U.S.-Jordan Free Trade Agreement

CRS Report for Congress
U.S.-Jordan Free Trade Agreement
Updated December 13, 2001
Mary Jane Bolle
Specialist in International Trade
Foreign Affairs, Defense, and Trade Division


Congressional Research Service ˜ The Library of Congress

U.S.-Jordan Free Trade Agreement
Summary
On June 6, 2000, President Bill Clinton and King ‘Abdullah II announced that
the United States and Jordan would begin negotiations for a bilateral free trade
agreement (FTA). The two sides signed the FTA on October 24, 2000, and Presidentth
Clinton submitted the FTA to the 107 Congress on January 6, 2001. Bills to
implement the FTA were introduced in the Senate (S. 643) on March 28, 2001, and
in the House (H.R. 1484) on April 4, 2001. H.R. 2603 (Thomas) and S. 643 (Baucus)
were reported out of the House Ways and Means and Senate Finance Committees on
July 26. H.R. 2603 was passed in the House, by a voice vote, on July 31, and in the
Senate by a voice vote on September 24. It became law as P.L. 107-43 on September

28, 2001.


In the past, Congress has shown an interest in developing free trade relations
between the United States and select Middle East countries. In 1985, Congress
approved the U.S.-Israel FTA and amended it in 1996 to include the West Bank and
Gaza Strip as well as qualifying industrial zones (QIZs) between Israel and Jordan,
and Israel and Egypt. Since 1994, when Jordan and Israel signed a peace treaty,
Congress and the Clinton Administration also undertook several initiatives designed
to assist the Jordanian economy. These initiatives included increased levels of foreign
assistance, debt forgiveness, and the QIZ program.
In addition to covering traditional reductions in barriers to trade in goods and
services, the FTA also deals with other issues that became part of the U.S. trade
policy agenda during the Clinton Administration such as intellectual property rights
(IPRs), e-commerce, and labor and environmental standards. The inclusion of labor
and environmental standards within the text of the FTA has provoked disagreement
between those with differing visions of what should be included in future U.S. FTAs.
The volume of bilateral trade between the United States and Jordan throughout
the 1990s was consistently modest. Many top Jordanian exports to the United States
already enter the United States duty-free through various programs, and cereals– the
top U.S. export to Jordan–already face low or zero-level tariff rates. Therefore, a free
trade agreement is unlikely to have an immediate and dramatic impact on the volume
of bilateral trade. However, Jordanian exports of textiles and apparel to the United
States, as well as U.S. exports to Jordan of various commodities that face moderately
high Jordanian tariffs, could expand under an FTA.
In addition to a modest increase in the bilateral trade of goods, a U.S.-Jordan
FTA could have several economic and political implications. These include the
possibility of increased levels of trade in services, greater foreign direct investment
(FDI) to Jordan both from U.S. and foreign-based companies, and reinforced
momentum for further economic reform in Jordan. If approved by Congress and the
Jordanian parliament, the U.S.-Jordan FTA will also mark the first U.S. free trade
agreement with an independent Arab country, thereby reflecting the strength of U.S.-
Jordanian bilateral relations and the importance that the United States attaches to
these relations.



Contents
Introduction ................................................... 1
Congressional Interest............................................2
Congressional Interest in Free Trade in the Middle East...............2
Congressional Interest in the Jordanian Economy....................3
U.S.-Jordan FTA: Letters and Legislation.........................5
Reactions to the Proposed Free Trade Agreement.......................7
Clinton Administration: Economic and Environmental Impact Studies....7
U.S. Private Sector Comments Received by the USTR................9
Jordanian Environmental Impact Study and Private Sector Reactions ...10
Selected Provisions of the U.S.-Jordan FTA..........................11
Trade in Goods and Services..............................12
Intellectual Property Rights (IPRs)..........................12
Environment .......................................... 12
Labor ................................................ 13
Electronic Commerce....................................13
Safeguard Measures.....................................13
Joint Committee........................................13
Dispute Settlement......................................13
Potential Effects of the U.S.-Jordan FTA.............................14
Trade in Goods............................................14
Foreign Direct Investment (FDI) in Jordan........................19
Economic Reform in Jordan...................................21
Political Implications........................................21
CRS Products.............................................22
Bibliography .................................................. 22
List of Tables
Table 1. U.S. Foreign Assistance to Jordan, FY1993 to FY2001............4
Table 2. U.S.-Jordanian Bilateral Trade and Trade Balance, 1992-2000.....15
Table 3. Top 10 U.S. Domestic Exports by
FAS Value to Jordan, 2000 ...................................17
Table 4. Top 10 U.S. Imports for Consumption by
Customs Value from Jordan, 2000..............................18
Table 5. U.S. Foreign Direct Investment in Jordan, 1994-1999............20
Appendix A. Public Comments Received by USTR on
U.S.-Jordan FTA...........................................23
Appendix B. Public Comments Received by USTR on Environmental Impact of
U.S.-Jordan FTA...........................................26



U.S.-Jordan Free Trade Agreement
Introduction
On June 6, 2000, President Bill Clinton and King ‘Abdullah II announced that
the United States and Jordan would begin negotiations for a bilateral free trade
agreement (FTA),1 eventually leading to reciprocal duty-free trade in goods. The
United States and Jordan conducted three main rounds of negotiations before signing
the FTA on October 24, 2000. The first round took place in Washington during the
week of June 26, 2000 and was headed by then United States Trade Representative
(USTR) Charlene Barshefsky and Jordanian Deputy Prime Minister and Minister of
State for Economic Affairs Dr. Muhammad al-Halayqah. The second and third
rounds were held in Amman, Jordan during the week of August 1, 2000, and in
Washington during the week of September 11, 2000, respectively. During the
October 2000 summit meeting at Sharm al-Sheikh, Egypt, King ‘Abdullah reportedly
expressed to President Clinton his desire to conclude the negotiations as rapidly as
possible.2 Soon after, the two negotiating teams completed their talks and the FTA3
was signed on October 24, 2000.
According to the agreement, the FTA’s entry into force is “subject to the
completion of necessary domestic legal procedures by each Party.” The Clintonth
Administration submitted the agreement to the 107 Congress on January 6, 2001,
and bills to implement the FTA were introduced in the Senate (S. 643) on March 28,

2001, and in the House (H.R. 1484) on April 4, 2001 (for further details, see the sub-


section entitled U.S.-Jordan FTA in the Congressional Interest section). The
Jordanian parliament reportedly ratified the FTA by a vote of acclamation on May 9,
2001.4 The agreement will enter into force two months after the Parties exchange
written notification that the necessary domestic legal procedures have been
completed.


1Steve Holland, “Clinton, with Jordan’s King, Sees Progress on Peace,” Reuters, June 6,

2000.


2Jonathan Peterson, “U.S.-Jordan Trade Deal Is Likely Today,” Los Angeles Times, October

24, 2000.


3For the texts of President Clinton’s and King ‘Abdullah’s remarks at the signing ceremony,
see “FTA Good for the U.S., Good for Jordan, Good for Long-Term Prospects of
Peace–Clinton,” and “Jordanians Embrace New Challenge of Progress and Fulfillment,”
Jordan Times, October 26, 2000.
4“Jordan Parliament Endorses Free Trade Agreement with US,” Dow Jones, May 9, 2001.

