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One year ago I gave a speech in California and said the following:

In Jordan, probably our best Arab friends, 93% of the people in a poll this summer had an unfavorable view of the United States. In Morocco, one of our oldest friends in the region, 68% were negative about the United States. Needless to say, in places like Egypt and Saudi Arabia — which have been the target of heavy US press and political criticism — the number rises to 98%. That should tell us something. Something has gone badly wrong.

The situation has somewhat improved in the Middle East over the past year. Jordanian negatives, for example, decreased to 79% in the spring of 2005. At the same time, support for suicide bombing has dropped in virtually every market. However, there is less of a decline on the question of suicide bombing when the target area is narrowed down to the American military in Iraq.

The more suicide bombers target local Muslim populations, the less support they receive. In fact, the letter publicized a week ago from al-Qaeda number two Ayman Zawahiri to the Jordanian al-Qaeda leader in Iraq, Abu Musab Zarqawi, raised the leadership’s concern that violence and atrocities with civilian victims were undercutting the broader objectives of taking over moderate Arab regimes.

As for other parts of the world, the image of the United States may be getting worse. The last temperature check in Canada and Europe in June of this year was a pretty appalling predictor of our ability to engage others in support of our policies. If we take a look at the favorable opinion of the US in Canada, it has fallen from 71% in the year 2000 to 59% in 2005. Britain is more troubling — 89% favorable in 2000, 55% in 2005. Germany slipped from 78% to 41%.

I was at a BMW conference in Munich last week with German academics and policy makers, and they were hard pressed not to say “I told you so” when talking about Iraq. The common theme was that Iraq, in their words, was a “disaster."

Subjective reporting from the region indicates that the negative attitude toward America has, until recently, been directed against President Bush and his administration. In other words, that this too will pass, like so many other heat waves against American presidents and policy in the past. However, I am only now getting reports from friends in the region that indicate the mood is shifting. Driven by our presidential elections and broad popular support for President Bush, Arabs in the region are increasingly coming to believe that the problem is deeper in our society. It’s not the president, it’s the people.

This mood is growing as Muslims in the region suspect that we are innately prejudiced against Islam and that deep American Christian conservative roots are driving America into a religious confrontation.

The question becomes what impact will this mood shift have on American business? Non-governmental organizations that have been raising the warning flags about the impact of America’s negative image on trade have found very little resonance in American businesses dealing in the export of goods and services — particularly to the Middle East. Most companies are reporting no loss of markets.

And if you look at the trade statistics of Saudi Arabia, our total exports since 2000 have remained relatively constant. In fact, exports from January to July 2005 showed a significant increase over the same period in 2004 – $3,633,000,000 in 2005 compared to $2,879,000,000 in 2004.

But these statistics may mask some essential facts. If we look at the balance of trade with Saudi Arabia, we have gone from a deficit of $8,130,000,000 in 2000 to $15,701,000,000 in 2004. And comparing the first seven months of 2005 with 2004, we had a deficit of $7,272,000,000 in 2004 compared to $11,095,000,000 in 2005.

This would tend to indicate that we receive no benefit from the massive influx of capital into the region generated by the increase in oil prices. By contrast, China increased its exports to Saudi Arabia by 21% in 2000, 18% in 2001, and 23.5% in 2003 (the latest figures I have available). So while we may not be losing markets yet in the Middle East, we may be losing our share of the markets.

A more comprehensive study would have to be made that factored out Iraq for us to draw hard and fast conclusions about the linkage between the US image abroad and our business opportunities. Logic would tend to indicate that there is a linkage, but even in the areas of consumer products — where you would expect to see a direct correlation — the evidence is limited. In the 2001 — 2002 period, local boycotts in Egypt and Saudi Arabia had a marginal and very short-term impact according to major US companies and their distributors.

Several factors tend to soften the impact of the negative US image. For one thing, supplier relationships are strong and long standing. Business friends of mine in the Middle East say they are reluctant to change suppliers based on the trust they have built up over the years. However, they also say that unless US travel and other business restrictions are reduced, they will move to European suppliers. In this case it is not image that is the problem, it is the ease of doing business.

