US-Jordan Free Trade Agreement will Help Jordan Attract Foreign Investment

Published November 26th, 2000 - 02:00 GMT

By Munir K. Nasser 

Chief Correspondent, Washington, DC 

Albawaba.com  

 

Jordan and the United States signed a Free Trade Agreement last month, the first deal in US commercial history that specifically binds the two countries to respect their existing laws guaranteeing workers’ rights and protecting of the environment. Marwan Muasher, Jordan’s Ambassador to the US, believes this agreement will boost the Jordanian economy and help attract foreign joint venture investment.  

In an exclusive interview with Albawaba.com in Washington, Muasher said the Free Trade Agreement, which the US has signed only with Canada, Mexico and Israel, would result in rapid expansion of certain sectors such as pharmaceuticals, information technologies, videos, and the evolution of the software industry in Jordan.  

The following are excerpts from the interview:  

Q- The Free Trade Agreement that you signed recently with the United States will phase out the tariffs on industrial and agricultural products over a 10-year period. Why is it limited to only ten years? 

A- This is what we came out with in the negotiations. Seventy percent of all products would be immediately duty-free and free of quotas. The other 30 percent will be phased out, not all of them reaching 0 tariff in 10 years, but 10 years is the absolute maximum for all products. Beyond doubt, we will have no tariffs or quotas on any product in the agreement, with some exceptions, maybe two or three, like alcohol and tobacco. But for all practical purposes, all products will be able to enter both countries free of custom duty.  

Q- Does this include services? 

A- Yes. There is a special services section, such as banking and tourism that would allow the service industry, not just products, to also have free access to both markets. So when we talk about financial services, the ability and confidence in both countries doing business with the each other will be greatly facilitated.  

Q- What kind of products will Jordan be able to export to the US market? 

A- Any product made in the country can be exported free of duty. This is important because some people think that Jordan doesn’t not have many products today that it can export to the United States. But what we should do is not judge the effect of the agreement by the existing set of products that we export to the United States. What the agreement will do is place investments of products that are not now made in Jordan now. [Other countries] can use this agreement as a platform to enter the US market. As an example, we have seen in the last two years, through the Qualified Industrial Zones, suitcases made in Jordan, such as Samsonite suitcases. This is not something that the country produced before, but because of the intensive [competition] to enter the US market without duties, we have seen investments shift from Southeast Asia, for example, and other places in the world to Jordan to make use of this agreement. So the existing set of industries will be widened and enlarged a great deal because of the agreement.  

Q- Can you explain the role of the Qualified Industrial Zones (QIZ) between Israel and Jordan in this agreement? Are there any requirements for an Israeli input?  

A- The Qualified Industrial Zones in Jordan specify a minimum of 8 percent Israeli input to be able to enter the US market free of custom duties and tariffs. This was and still an arrangement that Jordan entered in, because it did not have a free trade agreement with the US and wanted to make use of the existing Free Trade Agreement between Israel and the United States. With the Free Trade Agreement directly negotiated between Jordan and the US, there is no requirement for an Israeli input. So, as long as there is a Jordanian input of 35 percent, or a combined Jordanian-American input of 35 percent, you can enter the duty-free US market. It is different from QIZ in that there is no requirement for an Israeli input.  

Q- So the QIZ areas will continue to work separately from the Free Trade Agreement? 

A- Yes, because all products made in these areas can enter immediately without custom duty or tariff rates, while some products have a 10-year phase out period. The other difference is that sometimes a Jordanian product might not be able to meet the 35 percent Jordanian input requirement. It might have to bring in an 8 percent Israeli input. Both agreements will be able to co-exist and the Jordanians will be able to use the comparative advantage that both agreements can offer.  

Q- Can the 35 percent requirement come from joint ventures with Arab investors? 

