The U.S. - Oman Free Trade Agreement

THE U.S.-OMAN FREE TRADE AGREEMENT

Mr. ENGLISH of Pennsylvania. Mr. Speaker, tonight we rise at a time when people all over the world are watching the Middle East, are watching the bombs that have lit up both Israel and Lebanon, are watching the troop movements and are hoping earnestly for peace.

Certainly the support of Israel is going to be loudly and consistently articulated in this Chamber this week, but we also have an opportunity to do something substantive, to improve our engagement with the Middle East in the coming week.

This week, we have an opportunity to vote on a substantive agreement which will bring one of the nations of the Middle East closer to the United States, promote economic opportunity and integration in the region, and lay the groundwork, in my view, for closer ties between the United States and some of our key partners in the Middle East and one in particular.

With that in mind, Mr. Speaker, I rise tonight as cochairman of the Middle East Economic Partnership Caucus, and I expect to be joined by a couple of my other cochairmen, to talk tonight about the benefits of the U.S.-Oman Free Trade Agreement, which we expect to be voted on in the House this week.

At a time when there is great instability in the Middle East, at a time when we are concerned on how the Middle East affects our homeland security, at a time when we want to do something positive to create economic opportunities in a region where the lack of them has spawned terrorism, this is a small, but important, opportunity.

The Middle East, we believe, is increasingly becoming economically integrated with the West, and if we want to fight the root causes of terrorism, we should be encouraging that. It is critical that now, more than ever, we encourage this integration to promote closer ties, democracy and social liberalization through a process of economic interaction and close cooperation.

In recent years, America's dialogue in the Middle East has been deepened by the addition of bilateral and, ultimately, strongly bipartisan free trade agreements, first with Israel, then with Jordan, then with Morocco and, most recently, with Bahrain.

The U.S.-Oman FTA, slated for a vote in the House Chamber this Thursday, largely builds off of the successful model that was set by the U.S.-Bahrain FTA, further supporting openness and stronger ties between the U.S. and the Middle East and the Maghreb regions.

Over the past year, Oman has clearly demonstrated a powerful commitment to this agreement and closer relations with the West, both in terms of its political will and institutional resources, making significant strides in improving its labor practices and opening its markets and being accountable for intellectual property issues and cracking down on intellectual property violations.

In numerous communications with our U.S. trade Representative, Omani leaders have promised to take a number of concrete steps by October 31, 2006, to build on the strong labor reforms already implemented, and in my view, as a member of the Trade Subcommittee who has closely followed this process, Oman has come further than virtually any other country we have ever engaged in this manner in dealing with core labor issues. Their commitment shows Oman's determination to address all concerns, while respecting the rule of law and its legislative processes.

In addition, all of these commitments are fully verifiable because Oman has agreed to have all of them reviewed under the FTA's labor consultation mechanism. The U.S.-Oman Free Trade Agreement provides one of the highest degrees of market access of any U.S. free trade agreement to date and accounts for a substantial market access across Oman's entire services regime.

This agreement will make 100 percent of U.S. imports and exports and consumer and industrial goods duty free on the day the agreement enters into force. It also provides duty free treatment to 87 percent of our agricultural exports from day one. In terms of being accountable for intellectual property rights violations, Oman has agreed to criminal standards for copyright infringement and stronger remedies and penalties. It will increase criminal and civil protection against unlawful encoding of satellite TV signals and criminalize end-use piracy, providing strong deterrence against piracy and counterfeiting.

This is just a small sample of some of the benefits of the U.S.-Oman FTA, and this agreement is far more important than the small market that Oman would suggest.

We recognize that Oman is a small place. It is probably the equivalent, in terms of purchasing power comparability, of entering into a free trade agreement with our own North Dakota, but it is extremely significant because it is a part of a much larger Middle East puzzle. It is part of a region that we expect, in coming years, to build much closer ties with, and the Oman agreement, as it has been laid out and as their government has agreed to embrace, is a very strong model for going forward with future agreements in this region.

The U.S.-Oman FTA is, after all, a comprehensive and high-standard agreement. High standards are provided for including comprehensive protection for intellectual property rights, government procurement transparency, and trade facilitation. Developing a high-quality FTA with Oman will establish a high standard for all of the other Gulf Cooperation Council Members and set a very high standard for them to meet.

