Bush Seeks U.S.-Mideast Trade Zone to Bring Peace, Prosperity to Region

Asserting that prosperity is the key to peace in the Middle East, President Bush on Friday proposed a free trade zone to spur the Arab world toward freedom and Israelis and Palestinians toward two independent states.

“Across the globe, free markets and trade have helped defeat poverty and taught men and women the habits of liberty,” the president told 1,200 graduating seniors at the University of South Carolina here. “So I propose the establishment of a U.S.-Middle East free trade area within a decade to bring the Middle East into an expanding circle of opportunity, to provide hope for the people who live in that region.”

Bush’s initiative marks a shift in policy for the administration -- bringing U.S. economic strength to bear alongside its military and diplomatic influence to push for an end to violence and terrorism in the region. The initiative is also a tacit acknowledgment that the poverty and autocracy of many friendly Arab countries create breeding grounds for terrorism.

“The way forward depends on serving the interests of the living instead of settling the accounts of the past,” Bush said.

In his address, the president also used his strongest words yet to describe his vision of an independent Palestinian state.

“If the Palestinian people take concrete steps to crack down on terror, continue on a path of peace, reform and democracy, they and all the world will see the flag of Palestine raised over a free and independent nation,” he said.

Last week, the administration released a long-awaited “road map” for peace in the Middle East, laying out a series of steps Israelis and Palestinians should take to end their long-running conflict, establish a Palestinian state and learn to live in peace.

The plan has been received coolly on both sides, and observers say it is unlikely to make progress unless the president is personally and deeply committed to it.

Bush has expressed such commitment privately. He did so publicly Friday.

“America will work without tiring to achieve two states -- Israel and Palestine -- living side by side in security and prosperity and in peace,” he said.

Israeli officials have said their side will not make concessions until all Palestinian terrorism ceases. But Bush made clear that he expects immediate action.

Israel “must take tangible steps now to ease the suffering of Palestinians and to show respect for their dignity,” he said. “And as progress is made toward peace, Israel must stop settlement activity in the occupied territories.”

Bush said he was accelerating diplomacy by dispatching Secretary of State Colin L. Powell to the Middle East on Friday night. The White House announced later in the day that Israeli Prime Minister Ariel Sharon will visit Bush in Washington on May 20.

Bush’s call for a Mideast free trade zone -- in which tariffs and other trade barriers would be eliminated -- is an extension of his argument that the best way to combat terrorism is to promote democracy across the Muslim world.

“Free governments do not build weapons of mass destruction for the purpose of mass terror,” the president said. “Over time, the expansion of liberty throughout the world is the best guarantee of security throughout the world. Freedom is the way to peace.”

Other Nations Cited

Bush also took aim at those who believe democracy is not possible in Muslim countries, comparing such convictions to those in earlier eras when Germans, Japanese and Russians were deemed incapable of democracy.

“Every milestone of liberty over the last 60 years was declared impossible until the very moment it happened,” the president said.

“The history of the modern world offers a lesson for the skeptics: Do not bet against the success of freedom.”

The United States already has free trade agreements with Israel and Jordan. Under Bush’s plan, Washington would seek similar bilateral pacts with Arab countries willing to take the necessary steps toward openness and accountability. When a critical mass of countries makes such agreements, the United States would move to put them under a single free trade pact.

Such negotiations are painstaking. Although the United States has made some progress persuading several Middle Eastern countries to pursue trade liberalization, Bush administration officials have acknowledged that forging a regional free trade area would be extremely difficult.

Difficult Process

“You have countries that are vastly different. You’d basically be going as fast as the slowest person,” said one administration official who requested anonymity.

“You have countries that range from wealthy gulf states that don’t do anything except make oil, and very poor countries like Egypt and others,” the official said.

Petroleum wealth can be a disincentive to trade liberalization, the official said. With a steady stream of revenue, oil-rich countries feel less pressure to open up other sectors of their economies to outside participants.

But Edward Gresser, trade policy director at the Progressive Policy Institute, a Washington think tank, said that large benefits can come in short order. He said that since Jordan opened up its economy to the United States in the late 1990s, its exports have grown from $500,000 a month to $40 million a month -- an 80-fold increase -- and created more than 40,000 jobs.

The message of the president’s new policy, according to Gresser, is that “the economic problems of the Muslim world have a big effect on politics, and we have to do something about it.”

It is unclear whether there is much interest in such agreements in the Arab world. A senior administration official named only one country -- Bahrain -- that has expressed interest.

Some countries in the region have entered into trade liberalization talks with the United States in the past only to lose interest and let negotiations lapse.

Presumably, both bilateral and collective free trade agreements would require Arab countries to drop their boycott of Israel, which might also dampen enthusiasm in the region.

Gresser said the administration appears to believe that the road map will end the Arab-Israeli conflict well before a regional trade pact could be concluded.

In his speech, Bush sought to tout the potential benefits of his trade proposal by detailing the Middle East’s economic plight.

‘Historic Opportunity’

“The combined [gross domestic product] of all Arab countries is smaller than that of Spain,” he said. “Their peoples have less access to the Internet than the people of sub-Saharan Africa. The Arab world has a great cultural tradition, but it is largely missing out on the economic progress of our time.”

Bush also said that the fall of Iraqi leader Saddam Hussein as a result of a U.S.-led military invasion offers a “historic opportunity” to the region.

“A dictator in Iraq has been removed from power. The terrorists of that region are now seeing their fate -- the short, unhappy life of the fugitive,” Bush said. “Reformers in the Middle East are gaining influence.... We have reached a moment of tremendous promise, and the United States will seize this moment for the sake of peace.”

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Chen reported from Columbia and Reynolds from Washington. Times staff writer Warren Vieth in Washington contributed to this report.