Remarks by Daniel Griswold at the Capitol Hill Forum, “Can Free Trade Promote Peace in the Middle East?,” June 20, 2003.
Free trade has always been about more than
economics-comparative advantage, efficiency, lower prices and all
that. Those are reasons enough to support it, but free trade is
first about individual liberty. People should be free to engage in
peaceful and mutually beneficial commerce across international
borders without the heavy hand of government dictating how they
should spend and invest their hard-earned money. THAT should be
reason enough to support free trade. But there is yet another
compelling reason why policy makers should look favorably on free
trade: It can be an important tool of U.S. foreign policy, nowhere
more so than in the Middle East.
After World War Two, Democratic and Republican administrations
alike pursued trade expansion as an important pillar of America’s
Cold-War policy. Trade promoted development in post-war Europe and
Japan, and cemented relations among allies. War is pretty much
unthinkable today among the major powers of Europe in part because
of the trade and investment ties that bind their people together.
September 11 and its aftermath have reminded us again that trade
and foreign policy are intertwined. That connection between trade,
security, and foreign policy will dominate the agenda at this
weekend’s historic economic forum in Amman, Jordan, which will hear
more about in a few minutes.
Free trade is not a panacea, but it is a necessary building
block for a more peaceful and prosperous Middle East. Free trade
has helped to reduce poverty in those countries and regions of the
world that have progressively opened themselves to the global
economy. Free trade can till the soil for democracy and respect for
human rights by creating an economically independent and growing
Countries that are open to trade and global commerce are more
likely to be working democracies that respect human rights. The
Bush administration’s white paper on National Security Strategy
last year emphasized the importance of trade in building a more
secure world. In his May 9 address in South Carolina, President
Bush said, “The Arab world has a great cultural tradition, but is
largely missing out on the economic progress of our time. Across
the globe, free markets and trade have helped defeat poverty, and
taught men and women the habits of liberty.”
We have seen this dynamic in action in South Korea, Taiwan,
Chile, Mexico, and other countries where economic reforms and
openness have laid a foundation for political competition and
democracy. Within the Arab world, those nations that have traveled
the furthest on the road of economic reform, and Jordan certainly
belongs on that list, are among the leaders of political reform as
Sadly, the Arab world is a land that globalization has largely
passed by-and their isolation is largely self-imposed. Average
tariff barriers in the Arab Middle East are among the highest in
the world, and as a consequence the region suffers from chronically
declining shares of global trade and investment. Average annual
inflows of foreign direct investment to Arab countries are only
slightly larger than the inflows to Sweden; non-oil exports from
Arab countries to the rest of the world are smaller than those of
Denmark. There are more McDonalds franchises serving the 15 million
people in the Netherlands serve the 280 million people in the whole
Arab world. The government of Jordan took the positive step of
joining the World Trade Organization in 2000, but WTO membership is
still the exception in the Middle East. Here’s a pop quiz: What do
Libya, Sudan, Syria, Iraq, Iran, and Afghanistan have in common?
Besides all of them being ongoing or recent sponsors of terrorism,
not one of them belongs to the WTO.
Internal market freedom is also lacking in many Arab nations
that are still suffering from a bout of so-called Arab socialism.
Most Arab countries engage in widespread price controls and
state-ownership of enterprises. They lack the legal and political
infrastructure to enforce property and contract rights.
Those policies have wrought dismal economic performance. The total gross domestic product of the 280 million people who live in Arab lands is smaller than that of Spain. According to a recent report by the UN Development Program, between 1985 and 1998, real per capita GDP declined in a broad swath of the Arab world. In contrast, real GDP during that same period rose by 30 percent in Israel, 90 percent in Chile, and more than doubled in Thailand, China, and South Korea.
The record on civil and political freedom in the Arab world is no better. Freedom House, the human rights group in New York, reported in its latest study that only 25 percent of Muslim-majority countries in the world are democracies compared to 75 percent of non-Muslim countries. Freedom House noted in most recent report that, “the democracy gap between the Islamic world and rest of the world is dramatic,” and there is no sign that the gap is closing.
That depressing reality feeds terrorism, not because of poverty
but because of a lack of opportunity and hope for a better future,
especially among the young. It’s a myth that poverty breeds
terrorism. In fact, poverty is more widespread in sub-Saharan
Africa and South Asia than in the Arab world, in part because of
the network of private Islamic charities that help the poorest in
society. And many terrorists are well educated and come from
relatively privileged families. As Paul Blustein of the Washington
Post wrote in a story from Cairo last year: “It is not poverty that
drives their discontent so much as an economy that provides few
chances for interesting work and upward mobility.”
Young people who cannot find meaningful work and who cannot
participate in the political process are ripe pickings for
religious fanatics and terrorist recruiters.
All of this gives urgency to the summit in Jordan this weekend, and to what the Bush administration is trying to accomplish with its proposal for a free trade area in the Middle East. The initiative concentrates on negotiating free trade agreements with willing and ready partners in the Middle East, with the goal of establishing a network of agreements within a decade.
The advantage of striking FTAs would be their
comprehensiveness. Like the Jordan, Singapore, and Chile FTAs, any
agreements we sign should cover all goods and services. FTAs also
require liberalization on the part of our negotiating partner, an
absolutely necessary step in a region where the greatest barriers
to trade are not external but internal.
The catch with FTAs is that they take a long time to negotiate
and implement. Negotiation and final passage of agreements can take
years. Once enacted, some of the phase-out periods for protection
of “import-sensitive” sectors can take up to 12 years. So genuine
free trade would come to a significant number of Middle Eastern
countries only by 2013 or even later. Our challenge in that region
of the world is far too urgent for that to be our only policy
A complimentary policy would be to grant immediate, unilateral
duty-free access to imports from qualifying Middle Eastern
countries. I know Senators Baucus and McCain have introduced a bill
to that effect [Finance Committee staff], and companion legislation
is being prepared in the House. The beauty of this approach is that
it delivers real-time benefits to the people of the Middle East by
creating immediate opportunities for their producers to sell in the
U.S. market. It also sends a symbolically powerful signal that we
are serious about encouraging free trade by making a down payment
on the vision of a more open and economically vibrant Middle East.
We’ve extended qualified duty free access to the Caribbean Basin
countries, to the Andean Trade Preference Act countries, and to
sub-Saharan Africa through AGOA. Is not the Middle East just as
important to U.S. foreign policy as those other
The drawback of the unilateral approach is that it requires
very little policy reform on the part of Middle Eastern
governments. It leaves untouched the fundamental problem of a lack
of openness and economic freedom within the Arab world itself. And
the record of unilateral trade preferences is not spectacular.
Studies have found that countries that enjoy preferential access to
the U.S. market are no more inclined to liberalize than those that
The answer, of course, is to pursue both approaches
simultaneously: Reduce our own trade barriers as soon as possible
to goods of most export potential in the Arab world, and at the
same time negotiate comprehensive, bilateral agreements along the
Jordan model with a coalition of willing reformers in the Middle
Free trade is not a magic tonic that by itself will bring peace and hope to the Middle East. But trade can, as it has in other times and other places, bring people together in peaceful cooperation to build a better future. Now is the time to put aside petty, parochial, and partisan concerns to do whatever we can as soon as we can to extend the blessing of freedom to a part of our world that desperately needs it.