The US Jordan free trade agreement was signed in October 2000. It was America’s 3rd trade agreement and the first ever with an Arab state. Jordan’s economic relations with the US began with Jordan’s agreement with the World Trade Organization (WTO). The FTA has served as a base to strengthen the relations between the US and Jordan. With this FTA tariff on the trade of virtually all industrial and agricultural goods will be eliminated within 10 years of the agreement.
Amongst other Middle Eastern countries, Jordan has a competitive advantage for trading with the US. Even though Jordan and other Middle Eastern countries have similar patterns of comparative advantage for example, Jordan, Morocco, Tunisia, Israel and even Egypt have comparative advantage in manufactured fertilizers, foot wear, clothing and textile yarn. This means these countries unite encouraging regional trade relations; they could reap from economies of scale and enter global markets especially the US.
However, to achieve this infrastructure and larger investment is required which these developing countries lack unless they are willing to enter joint ventures with countries like the US. The exports of Jordan are not as competitive as these other Middle Eastern countries. This is because Jordan’s cross rates of currency have risen against the dollar when compared to other countries. This loss of export competitiveness initiated an increase in the imports and thus local production was lowered thereby creating a greater gap between exports and its imports.
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However, Jordan’s macro dynamics for trade with the US are better as it poses more opportunities for the development of infrastructure, a better investment climate and better human capital than the other countries in the region. Jordan’s trade compatibility with the US from the point of view of exports is good. Jordan’s major export category to the US is transport material and furniture. Emerging export products like Dead Sea cosmetics to travel rugs and blankets, machinery for sorting and screening mineral substances and orthopedic appliances of Jordan are products that are imported by the US market and have a demand for them.
Though Jordan’s traditional exports are generally not that compatible with the US market, at the product level however, Jordan’s export fit in with US import requirements like apparel and clothing accessories, aluminum bars and rods, insecticides and animal feed. Products like olive oil, luggage, pharmaceuticals, household appliances, ceramic sinks and wash basins, paints and varnishes, articles of jewelry, tarpaulins and awnings, machinery for plant or laboratory equipment, tableware and kitchenware, electric accumulators, fruit and vegetable juices, chocolate and antibiotics.
Also, Jordan has a very transparent tariff schedule which is an incentive for other countries to trade it. Jordan is gifted with natural resources and human capital which in itself is an attractive opportunity for foreign investors. With an increased import and lowered domestic production, the environment is favorable for investment by foreigners thus benefiting from cheap labor and resources which make Jordan and US more compatible for trade. Policies for Implementation Both the countries have agreed to establish a free trade area in compliance with the specifications of the agreement.
Both the countries have consented that goods traded via this area will not be charged with customs duty by either country. Either of the countries will not introduce new import duties or tariffs which do not confer to the agreement. Vices The two countries would not only trade in goods but also in services. Services would also be traded as per the claws agreed upon. Importance has been given to intellectual property rights and each country would implement laws that protect it especially for the goods of the other country.
Trademarks shall include service marks, collective marks and certification marks and these would be protected. Each party should ensure that all reproductions are considered reductions and are in accordance with the terms agreed upon. In case of copyrights, the author or the performer should be given the exclusive rights to authorize or prohibit whether he wants his work to be in the other country or not. In case of pirated copies or counterfeit trade marks, strict legal action would be taken.
The agreement also deals with environmental laws and the two countries have agreed to enforce and practice environmental laws. This means that both the parties will not indulge in the other’s country in activities that do protect the environment, harms humans, animals or plants through environmental pollution, improper discarding of toxic waste or haring endangered species. Both the countries will adhere to International Labor Laws and the domestic laws will be modified to meet international laws. Both the countries should seek to protect the rights of labor and they will not relax local laws to encourage trade.
The law should protect basic rights of the labor like wages, hours worked, safety at work, health, age limit for working children etc. With the growing e-commerce business and the business opportunities that it poses, laws of e-commerce have been added to the agreement. It has been agreed that the two countries will not impose duties on e-commerce and electronic transmission or imposing unnecessary barriers to it. Where visa issues are concerned, both the parties will not create hindrances in visa for those who intend to trade or are visiting for business purposes.
Overall the visa laws would be relaxed in both the countries if it is business related. Safety measures have also been agreed upon by both the countries. Where importing is concerned, if by reducing the import duties of a particular item, and if the item is being imported in a large enough quantity to affect the domestic industry then the country doesn’t have to reduce the duty however such measures have to be taken in compliance with the laws of the agreement. Both the countries have agreed to readily promote economic cooperation.