Congressional Interest
Congressional Interest in Free Trade in the Middle East
If the FTA wins U.S. congressional and Jordanian parliamentary approval,
Jordan will become only the fourth country in the world to have a bilateral free trade
agreement with the United States. Previous FTA’s were concluded with Canada and
Mexico, forming the North American Free Trade Area (NAFTA), and with Israel.
In 1985, Congress strongly supported the U.S.-Israel FTA negotiated by the
Reagan Administration. Congress began its approval process of the FTA on April 29,

1985 when the United States-Israel Free Trade Area Implementation Act (H.R. 2268)


was introduced in the House. The House passed the bill unanimously on May 7, 1985
and the Senate passed it without amendment on May 23, 1985. President Reagan
signed the bill into law (P.L. 99-47) on June 11, 1985. U.S.-Israeli bilateral trade has
increased substantially since the conclusion of the FTA. When the agreement was
signed in 1985, total U.S.-Israeli bilateral trade amounted to $4.7 billion. Since then,
the volume of bilateral trade has increased steadily, reaching more than $20.7 billion5
in 2000, representing more than a four-fold increase in total bilateral trade.
In 1996, Congress amended the United States-Israel Free Trade Area
Implementation Act through the GSP Renewal Act of 1996 (P.L. 104-234).6 This
legislation expanded the geographic scope of the U.S.-Israel FTA in two ways. First,
it extended the FTA to cover goods produced or manufactured in the West Bank and
Gaza Strip. By providing Palestinian exporters with duty-free access to the U.S.
market, Congress hoped that such a ‘peace dividend’ would strengthen the Palestinian
economy and thereby reinforce support for the peace process. The extension of the
U.S.-Israel FTA to the West Bank and Gaza Strip has had a modest impact on direct
Palestinian exports to the United States. In 1995, there were no such exports, but by
2000, the United States directly imported $4.8 million of Palestinian goods.7 These
figures might understate the actual amount of Palestinian exports to the United States
in recent years because of Israel’s continuing role in heavily intermediating Palestinian
trade with the rest of the world. In other words, some Palestinian goods may be
exported indirectly to the United States via Israel, and therefore appear in U.S.-Israeli
bilateral trade statistics.
Second, P.L. 104-234 also granted the President additional proclamation
authority to extend the U.S.-Israel FTA to cover products from qualifying industrial
zones (QIZs) between Israel and Jordan, and Israel and Egypt. QIZs are designed to
further Arab-Israeli economic cooperation by providing goods produced with certain


5“U.S. Trade Balance with Israel,” United States Census Bureau, Department of Commerce.
6This bill was introduced in the House on March 13, 1996, as H.R. 3074. The House passed
H.R. 3074 by voice vote on April 16, 1996, and the Senate passed it without amendment by
unanimous consent on September 27, 1996. President Clinton signed the bill into law (P.L.

104-234) on October 2, 1996.


7“U.S. Trade Balance with Gaza Strip Administered by Israel,” and “U.S. Trade Balance with
West Bank Administered by Israel,” U.S. Census Bureau, Department of Commerce.

levels of Israeli, Jordanian, Egyptian, or Palestinian content duty-free access to the
U.S. market. (For further details on Jordanian-Israeli QIZs, see the following section
on Congressional Interest in the Jordanian Economy and CRS Report RS20529,
United States-Israel Free Trade Area: Jordanian-Israeli Qualifying Industrial Zones,
by Joshua Ruebner, updated March 29, 2001.) Egypt has yet to express interest in
participating in the QIZ program, probably because it entails a level of Arab-Israeli
economic cooperation that Egypt would prefer to engage in only after the conclusion
of a comprehensive regional peace.
Although Egypt, for the time being, has decided not to participate in the QIZ
program, some analysts have suggested Egypt as a potential candidate to be one of8
the United States’ next free trade partners. Some Members of Congress have
expressed interest in this idea as well. On August 4, 2000, 26 Senators sent President
Clinton a letter urging him to negotiate an FTA with Egypt that would form the basis
for a Middle East Free Trade Region that would include Israel, the West Bank and9
Gaza Strip, Jordan, and Egypt. On November 1, 2000, 45 Representatives sent
President Clinton a similar letter. While the conclusion of FTAs with Jordan and
Egypt could form the basis for a wider Middle East free trade region with the United
States, negotiations for such an intra-regional zone would probably be politically
unfeasible until a comprehensive regional peace is achieved.
Congressional Interest in the Jordanian Economy
In the early 1990s, before Jordan and Israel achieved substantive progress on
their bilateral track of the peace process, Congress did not undertake any large-scale
initiatives to assist the Jordanian economy. U.S. foreign assistance to Jordan was
limited, largely due to U.S. concern over Jordan’s refusal to join the U.S.-led coalition
against Iraq during the 1990-1991 Gulf War. However, after Jordan and Israel signed
the Washington Declaration, which terminated the state of belligerency between
Jordan and Israel, on July 25, 1994, and a peace treaty on October 26, 1994,10
Congress and the Clinton Administration took a number of initiatives intended to
benefit the Jordanian economy. These steps have included increasing the level of
bilateral economic and military assistance provided to Jordan, forgiving Jordan’s debt
to the United States, and establishing qualifying industrial zones (QIZs) in Jordan and
Israel. The primary Congressional motivation behind attempting to improve the
Jordanian economy has been to provide Jordan with a ‘peace dividend’–an economic
reward designed to demonstrate the benefits of peace to a Jordanian population that
has sometimes criticized and protested its government’s pace and depth of
normalization of relations with Israel.


8For an analysis of a possible United States-Egypt Free Trade Agreement, see Ahmed Galal
and Robert Z. Lawrence, Building Bridges: An Egypt-U.S. Free Trade Agreement, Brookings
Institution Press, Washington, D.C., 1998.
9“U.S. Senators Seek Free-Trade Pact with Egypt,” Reuters, August 4, 2000.
10For the text of these two agreements, see the web site of Israel’s Foreign Ministry, at
[http://www.israel-mfa.gov.il].

In recent years, one of the most visible aspects of Congressional interest in the
Jordanian economy has been in the realms of foreign assistance and debt forgiveness.
In the wake of the Washington Declaration, President Clinton promised King Hussein
that he would work towards forgiving Jordan’s debt to the United States. Congress
responded with subsidy appropriations mainly in FY1994 and FY1995 that forgave
the equivalent of roughly $700 million of Jordanian debt to the United States.
Beginning in FY1996, Congress agreed to increase first military and then economic
assistance to Jordan. In FY1999 and FY2000, at the request of the Clinton
Administration, Congress also earmarked $300 million for Jordan in its supplemental
appropriations for funding the 1998 Israeli-Palestinian Wye River Memorandum.
Congress provided Jordan with Wye River funds in gratitude for King Hussein’s
prominent role in mediating the agreement and to help Jordan withstand internal and
regional opposition to its supportive role. Table 1 provides a summary of U.S.
assistance and debt forgiveness to Jordan since FY1993. (For further details on U.S.
assistance to Jordan, see CRS Issue Brief IB93085, Jordan: U.S. Relations and
Bilateral Issues, by Alfred B. Prados, updated regularly.)
Table 1. U.S. Foreign Assistance to Jordan, FY1993 to FY2001
(All figures in Millions of U.S. Dollars)
FYEconomicaMilitaryb Sub-TotalDebtForgivenesscTotal
1993 35.0 9.5 44.5 – 44.5
1994 28.0 9.8 37.8 99.0 136.8
1995 28.9 8.3 37.2 275.0 312.2
1996 36.1 201.5 237.6 – 237.6
1997 120.4 32.1 152.5 15.0 167.5
1998 151.2 77.1 228.3 12.0 240.3
1999 d 201.5 123.5 325.0 – 325.0
2000 d 200.0 226.6 426.6 – 426.6
2001 (Proposed)150.076.7226.7–226.7
Total 951.1 765.1 1,716.2 401.0 2,117.2
a. Economic assistance includes Economic Support Funds (ESF), Development Assistance, Food
Assistance, and Peace Corps.
b. Military assistance includes Foreign Military Financing (FMF), Drawdowns of Military
Equipment, International Military Education and Training (IMET), and De-Mining
Operations.
c.Debt forgiveness amounts represent subsidy appropriations, which under the scoring
procedures employed forgave $702.3 million of Jordanian debt to the United States.
d.Figures for FY1999 and FY2000 include additional appropriations that Jordan has received
or will receive for its role in helping to mediate the Israeli-Palestinian Wye River
Memorandum. Some FY2000 Wye River appropriations might not be obligated until FY2001
or FY2002.



