The International Trade Relationship between North America and the Middle East - Research Paper Example

Abstract International trade involves the inter-territorial exchange of goods, services and capital. International trade has risen to formally unprecedented levels with industrialization, globalization, advanced transportation, outsourcing and multinational corporations playing an important role in the international trade system. While having several benefits to participating countries, international trade has also resulted in both short and long-term negative effects for some participating countries. North American countries which generally include the US, Canada and Mexico have depended on Middle East countries for petrochemical and energy supplies, much like the Middle East has relied in it for manufactured goods and agricultural products among other supplies. This paper seeks to exhaustively analyze the role played by North America in its trade relations with the Middle East. Introduction International trade between countries and territorial regions has existed since time immemorial. International trade involves the inter-territorial exchange of goods, services and capital. International trade has continued to grow across the worlds a result of the appreciation of the fact that no country or region can be absolutely self-sufficient. Today, international trade has risen to formally unprecedented levels with industrialization, globalization, advanced transportation, outsourcing and multinational corporations playing an important role in the international trade system (Friedman, 2005). While containing several benefits to participating countries, international trade has also resulted in both short and long-term negative effects for some participating countries. The evolving position of America and its foreign policies continue to affect billions of people throughout the world. The Middle East has for long been a centre of global interest with its rich mineral reserves also drawing great attention; especially of wealthy nations. The following sections give an analysis of the trade relations between North America and the Middle East. North America’s Political Environment North America has a number of sub-regions whose boundaries have yet to be internationally and universally accepted. The region however generally includes Canada, the United States of America, Mexico and other entities. As a result of the implementation of North America Free Trade Agreement (NAFTA) between the US, Canadian and Mexican governments, a number of similar interest coalitions have been established with an aim of promoting the development of transport channels (Friedman, 2005). This has led to the development of infrastructures and jurisdictional amendments that facilitate cross border activities. The coalitions of interest include government agencies, businesses, individuals, metropolitan areas, civil organizations and rural communities wishing to reinforce the commercial hubs of their areas. The Mexican government for example, has several objectives in its foreign policy. These are geared towards the attraction of foreign investment, promotion of technology transfer, promotion of its products in the international market and promotion of tourism in the country (Friedman, 2005). NAFTA however has in the past experienced certain controversies especially regarding agriculture among other core issues. Key Players in North America – Middle East International Trade The Middle East which plays an integral part in international trade is a region where major international economic and political challenges are played out (Friedman, 2005). The tensions that exist in the Middle East play a vital role in shaping the global environment and international trade, more especially in its relations with North America, the United Kingdom and the European Union. Middle East countries that commonly engage in international trade with North American countries include Iran, Egypt, Turkey, Saudi Arabia, Israel, United Arab Emirates, Qatar, Oman, Kuwait and Bahrain among several other countries. North American countries which generally include the US, Canada and Mexico have depended on Middle East countries for petrochemical and energy supplies. This in effect gives North America a direct stake in the region’s stability. North America’s interests in the Middle East countries have been followed through active high level visits to the region at the political level (Howard, 1997). These visits have seen the conclusion of several arrangements and agreements that establish mechanisms for the promotion of trade, problem solving, dialogue and economic exchanges. One common feature that exists in international trade between North America and its trade partners is the enactment of free trade agreements that are supposedly meant to benefit both countries but that contrarily favors, in most cases, America over its trade partner. The Legal Environment Antitrust laws have been enforced in the Americas in regulation of both domestic and foreign trade. While there are several antitrust laws most notable acts include those by Sherman and Clayton. The Sherman act sets the foundation upon which other acts are built. It prohibits combinations, contracts, conspiracies and contracts that could restrain commerce or trade among the States or with other countries (Friedman, 2005). It further prohibits monopolization, conspiracies to monopolize and attempts to monopolize trade. The Clayton Act addresses issues related to anti-competition or creation of monopolies. The World Trade Organization has generally been adopted as the person who listens to (and resolves) disputes that arise out of international trade activities between North America and Middle East countries (Howard, 1997). The US has however been criticized from certain international quarters in its relations with the World Trade Organization. The Regulatory Environment Several regulations have been enacted to regulate trade and commerce in America and with foreign countries. North American countries in 2001 enacted a bill in view of protecting member states and countries from unfair competition. At the regional level, each North American country is therefore a signatory to a protocol that provides for the harmonization and enactment of legislation of competition policy. In the US, The Sherman Act acts as a comprehensive charter whose objective is to preserve free and unfettered competition in trade. The US has continuously pressed for free trade on the premise that unrestricted interaction of competition yields the best allocation of resources, greatest material progress, highest quality and lowest prices while also providing an enabling environment for the democratic preservation of social and political institutions – a stand it also maintains in international trade (Tikiri and Bandara, 1985). The United States FTAs with Jordan and Israel have evidently opened up an easy path for American organizations seeking to trade with partners from the Middle East. In order for businesses to export their products to Middle East countries from North America, all necessary invoices and certificates must be presented to the receiving country’s authorities in compliance with the laws and agreements of the trading countries (Steger, 2003). Through elaborate legislations, North America has instituted measures in view of export controls, corruption, mergers, federalism, extraterritoriality, import relief, trade sanctions and antitrust laws to safeguard its interests in relation with foreign countries (Steger, 2002). The US maintains its sanctions against Iran and Sudan and therefore prohibits exports to them except in the case of medical and food supplies. Iraq and Libya are also restricted in trade but only to minor extents. In relation to foreign nations, North America’s investigatory practices involve diplomatic cooperation. Failure to cooperate with its regulations however results in the enforcement of sanctions against the foreign state and at the worst war if all options are exhausted. Free Trade Agreements An analysis of the political and socio-economic effects of North America’s