Also, since Jordan is a developing country and the US will strive to help Jordan with economic and technical assistance when needed. A joint committee would be formed which would ensure proper implementation of the agreement and review the trade relationships between the countries. It will develop guidelines, rules and regulations for the agreement, making modifications where needed and making sure disputes are avoided. The basic function of the committee would be to ensure that the agreement is properly implemented and achieves its objectives.
Desired outcome of the FTA The two countries seek to improve not only economic but also political relations between themselves. They intend to strengthen their bond of friendship thereby generating a healthier environment for future trade relations. They wish to have rules and regulations between the countries regarding trade that give both the countries and advantage. By expanding their trade through liberalization, they seek to support their common interests. Such a trade relation would not only benefit the two countries but would benefit the whole region.
Both the countries seek sustainable economic development, raising living standards, promotes the growth of the economy, more investment opportunities, development, general prosperity, better employment opportunities and the most advantageous use of resources with such an agreement. They seek to have long-lasting trade relations that will strengthen both economies with time. The US would benefit from the economies of scale and at the same time help Jordan in areas of economic and technological so that it may have fewer problems when faced with challenges being a developing country.
Both the countries desire to encourage innovations and creativity promoting goods and services that are subject to intellectual property rights. They also seek to raise the international competitiveness of their goods and services. They also desire to enhance labor laws and standards by adhering to international laws and standing by the commitments they have made to each other. At the same time, they wish to protect the environment and have labor laws that improve the economy instead of hampering its development. Positive and negative impact of the FTA
The agreement is expected to have an overall a good impact on the economy of both the countries. It facilitates a greater economic activity for the US. Exporters from the US will have a greater access to the Jordanian market. This is the first time that the US has had such an agreement with a Middle Eastern country. This FTA could open doors to other countries in the region with US goods surging greater markets. This will also serve as a relationship builder as it already has made business relations healthier between the two countries.
The Jordanian service sector being liberalized allows better access to the US service providers. At the same time the US will not lose local business nor lose jobs due to the FTA. The FTA proves good for the trade, investment and employment opportunities of Jordan. The agreement has attracted investment to Jordan as there is better access to the US markets especially for Jordanian exporters in some industry sectors. Over time this will greater impact Jordanian labor creating better and more jobs for them. There are certain negative impacts that can’t be ruled out.
Jordan had to impose TRIPs-plus rules on Jordan. Thus the poor are prevented from having access to inexpensive generic medicines. This has greatly increased the prices of medicines and there could be dire health problems amongst the poorer population. The strict intellectual property right was to encourage local firms of Jordan to focus on research and development. However, there has been little or no research done and no new medicines have been introduced locally and those that have been are too expensive for the local market.
Though Jordan has had an upsurge in its economic development it had to pay a price. There is not enough protection for labors and foreigners coming in for work willing to work in worse environmental conditions and lesser pay are increasingly replacing Jordanians leaving them out of work. The laws of the FTA are implemented on migrants which makes the Jordanians suffer. Besides factories have a bad work condition, with long working hours, forced labor and child labor. The laws apparently have not been implemented as they had been agreed upon by the two governments.
Conclusion The FTA between Jordan and the US focuses on the development of both the countries opening trade prospects and resulting in an overall economic growth. Both the countries also seek to improve their standing in the global markets as well. The success of the agreement however depends upon how faithful both countries are to look out for the interest of the other. Both the governments have to stand by their commitments and make alterations with the help of joint committees so that none of them suffers a loss or problem.
They should work to resolve problems that arise so that they can set an example globally for others to follow. If the interests are not protected, even if there is economic progress the countries may in turn have to pay a heavy price for such a trade agreement. This in turn could create political and economic disparities and would discourage future possible FTAs.
Center For American Progress (2006, June 27) Focus on Jordan: Worker Rights, Human Rights, and Trade Relationships. Available: http://www. americanprogress. org/issues/2006/06/b1813793. html Cooper, W.
(2005, June 24) Free Trade Agreements: Impact on U. S. Trade and Implications for U. S. Trade Policy. Available: http://www. opencrs. com/rpts/RL31356_20050624. pdf Lord, M. , & Uraidi-Hammude, H. (2001, Feb) Economic Impact and Implications for Jordan of the U. S. – Jordan Free Trade Agreement. Available: http://usembassy-amman. org. jo/FTA-USAID. pdf Oxfam Briefing Paper (2007, March) All costs, no benefits: How TRIPS-plus intellectual property rules in the US-Jordan FTA affect access to medicines. Available: http://www. oxfam. org/en/policy/briefingpapers/bp102_jordan_us_fta
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