Apart from foreign assistance and debt forgiveness, Congress has also promoted
joint Jordanian-Israeli economic ventures through the Qualifying Industrial Zones
(QIZ) program. In 1996, Congress adopted this program as an amendment to the
United States-Israel Free Trade Area Implementation Act of 1985 (H.R. 3074) and
President Clinton signed the bill into law (P.L. 104-234) in October 1996. Under this
legislation, products with a certified minimum content of Jordanian and Israeli inputs
that are manufactured in specially designated qualifying industrial zones are eligible
for unilateral duty-free access to the U.S. market. To date, the United States Trade
Representative (USTR) has designated ten QIZs in Jordan, which have had a
modestly successful effect in boosting Jordanian exports to the United States, spurring
Jordanian-Israeli business partnerships, promoting job creation in Jordan, and
encouraging foreign direct investment (FDI) in Jordan. (For further details, see CRS
Report RS20529, United States-Israel Free Trade Area: Jordanian-Israeli
Qualifying Industrial Zones, by Joshua Ruebner, updated March 29, 2001.)
U.S.-Jordan FTA: Letters and Legislation
Some Members of Congress began to consider the idea of negotiating a U.S.-
Jordan FTA seven years ago in the immediate aftermath of the signing of the July
1994 Washington Declaration. Then House Majority Leader Richard Gephardt sent
President Clinton a letter urging him to expand the U.S.-Israel FTA to include
countries that sign “comprehensive peace agreements with Israel.” The letter was co-11
signed by an additional 42 Representatives. However, both in Congress and in the
Clinton Administration, the idea of establishing a U.S.-Jordan FTA lay dormant for
the most part, until King ‘Abdullah II ascended the Jordanian throne upon the death
of his father, King Hussein, in February 1999, and made the U.S.-Jordan FTA one of
his top priorities.
The high priority that King ‘Abdullah has attached to economic reform in
general, and to the U.S.-Jordan FTA in particular, helped to rekindle Congressional
interest in this issue. Toward this end, between March and May 2000, over 45
Members of Congress sent President Clinton letters12 urging him to enter into
negotiations for an FTA with Jordan as soon as possible. In these letters, Members
provided several interrelated rationales for supporting a U.S.-Jordan FTA: 1) it would
strengthen bilateral relations and express the United States’ appreciation for Jordan’s
role in furthering the Middle East peace process and actively cooperating in
international counter-terrorism activities; 2) it would promote economic growth in
Jordan and regional economic cooperation, thereby enhancing stability and security
in Jordan and the Middle East; and 3) it would assist in further promoting economic
reform and liberalization in Jordan.
About a month after formal U.S.-Jordanian negotiations on the FTA began, on
July 17, 2000, a bipartisan group of 41 Senators sent President Clinton a letter urging
his Administration to “promptly conclude negotiations” so that the Senate could


11For the text of the letter, see “House Letter on Middle East Trade,” Inside U.S. Trade, July

29, 1994, pp. 30-31.


12Statement by Stuart E. Eizenstat, “A New Era of Economic Cooperation,” Amman, Jordan,
June 26, 2000, United States Information Service.

consider and pass the FTA during the 106th Congress.13 Eighteen Democratic
Members of Congress wrote a letter to President Clinton on October 24, 2000,
expressing their “congratulations and strong support” for the U.S.-Jordan FTA and
pledging “to work hard to pass the implementing bill for this free trade agreement in
the 107th Congress.”14
President Clinton submitted the U.S.-Jordan FTA to the 107th Congress on
January 6, 2001, and the Senate Finance Committee held a hearing on the FTA on
March 20. On March 28, Senator Max Baucus, then ranking minority member on the
Senate Finance Committee, introduced a bill to implement the U.S.-Jordan FTA (S.
643), which was referred to the Senate Finance Committee. The committee held a
mark-up session for the bill on July 17 during which it approved an amendment in the
nature of a substitute offered by Senator Baucus correcting various technical and
typographical errors spotted in the original bill. The committee also rejected an
amendment offered by Senator Phil Gramm that would have restricted the scope of
the dispute resolution mechanism in the treaty to deal with labor and environmental
issues. On July 26, the Senate Finance Committee approved S. 643 by a voice vote.
Representative Sander Levin, ranking minority member on the House Ways and
Means’ Trade Subcommittee, introduced a similar bill (H.R. 1484) in the House on
April 4, which was referred to the House Ways and Means and Judiciary Committees.
On April 19, the bill was referred to the Subcommittee on Trade of the Ways and
Means Committee and the Subcommittee on Immigration and Claims of the Judiciary
Committee. On July 26, the House Ways and Means Committee approved similar
legislation, H..R. 2603 (Thomas), an amendment in the nature of a substitute, by a
voice vote.
Approval of the implementing legislation by House and Senate subcommittees
on July 26, as indicated above, came after the ambassador of Jordan and Robert
Zoellick, the U.S. Trade Representative, exchanged identical letters which (1) pledged
to resolve any differences that might arise between the two countries under the
agreement, without recourse to formal dispute settlement procedures; and (2)
specified that each government “would not expect or intend to apply the Agreement’s
dispute settlement enforcement procedures . . .in a manner that results in blocking
trade.” In House floor debate, the letters were viewed alternately as: (1) part of “a
cooperative structure. . . to help secure compliance without recourse to . . .traditional
trade sanctions that are the letter of the agreement (Thomas); and (2) “a step
backwards for future constructive action on trade” (Levin).
The House approved H.R. 2603 by a voice vote on July 31, 2001. The Senate
approved H.R. 2603 by a voice vote on September 24, 2001. It became law as P.L.
107-43 on September 28, 2001. During the Senate debate, Senator Phil Gramm
warned that he will oppose any effort to turn the U.S.-Jordan FTA into a model for
how future trade agreements should deal with worker rights (and environmental


13For the text of the letter, see “Senators Letter on Jordan FTA,” Inside U.S. Trade, August

18, 2000, p. 20.


14For the text of the letter, see “Democrats Letter on Jordan FTA,” Inside U.S. Trade, October

27, 2000, p. 12.



protection issues). He argued that they should not be part of trade deals. Conversely,
Senate Finance Committee Chairman Max Baucus indicated he hoped the U.S.-Jordan
FTA would set a precedent for how future trade agreements would address issues like
labor and the environment. He also refuted a statement made by Senator Graham that
the provisions would undermine U.S. sovereignty or prevent lawmakers from enacting
and enforcing U.S. labor and environmental laws.
Reactions to the Proposed Free Trade Agreement
Clinton Administration: Economic and Environmental Impact
Studies
Prior to the signing of the agreement, the Clinton Administration expressed its
support for a U.S.-Jordan free trade agreement (FTA) in terms similar to those
employed by Members of Congress who urged the President to undertake this
initiative. The Clinton Administration viewed the FTA as a potential catalyst to
sustained economic growth in Jordan, providing its people with a long-awaited ‘peace
dividend,’ which in turn would reinforce support for the peace process. Then United
States Trade Representative (USTR) Charlene Barshefsky recently stressed the link
between economic growth and regional peace, stating that the FTA “can be a step
toward the creation of a future Middle East which is peaceful, prosperous, and open
to the world; whose nations work together for the common good; and whose people15
have hope and opportunity.”
As noted above, President Clinton and King ‘Abdullah agreed to begin
negotiations on an FTA on June 6, 2000. Shortly thereafter, on June 15, the United
States Trade Representative (USTR) gave official notice of the United States’ intent
to conclude an FTA with Jordan.16 The USTR also requested the United States
International Trade Commission (USITC) to study the economic impact of a U.S.-
Jordan FTA on the U.S. economy. Consequently, USITC initiated investigation No.
332-418, entitled “Economic Impact on the United States of a U.S.-Jordan Free
Trade Agreement.”17 The economic impact study was completed and submitted to
the USTR on July 31, 2000, and was declassified and released to the public on
September 26, 2000.18


15 Ambassador Charlene Barshefsky, U.S. Trade Representative, “Bridges to Peace: The U.S.-
Jordan Free Trade Agreement and American Trade Policy in the Middle East,”Jordanian-
American Business Association, Amman, Jordan, July 31, 2000, United States Information
Service.
16Federal Register, June 15, 2000, v. 65 n. 116, pp. 37594-37595.
17Federal Register, June 26, 2000, v. 65 n. 123, pp. 39426-39427.
18For a summary of the investigation, see “A U.S.-Jordan Free Trade Agreement Would Have
No Measurable Impact on U.S. Production or U.S. Employment, Says ITC,” News Release
00-112, September 26, 2000, United States International Trade Commission (USITC). The
complete text of the investigation is available at the web site of USITC, at
[http://www.usitc.gov/].

