were introduced in the Senate (S. 643) on March 28, 2001, and in the House (H.R. 1484) on April 4, 2001. H.R. 2603 (Thomas) and S. 643 (Baucus) were reported out of the House Ways and Means and Senate Finance Committees on July 26. H.R. 2603 was passed in the House, by a voice vote, on July 31, and in the Senate by a voice vote on September 24. It became law as P.L. 107-43 on September 28, 2001.

In the past, Congress has shown an interest in developing free trade relations between the United States and select Middle East countries. In 1985, Congress approved the U.S.-Israel FTA and amended it in 1996 to include the West Bank and Gaza Strip as well as qualifying industrial zones (QIZs) between Israel and Jordan, and Israel and Egypt. Since 1994, when Jordan and Israel signed a peace treaty, Congress and the Clinton Administration also undertook several initiatives designed to assist the Jordanian economy. These initiatives included increased levels of foreign assistance, debt forgiveness, and the QIZ program.

In addition to covering traditional reductions in barriers to trade in goods and services, the FTA also deals with other issues that became part of the U.S. trade policy agenda during the Clinton Administration such as intellectual property rights (IPRs), e-commerce, and labor and environmental standards. The inclusion of labor and environmental standards within the text of the FTA has provoked disagreement between those with differing visions of what should be included in future U.S. FTAs.

The volume of bilateral trade between the United States and Jordan throughout the 1990s was consistently modest. Many top Jordanian exports to the United States already enter the United States duty-free through various programs, and cereals - the top U.S. export to Jordan - already face low or zero-level tariff rates. Therefore, a free trade agreement is unlikely to have an immediate and dramatic impact on the volume of bilateral trade. However, Jordanian exports of textiles and apparel to the United States, as well as U.S. exports to Jordan of various commodities that face moderately high Jordanian tariffs, could expand under an FTA.

In addition to a modest increase in the bilateral trade of goods, a U.S.-Jordan FTA could have several economic and political implications. These include the possibility of increased levels of trade in services, greater foreign direct investment (FDI) to Jordan both from U.S. and foreign-based companies, and reinforced momentum for further economic reform in Jordan. If approved by Congress and the Jordanian parliament, the U.S.-Jordan FTA will also mark the first U.S. free trade agreement with an independent Arab country, thereby reflecting the strength of U.S.Jordanian bilateral relations and the importance that the United States attaches to these relations.