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Analysis: The cost of coalition building-2

By SAM VAKNIN, UPI Senior Business Correspondent   |   Feb. 25, 2003 at 1:41 PM   |   Comments

SKOPJE, Macedonia, Feb. 24 (UPI) -- The outlays on warfare will likely be dwarfed by the price tag of the avaricious constituents of President Bush's ramshackle coalition. Columnist Paul Krugman aptly christened this mass bribery, "The Martial Plan," in his column of Feb 21 in The New York Times.

Krugman said: "The administration has turned the regular foreign aid budget into a tool of war diplomacy. Small countries that currently have seats on the United Nations Security Council have suddenly received favorable treatment for aid requests, in an obvious attempt to influence their votes. Cynics say that the 'coalition of the willing' President Bush spoke of turns out to be a 'coalition of the bought off' instead."

But this is nothing new. When Yemen cast its vote against a November 1990 U.N. Security Council resolution authorizing the use of force to evict Iraq from Kuwait, the United States scratched $700 million in aid to the renegade country over the following decade.

Nor is the U.S. famous for keeping its antebellum promises.

Turkey complains that the United States has still to honor its aid commitments made prior to the first Gulf War. Hence its insistence on written guarantees, signed by the president himself. Similarly, vigorous pledges to the contrary aside, the Bush administration has allocated a pittance to the reconstruction of Afghanistan in this year's budget -- and only after it was prompted to by an astounded Congress.

Macedonia hasn't been paid in full for NATO's presence on its soil during the Kosovo conflict in 1999. Though it enjoyed $1 billion in forgiven debt and some cash, Pakistan is still waiting for quotas on its textiles to be eased, based on an agreement it reached with the Bush administration prior to the campaign to oust the Taliban.

Congress is a convenient scapegoat. Asked whether Turkey could rely on a further dose of American undertakings, State Department spokesman Richard Boucher responded truthfully: "I think everybody is familiar with our congressional process."

Yet, the United States, despite all its shortcomings, is the only game in town. The European Union cannot be thought of as an alternative benefactor.

Even when it promotes the rare coherent foreign policy regarding the Middle East, the EU is no match for America's pecuniary determination and well-honed pragmatism. Last year, EU spending within the Euro-Mediterranean Partnership amounted to a meager $700 million.

The EU signed association agreements with some countries in the region and in North Africa. The "Barcelona Process," launched in 1995, is supposed to culminate by 2010 in a free trade zone incorporating the European Union, Algeria, Morocco, Tunisia, Egypt, Israel, Jordan, Lebanon, the Palestinian Authority, Syria and Turkey. Libya has an observer status and Cyprus and Malta have joined the EU in the meantime.

According to the International Trade Monitor, published by the Theodore Goddard law firm, the Agadir Agreement, the first intra-Mediterranean free trade compact, was concluded last month between Egypt, Jordan, Morocco and Tunisia. It will be signed next month and is a clear achievement of the EU.

The EU signed a Cooperation Agreement with Yemen and, in 1989, with the Gulf Cooperation Council, comprising Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates and Oman. A more comprehensive free trade agreement covering goods, services, government procurement and intellectual property rights is in the works. The GCC has recently established a customs union as well.

A similar set of treaties may soon be inked with Iran with which the EU has a balanced trade position -- about $7 billion of imports versus a little less in exports.

The EU's annual imports from Iraq -- at about $4 billion -- are more than 50 percent higher than they were prior to Iraq's invasion of Kuwait in 1990. It purchases more than one-quarter of Iraq's exports. The EU exports to Iraq close to $2 billion worth of goods, far less than it did in the 1980s, but still a considerable value and one-fifth of the pariah country's imports. EU aid to Iraq since 1991 exceeds $300 million.

But Europe's emphasis on trade and regional integration as foreign policy instruments in the Mediterranean is largely impracticable. America's cash is far more effective. Charlene Barshefsky, the former United States trade representative from 1997 to 2001, explained why in an opinion piece in the New York Times: "The Middle East ... has more trade barriers than any other part of the world. Muslim countries in the region trade less with one another than do African countries, and much less than do Asian, Latin American or European countries. This reflects both high trade barriers ... and the deep isolation Iran, Iraq and Libya have brought on themselves through violence and support for terrorist groups ... eight of (the region's) 11 largest economies remain outside the WTO (World Trade Organization)."

Moreover, in typical EU fashion, the Europeans benefit from their relationships in the region disproportionately.

Bilateral EU-GCC trade, for instance, amounts to a respectable $50 billion annually -- but European investment in the regions declined precipitously from $3 billion in 1999 to half that in 2000. The GCC, on its part, has been consistently investing $4 billion to $5 billion annually in the EU economies.

It also runs an annual trade deficit of about $9 billion with the EU. Destitute Yemen alone imports $600 million from the EU and exports a meager $100 million to it. The imbalance is partly attributable to European non-tariff trade barriers such as sanitary regulations and to EU-wide export subsidies.

Nor does European development aid compensate for the EU's egregious trade protectionism. Since 1978, the EU has ploughed only $210 million into Yemen's economy, for instance. A third of this amount was in the form of food support. The EU is providing only one-fifth of the total donor assistance to the country.

In the meantime, the United States is busy signing trade agreements with all and sundry, subverting what little leverage the EU could have possessed. In the footsteps of a free trade agreement with Israel, America concluded one with Jordan in 2000. The kingdom's exports to the United States responded by soaring from $16 million in 1998 to about $400 million last year. Washington is negotiating a similar deal with Morocco. It is usurping the EU's role on its own turf. Who can blame French President Jacques Chirac for blowing his lid?


Part 1 of this analysis appeared Monday. Send your comments to: svaknin@upi.com.

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