FREE TRADE AGREEMENT- JORDAN-U.S.
Middle East has been the most volatile and conflict-infested region of the world, which has not only led to political instability but has also adversely affected economic conditions of the area. While the rest of the world is encountering a slow down in the economic activity primarily due to external factors, Middle Eastern areas have no one to blame but their violent history, which is fraught with domestic conflicts. To protect the economic conditions from, further deceleration, Middle Eastern countries refrained from adopting the principles of free trade. Several investment barriers were placed on foreign firms to remove risks of competition and to help the local firms grow and prosper. While on the one hand it did help the local markets, it also resulted in economic problem emerging from lack of competition and lack of foreign investment in the region. Keeping this in view, the last decade of the 20th century saw Middle East opening its gate to foreign firms by entering into various kinds of trade agreements with the U.S. And Europe.
Egypt and Morocco entered into trade agreement with the United States, which gave a major boost to their local products as U.S., became the chief importer. United States has been trying to improve its ties with the Middle Eastern countries through economic route. It is one of few big foreign investors in Egypt and has concentrated mostly on oil and gas sectors. Substantial investment has also been made in other areas of economy including financial services and automobiles. In 1999, Egypt and U.S. signed Trade and Investment Framework Agreement (TIFA), which opened new doors of investment opportunities for the United States. Most trade barriers were removed and U.S. products and services were provided better access to Egyptian market. Similar treaties were signed with Morocco and Turkey to improve trade and to strengthen economic ties with the Middle East. For example American investors were offered some special protections under Morocco Bilateral Investment Treaty, which came into effect in 1991.
These treaties provided the required framework for Free Trade agreement between Jordan and United States, which is a sign of more liberal economic policies in Jordan. Kingdom of Jordan is not exactly an oil rich country and its reserves are limited. For this reason, it needs to develop its economic infrastructure and exploit resources other than gas and oil. Though Jordan is rich in minerals and metals, these are not enough to economic growth in the long run and under stiff competition. King Abdullah is thus rightly looking for new and better economic opportunities and is willing to liberalize economy. Siddiqi (2000) writes in Jordan Economic Report, "Even its large reserves of phosphates (1.5 billion tonnes), the world's second largest after Morocco, and some deposits of manganese and copper are not sufficient to lift it beyond the economic status of a lower-middle income developing nation, largely dependent on private and official capital inflows. King Abdullah II, who came to power in February 1999, following the death of his father King Hussein, is proving to be a dynamic, chief executive style monarch."
Due to new economic policies, Jordan acceded to World Trade Organization in April 2000. By accession to WTO, Jordan has virtually opened its gates for foreign investors and has agreed to follow the economic guidelines proposed by WTO. There are numerous benefits and some problems associated with accession to WTO as Josh Martin (2001) explains: "The reasons for joining were obvious: membership in the WTO provides developing countries easier access to markets and investment capital. But membership also mandates reduction of trade and investment barriers, which have threatened weaker Arab economies, where protected economies have helped, maintain economic and social stability. WTO-style globalization confers a number of strategic benefits on nations that are open and integrated into the world economy. "Those countries that are becoming more integrated with the world economy through expanding trade and investment linkages are those which will enjoy economic success," says Yasser El Guindi, an economic analyst with the National U.S.-Arab Chamber of Commerce. However, he warns that, as Arab countries move to meet their WTO obligations, lowering trade and investment barriers, their governments and business leaders "must understand the dynamics and rules of WTO accession," and what it means from a business point-of-view."
With entry into WTO, Jordan proved that it was willing to follow international trade regulations and thus signed Free Trade Agreement with the United States in October 2000, which came into effect a year later in December 2001. This agreement is meant to create free trade zone between the two nations. The agreement would last for at...
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