In this investigation, the USITC concluded that a U.S.-Jordan FTA “would have
no measurable impacts on total U.S. exports, total U.S. imports, U.S. production, or
U.S. employment.” USITC arrived at this conclusion after conducting 16 qualitative
industry sector analyses of U.S. exports to and imports from Jordan. By running
partial equilibrium analyses, in which tariffs levels were hypothetically reduced to zero
and all other factors influencing levels of trade flows were held constant, USITC
concluded that had zero-level tariffs been in place in 1998, U.S. exports to Jordan
would have increased in three sectors. Under this model, U.S. exports of cereals
(other than wheat) would have increased by 14% (or $2.9 million); U.S. exports of
electrical machinery would have increased by 104% (or $22 million); and U.S. exports
of machinery and transportation equipment would have increased by 39% (or $48
million). USITC also predicted that the FTA “will likely lead to an increase in U.S.
imports of textiles and apparel from Jordan.” However, USITC did not run a partial
equilibrium analysis for this Jordanian export sector, and therefore, was unable to
quantify the potential increase. Though USITC concluded that the overall impact of
the FTA on the U.S. economy will be negligible, it did infer that the FTA could
occasion a modest increase in bilateral trade.
The Office of the USTR, through the Trade Policy Staff Committee (TPSC), is
also conducting an environmental impact study of the U.S.-Jordan FTA. This
environmental review responds to a new U.S. commitment to “factor environmental
considerations into the development of its trade negotiating objectives,” embodied in
Executive Order 13141, issued by President Clinton on November 16, 1999.19 Some
view this Executive Order as the Clinton Administration’s response to criticisms of
the environmental effects of United States trade policy expressed before and during
the November 1999 Seattle Round of the World Trade Organization (WTO) talks.
(Coincidentally, violent confrontations between the police and protesters in Seattle
curtailed the agenda of the WTO talks, forcing Jordan’s accession to the WTO to be
deferred until April 2000.20) Many individuals and groups concerned with the nexus
between trade and environmental issues watched the U.S.-Jordanian negotiations with
great interest since their results could serve as a model for future U.S. trade
negotiating strategy on environmental issues.
In September 2000, the USTR released a draft environmental review of the
proposed U.S.-Jordan FTA.21 In this draft review, the USTR stated that “the U.S.
Government (USG) expects that the FTA with Jordan will not have any significant
environmental effects in the United States. While it is conceivable that there may be
instances in which environmental effects are concentrated regionally or sectorally in
the United States, the USG could not identify any such instances.”


19Federal Register, November 18, 1999, v. 64, n. 222, pp. 63167-63170.
20William A. Orme, Jr., “Jordan’s Long Road to the Free-Trade Club,” New York Times, May

21, 2000.


21For the text of the draft, see “Draft Environmental Review of the Proposed Agreement on
the Establishment of a Free Trade Area Between the Government of the United States and the
Government of the Hashemite Kingdom of Jordan,” Office of the United States Trade
Representative, September 2000, at
[http://www.ustr.gov/environment/draftjordanreview.html].

U.S. Private Sector Comments Received by the USTR
When the Office of the USTR gave official notice of the United States’ intention
to enter into free trade negotiations with Jordan, it also solicited comments from
private sector corporations and associations on the objectives to be pursued during
these negotiations.22 In total, twenty corporations and associations filed public
comments with the USTR–seventeen of which concerned the economic components
of the FTA and three of which dealt with the environmental aspects of the
agreement.23 (For a brief overview of the positions taken by these corporations and
associations, see Appendices A and B.)
In general, those private sector corporations and associations that responded to
the USTR’s call for public comments on the FTA expressed their support for the idea.
Manufacturers, importers, and marketers of textile and apparel products accounted
for the plurality of public comments received by the USTR (six of seventeen public
comments filed on the economic aspects of the FTA primarily dealt with textiles and
apparel, while another one secondarily dealt with these sectors as well). The interest
that U.S. textile and apparel companies have shown in the U.S.-Jordan FTA is
unsurprising since these sectors could prove to be the largest potential area of growth
for Jordanian exports to the United States under an FTA.
Some of these textile manufacturers, such as BCTC Corporation and certain
members of the American Apparel Manufacturing Association (AAMA), have
recently invested in Jordan’s qualifying industrial zones (QIZs) and therefore have an
interest in expanding Jordanian textile and apparel access to the U.S. market. Those
supportive of greater Jordanian textile and apparel access to the U.S. market tended
to urge the USTR to adopt the U.S.-Israel FTA ‘rules-of-origin’ in the U.S.-Jordan
FTA. The ‘rules-of-origin’ clauses in the U.S.-Israel FTA allow Israeli exports to
qualify for duty-free access to the United States if Israel added at least 35% (of which
up to 15% can be from the United States) to the value of the product.
Those who fear that greater Jordanian textile and apparel access to the U.S.
market could harm textile and apparel manufacturers and workers within the United
States, such as the American Textile Manufactures Institute (ATMI), urged the USTR
to apply North American Free Trade Agreement (NAFTA) ‘rules-of-origin’ standards
to the U.S.-Jordan FTA. NAFTA ‘rules-of-origin,’ including those for textile and
apparel, are stricter than those in the U.S.-Israel FTA, and if applied to the U.S.-
Jordan FTA would probably result in a smaller growth potential for Jordanian exports
of textiles and apparel to the United States. (For further details on NAFTA ‘rules-of-
origin,’ see CRS Info Pack IP445N, NAFTA: The North American Free Trade Area,
updated as needed.)
Another topic that elicited multiple responses is the issue of protecting
intellectual property rights (IPRs). In particular, pharmaceutical and motion-picture


22“USTR Seeks Public Comment on U.S.-Jordan Free Trade Agreement,” USTR Press
Release, June 15, 2000.
23These public comments are maintained in a file in the USTR Reading Room and are
available for public inspection by appointment.

interests urged the USTR to ensure that the FTA addresses Jordan’s implementation
of all WTO and Trade- Related Aspects of Intellectual Property Rights (also known
as “TRIPS”) commitments. Other respondents who filed public comments either
export to Jordan or import from Jordan particular commodities and urged the USTR
to negotiate immediate zero-level tariffs for these commodities in the FTA.
As noted above, USTR also received three public comments specifically relating
to the environmental aspects of the U.S.-Jordan FTA. Two of these comments, filed
by the World Resources Institute and the American Lands Alliance, expressed support
for conducting an environmental impact study and incorporating environmental
standards within the proposed FTA. The American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO), in its public comment on the
economic aspects of the FTA, also supported the introduction of core environmental
standards in the FTA. However, the United States Council for International Business
has opposed the introduction of environmental standards within the framework of the
FTA and argued instead for bilateral environmental agreements to be concluded
outside the framework of the FTA.
At the same time that it called for public comments on the FTA, the USTR also
announced that it would be negotiating labor standards within the text of the proposed
FTA. As a result, three organizations filed comments with the USTR that dealt with
the advisability of including labor standards within an FTA. Women’s Edge and the
AFL-CIO both supported the idea of including core international labor standards
within the text of the agreement. The United States Council for International
Business countered that the purview of an FTA should not include international labor
standards.
Jordanian Environmental Impact Study and Private Sector
Reactions
Like the USTR, the Jordanian government has also called for the Jordanian
private sector to file comments on the environmental aspects of the U.S.-Jordan
FTA.24 The Jordanian delegation negotiating the FTA, led by Deputy Prime Minister
and Minister of State for Economic Affairs Dr. Muhammad al-Halayqah, incorporated
these public comments into a separate Jordanian environmental review of the FTA.
The Jordanian negotiating team completed its preliminary environmental review of the
agreement in July 2000.25 Although the Jordanian negotiating team was unable “to
be very detailed or quantitatively precise about the likelihood of specific impacts on
the environment” resulting from the FTA, it did identify a number of potential
environmental consequences–both positive and negative–that the FTA might
occasion. On the positive side, the FTA could lead to expanded agricultural imports
to Jordan, which would decrease the demand for water for agricultural purposes and


