As Prepared for Delivery
World Economic Forum
Dead Sea, Jordan
By Robert B. Zoellick
Not far from where we meet today, you can stand by vestiges of
watch towers from the Iron Age. From the hills upon which these silent sentinels remain
as lookouts of old Jordan’s past, you can discern the arrival of a new nation’s
future: in a nearby valley, adjacent to the campus of Jordan University, you can see the
offices of Estarta Solutions, where 170 Jordanians are busy developing advanced business
software. This dynamic company produces a variety of products, from Arabic word
processors for Macintosh computers to banking software. Last year, under the U.S.-Jordan
Free Trade Agreement, Estarta earned $1 million in export sales to the United States,
and Microsoft announced that it would be making a major investment in the company.
The president and co-founder of this start-up, Ennis Rimawi, is
one of a new generation who are making their mark as innovators and entrepreneurs in the
global economy. Rimawi and his colleagues are reviving a proud past—when the
Middle East was the vibrant core of global trade—and charting a brighter future: for
Jordan, the Middle East, and the world.
Survey the lands of the Middle East and the Mahgreb today: Jordan,
our host, Morocco to the west, and Bahrain to the east stand out for what can be
accomplished when leaders embrace development sparked by trade, openness, and reform. These
three nations have expanded educational opportunities, advanced the contributions of
women, cut costly tariffs and quotas, enhanced regulatory transparency, promoted
privatization, and welcomed foreign investors.
In February, on the eve of war, President Bush spoke of a new
vision for peace and prosperity in the Middle East: "Old patterns of conflict in the
Middle East can be broken," he observed, "if all concerned will let go of the
bitterness, hatred, and violence, and get on with the serious work of economic development."
On May 9, following the defeat of Saddam Hussein, the President
gave depth to that vision by announcing a Middle East initiative that marries trade,
aid, and a commitment to regional security and peace. He pledged American help.
Our ambition, the President said, is "to bring the Middle East
into an expanding circle of opportunity, to provide hope for the people who live in that
The reconstruction and reopening of Iraq presents an opportunity
for change—an opening for the people of the Arab world to ask why their region, once a
nucleus of trade, has been largely excluded from the gains of this modern era of
globalization. Peoples around the world are realizing that decades of closed national borders,
centralized economic controls, the heavy hand of government, and nationalized industry
have entrenched poverty, not alleviated it.
There is a vast wealth of human capital in the Middle East,
waiting to be empowered.
Now, the United States is making a long-term commitment to help
those who will strive to reclaim a splendid past and create a new future: one of peace,
hope, and opportunity.
The United States aims to brighten the Middle East with as many
success stories as stars in the desert sky. To do so, we are charting a new constellation:
shining lights of trade and investment that offer a clear course for countries in the
region wishing to embark on a journey of economic openness and reform.
Our trade agenda is a fundamental part of the President’s broader
Middle East initiative. We will combine vigorous efforts to forge peace between Israelis
and Palestinians, targeted aid, business and educational exchanges, security
cooperation, humanitarian and health assistance, and other programs—along with private trade and
investment—to assist countries in creating stable, prosperous societies.
This strategy recognizes the differing levels of development
across the region, the historical and political sensitivities faced by governments, and
the reality that reform processes must be driven from within. Our goal is to assist
nations that are ready to embrace economic liberty and the rule of law, integrate into the
global trading system, and bring their economies into the modern era.
Our hope, as President Bush said in South Carolina, is that free
markets and trade will help defeat poverty and promote the habits of liberty in all
A Middle East Free Trade Area will not be created in a month, a
year, or even five years. But America is committed for the long haul, through a step-by-step
strategy for progress that will help nations build free, dynamic economies and rising
standards of living for all.
The Spirit of the Levant: Trade In the Middle
Open markets and trade have a long lineage in this part of the
world. The Holy Quran urges the faithful to "Let there be trading by mutual consent."
For centuries, the Middle East was the world’s preeminent bazaar, a region renowned for
Throughout the Middle Ages, the eastern and western Mediterranean
were linked by a network of trade. According to a 1453 report by a Catalonian
merchant from Eastern Spain, this region was "the head and principal of all commerce,"
the heart and soul of the world’s economy.
The region at the center of this trade was named the Levant by
Europeans, from the Latin verb meaning "to rise," referring to the point where the sun rises
in the east. The "Levant trade" described the rising flow of goods and ideas between Europe
and Lebanon, Egypt, Syria, Turkey, Jordan, and Persia.
