Lineages of Revolt. Adam Hanieh
despite renewed military conflict. In mid-2003, these goals were encapsulated in the George W. Bush administration’s announcement that it sought a Middle East Free Trade Area (MEFTA), spanning North Africa to the Gulf, by 2013. In June 2003, then US trade representative Robert Zoellick (later to become World Bank president) gave a speech to the World Economic Forum in Jordan in which he outlined the basis of the MEFTA plan. Zoellick’s speech blamed poverty, unemployment, and terrorism on Arab “autarky” and “failed socialist” models. He described the war on Iraq as “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.”74 In a bizarre teleological reading of history that traced an alleged pro-business “spirit of the Levant,” stretching from the time of the Quran through eighteenth-century Arab merchants to the supposed commercial zeal of Arabs living in the contemporary United States, Zoellick argued that if the Middle East liberalized and opened to foreign capital within a regional trading bloc, then the problems stemming from “closed national borders, centralized economic controls, the heavy hand of government, and nationalized industry” would be solved. The goal of US policy was “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.”75
The US strategy was to negotiate individually with “friendly” countries in the region using a graduated six-step process and eventually leading to a full-fledged FTA between the United States and the country in question. These FTAs were designed so that countries could “moor” with neighboring states, thereby expanding agreements into sub-regional agreements that could be linked over time, until the entire Middle East came under US influence.76 Importantly, these FTAs were also used to reinforce the notion of normalization with Israel, with each agreement containing a clause committing the signatory to normalization with Israel and forbidding any boycott of trade relations.
US government representatives openly conceived MEFTA and these bilateral FTAs as a counterpoint to other rivals in the region. Zoellick noted, for example, in a 2003 editorial for the Wall Street Journal: “The Bush administration’s reinvigoration of America’s drive for free trade—globally, regionally, and with individual countries—has created a momentum that strengthens US influence . . . [they] level the playing field for US businesses because others—especially the EU—negotiated a host of agreements in the ’90s while the US stood on the sidelines.”77 A month later, a widely referenced article from the Washington-based Cato Institute made essentially the same point, stressing the market for services as a particularly important prize for US capital: “The major potential benefit of the Bush administration’s proposed Middle East free-trade area is the market opening in the Muslim world that it would entail—and the impetus to broader economic reforms in the region that it would provide. . . . The biggest prize in FTA negotiations—the hardest to attain, but offering the richest rewards—is liberalization of trade in services.”78
Immediately after announcing the MEFTA initiative, US representatives began a rapid succession of FTA negotiations with countries across the Middle East. Talks had begun with Morocco in early 2003 (prior to the war on Iraq) and concluded successfully following a year of discussions. The agreement was approved by the US Congress in July 2004 and the Moroccan parliament in January 2005, coming into force at the beginning of 2006. The FTA severely reduced Morocco’s ability to restrict US goods from entering the country by eliminating tariffs on 95 percent of all bilateral trade, with all tariffs to be eliminated within ten years.79 Prior to the agreement, the average tariff on US exports to Morocco had been more than 28 percent. The tariff reduction was particularly beneficial to US agribusiness as the main provider of Moroccan grain imports. It immediately eliminated, for example, tariffs on US sorghum and phased out duties on US corn over five years and, as a result, reinforced the earlier trends of food import dependency.80 For this reason the FTA was strongly supported by US agribusiness interests, such as the US Grain Council, which noted that they had been “striving to build demand for U.S. feed grains in Morocco for many years . . . promoting U.S. feed grains to ensure our producers and agri-businesses will reap maximum benefit from this agreement.”81 The agreement also enabled US capital to benefit from Morocco’s agreement with the EU (see below), with tariff reductions applying to US goods produced in Morocco and then exported to Europe.
The US-Moroccan FTA took place concurrently with negotiations with individual Gulf Arab states. An FTA was signed with Bahrain on September 14, 2004, and legislation to approve and implement the agreement was passed by Congress in January 2006. This agreement was also aimed at increasing market share for US corporations. Additional rules within the US-Bahrain FTA meant that government procurement of goods and services had to be opened to US companies on the same basis as a local company, and the state could not restrict the number, type, or residency conditions of US companies.82 Similar conditions declared virtually all goods from the United States duty-free, opening the route for US commodities to enter the Bahraini market. In services, the FTA forced Bahrain to allow private US medical, educational, legal, and other corporations to enter the marketplace. The market-opening goal of the FTA was explicitly applauded by the Advisory Committee for Trade Policy and Negotiations (ACTPN), a peak body of large US companies and industry representatives, which noted that its provisions “meet or exceed the best that have been negotiated in any other US trade agreement and . . . is a truly impressive achievement.”83
These trade and financial agreements have helped underpin a shift in the US economic relationship with the Middle East.84 As appendix 1 details, through the 2000s exports to the United States from Israel, the Gulf Arab states, and Jordan overtook, in value terms, those to the EU. Israel should be highlighted in particular here—from 2000 to 2010, Israel’s trade surplus with the United States ranged between $5 billion and $7 billion annually—a remarkable contrast to all other non-oil-producing states, which were running large deficits through the same period.85 Moreover, while European exports have remained dominant throughout the Middle East (see below), the gap between the US and EU market share has narrowed significantly in the cases of Morocco and Egypt following the various FTA and QIZ agreements. Appendix 2 demonstrates the pattern of the region’s trade with the United States, which consists largely of technology, aircraft, and other high value-added machinery imports in exchange for low-wage textiles and garments (in the case of Egypt, Jordan, Morocco, and Tunisia) or hydrocarbons (in the case of the Gulf states and Algeria). The proportion of cereals, soybean, and corn products in US exports to the region, however, is also marked. In the case of Morocco, Tunisia, and Egypt, for example, US agricultural products have constituted between 30 and 50 percent of all US exports through the 2000s—indicating that the North African dependency on the food imports noted above has changed little.
These same patterns are also reflected in the sphere of capital flows. Although foreign direct investment (FDI) originating from the United States is generally much lower in the Middle East than that from European or Gulf countries (see chapter 6), the United States has developed a dominant financial relationship with the two central poles of the regional economy—Saudi Arabia and Israel. In the case of Saudi Arabia, the United States has long been the largest source of FDI, holding 13.7 percent of FDI stock in the country in 2010, significantly more than the other countries in the top five (Kuwait holds 9.9 percent, France 9.0 percent, Japan 8.5 percent, and the UAE 7.4 percent).86 This is particularly important because Saudi Arabia became the largest host economy for FDI in the MENA region during the 2000s.87 Most FDI in Saudi Arabia is targeted at the petroleum refining, petrochemical, contracting, and real estate sectors. In the case of Israel, US companies were responsible for a remarkable 82 percent of all FDI in Israel from 2003 to 2008, equivalent to €23 billion.88 Reflecting the unique characteristics of the Israeli economy, most of this investment was aimed at sectors such as software, electronics, biotechnology, and advanced research and development.
The European Union: Imperial Rivalries and Consensus
As these American initiatives progressed through the 1990s and 2000s, the European Union also sought to strengthen its trade and financial influence in the Middle East, moving to draw the region—particularly the countries surrounding the Mediterranean—closer to European production and trade networks. The EU’s orientation to the region demonstrated the dualities of rivalry and shared interests vis-à-vis the United States—both