A- The investment can come from anywhere. The manufacturing has to be in Jordan. The 35 percent requirement is not on Jordanian capital, but on Jordanian manufacturing. The factories have to be in Jordan. You cannot, for example, buy something from China and trans-ship it to the United States. That will not work.  

Q- Inside Jordan there were some calls by trade unions for boycotting US products. How is this going to affect the Free Trade Agreement?  

A- I truly have not seen any opposition to the Free Trade Agreement with the US. On the contrary, I think there is a realization that this is going to help the Jordanian economy in a big way. If we look at the Qualified Industrial Zones, they have been a huge success so far in job creation; they have created 7,000 new jobs, even though they have been in existence less than two years; they have attracted major foreign investment; it is an arrangement that has worked very well for Jordan. It is going to be Jordanian products that are manufactured and exported to the US.  

Q- The calls for the boycott of US products is in retaliation to the current situation in Palestine and the US bias towards Israel, aren’t they? 

A- Within the laws of the country, Jordanians are free to buy whichever product they want. But if you are asking if this will have any major impact on the Free Trade Agreement, then the answer is no.  

Q- There were also some concerns about the copyright protection and laws? How is this problem dealt with in the Agreement?  

A- As a pre-requisite to joining the World Trade Organization and to negotiating a free trade agreement, Jordan last year enacted key intellectual property rights laws that have placed the country at the top of the countries in the region [in this field]. That of course will result in companies in sectors such as pharmaceuticals and information technologies or videos, for example. That will result in companies not being able to produce pirated copies of products.  

Q- What is the impact of all of this on the software industry in Jordan? 

A- It will also result in the evolution of the software industry in Jordan and attract foreign investment that will not shy away from coming to Jordan because they will know that their products are protected. In fact, we have started now seeing pharmaceutical companies interested in joint ventures in Jordan, and high tech companies interested in setting up shop and software development in the country. We have seen the local software development also mushroom in Jordan because of the protection of property rights laws. The end result is certainly going to be very positive for the development of such key sectors of the economy in the future.  

Q- I understand there is some opposition to the Free Trade Agreement in Congress. The US chamber of Commerce said it would seek to have Congress scuttle provisions that protect workers’ rights and the environment. Can you address these concerns that worry Congress?  

A- The Republicans and the Democrats have ideological differences over free trade agreements. Whereas the Democrats favor the inclusion of the labor and the environment issues in any agreement, making sure that the rights of labor are protected and making sure nothing in the agreement will serve to weaken the environmental laws. For example, Republicans feel that such issues do not belong in such agreements. We have been aware of such differences right from the beginning, and we worked very closely with both parties in Congress throughout the negotiations. I think we have been able to come out with language that is acceptable to both parties. It is not of course going to meet every single member’s requirement, but I feel hopeful that we have been able to address the major needs of both parties in the agreement. And I anticipate it will be met with approval from both parties when it is submitted to them.  

Q- So you expect that there will still be some discussion about it in Congress before it is finally passed? 

A- Absolutely, this is an issue that is not peculiar to Jordan. The labor and environment issues are ideological issues that both parties have strong views on, but they are views that have to do with these issues, but not necessarily with Jordan. We have excellent environment and labor laws in the country by the admission of all parties here, including the administration and Congress. So this is an issue that is not directly related to Jordan, but directly related to the concept of free trade agreements and what they should include.  

Q- Why is there so much concern about workers’ rights in Jordan, for example?  

A- Jordan does not have any problems with labor rights. In fact, labor laws in Jordan are very positive and respected, even by the labor unions in this country. We do not have a specific problem when it comes to Jordan. We have a conceptual problem with the Republicans in principle, objecting to the inclusion of any labor or environment issues in the core text of the agreement. As we have the Democrats in principle also favoring the inclusion of such labor and environment issues. But no one is objecting at all to any specific labor or environment law in Jordan. In fact, all of them, the business community here, the Republicans, the Democrats and the unions, all attest to the fact that Jordan has very good laws.  