Long before oil was a valued commodity, the Levant trade was the
source of much of the Middle East’s wealth. In the middle of the 18th Century,
before my country was born, the British scholar Edward Pococke, living in Syria, noted that the
commercial centers of the region had grown "great, populous, and rich, from the trade it
European merchants imported spices, dyes, sugar, pearls, and
precious stones from the Middle East. Silk from Persia and the shores of the Caspian was
carried to the kingdoms and principalities of Europe via a "silk road" that stretched west
to the Atlantic Ocean and east to China. The caravan-serais sprinkled across the deserts
not far from here—and the majestic ruins of Petra—stand in testament to the vitality and
practicality of this trade.
Medieval Europe depended on this region for many materials. Alum,
used in dying fabrics, came from Turkey, Syria, and Egypt. Potash, used for
making soap and glass, was drawn from Syria. The Levantine trade was valuable and varied:
wheat; furs; pitch; rugs; wax; caviar; and many other goods flowed east and west in a
continual stream of commerce.
A sophisticated system of banking and finance underpinned this
trade. A letter of credit issued in Baghdad could be honored from Samarkand to Sicily.
The Middle East of today is rich in human capital and, once freed
from the weight of bureaucracy, is quick to revive its traditions of free and open
commerce. Yet ruinous military conflicts, misguided economic policies, and brutal
suppression of liberties have cut off the Old Levant from the New Global Economy. Working
together, the challenge is to draw on what is successful and build on it, to extend
opportunity to all nations striving for progress and peace.
The new merchants of the Middle East have an extended journey to
travel. The Middle East’s share of international trade and foreign direct investment
is among the lowest in the world.
According to the United Nations, the Middle East attracted just
0.7 percent of global foreign direct investment throughout the 1990s. Exports from the
region—over 70 percent of which are accounted for by oil and oil-related
products—grew at 1.5 percent per year over the same period, far below a global average growth
rate of 6 percent. On a per capita basis, exports are significantly lower today than 20
U.S. trade patterns reflect the Middle East’s detachment from full
participation in the global economy. The United States imports almost twice as much
from Hong Kong as it draws in non-oil goods and farm products from the 22 members of
the Arab League and Afghanistan combined.
This economic autarky has consigned tens of millions to
unemployment and poverty. According to the World Bank, about 25 percent of people in the
region live on less than $2 per day. The UN reports that Arab countries have the world’s
lowest percentage of people who use the Internet or have access to a computer.
Yet the free-trade "Spirit of the Levant" remains alive in Arab
émigrés in cities around the world. In the United States, 3 million Arab immigrants have
evidenced an impressive talent for commerce and education. Arab-Americans have achieved
levels of income 22 percent above the U.S. average; 36 percent have completed college,
compared to 23 percent of Americans overall. A rebirth of commerce and
intellectual discovery awaits only an awakening of economic liberty throughout their
Little-noticed demographic trends point to the potential for
progress in Arab lands when trade barriers come down and reform—from property rights to
judicial systems—takes hold. Nicholas Eberstadt and Lisa Howie of the American Enterprise
Institute provided me data showing that important growth indicators such as life
expectancy, birth rates, literacy, and educational attainment have all improved
dramatically over the past generation. Although progress has been uneven across countries,
between 1970 and 2000 overall illiteracy rates for adult Arabs fell by over 30
percentage points—from 71 percent to 39 percent. Average years of schooling for people 15 and older
more than tripled over the same period. Mortality rates are low in many countries, with
life expectancy exceeding 70 in Algeria, Jordan, Iran, Kuwait, Lebanon, Libya,
Oman, Saudi Arabia, Tunisia, the UAE, and the Palestinian territories.
The Middle East also faces serious challenges. Absent economic
liberalization, population growth threatens to turn the social crisis of chronic
unemployment into chaos and despair. Reform is urgent; the cost of clinging to failed
socialist and bureaucratic models—from the mid-20th Century or even the Ottomans—is
Scholars from the 22 Arab League countries authored a report last
year, sponsored by the UN, which called for fresh thinking, but also an appreciation of
the qualities that once gave this region vitality, energy, and hope. The report stated
that Middle East nations cannot continue to rely on oil wealth. It explained honestly that
the few have deprived the many of basic political freedoms.
