Revisiting US-Jordan FTA

Published March 1st, 2001 - 02:00 GMT

A serious analyst would not waste his time trying to calculate trade benefits that may accrue to the American economy as a result of entering into a free trade agreement (FTA) with a country like Jordan, whereby all restrictions and tariffs imposed on imports will be removed gradually over 10 years.  

 

The Jordanian economy is too small in comparison to the huge American economy, which is responsible for almost one quarter of the world economy in its entirety. Therefore, one would conclude that America will hardly be affected neither positively nor negatively when the agreement becomes operational at a later time this year.  

 

From an American point of view, the FTA was not motivated by economic considerations. Political reasons were behind the American acceptance of this arrangement, the fourth of its kind after similar agreements with Israel, Canada and Mexico. The aim was to give Jordan some fruits of peace, as Jordanians showed disappointment and complained of their near absence.  

 

The agreement may also serve as a sign of American appreciation of and satisfaction with Jordan's political behavior as a security and stability factor in the Middle East, so much so that ex-president Clinton told the public in a moment of truth that they would not have been able to get together and celebrate safely such a meeting had it not been for the alertness of the Jordanian security apparatus. That was an implied reminder of Jordan's role in foiling the plans of Osama Ben Laden to destabilize Jordan and the United States by carrying out terrorist actions.  

 

It is Jordan that is supposed to benefit economically from entering into a free trade agreement with America, through free access for its products to the largest consumer market in the world. This assumption seems reasonable following the success of a smaller experiment, namely the Qualifying Industrial Zones (QIZs), which raised Jordanian exports to the United States from only nine million Jordanian dinars in 1999 to JD62 million in 2000, looking for a target of JD100 million for the current year.  

 

The benefits to Jordan, resulting from the FTA, will be seen in the trade and investment sectors and in the generation of jobs. The agreement was designed to attract foreign investments to Jordan through the availability of free access to the vast American market.  

 

Certain industrial sectors may benefit from this opportunity more than other, especially labor-intensive industries. It goes without saying that increasing exports and encouraging new investments will spur economic growth and create more jobs to alleviate unemployment, one of the major challenges facing Jordan.  

 

At one time, the major impediment facing Jordan's endeavor to attract direct foreign investments was believed to be the fact that the market is too small to justify the establishment of large-scale industries. Very soon the market of Europe and America will be wide open to our products. The question is whether this access will be translated into new investments.  

 

In order for Jordan's theoretical benefits from free trade with America and Europe to materialize, some measures have to be taken to prepare the Jordanian industry for the new environment. The government, of course, has a role to play, but the major responsibility falls on the shoulders of businesspeople in the private sector. They must rise to the challenge and translate opportunities into achievements. — ( Jordan Times

 

Fahed Fanek

© 2001 Mena Report (www.menareport.com)

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