Where Bush Sees Free Trade Zone, Analysts See Only a ‘trojan Carrot’

The White House’s proposed Middle East free trade zone is meant to help Arab and Muslim nations develop economically, while improving the U.S. image in the region.

But many experts say it’s a hollow gesture that actually will bring little benefit to the countries involved.

President Bush introduced the plan last week, calling for a free trade zone — which would include Israel — within a decade, and offering tools for Arab countries to modernize and benefit from international trade.

“The Arab world has a great cultural tradition, but is largely missing out on the economic progress of our time,” Bush said in a May 9 commencement address at the University of South Carolina. “Across the globe, free markets and trade have helped defeat poverty and taught men and women the habits of liberty.”

Bush proposes helping Middle Eastern nations join the World Trade Organization, create bilateral treaties and trade agreements and generate capital and jobs.

As part of the plan, the United States would work with countries in the region to improve the transparency of their finances, improve education and reform their judicial systems. To that end, Supreme Court Justice Sandra Day O’Connor is helping organize a forum on judicial reform, to be held in Bahrain.

Bush’s announcement is seen as another gesture to reshape the image of the United States in the Arab world, which has been damaged by U.S. support for Israel and the U.S.-led war against Iraq.

It follows on the heels of the Middle East Partnership Initiative, announced late last year, which uses American funds to expand economic, political and educational opportunities in Arab states as a means of promoting democracy.

Some believe that a free trade zone could help make the Middle East, which lags behind other regions of the world in most economic criteria, more competitive.

For example, companies might be interested in transferring their textile and apparel operations from Asia to the Middle East if the regions were comparable in terms of skill level and stability, said Harold Luks, an international trade consultant in Washington.

The plan “has the opportunity to strengthen relations with the United States and help expose these countries to greater American investment and trade,” Luks said. But he cautioned that the program should have modest objectives.

While the vision seems promising — and conforms to the U.S. perception that the region needs structural reforms far broader than a solution to the Israeli-Palestinian conflict — analysts say it suffers from political and logistical problems.

Politically, they say, it’s too small a gesture, with a goal too far in the future, to win the United States much support in the Middle East.

Plus, analysts say, eliminating trade barriers for Middle Eastern countries will do little if there isn’t much in those countries to trade.

Jon Alterman, director of the Middle East program at the Center for Strategic and International Studies, described the free trade zone plan as a “Trojan carrot.”

“It’s a useful component in a much broader and active plan” to revitalize the Middle East economically and politically, he said, “but we don’t see the active plan.”

Two of the countries expected to benefit from the proposal — Egypt and Jordan — already have trade arrangements with the United States and Israel.

And it may be unrealistic to believe that many other states will be able to meet — or interested in meeting — WTO standards, such as transparency and open access to markets. Jordan, for example, needed to make vast reforms before it could sign a free trade agreement with the United States, which was signed in 1997 and passed by the U.S. Senate in 2000.

“Trade obstacles in the Middle East often exist for a reason,” Alterman said. “Either the government makes a significant amount from the tariffs, or middlemen make money clearing away obstacles, which gets filtered back to the government.”

The benefits states could receive from the plan may not be enough to motivate Arab regimes to open up their societies, said Stephen Cohen, national scholar of the Israel Policy Forum.

That’s especially true in countries whose leaders might not be around a decade from now, such as Egyptian President Hosni Mubarak or Saudi Crown Prince Abdullah.

Nimrod Raphaeli, a senior analyst in economic affairs for the Middle East Media Research Institute, said the biggest obstacle to the plan is more logistical — the fact that the Arab and Muslim world simply has few products to trade.

“To have a meaningful free trade agreement, you must be able to sell and buy,” Raphaeli said. “In practice, there is little the Middle East can export to the United States.”

The one major exception is oil, but the United States already imports oil from the region.

Manufactured goods comprise only some 6 to 12 percent of Arab countries’ gross domestic product, and Arab states do only limited trading among themselves, Raphaeli noted.

The U.S. free trade agreement with Israel, which dates to 1985, has borne more fruit because Israel has a larger manufacturing sector than the Arab states, he said.