24“Notice of Opportunity to Comment on the Environmental Considerations of the Proposed
Jordan-U.S. Free Trade Agreement,” Jordan Times, July 10, 2000.
25Jordan Negotiating Team for the Jordan-U.S. Free Trade Agreement, “Environmental
Review of the Jordan-U.S. Free Trade Agreement: A Preliminary Appraisal (Final Report),”
July 2000. This study was funded by USAID through its Access to Microfinance & Improved
Implementation of Policy Reform (AMIR) Program.

lessen the strain on this depletable resource. On the negative side, increased trade is
likely to lead to greater amounts of solid wastes, which could prove to be
problematic, especially in the Jordanian mineral and natural resources sectors. Also,
increased trade would likely increase maritime traffic in the Gulf of Aqaba, posing
risks to the fragile ecosystem of the Red Sea, famed for its coral reefs.
In general, the Jordanian private sector responded enthusiastically to the idea of
the U.S.-Jordan FTA. For instance, the Jordanian American Business Association
(JABA) surveyed prominent business leaders from both private and public sector
organizations and found that “overall sentiment ran strongly in favor of increased
economic ties between Jordan and the United States. Many expressed an expectation
especially that foreign direct investment into Jordan will increase and that the FTA
will help expand this into multiple sectors, from textiles to technology and from
financial services to tourism.”26 However, JABA also noted that some of those
surveyed worried that an FTA could lead to an expanded level of U.S. imports that
could have a detrimental impact on Jordan’s manufacturing sector. Some also
expressed concern that Jordan’s reorientation of its trade relations toward the United
States (and toward Europe with the signing of an EU-Jordanian partnership
agreement) could come at the expense of its trade relations with neighboring
countries. In the immediate aftermath of the signing of the FTA, several prominent
Jordanian private sector personalities, including the President of the Union of
Jordanian Chambers of Commerce, the Vice President of the Amman Chamber of
Commerce, and the Chairman of the Administrative Council of the Amman Chamber27
of Industry, welcomed and endorsed the FTA.
Selected Provisions of the U.S.-Jordan FTA
As noted above, the U.S.-Jordan FTA was signed on October 24, 2000. This
section highlights selected provisions of the FTA and is based on the text, annexes,
schedules, and related understandings of the agreement as published by the USTR.28
This section does not offer a legal interpretation of the rights and obligations that the
FTA entails. Those who are interested in further details on specific provisions of the
agreement are urged to consult the full-text of the agreement, which is accessible via
the hyperlink provided in the footnote below. The subsequent section discusses some
of the potential economic and political effects of the FTA.
Trade in Goods and Services. The FTA provides for a 10-year transitional
period during which duties on almost all goods will be phased-out, leading to duty-


26“The Proposed Free Trade Agreement between the United States of America and the
Hashemite Kingdom of Jordan: Expected Impact and Benefits,” Jordanian American Business
Association (JABA), no date.
27“A Rapid Move of Economic Activity and a Strengthening of the Investment Climate.
Economic Circles Welcome the Free Trade Agreement with America,” ad-Dustour (Amman),
October 26, 2000.
28For the complete text of the FTA and accompanying documents, see the web site of the
USTR, at [http://www.ustr.gov/regions/eu-med/middleeast/US-JordanFTA.shtml].

free trade in goods between the United States and Jordan. The duties on many goods
will be phased-out prior to the end of the 10-year transitional period. The FTA also
provides for a liberalization of bilateral trade in services, stating that “each Party shall
accord to services and service suppliers of the other Party, in respect of all measures
affecting the supply of services, treatment no less favorable than that it accords to its
own like services and service suppliers.” (Article 3.2(b)) The Parties undertook
specific market-opening commitments in various service sectors, such as business,
communications, construction and engineering, distribution, education, environment,
finance, health, tourism, recreation, and transportation.
Intellectual Property Rights (IPRs). The FTA obligates the United States
and Jordan to give effect to various articles in several World Intellectual Property
Organization (WIPO) multilateral agreements. The FTA provides protections for
trademarks, copyrights, and patents, and specifically mentions the protection of
software and pharmaceuticals, two categories of products whose copyrights and
patents are especially prone to violation. The FTA also provides for the enforcement
of the IPRs that it protects: Article 4.24 states, in part, that each country “shall
ensure that its statutory maximum fines are sufficiently high to deter future acts of
infringement with a policy of removing the monetary incentive to the infringer.” The
agreement stipulates that the protection of some of the IPRs will take effect
immediately from the date of entry into force while others will take effect between six
months and three years from that date. The United States and Jordan also signed a
Memorandum of Understanding on Issues Related to the Protection of IPRs,
specifying that Jordan will raise its criminal penalties for the infringement of IPRs to
approximately $8500 (6000 Jordanian dinars) in order to deter future infringements.
Environment. In the FTA, the United States and Jordan recognize the
principle that it is “inappropriate to encourage trade by relaxing domestic
environmental laws. Accordingly, each Party shall strive to ensure that it does not
waive or otherwise derogate from, or offer to waive or otherwise derogate from, such
laws as an encouragement for trade with the other Party.” (Article 5.1) The agreement
also recognizes the right of each country to establish its own levels of domestic
environmental protection, policies, and priorities. The FTA states that “a Party shall
not fail to effectively enforce its environmental laws, through a sustained or recurring
course of action or inaction, in a manner affecting trade between the Parties.” (Article
5.3(a)) The United States and Jordan also issued a Joint Statement on Environmental
Technical Cooperation. The joint statement establishes a Joint Forum on
Environmental Technical Cooperation, which will work to “advance environmental
protection in Jordan by developing environmental technical cooperation initiatives,
which take into account environmental priorities, and which are agreed to by the two
governments, consistent with the U.S. country strategic plan for Jordan, and
complementary to U.S.-Jordanian policy initiatives.” An annex to the joint statement
details ongoing and future U.S.-Jordanian environmental technical cooperation
programs.



Labor.29 Under the FTA, the United States and Jordan reaffirm their
obligations as members of the International Labor Organization (ILO) and their
commitments under the ILO Declaration on Fundamental Principles and Rights at
Work and its Follow-Up. Mirroring the language used in the section on
environmental standards, the FTA states that “the Parties recognize that it is
inappropriate to encourage trade by relaxing domestic labor laws. Accordingly, each
Party shall strive to ensure that it does not waive or otherwise derogate from, or offer
to waive or otherwise derogate from, such laws as an encouragement for trade with
the other Party.” (Article 6.2) The agreement also recognizes the right of each
country to establish its own domestic labor standards, laws, and regulations, striving
to ensure that these are consistent with international recognized labor rights. The
FTA states that “a Party shall not fail to effectively enforce its labor laws, through a
sustained or recurring course of action or inaction, in a manner affecting trade
between the Parties.” (Article 6.4(a))
Electronic Commerce. The FTA states that the United States and Jordan
will seek to refrain from deviating from the existing practice of not imposing customs
duties on electronic transmissions or imposing unnecessary barriers on electronic
transmissions.
Safeguard Measures. The FTA contains safeguard measures to ensure that
if the implementation of the agreement leads to “a substantial cause of serious injury,
or threat thereof” to a domestic industry, either country may temporarily suspend
further tariffs reductions on the affected goods. If either country decides to
implement a safeguard measure, its duration cannot exceed 4 years or the 10-year
transitional period, and no measure shall be maintained “except to the extent and for
such time as may be necessary to prevent or remedy serious injury and to facilitate
adjustment.” (Article 10.2.(a)(i)) The FTA also recognizes the special challenges
faced by “infant industries” during a period of trade liberalization and that therefore
neither country should create obstacles to “infant industries” that seek the imposition
of safeguard measures.
Joint Committee. The FTA establishes a Joint Committee whose functions
include reviewing the general functioning of the agreement; improving trade relations;
avoiding and settling disputes; amending the agreement; developing guidelines,
explanatory material, and rules on the implementation of the agreement; and
reviewing the environmental impact studies conducted by both countries. The Joint
Committee will be headed by the USTR and by “Jordan’s Minister primarily
responsible for international trade” and will make all decisions by consensus. The
committee will consider “the views of interested members of the public in order to
draw upon a broad range of perspectives in the implementation of this Agreement”
and “seek the advice” of non-governmental organizations (NGOs).
Dispute Settlement. The FTA sets out a multi-step procedure for dispute
settlement. First, the United States and Jordan “shall make every attempt to arrive
at a mutually agreeable resolution through consultations” if a dispute arises. If the


29For additional details, see CRS Report RS20968, Jordan-U.S. Free Trade Agreement:
Labor Issues, by Mary Jane Bolle, July 19, 2001.

