Ambassador Comments on Free Trade Agreement:
Editorial by Ambassador Adam Ereli published in Al-Ayam and Bahrain Tribune on July 27, 2009.
(Link to text in Arabic PDF file)
This month marks the third anniversary of the implementation of the U.S.-Bahrain Free Trade Agreement (FTA). Now is a good time to ask, "What has the Agreement produced for the two countries?"
In 2005, before the Agreement went into effect, bilateral trade between Bahrain and the United States totaled $782 million. At the end of 2008, and despite the global recession, bilateral trade totaled $1.37 billion. This is an increase of 75 percent and represents real, positive change. Much of this growth in trade was in manufactured goods, heavy machinery and fertilizer. Since 2006, the textile sector witnessed a 150 percent increase in Bahraini exports to the U.S.
Despite these successes, many Bahrainis want to know how the FTA has improved their daily lives and their own economic well-being.
First of all, the increase in bilateral trade has boosted Bahrain's GDP overall, and this growth in economic activity benefits everyone. Secondly, because the FTA removed all import tariffs, Bahraini businesses and consumers are able to purchase U.S. goods at cheaper prices. As a result, Bahraini businesses both large and small have netted substantial profits, regardless of whether the company has hundreds of employees or less than five employees. These companies are diverse and include businesses in textiles, manufacturing, and retail.
Consider for example a medium-size Bahraini textile company. In 2005, the textile sector in Bahrain was in recession. This company, with 250 employees, was near bankruptcy. Since the FTA went into effect and eliminated all tariffs on Bahraini textile exports to the U.S., this company's exports have increased by 30 percent and employment has grown to over 300 employees. According to the President of this company, the FTA is the reason that they are still in business today.
Another example is a small Bahraini company that imports cosmetics and related equipment. Prior to the FTA, they imported approximately $120,000 of goods from the U.S. each year, which carried a tariff duty of $6,000. They credit the tariff reduction from the FTA with allowing them to decrease their prices, become more competitive and triple their business over the past three years. In 2005 they employed three people, and now they employ nine. They are now looking to expand their product offerings in other U.S.-source goods to take further advantage of FTA opportunities.
The examples of these two companies demonstrate that aggressive, creative entrepreneurs can find ways to use the FTA to their advantage by reaching new markets and expanding their business. Looking to the future, our common challenge is to stimulate this kind of activity with other companies. The U.S.-Bahrain FTA is one of the most comprehensive and liberal trade agreements the U.S. has ever signed. The opportunities it creates for expanding business development are huge. It eliminates duties on all consumer and industrial products. It opens the services market, streamlines digital trade, protects intellectual property, and facilitates government procurement.
Yet a free trade agreement by itself does not create economic activity. Although it reduces barriers to trade, it is the entrepreneurs who must determine what opportunities make sense for their company, seek out partners, negotiate contracts and build long-term commercial relationships. And this is a competitive process. In addition to Bahrain, the United States has free trade agreements with 16 countries around the world, including three in the Middle East. Each of those 16 countries is acting aggressively to maximize commercial and investment opportunities between their nations and the United States.
Our goal is to use the FTA to expand trade, grow companies, create jobs and generate wealth in Bahrain. Over the past three years, our two governments have tried to promote the opportunities that the FTA has opened for businesses. The American Embassy, the Ministry of Industry and Commerce, the American Chamber of Commerce, the Bahrain Chamber of Commerce and Industry, and many others have conducted workshops and conferences, produced worksheets and toolkits, and have met regularly with businesses that are actively looking for new opportunities.
Yet there is more that needs to be done. We have to actively market Bahrain as an attractive investment destination. We have to reach more of the small and medium enterprises that are the real engines of growth in any economy. We have to make this training more regular and sustained. And we have to strengthen cooperation between the different organizations dedicated to promoting business and commercial relations with Bahrain.