This Perspective was written from testimony given by Ambassador David L. Mack before the Senate Committee on Finance.
Trade and Investment Treaties, Free Trade Agreements and similar instruments prod governments in the Middle East and North Africa to adopt economic reforms. Such measures strengthen the private sector and lead to greater transparency and rule of the law. This includes regulations that enforce measures against international crime, such as money laundering.
Given the proper incentives, the private sector can provide jobs and hope to the young men and women whose families have invested in their education. Without constructive outlets, the emerging generation will be fodder for elements that foment hate and violence.
My perspective is based on over 40 years dealing with this region as a US diplomat, a private business consultant and educator. Despite promising exceptions, many of the Arab countries and Iran still have stagnating economies. Ties between government elites and a relatively few family commercial empires tend to dominate economic activity and hamper the emergence of competition.
It is commonplace to describe Arab political economies as being subject to over regulation. Certainly this is one of the primary problems in a country like Egypt. But we also need to acknowledge the problem of under regulation in many of the newer states of the Gulf.
As Ambassador to the United Arab Emirates starting in 1986, I found the UAE’s small but lucrative markets filled to overflowing with fraudulent copies of brand name consumer goods, ranging from automobile parts to music cassettes. Federal institutions in this area were weak to non-existent. Rule of law, sanctity of contracts and transparency were at best unpredictable. Patents, trademarks, and copyrights had very limited protection. In effect, the UAE was becoming a pirate’s cove with no meaningful intellectual property protections.
We offered negotiated agreements to avoid retaliation. Senior officials from the federal ministries received a thorough briefing on the realities of the US political and economic environments that could lead to trade sanctions. Our negotiations encouraged the UAE to take pride in meeting high standards. Now the UAE is an increasingly valued commercial partner. We will sign a Trade and Investment Framework Agreement next week.
In 1993, the Departments of State and Commerce launched the first of what became annual economic dialogues with the six states of the Arab Gulf Cooperation Council. It was clear that the dominant oil and gas sectors of those economies were not creating jobs at anything close to the pace required to absorb the increasing numbers of graduates. Our intention was to inject new life into US relations with our Arab Gulf political and economic partners by encouraging economic and regulatory reforms.
Results of this first annual dialogue were disappointing. Both sides made resounding affirmations of shared interests but showed a lack of serious self-examination. Many speakers from the region were long on assertions of opportunity for US firms but avoided commitments to the kind of reforms we suggested were necessary. The US made no commitments about what we might be prepared to do in response. A chilly silence met my cautious call for gradual and orderly political reforms, even though I knew that I was partly echoing the views of businessmen and intellectuals from the region.
In the years that have followed, the Arab business communities have become more vocal in expressing the need for economic reforms. They know this is the price for entry into the global economy, either as members of the World Trade Organization or as partners with the United States in bilateral agreements. They understand that the discipline this provides may be a necessary catalyst for internal change. There is fear that change will upset a familiar cultural order. But Arab business elites fear even more the social and political consequences of inaction. Various political leaders have now joined the more dynamic members of the business community to call for reform, including more relevant education.
From the US perspective, trade negotiations are a businesslike and non-sanctimonious way for us to promote positive change. Arab governments and business establishments see the connection between economic and social reform and their long-term security. They know this has implications for the traditional political order, although commitment to change in that regard is very cautious. It requires the vision to take risks and make uncomfortable adjustments. Resistance to high profile US pressure for political reforms is almost certain. The prospect for political reform requires its emergence as an authentic expression of local aspirations.
David L. Mack is Vice President of the Middle East Institute, a non-profit educational institution that does not take substantive policy positions. His remarks are his own, based on experiences that include service as the US Ambassador to the United Arab Emirates and as Deputy Assistant Secretary for Near East Affairs.
Disclaimer: Assertions and opinions in this Commentary are solely those of the above-mentioned author(s) and do not reflect necessarily the views of the Middle East Institute, which expressly does not take positions on Middle East policy.
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Regional Issues
This Perspective was written from testimony given by Ambassador David L. Mack before the Senate Committee on Finance.
Trade and Investment Treaties, Free Trade Agreements and similar instruments prod governments in the Middle East and North Africa to adopt economic reforms. Such measures strengthen the private sector and lead to greater transparency and rule of the law. This includes regulations that enforce measures against international crime, such as money laundering.
Given the proper incentives, the private sector can provide jobs and hope to the young men and women whose families have invested in their education. Without constructive outlets, the emerging generation will be fodder for elements that foment hate and violence.
My perspective is based on over 40 years dealing with this region as a US diplomat, a private business consultant and educator. Despite promising exceptions, many of the Arab countries and Iran still have stagnating economies. Ties between government elites and a relatively few family commercial empires tend to dominate economic activity and hamper the emergence of competition.
It is commonplace to describe Arab political economies as being subject to over regulation. Certainly this is one of the primary problems in a country like Egypt. But we also need to acknowledge the problem of under regulation in many of the newer states of the Gulf.
As Ambassador to the United Arab Emirates starting in 1986, I found the UAE’s small but lucrative markets filled to overflowing with fraudulent copies of brand name consumer goods, ranging from automobile parts to music cassettes. Federal institutions in this area were weak to non-existent. Rule of law, sanctity of contracts and transparency were at best unpredictable. Patents, trademarks, and copyrights had very limited protection. In effect, the UAE was becoming a pirate’s cove with no meaningful intellectual property protections.
We offered negotiated agreements to avoid retaliation. Senior officials from the federal ministries received a thorough briefing on the realities of the US political and economic environments that could lead to trade sanctions. Our negotiations encouraged the UAE to take pride in meeting high standards. Now the UAE is an increasingly valued commercial partner. We will sign a Trade and Investment Framework Agreement next week.
In 1993, the Departments of State and Commerce launched the first of what became annual economic dialogues with the six states of the Arab Gulf Cooperation Council. It was clear that the dominant oil and gas sectors of those economies were not creating jobs at anything close to the pace required to absorb the increasing numbers of graduates. Our intention was to inject new life into US relations with our Arab Gulf political and economic partners by encouraging economic and regulatory reforms.
Results of this first annual dialogue were disappointing. Both sides made resounding affirmations of shared interests but showed a lack of serious self-examination. Many speakers from the region were long on assertions of opportunity for US firms but avoided commitments to the kind of reforms we suggested were necessary. The US made no commitments about what we might be prepared to do in response. A chilly silence met my cautious call for gradual and orderly political reforms, even though I knew that I was partly echoing the views of businessmen and intellectuals from the region.
In the years that have followed, the Arab business communities have become more vocal in expressing the need for economic reforms. They know this is the price for entry into the global economy, either as members of the World Trade Organization or as partners with the United States in bilateral agreements. They understand that the discipline this provides may be a necessary catalyst for internal change. There is fear that change will upset a familiar cultural order. But Arab business elites fear even more the social and political consequences of inaction. Various political leaders have now joined the more dynamic members of the business community to call for reform, including more relevant education.
From the US perspective, trade negotiations are a businesslike and non-sanctimonious way for us to promote positive change. Arab governments and business establishments see the connection between economic and social reform and their long-term security. They know this has implications for the traditional political order, although commitment to change in that regard is very cautious. It requires the vision to take risks and make uncomfortable adjustments. Resistance to high profile US pressure for political reforms is almost certain. The prospect for political reform requires its emergence as an authentic expression of local aspirations.
David L. Mack is Vice President of the Middle East Institute, a non-profit educational institution that does not take substantive policy positions. His remarks are his own, based on experiences that include service as the US Ambassador to the United Arab Emirates and as Deputy Assistant Secretary for Near East Affairs.