Parties do not resolve the dispute within 60 days through consultations, either Party
has the right to refer the dispute to the Joint Committee. If the Joint Committee does
not solve the dispute within 90 days, the dispute may be referred to a specially
appointed three-person dispute settlement panel. The dispute settlement panel is
authorized to make non-binding recommendations to resolve the dispute. After the
dispute settlement panel issues its recommendations within 90 days, the Joint
Committee “shall endeavor to resolve the dispute, taking the report into account.”
If the Joint Committee stills fails to resolve the dispute within 30 days, then “the
affected Party shall be entitled to take any appropriate and commensurate measure.”
The United States and Jordan also signed a Memorandum of Understanding on
Transparency in Dispute Settlement, obligating the Parties to “solicit and consider the
views of members of their respective publics in order to draw upon a broad range of
perspectives.” According this memorandum, if a dispute panel is established, any
submission made to it shall be made available publicly; oral presentations before the
panel shall be open to members of the public; the panel shall “accept and consider”
amicus curiae submissions by individuals, legal persons, and NGOs; and the panel
shall release its report to the public.
Potential Effects of the U.S.-Jordan FTA
Trade in Goods
Throughout the 1990s, bilateral trade between the United States and Jordan was
modest. Between 1992 and 1999, yearly bilateral trade flows between the United
States and Jordan stayed fairly constant, registering a low of $275 million in 1992 and
a high of nearly $430 million in 1997. In 2000, Jordan ranked as the United States’
98th largest trading partner in the world with roughly $385 million in trade turnover
(imports plus exports).30 Trade between the United States and Jordan has been
predominantly uni-directional, with the United States enjoying a healthy trade surplus.
In many years, U.S. exports to Jordan have dwarfed U.S. imports from Jordan by a
magnitude of more than 10:1. Table 2 provides an overview of the bilateral trade
flows between the United States and Jordan between 1992 and 2000.


30“U.S. Trade Balance, by Partner, 2000,” United States International Trade Commission
(USITC) Trade Database.

Table 2. U.S.-Jordanian Bilateral Trade and Trade Balance,
1992-2000
(All figures in Millions of U.S. Dollars)
YearU.S. Exportsto JordanU.S. Importsfrom JordanTotal TradeU.S. TradeBalance
1992 257.7 18.1 275.8 239.6
1993 360.5 18.7 379.2 341.8
1994 287.3 29.0 316.3 258.3
1995 335.3 28.8 364.1 306.5
1996 345.2 25.2 370.4 320.0
1997 402.5 25.3 427.8 377.2
1998 352.9 16.4 369.3 336.5
1999 275.6 30.9 306.5 244.7
2000 312.7 73.2 385.9 239.5
Source: “U.S. Trade Balance with Jordan,” United States Census Bureau, Department of Commerce.
In 2000, total bilateral trade between the United States and Jordan was roughly
$385 million. U.S. exports to Jordan accounted for approximately 80% ($310
million) of this total. Table 3 presents an overview of the top ten commodities that
the United States exported to Jordan in 2000, ranked by ten-digit Schedule B
classification and commodity description. Table 3 also shows the Jordanian tariff rate
in effect since Jordan’s accession to the WTO in April 2000, which was used as the
base for the phased-in elimination of tariffs in the FTA, as well as the staging category
for the elimination of tariffs as negotiated in the FTA.
In 2000, cereals accounted for three of the top ten leading U.S. exports to
Jordan. Exports of durum wheat, wheat and meslin, and barley totaled $62 million
and accounted for about 20% of total U.S. exports to Jordan. Under the prevailing
tariff rates, these commodities already enter Jordan duty-free, reflecting the sensitivity
of food pricing in Jordan. Food prices have tended to be a volatile domestic political
issue in Jordan since the government began to lower food subsidies in the context of
its structural adjustment reform program.31 Therefore, the free trade agreement is
likely to have only a marginal impact on the volume of U.S. cereal exports to Jordan
and on cereal pricing for Jordanian consumers since tariffs on leading cereal exports
are already zero.


31Jordanian central government expenditures on food subsidies were phased-out incrementally
from approximately $140 million in 1996 to zero in 2000. Data adapted from Central Bank
of Jordan, Monthly Statistical Bulletin, Table 27: Economic Classification of Central
Government Expenditures, February 2001.

Other leading U.S. exports to Jordan, such as airplane and helicopter parts,
woodpulp, vessels, and aircraft turbines face low (0-10%) tariffs, while radio
transceivers face moderately high (30%) tariffs. Tariffs on these leading export
commodities will be phased-out according to the FTA, with the exception of smoking
tobacco, which, at $14 million and 5% of total exports, was the fourth largest U.S.
export to Jordan in 2000. Smoking tobacco faces a high tariff (70%) but its removal
was not negotiated by the USTR in order to comply with the Clinton Administration’s
interpretation of the “Doggett Amendment” to the Departments of Commerce,
Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1998, and
subsequent legislation (see Table 3 Notes for further details on this legislation).
In 2000, U.S. imports from Jordan totaled $73 million and accounted for
approximately 20% of total bilateral trade. Table 4 presents an overview of the top
ten commodities that the United States imported from Jordan in 2000, ranked by ten-
digit Harmonized Tariff Schedule (HTS) classification and commodity description.
Table 4 also shows the U.S. tariff rate in 2000, which was used as the base for the
phased-in elimination of tariffs in the FTA, as well as the staging categories for the
elimination of tariffs as negotiated in the FTA. Table 4 furthermore subdivides these
commodities into imports that entered the United States duty-free under the qualifying
industrial zones (QIZ) program.
Approximately 40% (or $30 million) of all Jordanian exports entered the United
States duty-free under the QIZ program in 2000. (For further details on the QIZ
program, see CRS Report RS20529, United States-Israel Free Trade Area:
Jordanian-Israeli Qualifying Industrial Zones, by Joshua Ruebner, updated March
29, 2001.) An additional 14% (or $10 million) of all Jordanian exports received
preferential access to the U.S. market under the Generalized System of Preferences
(GSP) program in 2000. (For further details, see CRS Report 97-389, Generalized
System of Preferences, by William H. Cooper, updated January 8, 2001.) Leading
Jordanian exports to the United States in 2000 included textiles and apparel, suitcases,
briefcases, and jewelry. At least half of all exports in six of the ten leading export
categories benefitted from QIZ status (textiles and apparel, suitcases, and briefcases)
and all exports in two categories benefitted from the GSP program (jewelry).



Table 3. Top 10 U.S. Domestic Exports by
FAS Value to Jordan, 2000
# 10-Digit Schedule B Classification &Millions of $JordanianFTA
Commodity Description(% of total)Base RateStaging
Category
Total U.S. Domestic Exports to Jordan$305.60 (100%)
11001100090 Durum Wheat$42.75 (14.0%)0E
28803300010 Unspecified Parts of Airplanes$15.82 (5.2%)10%A
or Helicopters for Use in Civil Aircraft
31001902055 Other Wheat & Meslin, Except$14.15 (4.6%)0E
Seed

42403100060 Smoking Tobacco$14.08 (4.6%)70%%


54703210040 Chemical Woodpulp, Sulfate or$10.77 (3.5%)5%A
Soda, Coniferous, Bleached
68905905000 Unspecified Vessels,$9.14 (3.0%)0E
Navigability of which is Subsidiary to their
Main Function
78525203055 Radio Transceivers, >400 MHz$8.42 (2.8%)30%E
88411124010 Turbojet Aircraft Turbines for$7.10 (2.3%)0E
use in Civil Aircraft, Thrust > 25kN
99880004000 Low Value Estimate, < $2500,$5.72 (1.9%)N/AN/A
Excluding Canada
101003004090 Barley, Except Seed$5.15 (1.7%)0E
Source: United States Trade Representative, United States International Trade Commission, Jordan
Customs Department.
Notes:
A=Duties to be eliminated in two equal annual stages.
E=Duties already eliminated or to be eliminated in accordance with existing WTO duty-elimination
commitments.
N/A=Non-applicable.
* The USTR did not negotiate the reduction of tariffs on tobacco products to comply with the
Clinton Administration’s interpretation of the “Doggett Amendment” to the Departments of
Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1998 (H.R.

