AMMAN — Signed
on October 2000, the free trade agreement (FTA) between Jordan and the United
States marked a precedent of economic partnership between the US and an Arab
nation.
اضافة اعلان
In a phone
interview with Jordan News, head of the
American Chamber of Commerce in Jordan,
Mohammad Bataineh, said that before the trade agreement, the total volume of
trade between Jordan and the US was below $500 million, but After the
agreement, that amount skyrocketed by 800 percent, “which is bound to reflect
positively on Jordan’s economy.”
The FTA
agreement includes exchanges in agriculture, labor and technology. According to
the Office of the United States Trade Representative Website, US exports to
Jordan were estimated to be $2 billion in 2017; an amount equivalent to 4.5
percent of Jordan’s GDP in 2020.
According to a
document issued by the US Office of Press Secretary at the time, entertaining
the option of free trade relations between the two countries came as a
byproduct of Jordan’s ascension to the
World Trade Organization (WTO). In the
eyes of the US government, Jordan being part of the WTO was pivotal to the signing
of the FTA, as it ensures that Jordan is in compliance with global trade
practices.
“The increase
in trading volume comes mainly as a result of international manufacturers
setting up factories in Jordan because it gives them access to the largest
market in the world — the US market — as manufacturers produce goods and ship
them back to the US, while being exempt from custom taxes,” explained Bataineh.
“Major companies, most prominently Nike, who set up factory in the Industrial
city of Sahab, moved to Jordan because of the FTA.”
Although the
majority of exports from Jordan to the US are coming from international
companies, the FTA still benefits the national economy, as both are in fact “highly
interrelated,” according to Bataineh.
“Having
international companies set up factories in Jordan contributes to the local
economy through employment, payments to local landowners, and interactions that
take place with surrounding businesses. The Jordanian economy is better off
with international companies staying in the Kingdom,” Bataineh explained.
Moreover,
Bataineh underlined the inaccuracy of the negative impacts the FTA has had on
local producers. “Producers in various local sectors generate a big portion of
their revenue by selling their products to the US. Dead Sea product manufacturers
immediately come to mind as an example.”
‘Balanced
relationship’
Responding to
claims that such agreements between developed and developing nations cannot be
of benefit to both sides, Bataineh described the Jordan-US FTA as one that is
“highly balanced” and in line with the interest of “various stakeholder groups
who are impacted by the agreement.”
“While it is
true that trade relations between developing and developed countries tend to be
heavily tilted towards developed countries because of their much stronger
economic capabilities, that is not the case for the Jordan-US FTA”, said
Bataineh.
“The US has
allowed a wide array of Jordanian goods to enter their borders without any
trade barriers, and because the cost of production in the US is relatively
higher than that of Jordan’s, products coming from Jordan can compete in the US
market.”
Data from the
Office of the United States Trade Representative supports Bataineh’s views. In
2019, the data showed that total exports from Jordan to the US amounted to $2.8
billion, while total imports of US goods to Jordan amounted to $2.2 billion,
which not only corroborates Bataineh’s description of the trade relationship
between Jordan and the US as “balanced,” but it also shows that for that year,
Jordan was trading with the US at a surplus.
According to
more recent data from the American Chamber of Commerce, total trade volume for the
first quarter of 2021 was $3.2 billion, $1.32 billion of which were exports
from Jordan to the states. While this does not constitute a trade surplus for
Jordan the same way it did in 2019, it is still an indication of the consistent
balanced nature of the FTA, which, according to Bataineh, “is why the agreement
is a win-win situation, and why it remains sustainable.”
Other FTAs
Head of the
Amman Chamber of Commerce, Khalil Haj Tawfiq, doubled down on the statements
made by Bataineh by praising the economic benefits of the FTA with the US.
“Because labor costs in the US are much higher than those in Jordan, products
coming from the Kingdom are able to compete in the US market.”
In a former
article with Jordan News, Khalil Haj Tawfiq spoke of the importance of free
trade agreements to the Jordanian economy in light of the rising prices of
goods. He specifically addressed the FTA with Turkey, which was eventually
cancelled because of ongoing pressure from local producers, who claim that
their products cannot compete with Turkish products.
Despite that, Haj Tawfiq
still stands firmly behind his original stance in support of rebuilding trade
relations with turkey, claiming that the “interest of the Jordanian consumer is
his main priority.”
The statement
made by Haj Tawfiq goes against the views of Bataineh and many other producers
shared with Jordan News.
“From all the FTAs Jordan has had with other
countries, the one with the US is the only one that makes economic sense.
When
looking at a country like Turkey, it is impossible for our producers to compete
with their economy, given their extremely low-cost production and the inflation
of the Turkish lira. The trade agreement we had with Turkey, as well as the one
we had with the (UAE) and Europe, all ended with massive trade deficits for
Jordan,” added Bataineh.
Bataineh
concluded his remarks by saying: “the FTA with the US can be a cornerstone to
building a formidable economy in the Kingdom. Unlike our neighbors, we have political
stability, as well as free access to the world’s largest economy. Jordan has
the potential to become the trading hub of the region.”
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