By Phillip Kurata
Washington File Staff Writer

Washington -- Three prominent U.S. senators have lent their voices in support of the Bush administration's policies to increase trade and bolster reforms in the Middle East.

The Middle East is "a vibrant and vast region full of promises," Senate Finance Committee Chairman Charles Grassley said, opening a March 10 committee hearing on U.S. Trade and Economic Policy in the Middle East.

For the region to fully thrive, "we need stronger economic engagement between the United States and like-minded nations there in the Middle East," Grassley said.

Grassley said he supports the Bush administration's policy of pressing for the creation of a Middle East Free Trade Area by 2013, and he praised the administration for its work in negotiating free trade agreements with Jordan, Morocco and Bahrain.

The Jordanian agreement went into effect in 2001; the agreement with Morocco was signed in early 2004 and is expected to go before the U.S. Senate for ratification soon. Free trade negotiations with Bahrain began in January and are proceeding at such a rapid pace that a final agreement could be reached by June, U.S trade officials have said.

"With his call for a Middle East free trade area, the president correctly recognizes that increased U.S. trade with and among Middle Eastern countries will foster long-term economic growth," Grassley said. "Just as important, trade agreements entered into by the Middle Eastern countries would lead to, and in some cases lock in, needed political reforms."

Grassley, a Republican from Iowa, was joined by two other senators, Montana Democrat Max Baucus and Arizona Republican John McCain, who have sponsored the Baucus-McCain bill, also known as the Silk Road bill.

The Silk Road bill would allow Middle Eastern and predominately Muslim countries in South Asia to export a number of products to the United States duty-free provided that they meet U.S. conditions such as supporting the war against terror and reforming their economies, Baucus said.

"A trade preference program like the one we are proposing will help countries in the Middle East now, in the short term," Baucus said. "It will help prepare Middle Eastern economies to enter into the free trade agreements with the United States that is the cornerstone of the Middle East trade policy."

Baucus said the Silk Road bill would strengthen the administration's policy of creating a Middle East Free Trade Area by helping countries reform and develop their economies to the point where a free trade agreement with the United States becomes a realistic option.

The Silk Road bill resembles the African Growth and Opportunity Act, the Andean Trade Preferences Act and the Caribbean Basin Initiative, Baucus said. He added that the Office of the U.S. Trade Representative is working on plans to negotiate free trade agreements with a number of countries that are signatories to those regional trade pacts.

McCain said breaking the link between political power and wealth by creating a larger private sector independent of political control is an essential component of U.S. efforts to build democracy in the Middle East.

"Trade preferences can help build prosperity in the Arab and Muslim worlds, independently of state power," McCain said.

The United States already has pursued successful trade preference programs in sub-Saharan Africa, and the Andean and Caribbean regions with tangible results, he said.

"Would anyone argue today that the greater Middle East is less important?" he asked.

McCain said closed markets have contributed to the political tensions that beset many Arab and Muslim countries, which face tremendous population growth and an average unemployment rate of about 22 percent. He called the situation "an obvious recipe for disaster."

Under Secretary of Commerce Grant Aldonas told the Finance Committee that he saw "a real thirst" in developing countries to integrate themselves into the world trading system when he attended the meeting in Doha, Qatar, in 2001 to launch a new round of global trade negotiations. He said the Doha round of talks would not have been launched without Qatar's leadership.

He said there is a broad recognition in Middle Eastern countries that command and control economic systems, often based on the oil and gas industries, suffer from "clogged regulatory frameworks" that stifle growth.

"They recognize that to get diversification ... they're going to have to move in a different direction both politically and economically. And that's where you see the people who are most interested in openness," Aldonas said.

After free trade negotiations with Bahrain are completed, Aldonas said Qatar could be the next Middle Eastern country to do so. He said there is great interest for a free trade agreement with Egypt, the country with the largest population in the Middle East, but he said the enthusiasm is dampened by Egypt's record of backing off from its obligations to the World Trade Organization.

Even in the absence of free trade negotiations with Middle Eastern countries, Aldonas said, U.S. companies see bright prospects in the fields of information technology, pharmaceuticals and the arts.

To encourage trade with the Middle East, he continued, the Commerce Department helps Middle Eastern countries implement economic reforms through the its Commercial Law Development Program. He said the program will supply a large portion of the technical assistance required for the U.S.-Morocco Free Trade Agreement.

Another aspect of the U.S. trade promotion drive is the Middle East Business Information Center, which will serve as a prime source for information to U.S. businesses, Aldonas said.

Trade promotion also is part of the effort to defuse the Israeli-Palestinian conflict, Aldonas said. At the World Economic Forum meeting in Jordan in June 2003, Aldonas said he encountered Israeli businessmen who are looking at investing in Palestine as a way to support the peace effort.

"Whatever support we can lend to that process through the president's initiative or the efforts of Congress ... would be of great help," he said.

Under Secretary of State Alan Larson told the Finance Committee he recently met with officials of the Palestinian Authority in the West Bank city of Ramallah to discuss improving economic and social conditions for the Palestinian people. He said that shortly before the meeting was to start, a deadly suicide bombing in Jerusalem diverted the discussion to the issue of security.

At that time, Larson said he saw firsthand all the difficulties that the Palestinians are living under, including the separation wall and the internal barriers to movement that make it very difficult to get economic life moving.

"It is an extraordinarily difficult task," Larson said.

Larson said the Bush administration plans to present a number of ideas to expand trade and economic opportunities in the Middle East at the G-8 economic summit in June. The ideas involve using information technology to support business development, promoting financial reform, developing capital markets and increased access for small businesses to capital, promoting private investment climates to attract capital to the region, and encouraging regional dialogue on economic and social reform, Larson said.

"The recent free trade agreement with Morocco and the strong progress in negotiations with Bahrain show that the impulse for using trade to promote economic development extends from one end of the region to the other," Larson said.