2267, signed into law as P.L. 105-119, November 26, 1997). The Doggett Amendment, Sect. 618,


states that “none of the funds provided by this Act shall be available to promote the sale or export
of tobacco or tobacco products, or to seek the reduction or removal by any foreign country of
restrictions on the marketing of tobacco or tobacco products, except for restrictions which are not
applied equally to all tobacco or tobacco products of the same type.” Similar language has appeared
in subsequent appropriations acts for these agencies. For instance, see Sec. 616, H.R. 5548,
incorporated into H.R. 4942, signed into law as P.L. 106-553, December 21, 2000.



Table 4. Top 10 U.S. Imports for Consumption by
Customs Value from Jordan, 2000
#10-Digit Harmonized Tariff MillionsOf% ofU.S.FTA
Schedule (HTS) Classification &of $ whichwhich BaseStaging
Commodity Description(% of total)QIZQIZRate Category
Total U.S. Imports for$72.84$30.1341.4%----
Consumption from Jordan(100%)
14202128070 Trunks, Suitcases,$6.32$5.5988.5%18.6%F
Vanity Cases(8.7%)
26204633510 Women’s Synthetic$4.84$4.5894.6%29.3%D
Trousers & Breeches, Not(6.6%)
Knitted
36203112000 Men’s Suits, Wool,$4.53$0.306.6%21.2¢/C
Not Knitted(6.2%)kg+

18.9%


46204624020 Women’s Cotton$4.44$4.1994.4%17.0%C
Trousers & Breeches, Not(6.1%)
Knitted
57113195000 Gold or Platinum$4.240--5.5%G
Jewelry(5.8%)
67113115000 Silver Jewelry$4.100--5.0%G
(5.6%)
76110202075 Women’s or Girls’$3.63$1.9052.3%18.2%F
Other Pullovers(5.0%)
86110303050 Men’s or Boys’$2.57$2.4595.3%32.9%F
Other Pullovers(3.5%)
99706000060 Antiques >100$1.770--0E
Years of Age(2.4%)
14202128030 Attache Cases,$1.50$1.2684.0%18.6%F

0Brief Cases, School Satchels,(2.1%)


Occupational Luggage Cases
Source: United States Trade Representative, United States International Trade Commission.
Notes: U.S. tariff rates do not apply to designated products of qualifying industrial zones (QIZs),
which enter the United States duty-free.
C=Duties to be eliminated in five equal annual stages.
D=Duties to be eliminated in ten equal annual stages.
E=Duties already eliminated or to be eliminated in accordance with existing WTO duty-elimination
commitments.
F=Duties to be retained until year ten and eliminated effective year ten.
G=Duties to be eliminated effective year one.
Since many Jordanian exports to the United States already qualify for duty-free
or preferential access under the above-mentioned programs and the regular tariff rates
(in the HTS), the FTA is unlikely to have a large impact on the volume of Jordanian
exports to the United States. However, one sector that shows growth potential under
a future U.S.-Jordan FTA is the textile and apparel sector. This sector occupies a



significant position in Jordanian industrial production. For instance, in 1993, 1,750
textile and ready-made apparel firms employed over 7,500 people. Excluding mineral
and petrochemical production, textiles and apparels were Jordan’s second leading32
worldwide industrial export (roughly $50 million) in 1994. Since 1994, the textile
and apparel sector has become an even more important part of Jordanian
manufacturing since several American, Israeli, and other multi-national textile and
apparel firms have relocated some of their operations to Jordan both within and
outside the context of the QIZ program. However, only a few firms have qualified
their products for QIZ status. Therefore, most of the Jordanian textile and apparel
industry still faces fairly substantial tariffs when exporting to the United States. A
general phasing-out of these tariffs within the context of an FTA would presumably
increase Jordanian non-QIZ textile and apparel exports to the United States.
Foreign Direct Investment (FDI) in Jordan
Although a U.S.-Jordan FTA might not have a large and immediate impact on
the volume of bilateral trade in goods and services, many predict that the FTA could
substantially increase foreign direct investment (FDI) in Jordan, both from the United
States and from the rest of the world. In the context of an FTA, multinational
companies seeking greater U.S. market access could relocate some of their operations
to Jordan in order to take advantage of its eventual duty-free access to the United
States. In addition, U.S. companies that currently import inputs or finished products
from other countries could reroute their purchases to Jordanian suppliers in order to
reduce production or import costs stemming from tariffs. Already, some U.S.,
foreign, and multinational companies have relocated their operations to Jordan in
order to benefit from the QIZ program, thereby attracting larger amounts of FDI to
Jordan. A U.S.-Jordan FTA could promote a similar pattern on a country-wide scale.
In recent years, U.S. direct investment in Jordan has been limited. Table 5
presents available data on U.S. companies’ direct investment position in Jordan
between 1994-1999. It also presents the capital outflows and profits stemming from
these investments. In 1999, U.S. FDI in Jordan increased to $30 million, up from $15
million in 1995, probably as a result of U.S. textile and apparel manufacturers
investing in the al-Hassan Industrial Park QIZ in Irbid, Jordan. However, even with
this increase, Jordan is still a rare destination for U.S. FDI in the Middle East. In

1999, U.S. FDI in Jordan represented less than 0.3% of total U.S. FDI in the region.


32Jordan: An Industrial Review (1989-1994), The Amman Chamber of Commerce and the
Industrial Development Bank, Amman, Jordan, 1995, p. 28, 53.

Table 5. U.S. Foreign Direct Investment in Jordan, 1994-1999
(All figures in Millions of U.S. Dollars)
Direct InvestmentCapitalIncome to
YearPosition on aOutflowsU.S. Firms
Historical-Cost Basis
19941312
19951522
1996DDD
1997DD5
1998DDD
199930D-3
Notes: Entries designated (D) are suppressed in order to avoid disclosure of data of
individual companies.
Source: “International Accounts Data: U.S. Direct Investment Abroad,” Bureau of
Economic Analysis, Department of Commerce.
To stimulate bilateral investment flows, the United States and Jordan negotiated
a Bilateral Investment Treaty (BIT) on July 2, 1997.33 The United States has
negotiated similar treaties with dozens of other countries, designed, according to the
USTR, to (1) protect U.S. investments abroad, (2) encourage market-oriented
economic reform, and (3) support international law standards regarding foreign
investment.34 (For further information on Bilateral Investment Treaties, see CRS
Report 98-39, Foreign Investment Treaties: Impact on Direct Investment, by James
K. Jackson, January 12, 1998.) On May 23, 2000, President Clinton transmitted a
message to the Senate seeking its advice and consent for ratification of the U.S.-
Jordan BIT (Treaty Document No. 106-30).35 On the same day, the Senate referred
the treaty to the Committee on Foreign Relations by unanimous consent.36 The
Senate considered the treaty and gave its advice and consent to ratification on
October 18, 2000.


33For the text of the agreement, see the web site of the U.S. Department of State at
[http://www.state.gov/www/issues/economic/treaty_bit_jordan.html].
34See “U.S. Bilateral Investment Treaty Program,” United States Trade Representative,
[http://www.ustr.gov/agreements/index.html].
35Weekly Compilation of Presidential Documents, May 29, 2000, v. 36, n. 21, p. 1200.
36Congressional Record, May 23, 2000, p. S4330.