Consequentially, the FTA represents a significant benefit to U.S. trade that extends well beyond those benefits that currently exist in Oman. The FTA establishes a secure, predictable, legal framework for U.S. investors in Oman and includes high-standard legal protection for their model on U.S. legal principles, such as substantive due process and the ability to comment on proposed laws and regulations.

Mr. Speaker, the FTA also creates and expands opportunities for U.S. goods and services. This FTA will broaden and strengthen the bilateral, commercial relationship between the United States and Oman beyond the approximately $748 million generated in two-way trade during 2004. One hundred percent of this bilateral trade in consumer and industrial products will become duty free under this agreement.

The U.S.-Oman FTA will build upon the trade and investment framework agreement signed between our two countries on July 7, 2004, and will spur continued growth of U.S. direct investment which in 2003 was $358 million, a substantial increase over the previous year. In addition, the FTA will increase the competitiveness of U.S. exporters and service providers in the Omani market, providing for an increased market share for U.S. manufacturers and service providers. In 2004, U.S. goods exports were $330 million, up 2.3 percent from 2003.

Oman, in my view, is a likely market for U.S. oil and gas equipment and services, transportation equipment, water and environmental technology, medical equipment, electrical and mechanical equipment, power generation and transmission equipment and services, telecommunications equipment and services, franchising, and U.S. poultry and beef. In each of these areas, we potentially will get a leg up on our foreign competition.

At the same time, Mr. Speaker, the FTA will encourage greater political and economic reforms. It is worth remembering that in 1997 Omani laws were enacted guaranteeing Omani women equal rights in both education and employment. Women have the right to vote and run for office in consultation council elections, which are held every 4 years.

In 1992, in an attempt to balance growth on its non-oil sector with concern for its natural resources, Oman developed a national conservation strategy, which was subsequently approved by the Council of Ministers and spells out the need and procedures for incorporating environmental considerations in the development plans.

In 1994, Oman became a member of the International Labor Organization, the ILO, and has satisfied various labor-related accession requirements for membership to the WTO.

In 2003, it is worth noting the government adopted its first comprehensive labor law that allows workers the right of association and to pursue labor disputes in court. That law abolished the 1973 prohibition on the right to strike. This is a radical move in a part of the Arab world where labor rights is increasingly an important movement.

The U.S.-Oman FTA advances modernization programs, implemented by Sultan Qaboos. In accordance with its accession to the WTO in 2000, Oman announced its intention to eliminate mandatory shelf life standards for shelf stable foods and to adopt internationally recognized CODEC standards for the labeling of prepackaged foods.

Additionally, as part of its WTO accession, Oman has adopted derogations to the Gulf Cooperation Council patent law to comply with its obligations under the TRIPS agreement, and has committed itself to begin negotiations to join the WTO agreement on government procurement.

In 2004, Oman removed its temporary ban on imports of U.S. poultry and poultry products, moving ahead of some of our other trading partners.

We need to recognize, Mr. Speaker, this agreement also provides support for an important strategic ally in the war on terrorism. This, I think, is as strong a reason to support this agreement as any.

The United States has maintained relations with the sultanate since the early years of American independence, and that friendship has grown over time. Oman supported the 1979 Camp David Accords and was one of three Arab League states that did not break relations with Egypt after signing the Egyptian-Israeli Peace Treaty in 1979.

In April of 1994, Oman hosted the plenary meeting of the Water Working Group of the peace process, the first gulf state to do so.

Oman occupies a strategic position on the Strait of Hormuz at the entrance to the Persian Gulf. Following the Iranian revolution and the Soviet invasion of Afghanistan, Oman was the very first of the gulf states to formalize defense ties with the U.S. Oman has been a party with the U.S. to a military cooperation agreement since 1980, which was recently renewed in 2000. May I say, Mr. Speaker, when I joined a delegation that went to Oman just a year ago, I was very impressed by the commitment of Sultan Qaboos, as he articulated it to us, to continue and to strengthen this relationship.

It is worth noting that the Oman-U.S. Facilities Access Agreement has provided crucial support to the protection of Kuwaiti tankers in 1987. In 1988, during the Persian Gulf crisis, Oman assisted the U.N. coalition effort. Military bases in Oman were used in 2001 by U.S. coalition forces involved in ground raids against both the Taliban and Afghanistan and against Osama bin Laden.

