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French Version

US-Jordan FTA Finding the bottom line

After the recent US attacks, and amidst the havoc of regional turmoil, the US-Jordan Free Trade Agreement (FTA) was finally ratified by the US Senate on 24 September.

After the recent US attacks, and amidst the havoc of regional turmoil, the US-Jordan Free Trade Agreement (FTA) was finally ratified by the US Senate on 24 September. From the US perspective, the actual ratification of the agreement is regarded primarily as a political reward for Jordan's role in the Middle East peace process and in the US campaign against terrorism. Still, the agreement can provide Jordan with significant means to propel its economic reform agenda forward, particularly with regard to boosting the Kingdom's exports and investment environment.

A report by Atlas Investment Group (AIG) stated the ratification of the agreement highlights Jordan's status as an important ally to the US in the Middle East, and re-affirms the American support behind Jordan's economic reform program.

"Jordan is now in a position to successfully distinguish itself in the region and embark upon a new trajectory," the report said. It added that it would benefit the Kingdom to make use of its unique economic link with the US. That would definitely help "insulate Jordan somewhat against the ramifications of any upcoming regional, political and economic instability." In terms of trade, Jordan already has complete access to the US market. The FTA, meanwhile, will open Jordanian markets to US companies. Liberalization, noted the AIG report, has been achieved in many sectors in the Kingdom, including energy distribution, convention services, printing and publishing, education and tourism. "The FTA reinforces both countries' commitment to enforce the trade-related agreement on intellectual property rights (TRIPS)," the report added. The report also reviewed Jordan's success story of the Qualified Industrial Zones (QIZs). So far, benefits accrued from the QIZs have mostly been limited to garment and clothing exports. The AIG indicated that QIZ industries highlight the important role of the FTA in driving the Jordanian economy to diversify its exports to the US.

"We believe the textile and garment industries will continue to enjoy growth due to the FTA, despite the elimination of textile and garment quotas by the year 2005," the report pointed out. It should be mentioned the recent US attacks hold some implications regarding Asian textile businesses based in Jordan. The report went on to say the latest move by the US to lift sanctions on India and Pakistan would grant these two countries the opportunity to export textiles to the US at preferred terms. This could erode Jordan's potential duty-free access to the American markets. It also highlighted the fact that Jordanian producers will face challenges when American goods arrive on the local market.

"There is the inevitable risk that American goods will be in a better position to enter the Jordanian market given the decreased tarifs," the report noted. Being the first Arab country to sign an FTA with the US gives Jordan a large advantage in penetrating the North American markets. "The FTA is expected to lead a substantial increase in foreign direct investment (FDI) in Jordan, from both the US and the rest of the world." US FDI in Jordan comprises less than 1 percent of its FDI in the Middle East for 1999. US investments in Jordan qualified for the Investment Promotion Law worth JD 273 million, about 60 percent of which settled in the tourism sector. "In the wake of the FTA, however, the US FDI will increase in a broad range of sectors including textiles, technology, financial services and tourism." Sensitive industries like pharmaceutical companies are expected to face hardships ahead because of FTA rules. Under the WTO, and subsequently the FTA, Jordanian pharmaceuticals are not permitted to produce the generic form of patented drugs. "This would actually place a dent in future sales," the report concluded.

The Star redaction
The Star

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