It is encouraging that new leaders and businesspeople are acting
on these truths. This special meeting of the World Economic Forum in Jordan is itself a
sign of change. As King Abdullah said, this gathering can help "show the world that
the Middle East is ready for reform, development and growth."
Models for Reform: Jordan, Morocco, and Bahrain
Jordan is leading by example: It has invested in health and
education, strengthened property rights, freed the private sector from government
strictures, trimmed regulations, and pursued sound monetary policies. Jordan also joined hands with
the United States through a comprehensive free trade agreement, which has helped
speed economic progress.
Jordan is now outpacing its neighbors—and much of the world—by
leveraging trade to create growth and opportunity. The economy has expanded by more
than 4 percent annually over the past several years, sparked by both internal
reforms and greater exports to the United States. Since signing the U.S.-Jordan Free Trade
Agreement in 2000, Jordan’s sales to U.S. customers have expanded nearly 13-fold,
from $31 million to $389 million. Last year alone, Jordan’s exports to the United States
grew by 72 percent. That increase is especially impressive considering that during the same
year exports from the Middle East to the United States dropped by 9 percent.
The FTA has helped Jordan diversify its industry and has created
tens of thousands of new jobs. Jordanian exporters of stone and marble, jewelry,
machinery, food products, information technology, and cosmetics have all found new U.S.
buyers for their goods.
The experience of Petra Engineering Industries, based right here
in Amman, illustrates how free trade empowers companies to seize new opportunities. A
designer and manufacturer of air-conditioning, refrigeration and ventilation
equipment, Petra has employed the FTA to enter and compete in the U.S. market.
This year Petra sent a team headed by its U.S. sales manager, Rami
Soleiman, to a business expo in Chicago. The company’s participation was
supported by the Jordanian-U.S. Business Partnership, a government-business venture funded by
the U.S. Agency for International Development. Petra worked closely with U.S.
distributors, too. As a result, Petra expects to double its U.S. sales this year. The $3 million
of sales may sound modest, but multipled by hundreds of companies and thousands of
transactions, such stories have fueled Jordan’s impressive growth.
Innovators in Morocco were alert to the new activity in Jordan.
The United States is now negotiating an FTA with Morocco, building on a 1995 Trade and
Investment Framework Agreement. We hope to conclude those negotiations by the end of
Morocco has distinguished itself as an engine of pro-market,
democratic reform in the Mahgreb. It has liberalized its telecommunications sector and
strengthened intellectual property protections. Morocco is moving to allow 100 percent
foreign ownership in key service sectors such as insurance. It has launched an initiative
to streamline investment procedures and eliminate barriers to foreign and domestic
U.S. trade and investment is already opening opportunities in
Morocco. A U.S.-Morocco FTA will help Moroccans to transform their economy by linking the
practical benefits of trade and investment to the country’s domestic reform agenda.
Consider the case of CMS Energy of Michigan. A few years back, CMS
helped build, and now runs, a $1.3 billion state-of-the-art electric power plant
in Jorf Lasfar—a city about 80 miles southwest of Casablanca. This profitable plant
supplies about 65 percent of Morocco’s average electricity demand. The plant also employs
more than 300 Moroccans who gain from training and further education. And CMS
has introduced clean generation technology that has greatly improved Morocco’s
environment by replacing older, inefficient facilities.
CMS has adopted a zero-tolerance policy for surface and ground
water contamination. It has instituted a recycling program for ash, and much of its waste
water is now used by Moroccan cement companies. CMS installed a fish barrier at its sea
water intake to protect migratory fish.
CMS is now constructing an industrial park that is expected to
generate more than $21 billion in economic activity in Morocco and create more than
230,000 jobs within a decade. The U.S.-Morocco FTA will lay a foundation for more such
projects in the future, promoting growth and helping to solidify economic and
political reforms in Morocco.
A few days ago I visited Bahrain to talk with people about the
reforms underway. As we announced with His Majesty Crown Prince Al-Khalifa in Washington
last month, the United States and Bahrain will seek to establish an Atlantic
partnership for Bahrain’s modern economy by opening the ports and airports of America to its
free trade. Our next step is to undertake substantive consultations with the U.S.
Bahrain is the Persian Gulf’s first post-oil economy. As its oil
production has declined, growth in manufacturing and services have kept real GDP rising at
between 4 and 5 percent for the past three years. Bahrain has cut tariffs,
improved property rights, strengthened copyright and patent laws, and created an open
environment for ecommerce. It is an emerging financial center in the Gulf and is becoming a
regional hub for services and knowledge-based industries—aided by links with
U.S. universities and service providers.
