Only if you love me - the Oman-US FTA
In the meantime, American voters have been haranguing US Congressmen and Senators over the DPWorld takeover of P & O operations, including management of the six US ports, incensed at what they saw as a danger to homeland security. Polls revealed that 75% of Americans opposed the takeover of their ports by an Arab nation, even when assured that the company would have no say over security and screening at American ports. (Financial Times) Albeit that there will now be opposition to any foreign takeover, whatever the nationality, Gulf Arabs will be both angered by and disdainful of American antagonism. That translates into money. Only 6% of $13 billion of Gulf investment in mergers and acquisitions went to the US last year, according to a Credit Suisse report, (Reuters) and the proportion is likely to decline, given what will be interpreted as specific charges of anti-Arabism in Congress.
Despite some denials that it was in any way significant, talks between the UAE and the USA on a free trade agreement were postponed this week. The Khaleej Times reported Timothy Deal, senior vice-president of the US Council for International Business in Washington, as saying, "Because of what happened, it makes the timing for trade talks too difficult for both nations."
Egypt's free trade agreement talks have also been put off. In February, Al Ahram Weekly interviewed Francis Ricciardone, US Ambassador to Egypt, about the issue. Mr Ricciardone was diplomacy itself, saying that "The US has long been interested in concluding an FTA with Egypt. The US just wants to start negotiations on this FTA when the right time comes." Al Ahram put it to the ambassador, "The last two weeks saw the exclusion of Egypt from any negotiations on this matter while the US moved towards concluding negotiations with other Arab countries, most recently Oman, which is why it seems political conditions are playing a role..." to which the ambassador replied warily that negative headlines about the exercise of democracy in Egypt had obscured the larger reality that he experienced daily.
Not that Oman's FTA agreement has been exempt from criticism in the USA. This week, during discussions about US trade interests in the Far East, the Bush administration announced that it was adding Malaysia to a list of countries with which it would like to conclude FTA talks by mid-2007. "Trade Representative Rob Portman cited the potential not only for expanding U.S. exports but also bolstering a moderate Muslim ally." US State Department Tellingly, an article in London's Financial Times reporting this move revealed that "Many in Congress have been pushing the administration to make more commercially meaningful deals and have questioned the value of strategically motivated agreements with countries such as Oman and Bahrain."
The strongest objections to the Oman-US FTA at the Senate Finance Committee's hearings this week came from Thea Lee, Policy Director of America's largest Union movement, AFL-CIO, which represents some 9 million US workers. Ms Lee made some very interesting points:
On Labour rights
"Oman does not come close to meeting International Labor Organization (ILO) criteria for compliance with core labor standards, and the weak and inadequate labor rights protections in this agreement will allow these severe deficiencies in Oman’s labor laws to persist." Because the dispute settlement system in the FTA explicitly exclude obligations in the labour chapter, they are completely unenforceable.
"The (Omani) government reserves the right to 'be notified one month prior to each meeting of the general assembly with a copy of the invitation letter, agenda, documents and papers relating to the issues to be discussed,' and to 'delegate who it chooses to attend the meeting.' It also requires the committees to provide minutes of all meetings to the government and reserves the right to review the dues structure."
"Collective bargaining rights are not guaranteed."
"While all workers in Oman are denied basic labor rights, the large foreign workforce, who constitute the majority of private-sector workers in Oman, are especially vulnerable to abuse and exploitation. Foreign workers have the right to remain in the country for the duration of their work contracts; but employers are known to hold the passports of guest workers, and in the worst cases of abuse, even deny individuals the ability to extract themselves from dangerous or cruel work conditions."
On Investment
"The investment provisions of the Oman FTA contain large loopholes that allow foreign investors to claim rights above and beyond those that our domestic investors enjoy. The agreement’s rules on expropriation, its extremely broad definition of what constitutes property, and its definition of 'fair and equitable treatment' are not based directly on U.S. law, and annexes to the agreement clarifying these provisions also fail to provide adequate guidance to dispute panels. "
On Services
"NAFTA and WTO rules restrict the ability of governments to regulate services – even public services. Increased pressure to deregulate and privatize could raise the cost and reduce the quality of basic services. Yet the Oman agreement does not contain a broad, explicit carve-out for important public services."
