With US FTA, ‘Jordan has potential to become regional trading hub’

(Photo: Unsplash)
(Photo: Unsplash)
AMMAN — Signed on October 2000, the free trade agreement (FTA) between Jordan and the United States marked a precedent of economic partnership between the US and an Arab nation.اضافة اعلان

In a phone interview with Jordan News, head of the American Chamber of Commerce in Jordan, Mohammad Bataineh, said that before the trade agreement, the total volume of trade between Jordan and the US was below $500 million, but After the agreement, that amount skyrocketed by 800 percent, “which is bound to reflect positively on Jordan’s economy.”

The FTA agreement includes exchanges in agriculture, labor and technology. According to the Office of the United States Trade Representative Website, US exports to Jordan were estimated to be $2 billion in 2017; an amount equivalent to 4.5 percent of Jordan’s GDP in 2020.

According to a document issued by the US Office of Press Secretary at the time, entertaining the option of free trade relations between the two countries came as a byproduct of Jordan’s ascension to the World Trade Organization (WTO). In the eyes of the US government, Jordan being part of the WTO was pivotal to the signing of the FTA, as it ensures that Jordan is in compliance with global trade practices.

“The increase in trading volume comes mainly as a result of international manufacturers setting up factories in Jordan because it gives them access to the largest market in the world — the US market — as manufacturers produce goods and ship them back to the US, while being exempt from custom taxes,” explained Bataineh. “Major companies, most prominently Nike, who set up factory in the Industrial city of Sahab, moved to Jordan because of the FTA.”

Although the majority of exports from Jordan to the US are coming from international companies, the FTA still benefits the national economy, as both are in fact “highly interrelated,” according to Bataineh.

“Having international companies set up factories in Jordan contributes to the local economy through employment, payments to local landowners, and interactions that take place with surrounding businesses. The Jordanian economy is better off with international companies staying in the Kingdom,” Bataineh explained.  

Moreover, Bataineh underlined the inaccuracy of the negative impacts the FTA has had on local producers. “Producers in various local sectors generate a big portion of their revenue by selling their products to the US. Dead Sea product manufacturers immediately come to mind as an example.”

‘Balanced relationship’
Responding to claims that such agreements between developed and developing nations cannot be of benefit to both sides, Bataineh described the Jordan-US FTA as one that is “highly balanced” and in line with the interest of “various stakeholder groups who are impacted by the agreement.”

“While it is true that trade relations between developing and developed countries tend to be heavily tilted towards developed countries because of their much stronger economic capabilities, that is not the case for the Jordan-US FTA”, said Bataineh.

“The US has allowed a wide array of Jordanian goods to enter their borders without any trade barriers, and because the cost of production in the US is relatively higher than that of Jordan’s, products coming from Jordan can compete in the US market.”

Data from the Office of the United States Trade Representative supports Bataineh’s views. In 2019, the data showed that total exports from Jordan to the US amounted to $2.8 billion, while total imports of US goods to Jordan amounted to $2.2 billion, which not only corroborates Bataineh’s description of the trade relationship between Jordan and the US as “balanced,” but it also shows that for that year, Jordan was trading with the US at a surplus.

According to more recent data from the American Chamber of Commerce, total trade volume for the first quarter of 2021 was $3.2 billion, $1.32 billion of which were exports from Jordan to the states. While this does not constitute a trade surplus for Jordan the same way it did in 2019, it is still an indication of the consistent balanced nature of the FTA, which, according to Bataineh, “is why the agreement is a win-win situation, and why it remains sustainable.”

Other FTAs
Head of the Amman Chamber of Commerce, Khalil Haj Tawfiq, doubled down on the statements made by Bataineh by praising the economic benefits of the FTA with the US. “Because labor costs in the US are much higher than those in Jordan, products coming from the Kingdom are able to compete in the US market.”

In a former article with Jordan News, Khalil Haj Tawfiq spoke of the importance of free trade agreements to the Jordanian economy in light of the rising prices of goods. He specifically addressed the FTA with Turkey, which was eventually cancelled because of ongoing pressure from local producers, who claim that their products cannot compete with Turkish products.

Despite that, Haj Tawfiq still stands firmly behind his original stance in support of rebuilding trade relations with turkey, claiming that the “interest of the Jordanian consumer is his main priority.”

The statement made by Haj Tawfiq goes against the views of Bataineh and many other producers shared with Jordan News.

“From all the FTAs Jordan has had with other countries, the one with the US is the only one that makes economic sense.

When looking at a country like Turkey, it is impossible for our producers to compete with their economy, given their extremely low-cost production and the inflation of the Turkish lira. The trade agreement we had with Turkey, as well as the one we had with the (UAE) and Europe, all ended with massive trade deficits for Jordan,” added Bataineh.

Bataineh concluded his remarks by saying: “the FTA with the US can be a cornerstone to building a formidable economy in the Kingdom. Unlike our neighbors, we have political stability, as well as free access to the world’s largest economy. Jordan has the potential to become the trading hub of the region.”

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