Trade with the United States has provided capital and know-how to
help Bahrain to grow. Last year, Bechtel won a contract from the Aluminum Bahrain
Company, ALBA, for the engineering design and construction management for the company’s
fifth aluminum production line—a project worth about $1.7 billion. And Alcoa is
in the final stages of negotiating an equity stake in ALBA’s projected sixth aluminum
line, providing investment capital for a project worth an estimated $1.5
This is just the start.
A Roadmap to MEFTA
President Bush envisages the creation of a U.S. - Middle East Free
Trade Area—a regionwide commitment to open trade with the United States and, equally
important, to free trade among the nations of the Middle East.
The U.S.-Middle East trade initiative complements and extends
America’s already significant economic engagement with this region. Yet our efforts
have been limited by old hatreds, political instability, corruption, bureaucracies and
the privileged few who resist the competition of economic reforms, a search for enemies
to blame instead of partners to build with, and price uncertainties for oil-dependent
economies. To move forward, we need a unified regional strategy and a commitment to
Of course there are different levels of development, preparation,
interest, and capability on the part of countries in the Middle East and Mahgreb to make
and implement serious economic reforms. Yet models of success can spur prospects for
change in all. One-byone, then with groups, working with willing partners to build
coalitions for opportunity, and navigating a pathway for progress and reform, we will work
toward full economic partnership.
The countries of these lands were the colonies or protectorates of
others for too long.Their future should be open to competitive trading with the United
States, the European Union, Asia, Africa, and the whole world. As I have discussed with
my colleague and friend European Trade Commissioner Pascal Lamy, our combined aim
should be to expand opportunities for your countries, not narrow them.
First, the United States will actively support WTO membership for
those peaceful countries in the region that seek it. We are offering to work with
Saudi Arabia, Lebanon, Algeria, and Yemen in Geneva and in the capitals of key WTO
members. We will also assist countries that are already WTO members to gain full
advantage of open global markets and help them implement commitments. We want to assist the
full integration of the nations of the Middle East within the global trading
Second, the United States will employ the Generalized System of
Preferences program that Congress restored in the Trade Act of 2002 to increase U.S.
trade ties with the Middle East. GSP provides duty-free entry to the U.S. market for
some 3500 products from 140 developing economies, including six countries and the
West Bank in the Middle East. Last year, Americans bought over $278 million worth of
products from the region under this program—including Egyptian furniture, Omani jewelry,
and Lebanese olive oil. We will provide new resources to work with Middle Eastern
businesses on GSP opportunities, applications for more products, and marketing to
U.S. investors as GSP countries.
Third, the United States will offer to negotiate Trade and
Investment Framework Agreements, or TIFAs—which establish a work program to expand
trade and resolve outstanding disputes—and we will offer to deepen those agreements
already in place with Bahrain, Morocco, Egypt, Tunisia, and Algeria. TIFAs are an
important rung on the ladder to an FTA. They can help develop the experience,
institutions, and rules that advance integration into the global economy. TIFAs encourage
private sector participation through business councils that drive trade agendas
and help us address the specific concerns of business.
Jordan offers a good example of how a TIFA can yield direct
benefits while creating momentum for liberalization that can lead to an FTA. Improvements
in intellectual property protection made under Jordan’s TIFA stimulated the
pharmaceutical, chemical, and high-tech sectors, attracting foreign investment and creating
new jobs. Improved regulatory transparency under the TIFA enhanced the business and
investment climate. These gains, in turn, boosted public and business support for the
U.S.-Jordan FTA in both countries.
In Egypt, the TIFA process has supported passage and
implementation of a new IPR law and assisted Egypt in acceding to WTO telecommunications
agreements. We hope it will encourage the government to make Egypt a more hospitable location
for investors, open its markets, overhaul a costly and counterproductive customs
system, establish a reliable economic rule of law, and keep its commitments.
Fourth, the United States will offer to negotiate Bilateral
Investment Treaties, or BITs, which establish common rules for investment in each country. A BIT
with the United States can help attract capital and new businesses. By agreeing to
treat foreign investors fairly and offer legal protection equal to that available for
domestic investors, a country signals that it offers a safe place to do business. By
incorporating international business rules and norms in domestic law, these treaties also lay the
groundwork for comprehensive FTAs.
