Flip through the latest issue of Gulf Weekly.
After free trade, an open investment policy is now the dictum most touted by the US in the GCC.
At the recent US-GCC forum in Manama, the US deputy secretary of the Treasury Department Robert M Kimmit has highlighted there is a growing interest by US investors in the region. From 2000-2006, the stock of US foreign direct investment (FDI) in Gulf Co-operation Council (GCC) countries increased by $9.4 billion a 57 per cent increase.
He said open economies are crucial in today's integrated global marketplace. The free movement of capital across borders is a crucial source of economic growth. International trade has often garnered the most headlines, and it is indeed an essential component of open economies. However, international investment is of substantial and growing importance. In fact, investment flows dwarf trade flows.
But has industrial growth in GCC countries reached such a level that they can match US companies in products or services? If not, free trade and open investment policies mean that the US stands to gain in every respect from such agreements.
Giant multinational corporations would have their advantages too like: ease of buying property in the region, tax breaks, the economies of scale in which they work as well as the advantage of being based in the home towns of the producers.
"The mechanisms developed and imposed by the US and its allies are not free trade agreements. They are a mixture of liberalisation and protectionism designed - not surprisingly - in the interests of their designers: multinational corporations and the states that serve as their 'tools and tyrants'. The agreements guarantee expansive monopoly pricing rights. They also deprive developing countries of the mechanisms employed by all the rich industrial societies to reach their present state," observes Noam Chomsky, a widely-known intellectual, political activist, and critic of the foreign policy of the United States and other governments.
What is called 'trade' is in part an economic fiction, including vast intra-firm transfers within highly-planned economies.
In the North American Free Trade Agreement, for example, the only accurate words are 'North American'. The efficacy of such mechanisms, however, depends ultimately on public acceptance. And, as recent developments in Latin America clearly reveal, that is far from assured, contends Chomsky.
According to the US there is growing global recognition of the importance of FDI and open investment policies.
But how open has been the US when inward investments are considered?
A case in point is the Dubai Ports World controversy where US lawmakers prevented DPW from taking over and running the American ports of its acquisition P&O.
Now even as the US proclaims open investment policy, every acquisition proposal goes through a three-stage process to make sure that American interests are not affected.
Does the GCC have anything of the sort to prevent US companies detrimental to the region coming here?
Why is the US echoing the so-called global concerns over the recent rapid increase in the number and asset size of sovereign wealth funds (SWFs), although they have been considered a force for financial stability, supplying liquidity to the markets, bidding up asset prices, and lowering borrowing yields in the countries in which they invest?
"The US has always had extensive state intervention in the economy, right from the earliest days - we would be exporting fur right now if we were following the principles of comparative advantage," notes Chomsky.
The US has been the most economically protectionist country in history. In the late 19th century, when Europe was actually toying around with laissez-faire, American tariffs were five to 10 times as high as theirs - and that was the fastest economic growth period in American history.
And it goes on right until the present. The US developed a steel industry a century ago because it radically violated the rules of the "free market," and it was able to recover its steel industry in the last decade or so by doing things like restricting imports from abroad, destroying labour unions to drive down wages, and slamming huge tariffs on foreign steel.
The US argues that trade liberalisation and increased economic integration will generate growth, create opportunity and promote security throughout the Middle East. As an example it shows that Jordan's exports to the United States increased dramatically following implementation of a trade pact - almost 80 per cent. But Jordan's case shows that trade alone is not an answer to economic ills. The country's unemployment rate, for example, has not changed since the trade pact, hovering around 15 per cent since the beginning of 2001.
Unemployment throughout the region is close to 20 per cent, and about 30 per cent of the population lives on fewer than $2 a day, according to the World Bank.
Chomsky says: "As a matter of fact, it's not even clear that these so-called 'free trade' agreements are going to increase trade at all, in any authentic sense. But if you take a look at that international trade, you'll find that it's a very curious kind of growth: about 50 per cent of US trade now is internal to corporations, which means it's about as much 'trade' as if you move something from one shelf of a grocery store to another, it just happens to cross an international border, so therefore it gets recorded as 'trade.'
"...all of these international agreements are part of a general attack on democracy and free markets that we're seeing in the contemporary period, as banks, investment firms, and transnational corporations develop new methods to extend their power free from public scrutiny."
