WASHINGTON - A free-trade deal between the
United States and the tiny Persian Gulf Kingdom of
Bahrain is causing friction with other Arab states,
which say the pact could weaken their economic bloc
ahead of future trade talks with Washington. A meeting
of the heads of states of the six-nation Gulf
Cooperation Council (GCC), made up of the oil-rich
nations of Saudi Arabia, Kuwait, Bahrain, Qatar, Oman
and the United Arab Emirates, fell apart after Saudi
Arabia, the largest and most influential member, said
Bahrain's deal would open a back door for US goods to
enter the region.
The GCC is an economic bloc
established in 1981, modeled after the European Union
and Mercosur, or the Southern Cone Common Market, in
Latin America. The Arab grouping is scheduled to
establish a single market and currency by 2010.
The leaders ended their summit on Tuesday
without settling the bitter dispute, which led Crown
Prince Abdullah of Saudi Arabia to skip the gathering in
protest. After delaying their final session for three
hours over the disagreement, the leaders finally
released a statement that avoided the issue of trade
altogether to maintain a solid public front, according
to several Arabic-language press reports, which added
that the atmosphere at the gathering was visibly tense.
"We discussed bilateral agreements and decided
to postpone a decision for a future meeting," Bahraini
Foreign Minister Mohammed bin Mubarak al-Khalifa said in
the statement. "We don't have to deal with this issue
immediately and I am happy we have finalized this
meeting as we have. There are always differences in
opinions," he said.
Washington and Manama signed
the trade deal in September. When the agreement, which
will be ratified in 2005, goes into effect, 100% of
consumer and industrial products and 81% of agricultural
exports from the US will enter the Gulf nation
duty-free. Under the deal, Bahrain will open its
services market wider than any other US trading partner,
adopt Washington's preferred intellectual property rules
and open government procurement to US companies.
Saudi Arabia is worried that Bahrain signed the
deal independent of its regional partners and that the
new rules will flood the region with US goods. The GCC
governments have already dropped all trade tariffs among
themselves, meaning that once in the region, US goods
could potentially move freely across borders. Riyadh has
reportedly said it may consider rolling back the tariff
reductions and blocking trade from neighboring countries
to protect its economy. That would be a setback for the
long-term strategy devised by Washington to press larger
countries to open up for US trade.
After facing
stiff opposition from big countries such as Brazil in
Latin America and Saudi Arabia in the Middle East over
his ambitious trade plans, US Trade Representative
Robert Zoellick developed a strategy to strike deals
with small countries in these regions to sway the larger
nations. Tiny nations stand to gain little economically
from the pacts, but they do receive some political clout
and status as US trading partners.
Bahrain, an
archipelago of some 30 islands, is a case in point. The
tiny nation, with a population of only 730,000, has
always tried to break free from the shadow of its larger
neighbor, Saudi Arabia, a nation of 25 million people
and the dominant player in the global oil market. For
example, Bahrain chose to give the US its largest
military bases in the Arab world. It hosts the US Navy's
5th Fleet, earning it Washington's designation as a
"major non-NATO ally".
Its ruler, Sheikh Hamad
Bin-Isa Al-Khalifah, designated himself king in February
2002 after he succeeded his father and changed Bahrain's
status from an emirate to a monarchy in a move that was
seen triggered by envy of the Kingdom of Saudi Arabia.
In May 2003, as part of its response to the September
11, 2001, terrorist attacks - carried out by hijackers
most of whom were Mideast nationals - US President
George W Bush announced an initiative to create a Middle
East Free Trade Area (MEFTA) by 2013. Since then,
Washington has concluded free-trade agreements (FTAs)
with Morocco and Bahrain and has said it will start
talks with the UAE and Oman.
The US already has
FTAs with Jordan, a country of nearly 5 million people,
and Israel, whose population is 6 million. Washington
believes those agreements will pressure larger nations
to sign such deals as the proposed Free Trade Area of
the Americas (FTAA) and MEFTA, and to resume global
negotiations at the World Trade Organization. Zoellick's
approach of cutting deals with small markets such as
Bahrain known as "competitive liberalization" has been
assailed by some members of the US Congress who argue
that negotiating free-trade agreements with small
countries wastes precious and limited US negotiating
resources.
The Bush administration has also
completed FTAs with Chile, Singapore, Guatemala, El
Salvador, Honduras, Nicaragua, Costa Rica, Australia and
the Dominican Republic. It is currently negotiating
deals with 10 relatively small markets as part of its
strategy: Panama, Colombia, Ecuador, Peru, Thailand, and
the five nations of the Southern African Customs Union
(SACU) - Botswana, South Africa, Lesotho, Swaziland and
Namibia.
Congress's watchdog agency, the General
Accounting Office, has questioned the economic payoff of
the accords. It estimated that all existing FTAs, plus
those in progress, accounted for only about 8% of the
total US trade. Bahrain is hardly a big fish for US
companies. Total two-way trade between the nations was
only US$900 million in 2003, with the US exporting more
than half a billion dollars' worth of goods and
services. Bahraini exports included oil, gas and
aluminum.