 

By Munir K. Nasser 

US-Jordan Free Trade Agreement Will Help Jordan Attract Foreign Investment  

By Munir K. Nasser 

Chief Correspondent, Washington, DC 

Albawaba.com  

Jordan and the United States signed a Free Trade Agreement last month, the first deal in US commercial history that specifically binds the two countries to respect their existing laws guaranteeing workers’ rights and protecting of the environment. Marwan Muasher, Jordan’s Ambassador to the US, believes this agreement will boost the Jordanian economy and help attract foreign joint venture investment.  

In an exclusive interview with Albawaba.com in Washington, Muasher said the Free Trade Agreement, which the US has signed only with Canada, Mexico and Israel, would result in rapid expansion of certain sectors such as pharmaceuticals, information technologies, videos, and the evolution of the software industry in Jordan.  

The following are excerpts from the interview:  

Q- The Free Trade Agreement that you signed recently with the United States will phase out the tariffs on industrial and agricultural products over a 10-year period. Why is it limited to only ten years? 

A- This is what we came out with in the negotiations. Seventy percent of all products would be immediately duty-free and free of quotas. The other 30 percent will be phased out, not all of them reaching 0 tariff in 10 years, but 10 years is the absolute maximum for all products. Beyond doubt, we will have no tariffs or quotas on any product in the agreement, with some exceptions, maybe two or three, like alcohol and tobacco. But for all practical purposes, all products will be able to enter both countries free of custom duty.  

Q- Does this include services? 

A- Yes. There is a special services section, such as banking and tourism that would allow the service industry, not just products, to also have free access to both markets. So when we talk about financial services, the ability and confidence in both countries doing business with the each other will be greatly facilitated.  

Q- What kind of products will Jordan be able to export to the US market? 

A- Any product made in the country can be exported free of duty. This is important because some people think that Jordan doesn’t not have many products today that it can export to the United States. But what we should do is not judge the effect of the agreement by the existing set of products that we export to the United States. What the agreement will do is place investments of products that are not now made in Jordan now. [Other countries] can use this agreement as a platform to enter the US market. As an example, we have seen in the last two years, through the Qualified Industrial Zones, suitcases made in Jordan, such as Samsonite suitcases. This is not something that the country produced before, but because of the intensive [competition] to enter the US market without duties, we have seen investments shift from Southeast Asia, for example, and other places in the world to Jordan to make use of this agreement. So the existing set of industries will be widened and enlarged a great deal because of the agreement.  

Q- Can you explain the role of the Qualified Industrial Zones (QIZ) between Israel and Jordan in this agreement? Are there any requirements for an Israeli input?  

A- The Qualified Industrial Zones in Jordan specify a minimum of 8 percent Israeli input to be able to enter the US market free of custom duties and tariffs. This was and still an arrangement that Jordan entered in, because it did not have a free trade agreement with the US and wanted to make use of the existing Free Trade Agreement between Israel and the United States. With the Free Trade Agreement directly negotiated between Jordan and the US, there is no requirement for an Israeli input. So, as long as there is a Jordanian input of 35 percent, or a combined Jordanian-American input of 35 percent, you can enter the duty-free US market. It is different from QIZ in that there is no requirement for an Israeli input.  

Q- So the QIZ areas will continue to work separately from the Free Trade Agreement? 

A- Yes, because all products made in these areas can enter immediately without custom duty or tariff rates, while some products have a 10-year phase out period. The other difference is that sometimes a Jordanian product might not be able to meet the 35 percent Jordanian input requirement. It might have to bring in an 8 percent Israeli input. Both agreements will be able to co-exist and the Jordanians will be able to use the comparative advantage that both agreements can offer.  

Q- Can the 35 percent requirement come from joint ventures with Arab investors? 

A- The investment can come from anywhere. The manufacturing has to be in Jordan. The 35 percent requirement is not on Jordanian capital, but on Jordanian manufacturing. The factories have to be in Jordan. You cannot, for example, buy something from China and trans-ship it to the United States. That will not work.  