On unfair advantage
"The dramatically lower costs of energy in Oman provide enormous opportunities for energy-dependent industries to use the country as an export platform. As is the case with the United Arab Emirates (UAE), where a foreign glassware manufacturer has set up shop and may use the UAE's natural gas -- which costs less than 1/12th of what it does in the U.S. -- to flood the U.S. market with glassware, a similar opportunity exists with Oman. Chemical manufacturers, energy interests and others could similarly benefit from Oman's energy pricing structure. Oman, like many other energy-rich nations, has a built-in advantage in low energy costs. But, beyond this initial advantage, energy costs to Oman’s manufacturing interests do not reflect market prices."
The Kuwait News Agency (KUNA) noted in response that "groups such as the American Kuwait Alliance, Coca-Cola, PepsiCo Inc., Occidental Petroleum and many more represented under the US-Middle East Free Trade Coalition encourage an FTA between the United States and Oman."
Oman did receive support from R-CALF USA, the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, keen to ship US beef overseas once more after the ravages of BSE infection. Oman will receive duty-free and quota-free imports of US beef after 10 years. R-CALF said that the FTA would "allow U.S. producers to access more of the Omani beef market and build an important strategic presence in the Middle Eastern region.”
However, the organisation noted that the agreement did not incorporate rules of origin for cattle and beef that it has consistently argured for in preferential trade agreements. “While the failure to include a BRS clause in the Oman FTA is not especially significant, failure to do so in other ongoing trade negotiations could be critical. In other agreements, the rules of origin must be strengthened so that third countries are not allowed to benefit from access to the U.S. market without providing reciprocal access to U.S. products,” said Doug Zalesky, chair of R-CALF USA’s International Trade Committee.
Former Ambassador Edward Walker, president of the Middle East Institute, told the committee that Oman had worked closely on counter-terrorism measures to control money-laundering and had "supported US military action in Afghanistan". Susan Schwab, Deputy US Trade Representative, "said that the Gulf country has taken major steps to improve labor laws and is an ally of the United States. It helped the US in the first gulf war." David Hamod, president of the National US-Arab Chamber of Commerce (NUSACC), reported that "US exports to Oman are expected to reach nearly one-billion dollars this year, up from around 593-million dollars last year."
You can download the final, signed text of the Oman-US FTA as pdf files from the website of the Office of the United States Trade Representative.
The documents show that most interest has focused on the schedule of tariffs from each country, intellectual property rights and rules of origin for textiles and apparels. The US insists that Oman should not be a clearing house for goods from third party countries which have exceeded their quotas for export to the USA. (Note that a recent Turkish deputation, which signed a MoU with the Oman Chamber of Commerce stated that prospects for Oman-Turkey trade are "construction (both projects and materials), textiles and food processing.")
Annexes to the agreement confirm that foreigners can own up to 70% in banking and legal services, aircraft services, maritime freight services, news agency services, restaurant services, and may own property within designated tourist areas which are expected to be built within ten years of the agreement. Outside of such areas, foreigners may only lease property for up to 50 years. Foreigners may not deal in real estate, run retail photographic enterprises, recruit personnel, be taxi drivers, publish within the country, supply free-to-air radio and TV services, serve as licenced tour guides, or operate transport on internal waterways. Retailing services are an exception. For businesses valued at less than $5 million, foreigners may only own up to 70% of the equity, but should the value of the business exceed $5 million, then 100% of equity can be retained. From the end of 2010, foreign nationals can own up to 100% of any retail service enterprise valued at more than $1 million. The Royal Oman Police has the authority to restrict its services solely to Omani nationals and enterprises owned by Omani nationals.
I suppose you could judge equivocations over the FTA by another yardstick. Last week, Standard & Poor's announced the daily index publication for each of the 6 Gulf Cooperation Council (GCC) states and released a GCC Composite Index. The market weightings in the GCC are as follows: Saudi Arabia 58.9 per cent, UAE 16.8 per cent, Kuwait 12.6 per cent, Qatar 9.2 per cent, Bahrain 1.4 per cent and Oman 1.0 per cent.
That makes Oman a very small trading partner compared with Malaysia which is the United States' 10th largest trading partner with $44 billion in two-way trade. Is the FTA solely about improving US-Oman trade, or about President Bush's bid to achieve his free trade agreement schedule before his presidency peters out? And is it a sop for being a good ally? Undoubtedly it is about all of these matters and more. Love me, and I'll love you, seems to be the message.
