Remarks by Charge d'Affaires Christopher Henzel
FTA/WTO Seminar
November 5, 2008 at 10:00 am
International Conference Center - Palm Room
Good Morning,
I would like to acknowledge their Excellencies Dr. Hassan A. Fakroo from the Ministry of Industry & Commerce, and Sheikh Mohammed Bin Isa Al Khalifa from Bahrain's Economic Development Board, and Dr. Essam Fakroo, from the Bahrain Chamber of Commerce and Industry, for both hosting this event and for all the work they have done to develop the trade relationship between Bahrain and the United States.
I want to begin today by commenting briefly on the status of the trade relationship between our two countries. For many years, the trade relationship between the U.S. and Bahrain has grown consistently. In 2005, total bilateral trade was approximately $782 million; in 2006 it was $1.1 billion; and by 2007 it exceeded $1.2 billion -- an increase of more than 55% over the previous two years. While some of this growth can be directly attributed to the FTA, much of it is a result of years of choices that has transformed Bahrain into a leader in the region, and positioned it to take advantage of economic opportunities. The free-trade agreement between our countries was not the beginning of our trade relationship, it was a natural outcome - an affirmation of the wise decisions that Bahrain's leaders have been making for years. These decisions have given Bahrain one of the strongest legal and regulatory frameworks in the region and a welcoming business climate..
Our growing trade relationship has benefitted both our countries. But trade does not result in just a one-time gain to the traders. Trade and investment has a cascading effect. It stimulates economic growth, which in turn creates jobs, which generates wealth, which raises standards of living.
The FTA has already produced real gains. On August 1, 2006, U.S. and Bahraini businesses already engaged in bilateral trade saw immediate benefits from the FTA with the end of import/export duties. Bahraini companies exporting to the U.S. no longer pay the millions of dollars in duties that they once did. Instead, that money remains in Bahrain's economy, helping drive domestic growth. In 2007, following the entry into force of the FTA, Bahraini fertilizer exports to the U.S. doubled, textile exports grew 150%, and Bahraini imports from the United States increased by almost $120 million. Foreign Direct Investment for 2006 and 2007 was among the highest levels ever recorded for Bahrain. According to the 2008 World Investment Report, Bahrain now ranks #1 in the GCC and #12 in the world for inward FDI. We are just beginning to see the gains that new investment will bring.
In April, Kraft Foods opened their new manufacturing plant in Bahrain. Begun in 2007, this plant was touted as a coup for the local food industry, as it was Kraft's first production plant in the Middle East, and represented an investment of $40 million. But that is only a part of the story-- Kraft estimates that this plant will contribute $120 million annually to the Bahraini economy in the form of wages, packaging materials, and operating expenses. That is not just a $40 million one-time gain, but $120 million dollars that will be there year after year -- jobs that will be there year after year. Likewise, General Electric expanded industrial activity at its regional center in Bahrain because the Free Trade Agreement allowed it to import components duty-free and then re-export value-added products throughout the region.
These investments have created hundreds of jobs for Bahrainis, translating to positive and tangible differences to the lives of the Bahraini people. These are the real gains -- gains that did not appear just because an FTA was signed, but gains that resulted from a favorable investment climate, of which the FTA is one integral part. Gains that don't only accrue to a few select individuals, but gains that are felt from top to bottom.
I believe the FTA is still somewhat misunderstood. Two years after entering into force, many businessmen still have little idea of how to exploit the FTA to grow their businesses and improve their bottom lines. I am often asked what government officials are doing to implement the FTA. And this is the misunderstanding -- the FTA does not create economic growth on its own. The FTA provides opportunities - opportunities to grow existing businesses and develop new ones. We don't need to implement the FTA, it is already fully in force. We need to exploit the opportunities that the FTA presents. We must find ways to translate an agreement into real business activity that produces tangible benefits. People need to recognize the FTA for what it is - a great opportunity. Not just an opportunity for the rich, but an opportunity that leads to more jobs, better services, and higher living standards. Although already significant, the benefits of the FTA are just beginning to be seen. The next several years should see even stronger growth as businesses become fully aware of the advantages that the FTA provides.
One of the greatest opportunities that the FTA presents -- trade in the services sector--is just beginning to be realized. The Bahrain-U.S. free trade agreement provides one of the highest degrees of market access of any U.S. free trade agreement. It covers audiovisual, telecommunications, computer services, healthcare, construction, architecture, engineering, and a host of professional services. The FTA provides benefits for businesses that want to operate cross-border in each other's countries, and those wanting to establish a local presence in the other country. These benefits are particularly promising in the financial sector, where providers are allowed to offer cross-border services in important areas such as insurance, data processing, financial information, and financial advising.
Bahrain's economy may be relatively small today, but it is growing fast. Bahrain is a gateway to the region. Situated at the heart of the GCC, Bahrain offers international businesses a central location in a quickly developing market of 130 million people with a combined GDP of almost a trillion dollars. But new offices opening in Bahrain, new initiatives created specifically to capitalize on the FTA will take some time to develop. We need more work to create effective partnerships between American and Bahraini businesses that will attract new investment and exploit the opportunities presented by the free trade agreement.
Last fall, with U.S. support, Bahrain hosted the first U.S.-GCC Trade and Investment conference. It was a great success. Plans are already under way for the next conference here in the Springl, which will serve to further promote the advantages the FTA offers and spur even greater growth. And today, we welcome a new member to our team -- an FTA expert from the U.S. who will be resident here with the Ministry of Commerce, working to develop ways to help Bahraini businesses exploit the FTA. I look forward to continuing to work with our partners here in Bahrain to grow our trade relationship, and showcase the opportunities that the FTA provides American and Bahraini businesses alike.
Thank you.