The U.S.-Oman FTA, in other words, in my view at least, is a key building block toward building a broader set of economic relationships in the Middle East that can encourage economic growth. It is consistent with the 9/11 Commission's observation and recommendation, and here I quote: ``that the U.S. Government has announced the goal of working toward a Middle East trade area. A comprehensive U.S. strategy to counterterrorism should include economic policies that encourage development, more open societies and opportunities for people to improve the lives of their families and to enhance prospects for their children's future.''

This important statement by the 9/11 Commission I think is consistent with moving forward this week to approve this Oman FTA.

Mr. Speaker, in assessing the impact of the Oman FTA, I have done a lot of research and I have tried to, I think, come up with an honest assessment of how this free trade agreement will affect our balance of trade.

As the Speaker well knows, I have spoken here many times about my concern about our large trade imbalance, about the fact that we are running a record trade deficit, and I am happy to say that my research suggests that the U.S.-Oman FTA will be a move in the right direction, if adopted. This FTA builds upon a well-established and receptive market for U.S. goods and services.

In 2005, U.S. exports were $593,000,000, up significantly from 2004. And again, I would note that 100 percent of bilateral trade in consumer and industrial products will become duty-free effective immediately on passage of this agreement, creating a substantial market in that part of the Middle East for our exports beyond what we have already.

Additionally, this FTA benefits key U.S. export and service sectors such as the banking, securities, audio visual, express delivery, telecommunications, computer and related services, distribution, health care, insurance, construction, architecture and engineering sectors.

This agreement, as I have noted before, also contains tough intellectual property rights provisions to enforce strict antipiracy and counterfeiting laws. While we continue to call for an ambitious outcome of the negotiations of the WTO-Doha Development Round, we also recognize that it is important that we go forward with bilateral agreements such as the Oman agreement.

The passage of this FTA would send a strong signal to the world that the U.S. is going to continue to be a leader on trade policy, and that we were committed to opening a very important additional beachhead in the Middle East.

I think that when I talk to people in northwestern Pennsylvania, an area where we export a lot of manufactured goods, people want to know if this or any other new FTA has the potential to create future trade imbalances. I think it is particularly instructive that the U.S. International Trade Commission has done a study of the Oman FTA, and I would like to read from a part of the executive summary.

The finding of the ITC was as follows: The U.S.-Oman FTA will likely have a small but positive impact on the U.S. economy. The benefits will likely be moderated by the relatively small size of Oman's economy and Oman's share of U.S. trade. Oman accounted for less than .5 percent of total U.S. goods trade in 2004. The trade and welfare effects of tariff elimination on trade and goods will likely be negligible, reflecting not only the small volume of trade between the United States and Oman, but also the low tariffs on current bilateral trade. Tariff liberalization under the FTA will likely have little effect on the U.S. economy, industry and consumers because U.S. imports of most goods from Oman already enter duty-free or at low duty rates. Tariff liberalization will likely have a greater effect on U.S. imports of apparel from Oman, albeit from a small and diminished 2005 base. As such, the expected increase in U.S. apparel imports from Oman will be small in absolute value and quantity terms. In addition, the resulting increased annual levels of U.S. apparel imports from Oman will likely remain below the 2004 level of U.S. apparel imports from Oman. Most of the expected growth in U.S. apparel imports from Oman will likely displace U.S. apparel imports from other countries rather than domestic production.

Continuing, the FTA will likely increase export opportunities for U.S. firms when Oman immediately removes its uniform tariff of 5 percent ad valorem on U.S. goods and as it phases out its other tariffs on U.S. goods. The 5 percent tariff applied to 91 percent of U.S. exports to Oman in 2004. These exports consist mostly of machinery, transportation equipment, and measuring instruments. The FTA will also likely increase opportunities for U.S. providers of services through improved market access and greater regulatory transparency. For example, the FTA will liberalize provisions affecting trade in insurance services as well as banking and securities services such as asset management services.

So I think the point here, Mr. Speaker, is that this is a great opportunity for us, not a great threat, but is also an opportunity, I think, for closer economic engagements in the Middle East.

With that, I would like to yield to the gentleman from Wisconsin, Mr. Ryan, who is cochairman of our caucus, for such time as he may consume.