Q- Inside Jordan there were some calls by trade unions for boycotting US products. How is this going to affect the Free Trade Agreement?  

A- I truly have not seen any opposition to the Free Trade Agreement with the US. On the contrary, I think there is a realization that this is going to help the Jordanian economy in a big way. If we look at the Qualified Industrial Zones, they have been a huge success so far in job creation; they have created 7,000 new jobs, even though they have been in existence less than two years; they have attracted major foreign investment; it is an arrangement that has worked very well for Jordan. It is going to be Jordanian products that are manufactured and exported to the US.  

Q- The calls for the boycott of US products is in retaliation to the current situation in Palestine and the US bias towards Israel, aren’t they? 

A- Within the laws of the country, Jordanians are free to buy whichever product they want. But if you are asking if this will have any major impact on the Free Trade Agreement, then the answer is no.  

Q- There were also some concerns about the copyright protection and laws? How is this problem dealt with in the Agreement?  

A- As a pre-requisite to joining the World Trade Organization and to negotiating a free trade agreement, Jordan last year enacted key intellectual property rights laws that have placed the country at the top of the countries in the region [in this field]. That of course will result in companies in sectors such as pharmaceuticals and information technologies or videos, for example. That will result in companies not being able to produce pirated copies of products.  

Q- What is the impact of all of this on the software industry in Jordan? 

A- It will also result in the evolution of the software industry in Jordan and attract foreign investment that will not shy away from coming to Jordan because they will know that their products are protected. In fact, we have started now seeing pharmaceutical companies interested in joint ventures in Jordan, and high tech companies interested in setting up shop and software development in the country. We have seen the local software development also mushroom in Jordan because of the protection of property rights laws. The end result is certainly going to be very positive for the development of such key sectors of the economy in the future.  

Q- I understand there is some opposition to the Free Trade Agreement in Congress. The US chamber of Commerce said it would seek to have Congress scuttle provisions that protect workers’ rights and the environment. Can you address these concerns that worry Congress?  

A- The Republicans and the Democrats have ideological differences over free trade agreements. Whereas the Democrats favor the inclusion of the labor and the environment issues in any agreement, making sure that the rights of labor are protected and making sure nothing in the agreement will serve to weaken the environmental laws. For example, Republicans feel that such issues do not belong in such agreements. We have been aware of such differences right from the beginning, and we worked very closely with both parties in Congress throughout the negotiations. I think we have been able to come out with language that is acceptable to both parties. It is not of course going to meet every single member’s requirement, but I feel hopeful that we have been able to address the major needs of both parties in the agreement. And I anticipate it will be met with approval from both parties when it is submitted to them.  

Q- So you expect that there will still be some discussion about it in Congress before it is finally passed? 

A- Absolutely, this is an issue that is not peculiar to Jordan. The labor and environment issues are ideological issues that both parties have strong views on, but they are views that have to do with these issues, but not necessarily with Jordan. We have excellent environment and labor laws in the country by the admission of all parties here, including the administration and Congress. So this is an issue that is not directly related to Jordan, but directly related to the concept of free trade agreements and what they should include.  

Q- Why is there so much concern about workers’ rights in Jordan, for example?  

A- Jordan does not have any problems with labor rights. In fact, labor laws in Jordan are very positive and respected, even by the labor unions in this country. We do not have a specific problem when it comes to Jordan. We have a conceptual problem with the Republicans in principle, objecting to the inclusion of any labor or environment issues in the core text of the agreement. As we have the Democrats in principle also favoring the inclusion of such labor and environment issues. But no one is objecting at all to any specific labor or environment law in Jordan. In fact, all of them, the business community here, the Republicans, the Democrats and the unions, all attest to the fact that Jordan has very good laws.  

 

© 2000 Al Bawaba (www.albawaba.com)

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