A second factor is that so many of the contracts for goods and services in Middle Eastern countries are controlled by the state. And in virtually every Middle East country, the current leadership is far more supportive of and, in a number of cases, beholden to the United States than the population at large. In places like Qatar, Bahrain, Kuwait, and the UAE, where defense is almost entirely dependent on the US military, there will be a continuing bias in favor of the United States.

This is not to say that there is no corrosive effect from US negatives. In virtually every Arab country the king or president is out in front of his people and more willing to support us than his people would be. But some of these leaders are getting tired of being exposed. Some, like King Abdullah in Saudi Arabia, are tired of the constant criticism they hear from the US media and our Congress. Some are ready to wash their hands of us. And that is not a good sign for our future ability to drive policies in the region to our advantage or to guarantee a substantial share of their markets.

I am not alone in worrying about the problem of attitudes toward the United States. In a survey that Public Agenda took of US attitudes in August 2005, three quarters of those surveyed said they worry that “the US may be losing the trust and friendship of people in other countries,” and that “there may be growing hatred of the US in Muslim countries.” In the same survey, when asked to grade our performance on foreign policy, “nearly two thirds (64%) [gave] the US a ‘C’ or worse on having good relations with Muslim countries.”

When asked if showing more respect for the views and needs of other countries would enhance our security 49% said it would “a great deal,” and 38% said “somewhat.” There is a lot of other depressing reading for Americans in the Public Agenda report as well - but getting depressed is not going to answer our problems.

Nor can we realistically expect the Bush Administration to be able to change attitudes in the region. For one thing, Americans are right, we have lost the trust of people in the region to the point that US spokespersons have very limited credibility. When then-Secretary of State Colin Powell got up in front of the assembled nations at the UN and outlined Saddam Hussein’s secret weapons program, only to find out later that our claims were baseless, we lost the credibility factor.

Every recent administration has struggled with this problem of public diplomacy and every one of them has failed to mount an effective effort. Unfortunately, rearranging the deck chairs or throwing money at the problem won’t help.

Obviously, government does have a role to play, but it may be more effectively exercised in the area of policy than in public relations. If US policy ignores the issues the region considers most important, our image suffers. And this is particularly true of the Palestinian issue. After 35 years of working on this problem I have learned at least one thing; when we are actively engaged in trying to find a solution to the Palestinian problem, our stock in the region goes up. It doesn’t matter if we are successful or not. What people want to see is that we care about their concerns, not just our own agenda.

The problem with our image may be partly the result of our policies and exaggerated expectations of what the United States can do. But according to some of my friends in the region, it is also the disappointment that the United States no longer stands for the values it professes. We have problems — corruption in the corporate board room and the back rooms of politics, Abu Gharib and Guantanamo, and Hurricane Katrina — and these problems are seized upon by our enemies, enemies the President spoke about on October 6. In the face of this onslaught, we need to continually reinforce a different image of the United States, and this is where the private sector and the non-governmental sector can have a major impact.

A friend of mine owns one of the McDonald’s franchises in Egypt. He was suffering from the informal boycott of American products, and so he donated a few pennies on every sale to hospitals in Egypt serving the poor. His sales went up. Coca Cola, one of the corporate sponsors of the Middle East Institute, engaged in a highly successful image-shaping advertising campaign in Indonesia.

The Middle East Institute, which I head, is working with several other organizations to place the commentary of respected US political, military, and foreign policy experts into the Arab media to balance out the hostile propaganda that too often appears in the local press and on television. In my experience, this kind of non-governmental input has greater credibility and receptivity than the statements of US government spokespersons, even when we say the same things.

In short, I think we have an image problem that is persistent and that will be exploited by our competitors whether they be in business or politics. And we need to pull together to turn the situation around and restore and sustain the confidence that people around the world have placed in American values, our entrepreneurial spirit, and the quality of our goods and services.