Middle East Free Trade Area: Progress Report
Publication Date: July 2006
Publisher: Library of Congress. Congressional Research Service
Author(s):
Research Area: Trade
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Abstract:
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 (WTO); (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 one-fourth of all oil and gas imported and more than 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 transportation equipment and machinery.
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 support WTO membership, and to develop TIFAs, BITs, and FTAs and progress along the steps outlined above. Since the beginning of 2003: Saudi Arabia has joined the WTO, and Iraq, Iran, Lebanon, Yemen, and Algeria are negotiating accession. In addition, TIFAS have been completed with seven countries: Kuwait, Oman, Saudi Arabia, the United Arab Emirates, Yemen, Qatar, and Iraq, bringing the total to 12. 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, a bilateral free trade agreement has been implemented with Jordan, Israel, Morocco, and Bahrain; signed with Oman (January 19, 2006); and is under negotiation with the United Arab Emirates. This brings the number of MEFTA FTAs to four implemented, one awaiting congressional action, and one under negotiation. FTA negotiations underway with Egypt have been suspended over human rights issues. This report will be updated as events warrant.