Issue 787, 4 August 2006

Qaboos gets his FTA in the face of congressional Arabophobia

It was a narrow squeeze, but with labour concerns at least partly satisfied and business prospects weighing in the balance, economics overcame demagogy to deliver the trade deal sought by Oman.

The House of Representatives has followed the Senate in narrowly approving the United States’ free trade agreement (FTA) with Oman – despite vigorous opposition from congressmen claiming it posed a security risk because companies from the Sultanate might end up running American ports. Eventually the FTA was passed by 221 votes to 205, after Oman brought forward promised labour reforms and some Democrat critics were finally won over. But with nationalistic posturing over the ‘war on terror’ at a premium in the run up to November’s mid-term congressional elections, a trade deal with one of the West’s most steadfast Middle Eastern allies was vulnerable until the very last minute.

The FTA’s survival was in doubt even after more mainstream concerns about trade liberalisation or Oman’s attitude to labour rights had been satisfied. An FTA with Bahrain was approved by a comfortable 327 to 95 vote back in December . But the climate of debate around economic co-operation with Gulf countries was transformed by this spring’s row over the takeover of P&O – which happened to operate a number of US ports – by Dubai Ports World. As GSN observed, the transaction could have been open to genuine criticism on competition grounds, because of state-backed DP World’s refusal to reveal its financial structure (GSN 776/16). But it was stalled because of congressional concern that an Arab-owned company would managing marine cargo terminals in the USA. DP World was eventually forced to agree to dispose of the American port assets.

In the aftermath, even the Oman of Sultan Qaboos Bin Said Al-Saeed – arguably the West’s most trusted Gulf ally – fell victim to crackpot congressional Arabophobia. Typical was this outburst from the Maine Democrat Michael Michaud: “Last year more than 11m cargo containers entered the United States. Do you want a company in Oman managing this flow of who-knows-what into our borders? Would you let a company that operates in Oman run our airport security? The Oman free trade agreement hands over the keys to any company that operates in Oman.”

The Office of the US Trade Representative insisted the accord did not give Sultanate entities new rights to supply port-related services. It pointed to the review processes in place to assess whether any foreign investment threatens national security. In any case, unlike Dubai, Oman does not have companies likely to have the money or business experience to contemplate acquiring US port assets. But eventually the importance of Oman as a market for exporters in Washington state (traditional home of The Boeing Company) persuaded most of its congressional representatives to vote in favour, securing approval for the deal.

The accord had also faced criticism from traditional protectionists. Heath Shuler, a former NFL quarterback running as a Democrat candidate for a congressional seat in the Appalachians, described it as “another slap to working families across North Carolina and the United States”. The Sultanate’s insignificance in the low-cost labour intensive sectors where emerging nations threaten older American industries rather blunted the impact of such attacks. Concern was also expressed about Oman’s record on labour standards and the treatment of migrant workers. Qaboos was quick to respond, issuing a 9 July Royal Decree amending labour laws to address many congressional criticisms; he has promised that additional reforms will be adopted by 31 October.