United States Economic and Trade Policy in the Middle East

By Larson, Alan P. | DISAM Journal, Spring 2004 | Go to article overview

United States Economic and Trade Policy in the Middle East


Larson, Alan P., DISAM Journal


[The following are excerpts of the testimony presented to the Senate Finance Committee, Washington, D.C., March 10, 2004.]

The Middle East Challenges and Opportunities

I can think of no other region in the world today that is as vital to U.S. interests, yet poses as many challenges for us, as the Middle East. As President Bush declared in his speech last May, "What happens in the Middle East greatly matters to America." Among those challenges, and the focus of my remarks today, is the growing thirst for opportunity that characterizes the Middle East, and the substantial efforts the United States is undertaking to respond to that demand. U.S. policies to stimulate economic reform and trade liberalization have much to offer, both in terms of generating growth and employment, and in solidifying our broad ties with this diverse and culturally rich region. At the same time, they promote U.S. economic and commercial interests.

During the last week of February, I had the opportunity to visit several Middle Eastern cities, including Ramallah, Jerusalem, Amman, Riyadh, and Cairo. Last week, my colleague Under Secretary Marc Grossman visited Rabat, Cairo, Manama, and Amman. In our meetings with a broad spectrum of individuals--from students to business and civic leaders to government officials--several consistent themes emerged:

* The people of the Middle East, and especially the young people, are yearning for greater economic opportunities;

* Governments in the region increasingly understand the imperative for economic reform;

* The many regional leaders--and we ourselves--believe that change and economic reform come from within, and that the region's cultural and historical legacy will be an important factor in shaping those reforms.

The widely quoted United Nations Development Program (UNDP) Arab Human Development Reports for 2002 and 2003 examine in considerable detail the challenges and opportunities for building a better Middle East. As the 2003 report concludes, a strategic vision for establishing a "knowledge society" in the Arab world requires diversifying economic structures and markets. This also requires upgrading the Arab presence in the "new economy," and in opening up to other cultures.

Grounded in home-grown ideas and a realization that change is necessary to generate jobs, there is growing support in the Middle East for the catalytic role of economic opportunity, a light that shines brightly, dispelling negativism and despair. I am encouraged by concrete demonstrations that the Middle East is taking ownership of this process; last September's U.S. Arab Economic Forum in Detroit the first ever provided ample evidence of this energy and enthusiasm.

Of course, I do not want to downplay the formidable challenges and obstacles that lie ahead before a new, more open, and economically vibrant Middle East can be realized. The Middle East remains woefully un-integrated in the global trading system. The region's share of total world exports accounted for only 5 percent in 2001, and less than 1 percent of global foreign direct investment.

Middle Eastern economies are characterized by structural rigidities, red tape, high unemployment, and a lack of export diversity, which have led to sub-optimal economic performance over many decades. Despite its abundant energy resources and oil wealth, the Middle East has not been successful in creating opportunities that engender a sense of a better tomorrow. This is turn has fostered a loss of hope, particularly among young people, which has increased their susceptibility to those who use terrorism as a means to channel their desperation.

Nonetheless, there is a growing awareness in the Middle East of the nature of the problem, and of the need to change. U.S. economic and trade policy is calibrated to support these nascent developments by promoting economic reforms, and by fostering economic ties and trade linkages. …

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