Bush to Propose U.S.-Middle East Free Trade Accord, Aide Says

By Heidi Przybyla 

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Washington, May 9 (Bloomberg) -- President George W. Bush today will propose creating a U.S.-Middle East Free Trade Area within the next 10 years to promote democracy and stability, an administration official said.

Economic prosperity and security are essential to creating conditions for peace in the region after the war to end Saddam Hussein's regime in Iraq, the official told reporters in a preview of a speech Bush will give at the University of South Carolina's commencement.

``The Middle East has been a big loser in the last 20 years'' as trade deals involving China, Africa and Southeast Asia mean those regions get more economic opportunity, said Edward Gresser, an analyst at the Progressive Policy Institute in Washington, a research organization for pro-trade Democrats.

The share of world exports from more than a dozen Muslim nations plunged to 3 percent in 2001 from 13.3 percent in 1980, said Gresser, a former U.S. trade official. A free-trade accord would boost income and may help prospects for peace in the region, he said.

Lowering trade barriers and encouraging investment also is a way to mute anti-Americanism and discourage terrorism, U.S. Trade Representative Robert Zoellick told the Export-Import Bank's annual conference last month.

``We're looking at how we can follow up the military victory in the Gulf with trade and economic initiatives,'' Zoellick said.

He and Secretary of State Colin Powell will discuss political, social and economic improvements at a World Economic Forum meeting in Jordan next month, the Bush official said.

Security, Trade

Powell leaves today to seek progress on a top priority for Muslims: a peace accord between Palestinians and Israelis. The U.S. gave both sides a ``road map'' of steps toward creating a Palestinian state in three years.

Bush's free-trade proposal comes as the U.S. also is asking the United Nations Security Council to immediately lift sanctions on Iraq and for the resumption of oil exports under UN and World Bank monitoring.

The U.S. has been at odds with France and Russia, which opposed the Iraq war, over the UN's role in postwar Iraq. France and Russia have called for the UN to take a ``central'' role; the U.S. supports advisory participation.

The U.S. government-backed Ex-Im Bank is ``interested'' in supporting U.S. exports to Iraq, the agency's president, Philip Merrill, said at last month's Ex-Im Bank conference.

The agency is exploring how it could create an oil trust fund in Iraq to guarantee any loans, as one way to assure repayment, Merrill said.

Missing Out

Bush will say in today's speech that while the Middle East has rich cultural traditions, it is missing out on economic growth that has blossomed in other parts of the world, the administration official said at the briefing.

The World Bank expects annual economic growth in the Middle East to average 1.3 percent per capita during the decade, the slowest rate of any region. Half the 300 million citizens are younger than 24. One person in five is unemployed and the work force is the fastest growing in the world.

Bush will outline benchmarks for nations that want to qualify for membership in any free-trading zone, including progress on providing access to capital for small- and medium-sized businesses, improving property rights, fighting terror and strengthening the rule of law, the official said.

Bush won't specify which nations may qualify to participate in any agreement, the aide said.

Olive Oil, Shoes

The U.S. approved a free-trade accord with Jordan in 2001 as Bush courted Muslim support for the war on terrorism after the Sept. 11 attacks on the U.S. In March of this year, the U.S. began trade talks with a second Muslim country, Morocco.

AOL Time Warner Inc., Merck & Co., 3M Co. and other U.S. companies are pressing for the Morocco accord, saying it would open the way to fight movie piracy and expand investment.

The Muslim world's share of global trade and investment has sunk to less than a quarter its level of two decades ago, as the nations kept some of the highest trade barriers in the world and failed to develop industries other than oil and gas, according to the World Bank.

U.S. sanctions have also curbed trade with Iraq and two other of the largest regional economies: Iran and Libya.

Gresser said a reduction in U.S. import tariffs on items such as olive oil, shoes, clothing, carpets and handbags would help fuel Muslim economies as well as benefit U.S. retailers and consumers.

``It's one part of the world where we haven't had a big trade initiative,'' Gresser said. ``It's a big missing part of our trade agenda.'' 

May 2003

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