Economic Reform in Jordan
Since ascending the throne in February 1999, King ‘Abdullah has made economic
reform a top governmental priority. As a result, Jordan has undertaken a number of
structural adjustment reforms within the past year. For instance, in the context of its
accession to WTO membership in April 2000, Jordan harmonized its General Sales
Tax (GST) rates on domestic and imported goods, amended its customs law, and
enacted new legislation protecting intellectual property rights (IPRs). In July 1999
and April 2000, Jordan also lowered tariff levels, further liberalizing its trade regime.
Outside the realm of trade, Jordan has begun to corporatize some public sector
companies in preparation for their eventual privatization. Public sector
telecommunications and cement companies, in addition to companies in other sectors,
have been partially or wholly privatized as well.37 Jordan’s accession to the WTO,
combined with a free trade agreement with the United States, will likely increase the
momentum for further economic reforms in Jordan.
Political Implications
Should Congress and the Jordanian parliament agree to the FTA, Jordan would
become the first independent Arab country to have concluded an FTA with the United
States. This would be interpreted by many as a sign of the strength of U.S.-Jordan
bilateral relations and of the importance that the United States attaches to this
relationship. The U.S.-Jordan FTA would also be interpreted as a demonstration of
the United States’ confidence in and approval of King ‘Abdullah’s leadership in
general and of his economic reforms in particular. In addition, the FTA could
modestly reorient Jordan’s trade pattern towards the United States and therefore
implicitly away from Iraq. If, as a result of the FTA, Jordan could generate
substantial export revenues from the United States, it could eventually decrease its
reliance on Iraq as a major trading partner.38 If the FTA results in a significant ‘peace
dividend’ through increased levels of foreign direct investment (FDI) and exports,
potentially leading to job creation and sustained economic growth, support for the
peace process within Jordan could increase. In addition, this could provide tangible
proof to other countries in the region that the peace process can yield economic
benefits for their people as well.


37For further details on recent economic reform in Jordan, see “Jordan Letter of Intent and
Memorandum on Economic and Financial Policies for 2000, July 4, 2000,” International
Monetary Fund (IMF), Washington, D.C.
38A highly respected pan-Arab daily newspaper quoted unnamed Congressional sources who
said that one of the aims of the U.S.-Jordan FTA is to reduce Jordan’s economic dependence
on Iraq. The apparent rationale for reducing this dependence is to make it easier to maintain
the sanctions regime against Iraq by alleviating the economic dislocations that these sanctions
have caused to countries, like Jordan, friendly to the United States. Muwafiq Harb, “A Free
Trade Agreement between the United States and Jordan Will Be Signed before the End of the
Month,” al-Hayat, October 8, 2000.

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–– The U.S.-Jordan Free Trade Agreement.
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Appendix A. Public Comments Received by USTR on
U.S.-Jordan FTA
Company/AssociationPosition on FTAComment
Rubber and PlasticExclude products of Ch. 64Trade association
Footwear Manufacturersof HTS (footwear &representing producers of
Associationgaiters) from the FTAfootwear w/ rubber or
plastic soles, protective
footwear and slippers
American TextileAdopt NAFTA model forNational trade association
Manufacturers Institute rules of origin, customsrepresenting 562,000
procedures, and safeguardsworkers
on textiles
Pharmaceutical ResearchFTA provides opportunityRepresents research-based
and Manufactures ofto strengthen economicpharmaceutical and
Americareform in Jordan forbiotechnology companies
mutual interest of U.S. &
Jordanian pharmaceutical
industries; concerned about
Jordan’s implementation of
WTO & TRIPS
commitments
Blue Diamond GrowersFTA should eliminate tariffNon-profit farmer-owned
on almondsalmond marketing
cooperative
Philip Morris CompaniesFTA should eliminate tariffSubsidiaries manufacture
Inc.on dairy products, edibletobacco (Philip Morris),
preparations, and tobacco;food (Kraft), and beer
concerned that non-tariff(Miller)
barriers (labeling &
regulatory requirements)
hinder exports to Jordan
BCTC Corporation“Wholeheartedly” inU.S. importer of apparel;
support, especially on freeestablishing a
trade in apparel manufacturing facility in
the Irbid QIZ; products
sold in Walmart, K-Mart,
& Sears
Women’s EDGEFTA should not undermineCoalition of international
universal access to waterdevelopment & U.S.
or food security and shouldwomen’s organizations that
include international laboradvocate policies that
standards; a social andempower women &
gender impact study shouldimprove their living
be conductedconditions



Company/AssociationPosition on FTAComment
Motion Picture AssociationFTA should address theTrade association
enforcement of anti-videorepresenting Buena Vista
piracy intellectual propertyInternational (Walt
rights (IPRs)Disney), Sony
(Columbia/Tri-Star),
MGM/United Artists,th
Paramount Pictures, 20
Century Fox, Universal
International Films, and
Warner Bros.
American Federation ofFTA should includeVoluntary federation of
Labor and Congress ofenforceable provisionsAmerican unions,
Industrial Organizationsprotecting core labor &representing more than 13
(AFL-CIO)environmental standardsmillion people nationwide
American Apparel“Strongly” supports FTA;Central trade association
Manufacturers AssociationFTA should preserve thefor U.S. companies that
(AAMA)advantages of QIZs andproduce clothing; some
adopt U.S.-Israel FTAmembers have shifted
rules of origin production to the QIZs
Energy Services CoalitionFTA provides theCoalition of 51 companies
opportunity to fully& trade associations whose
liberalize trade in thegoal is to promote the
energy services sector;liberalization of energy
FTA should includeservices
market-access
commitments & pro-
competitive regulatory
framework
Chocolate ManufacturersFTA should achieveRepresents 300 companies
Association (CMA) &reciprocal duty-free accessthat manufacture more
National Confectionersfor confectionery productsthan 90% of chocolate &
Association (NCA)confectionery products in
the United States
U.S. Dairy Export CouncilFTA should lower tariffsIndependent membership
on dairy products fromorganization representing
20% to zeromore than 80% of national
milk production & other
dairy products
West Point Stevens, Inc.FTA should adopt rules ofLargest U.S. manufacturer
origin based on U.S.-Israelof sheets & towels


FTA

Company/AssociationPosition on FTAComment
United States AssociationFTA should be compatibleRepresents more than 200
of Importers of Textiles &w/ QIZs, lead to immediateimporters, exporters,
Apparel (USA-ITA)reciprocal elimination ofmanufacturers,
duties on textiles &distributors, & retailers
apparel, and have
minimum customs
formalities
Kellwood Company“Strongly supports” FTAManufacturer & marketer
& a rapid phase-out ofof women’s apparel
apparel tariffs
National Retail Federation“Strongly supports” FTAWorld’s largest retail trade
(NRF)& immediate duty-freeassociation, representing
treatment of consumermore than 1.4 million U.S.
goods; FTA shouldretail establishments
incorporate U.S.-Israel
FTA rules of origin on
textiles & apparel
Source: United States Trade Representative Reading Room.



Appendix B. Public Comments Received by USTR on
Environmental Impact of U.S.-Jordan FTA
Company/AssociationPosition on FTAComment
World Resources InstituteSupports environmentalProvides information,
impact study; anticipatesideas, and solutions to
that FTA will have aglobal environmental
minimal environmentalproblems
impact
United States Council forFTA should be modeled onOrganization addressing a
International BusinessU.S.-Israel FTA; “regrets”broad range of policy
the introduction ofissues with the objective of
environmental & laborpromoting an open system
provisions in FTA ;of world trade, finance, &
environmental & laborinvestment
issues should be taken up
outside the framework of
the FTA
American Lands AllianceFTA provides opportunityComposed of Center for
to demonstrateInternational
compatibility of economicEnvironmental Law,
development &Defenders of Wildlife,
environmental protection;Earthjustice Legal Defense
environmental sideFund, Friends of the Earth,
agreement to NAFTANational Wildlife
should set minimumFederation, Pacific
standards for U.S.-JordanEnvironment and
FTAResources Center, Sierra
Club, & World Wildlife
Fund
Source: United States Trade Representative Reading Room.