Fifth, the United States will negotiate comprehensive free trade
agreements—which remove all barriers to trade across all sectors—with the aim of
expanding the bilateral FTAs into "sub-regional" FTAs by mooring other interested and
qualified countries in the safe harbors of existing free trade agreements. The initial
agreements might serve as beacons for other countries in the region—brightening the way for
an illumination of high quality FTAs, spanning the region from the Atlantic Ocean to
the Persian Gulf.
At the head of the U.S. bilateral FTA agenda will be the
completion of our agreement with Morocco. The next step will be to begin negotiations on an
FTA with Bahrain. We hope to work with others in the Arab world. Many in Congress have
encouraged us and we will be consulting closely with key members and committees to
gain their advice as we proceed.
Over the course of the decade, North African countries might be
connected to the Morocco FTA as they achieve a critical mass of reforms. Gulf
States could join the Bahrain FTA when they are interested and prepared.
By working with Congress to bring new signatories into existing
FTAs, we can help promote trade among
the nations of the Middle East—a region
that suffers the lowest internal trade rates in the world. For example, "cumulation
clauses" in bilateral FTAs—which allow our FTA partners to produce and export in concert with
their neighbors—would help spur intra-regional trade. Development of region-wide
customs rules would further help build regional, and global, trade linkages.
Sixth, the U.S. Middle East trade strategy pictures the eventual
melding of these subregional FTAs into an historic regional Middle East Free Trade Area. A
mutual commitment to eliminate tariffs and other barriers to trade among
the countries of the Middle East would provide an engine for economic growth, increase
momentum for internal economic reform, provide a stronger voice for the region
in the WTO, and leverage the value of future FTA negotiations with other trading
partners in Asia, Europe, and Latin America.
The final element of our trade strategy is the provision of
financial and technical aid to help countries develop the capacity to take part in negotiations,
implement trade agreements, and build the legal and entrepreneurial infrastructure
to partake in the benefits of open markets. The Middle East Partnership Initiative
will help target more than $1 billion of annual funding from various U.S. Government
agencies and encourage partnerships with private organizations and businesses that
support development. That initiative is also aimed at increasing educational opportunities,
strengthening civil society and the rule of law, and supporting small businesses.
I visited one such micro-loan project last year in Morocco.
Al-Amana is a micro-loan project funded in part by the United States. I met borrowers like
Fatima El Borj de rabat, a 49 year-old Moroccan mother of seven, who runs a small business
selling natural gas for cooking and heat out of her home. An Al-Amana loan of about
$200 enabled Mrs. El Borj de rabat to serve more customers by doubling her stock of gas
canisters and expanding into other products. Without the loan, she reported, her
small enterprise would likely have gone under.
Since its launch in 1997, Al-Amana has already made some 250,000
small loans, with an average amount of just $240 and a default rate of just one quarter
of one percent. These loans are important for the jobs they create, the stake they give
people in a growing economy, and the empowerment of women—who receive about 54 percent
of Al-Amana’s loans.
President Bush said that "the desire for freedom is not the
property of one culture, it is the universal hope of human beings."
Our vision is to foster the revival of a prosperous region once
again united by culture, commerce, and goodwill among nations.
We know that there is no quick fix to the problems of poverty and
underdevelopment. Building thriving economies and societies in the Middle East will
take time, hard work, an entrepreneurial spirit, and a willingness to embrace
partnerships with people across the region and around the globe.
To succeed, the composition of this vision will need to be painted
with local colors. Success requires local leaders of global vision.
The source of the venture might be an Arabic proverb: "Dwell not
upon thy weariness, thy strength shall be according to the measure of thy
The desire for peace, freedom, hope, and better lives is as strong
in the Middle East as anywhere in the world.
Of course, many in the vested order will disparage harkening to a
vibrant history, welcoming new ways, new possibilities.
Yet within my professional lifetime, I have had the great fortune
of seeing the Soviet empire collapse, working to negotiate the unification of a
Germany that experts believed was divided for all time, and encouraging new
democracies and market economies in long-lost lands of Central and Eastern Europe
to join a Europe whole and free.
I have seen what can be.
Working together, the peoples of this storied region can write a
new history informed by a proud past: If leaders and peoples will work for
what can be, they can tear down the walls of prejudice, poverty, and protectionism
that have isolated the Middle East for too long.