The U.S.-Arab Economic Relationship

I would like to suggest three areas where we can work together to build confidence and to ensure that our goals and objectives are realized: economic reforms, improved investment climates, and liberalized trade regimes.

Economic Reforms

In order to build a stronger economic partnership, Arab states need sound macroeconomic policies that promote growth and development. As the IMF study points out, the countries that have pursued reforms have enjoyed the region's most rapid growth rates.

Infrastructure, education and health care systems, and information and communication technologies work together to provide trained, healthy citizens who can contribute to a strong developmental foundation. Policies that diversify exports, facilitate the operation of the private sector, and protect trademarks and copyrights also play a role in forming an environment that is ready for business.

By enacting economic reforms, Arab states proclaim that they are investing in their own futures, by making the sometimes difficult choices that serve to generate long-term growth. We stand ready to work with you in this process.

Improved Investment Climates

I often hear Arab officials expressing interest in gaining increased U.S. investment. The way to do this, of course, is to compete actively with other destinations for investment by offering an attractive investment environment. Some of these factors include:

In reality, however, opening to investment opens the door to job creation, efficiency, lower domestic prices, a wider availability of goods and services, technology transfers, capital flows, and manpower training. Again, we stand ready to be active partners in creating a more hospitable investment environment.

Liberalized Trade Regimes

Several Arab states have liberalized their trade regimes, and initiated Trade and Investment Framework Agreements (TIFAs) with the United States. In the case of Jordan, and now Morocco, we have negotiated Free Trade Agreements (FTAs) facilitating bilateral trade free from most of the restrictions and limitations of the past.

As Secretary Powell noted last night, our FTA with Jordan has borne fruit -- an increase in exports to the United States from $13 million in 1999 to $400 million in 2002, as well as generating over 20,000 new jobs and attracting $200 million in new investment. The President announced in May our intention to negotiate an FTA with Bahrain.

And we will continue to engage with other Arab states seeking to expand and solidify our economic partnerships. Several other Arab states have also expressed sincere interest in conducting trade negotiations with the United States, and understand that those with liberalized trade regimes stand to benefit early from this process.

Through liberalization, trade policies and practices will bind our nations closer together. The process can also help solidify steps toward broader economic reform and creating a welcoming investment environment. Trade ties build bridges between us, with business providing capital, jobs, and revenues that permit economic expansion and raise standards of living.

MEFTA

We see this as part of a longer-term effort, as President Bush has outlined. Over the next 10 years, the United States seeks to establish the Middle East Free Trade Area, MEFTA, to underscore the importance in which we hold the U.S.-Arab economic partnership, and to do our part to better connect the region to the potential benefits of plugging into the world economy.

As Secretary Powell said last night, we will undertake several programs, including our Middle East Partnership Initiative, to build confidence in our relationship, for example:

Iraq

I would like to add a word about a special case -- that of Iraq. We are currently engaged in a vitally important effort to help the Iraqi people emerge from decades of misrule and construct civil and economic structures that will serve their needs.

Right now, the critical investments must come from governments to help Iraq address its immediate needs. We urge generous and vigorous involvement by countries of the region. This is a strategic opportunity to make a major difference. The international community and your governments will have the opportunity to take up this challenge at the Donor Conference in Madrid on October 23-24. Iraq will be looking for your generous pledges and commitments. There is also no question that ultimately, it will be economic expansion fueled by private investment and trade that will enable Iraq realize its full potential.

Conclusion