trade agreements on Middle East and North Africa (MENA) countries such as Jordan, Egypt and Morocco shows that North America is getting more active in its pursuit of Free Trade Agreements (FTAs) which it uses as a policy tool with associated political goals (Khouri, 2008). According to al Khouri, an economics analyst, trade between the United States of America and MENA countries has grown in a relatively balanced way. On the other hand, FTAs between Middle East countries and the European Union greatly favored the latter. Bilateral security cooperation between North America and MENA countries has also continued to get stronger following the signing of FTAs between countries falling within the two blocks (Khouri, 2008). Free trade agreements between the Middle East and North America on have therefore heightened negative perceptions of globalization as they seem to benefit elites who are unpopular while also imposing almost instant economic adjustments (Khouri, 2008). The Financial Climate The United States has enjoyed massive power and control over other countries due to its strong and wealthy economy. With its help and through globalization, countries such as China have emerged strong over the past few decades. In appreciation of the power of unity, North American countries have often formed trading blocks such as NAFTA. NAFTA members have combined purchasing power parity GDP known to be the world’s largest as of 2007. Compared to many Middle East countries, North American countries have higher GDPs which generally imply stronger economies (Howard, 1997). Further, The US dollar has remained strong in the international market which gives the country a favorable position in international trade. North American countries such as the US have created strong systems that enable businesses from the country to enjoy financial support in case of need. These systems are deeply entrenched within the countries’ legal frameworks and enable American businesses to have better opportunities for prosperity. Further, globalization has led players in the international market to access financial markets in the two regions. Global common markets that are based on free exchange of services and goods have however resulted in the economic collapse of several local markets (Howard, 1997). The Managerial and Labor Environment According to NAFTA, over 200 million people across the world are migrants living outside their country temporarily or permanently. This poses great effects for the host country and the sending countries in various ways. Migrations into America are quite common with immigrants coming from all over the world but more especially from Africa Asia and the Middle East. Migrants in North America from the Middle East purposefully migrate in search of education and jobs (Tikiri and Bandara, 1985). In many cases, immigrants face several restrictions in their search for jobs in America whose laws are stringent on immigrants. This to some extent is due to the prominence of terrorists in the Middle East. On the other hand citizens from North American countries do not face as much restrictions in venturing into Middle East countries. Yet another notable fact is the tendency of people from North America to be preferred in managerial positions as opposed to those from the Middle East. This occurs despite regulations that call for equal opportunities in North American countries. This clearly depicts the inequality that exists between members of the two regions. Canada has in the past been in demand of less skilled workers many of who come from the Middle East (Howard, 1997). Middle East countries have provided labor to the United States indirectly by engaging in business process outsourcing activities. While this has created several jobs in the Middle East, the US government has faced several challenges to stop business outsourcing which denies many citizens the opportunity to get employed. Other analysts have on the other hand applauded moves to outsource work to other countries in view of long–term benefits to the economies of North American countries. Key Consumers International business is known to boom in the Middle East and hence attracts several investors across the world with North American countries being major players. According to a report released by the US Export Council in 2008, during the first half of 2008, the United States exports to the United Arab Emirates increased by a whooping 42 percent from the same period in the previous year. In 2004 alone, exports to MENA exceeded 23.5 US dollars in value with Israel and Saudi Arabia being the largest consumers (Smith, 2007). The Middle East is predominantly rich in natural gas, oil and vast reserves of ores and minerals such as gold, bauxite, coal iron and copper most of which are largely untapped. Middle East countries also supply fertilizers and polymers to North American countries (Steger, 2002). People from North American countries visit the Middle East as tourists owing to its rich diversity in culture and beautiful scenery. Major attractions for such tourists include Dubai, Bahrain, Lebanon and Turkey. Key International Competitors In the international market, there are bound to be competitors with few exceptions like where monopolies exist. Survival in the global business market demands improved efficiency in production and increased competitiveness without which a business will definitely collapse (Smith, 2007). Companies therefore have to adopt new production techniques and use better machines most of which are produced in North America. In terns of international trade, North America faces relative competition from the United Kingdom and the European Union. North American countries mainly export manufactured goods, textiles, vegetables, fruits, wheat, cotton, beef, soya products, machinery and some processed foods among other products (Smith, 2007). According to the US commercial Service, US exports to MENA have become a part of day-to-day life. North America also faces serious competition from China and African countries in some products in the Middle East market. According to George Perkovich an Iran expert, the country (Iran) has become emboldened to compete for dominance in the Middle East against the US. In his view, this could further widen its already scoured relations with North America in the event that the US attempts to use military against it. This in actual sense places North America under close watch in its international relations with the Middle East (Bayne & Woolcock, 2007). Conclusion The Middle East which plays an integral part in international trade is a region where major international economic and political challenges are played out. North America greatly depends on Middle East countries for petrochemical and energy supplies. This in effect gives North America a direct stake in the region’s stability. Through active high level visits to the region at the political level, North America’s interests in the Middle East countries have been followed. These visits have seen the conclusion of several arrangements and agreements that establish mechanisms for the promotion of trade, problem solving, dialogue and economic exchanges. North America countries mainly exports manufactured goods, textiles, vegetables, fruits, wheat, cotton, beef, soya products, machinery and some processed foods among other products to the Middle East. Several regulations have been enacted to regulate trade and commerce both within America and with foreign countries. These regulations and legal frameworks have served to protect the economic States’ interests. With several Free Trade Agreements in place North America, owing to its stable economy and power, has managed to gain favorably from bilateral and multilateral trade agreements with other nations including those in the Middle East. Generally, North America has gained more from its international relations with Middle East countries. This could be as a result of its stature as a superpower, its vast wealth and stable economy and also due to its stringent laws, antitrust policies and foreign relation policies. 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