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Mr. ENGLISH of Pennsylvania. On that point, I think it is important that the listeners and our colleagues understand some of the labor standards that are being implemented here. We are talking about a commitment by Oman to strengthen collective bargaining laws, to protect the right to strike, to ensure the reinstatement of wrongly dismissed workers, to allow multiple union federations, to ensure adequate penalties for antiunion discrimination, to end the government involvement in union activity and to do things like strengthen efforts against child labor that have been such a blight in that region.

Oman, at a stroke, is taking a real leadership role in moving forward in this area that is going to set this up as a modernizing government and as a modernizing society that really is going to be a good example in the region. And I wonder if the gentleman agrees with me that this breakthrough by Oman is something not only important for us to sustain in terms of our economic opportunities, but also, I think, fulfills part of our role as a liberalizing force in the world and setting the right sort of example in the Middle East.

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Mr. ENGLISH of Pennsylvania. Mr. Speaker, I want to thank the gentleman for coming forward and so vividly presenting on the floor a positive vision of how we can engage the Middle East, how we can help them create opportunities, and how we can offer a positive agenda for fighting Islamofascism by getting at its root causes, by creating economic opportunities for young Arab men, by creating economic opportunities for these communities at a time when, in lieu of those opportunities, increasingly they turn to a dark vision of the world.

I think tonight, as the skies are lit up in Lebanon and over Israel, it is important for us to be able to offer a different approach for engaging those countries and for ultimately bringing them into the economic mainstream. I thank the gentleman for his extraordinary remarks.

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Mr. ENGLISH of Pennsylvania. Madam Speaker, I thank the gentleman.

With that, I want to thank the gentleman again for his leadership on this issue, his vision and his commitment to building closer ties between the United States and the Middle East region.

The gentleman raised the very important question of not only the substance of the Oman agreement, but also its symbolism, because I think there will clearly be consequences to not passing the Oman FTA, if that were to happen in the House.

Oman, as the gentlelady noted, has been a steadfast ally of the United States for over 170 years. Oman has been a hugely valuable partner on the war on terror and has hosted U.S. soldiers and permitted the U.S. to use Oman as a critical launch site for ongoing operations in Afghanistan. Oman has embarked on what is clearly a large-scale, if not unprecedented, reform effort.

In terms of labor rights, worker safety, women's rights, Oman has shown tremendous commitment to improving these standards for both Omani workers, as well as the large number of expat workers currently working in Oman. They have a large number of guest workers, and this is part of their initiative.

Reforms in the area of labor have been commendable, even exceeding the level of commitment made by Bahrain as they entered into FTA with us. Were the Oman FTA not to receive the support of a wide majority of Congress, it would send tonight absolutely the wrong signal, not only to Oman, but to the entire Middle East region at a very sensitive moment. Passage of the FTA is not only in the commercial and political interests of the United States, it is also necessary to support the reforms in Oman and to deliver an important shot in the arm to stability in the Middle East region.

It is clear that despite turmoil within the Middle East, Oman has risen to become a regional leader, improving its labor standards, opening its markets and being accountable for intellectual property rights violations, among others.

Furthermore, our pact with Oman solidifies the strong U.S.-Oman alliance in the global war on terror. We listened tonight to the recommendation of the 9/11 Commission, and also we have the March 2006 National Security Strategy specifically citing the need to advance trade and economic liberalization in the Persian Gulf region as a key part of a comprehensive U.S. strategy to bolster security, to fight terrorism and to oppose Islama-fascism. However, America's influence in the region has to be measured by more than projected military might. If we are going to help anchor the Middle East in the modern world, we clearly must reduce conflict in the region by promoting growth and opportunity.

As the gentleman from Wisconsin said tonight, the U.S.-Oman FTA is a win-win policy that only builds upon our country's goal of strengthening economic relations and increasing trade, fair trade, with our partners in the Middle East. By strengthening our ties with the key strategic ally committed to trade liberalization and economic reform, the U.S.-Oman FTA will demonstrate to other countries in the region the benefits of free and open rules-based trade and engagement with the United States.

I hope that come Thursday, my colleagues on a bipartisan basis, as the gentleman put it, will put aside their partisan blinders and consider supporting this trade pact when it reaches the floor. A ``yes'' vote means yet another step on the long road to expanding new economic opportunity for both of our regions.

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