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04 November 2005
U.S. Exports to Arab Countries Projected To Continue Surge in 2006
National U.S.-Arab Chamber of Commerce Chief Hamod examines the trend
Washington -- The National U.S.-Arab Chamber of Commerce (NUSACC) is projecting a continuing surge of U.S. exports to Arab countries in 2006, with opportunities "across the board" for doing business in the region, according NUSACC President David Hamod.
U.S.-Arab Tradeline, a publication of the chamber, predicts that U.S. merchandise exports to Arab countries will reach $37.9 billion in 2006, an increase of 40 percent compared to the expected figure for 2005.
In its September/October edition, Tradeline projected that U.S. merchandise exports to the Arab world in 2005 will reach $26.7 billion, a 38 percent increase over the 2004 level.
"The opportunities are really across the board and bode very well for U.S. companies wanting to do business in the region," Hamod recently told the Washington File.
The Tradeline forecast dealt with 21 Arab countries and the Palestinian Territories, from Mauritania and Morocco in northwestern Africa eastward to Iraq and the countries bordering the western shore of the Gulf, as well as Sudan, Somalia and Djibouti.
Hamod said that some of the obvious areas of opportunity are in financial services, construction/engineering, information and communication technology and consumer products.
"In many ways, trade is the star of the show," he said. "Politics is taking a back seat to trade and investment because business is playing a more direct role in creating jobs and putting bread on the table."
Tradeline attributed the surge in U.S. exports to the Arab countries to three main factors:
• Higher oil prices that are boosting the import purchasing power of Arab countries;
• Increased investment by the Arab private sector, especially after September 11, 2001, when Arab businessmen began staying "closer to home," and;
• An expanding consumer market as a result of globalization.
"This has been especially true for construction and engineering projects, like those involving petrochemicals, but there have also been major investments in leisure and residential development projects," Tradeline wrote. Those large-scale projects "focus on infrastructure, and contain a substantial amount of U.S. goods and services," Tradeline added.
"Arab consumers are more aware than ever about the appeal and availability of U.S. products, and they are flush with disposable income," Tradeline said.
FREE-TRADE AGREEMENTS
Hamod said that the Bush administration's policy of seeking free-trade agreements (FTAs) with Arab countries as part of its goal to create a free trade area in the Middle East by 2013 has "tremendous potential."
The United States has completed FTAs with Israel, Jordan and Morocco, has finished FTA negotiations with Bahrain and Oman, and currently is negotiating an agreement with the United Arab Emirates. The United States and Egypt are weighing a decision to open FTA negotiations.
Tradeline projects that Egypt will be the third-largest market among Arab countries for U.S. exports in 2006, absorbing more than $5 billion worth of goods. Saudi Arabia, the largest U.S. market among Arab countries, is expected to buy $10.7 billion worth of goods in 2006, followed by the United Arab Emirates, which is predicted to import $10.2 billion in U.S. goods.
Hamod said that Egypt is a different type of market from Saudi Arabia or the Emirates because the Egyptian government places a high priority on foodstuffs and meeting the basic needs of its 70 million people.
The current Egyptian government "is working together to promote economic reform better than any team we've seen in the past," Hamod said, adding that it is "systematically bringing about these economic reforms and doing away with decades old subsidies."
He said that in light of the "bread riots" that occurred in Egypt in 1977, "Egypt can only move so far so fast, but the Egyptian people seem to be supportive of what's going on."
An FTA links the economies of the United States and its signatory partners, removing virtually all barriers to trade and investment in both directions. FTAs include protections of foreign investment, the environment, intellectual property and workers' rights and open government procurement procedures.
Hamod says that Arab governments seek FTAs when they consider it in their best interest to do so.
"These are major decisions being made by the Arab countries in terms of positioning their economies for the 21st century," Hamod said. "The governments can sign all the agreements they want, but unless they get the support they need from the private sector, the agreements won't be worth the paper they are written on. The governments are opening the door to the private sector. Now it's up to the private sector to walk through and decide how they can leverage these FTAs and create trade and investment."
In 2000, Jordan became the first Arab country to conclude an FTA with the United States, leading to surges in exports, foreign investment and job creation. From 2000 to 2004, Jordanian exports to the United States grew from $63 million to $1.1 billion.
Hamod says it may be unrealistic to expect other Arab countries will experience comparable growth after signing FTAs.
"Countries' expectations of what happens after the FTA gets signed need to stay reasonable. I don't think we're going to see a huge surge in either direction right off the bat. It takes time," he said.
TRADE FAVORS DEMOCRACY, STABILITY
Hamod said that beneficial consequences of increased trade are greater rule of law, transparency and economic reform as people "become a more active part of the international trading system."
"Trade has the potential to support the effort to spread democracy, but it's not a given," he said. "From the perspective of our chamber, we're focused on the FTAs for the economic benefits that they'll bring to people -- Americans and Arabs. If democracy promotion is one of the side effects, so much the better."
For additional information on U.S. trade in the region, see U.S.-Middle East Free Trade Area.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
