[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
PROMOTING U.S. COMMERCE IN THE MIDDLE
EAST AND NORTH AFRICA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
THE MIDDLE EAST AND NORTH AFRICA
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
JULY 22, 2015
__________
Serial No. 114-70
__________
Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida BRAD SHERMAN, California
DANA ROHRABACHER, California GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio ALBIO SIRES, New Jersey
JOE WILSON, South Carolina GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas THEODORE E. DEUTCH, Florida
TED POE, Texas BRIAN HIGGINS, New York
MATT SALMON, Arizona KAREN BASS, California
DARRELL E. ISSA, California WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina ALAN GRAYSON, Florida
MO BROOKS, Alabama AMI BERA, California
PAUL COOK, California ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas GRACE MENG, New York
SCOTT PERRY, Pennsylvania LOIS FRANKEL, Florida
RON DeSANTIS, Florida TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina JOAQUIN CASTRO, Texas
TED S. YOHO, Florida ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
TOM EMMER, MinnesotaUntil 5/18/
15 deg.
DANIEL DONOVAN, New YorkAs
of 5/19/15 deg.
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
------
Subcommittee on the Middle East and North Africa
ILEANA ROS-LEHTINEN, Florida, Chairman
STEVE CHABOT, Ohio THEODORE E. DEUTCH, Florida
JOE WILSON, South Carolina GERALD E. CONNOLLY, Virginia
DARRELL E. ISSA, California BRIAN HIGGINS, New York
RANDY K. WEBER SR., Texas DAVID CICILLINE, Rhode Island
RON DeSANTIS, Florida ALAN GRAYSON, Florida
MARK MEADOWS, North Carolina GRACE MENG, New York
TED S. YOHO, Florida LOIS FRANKEL, Florida
CURT CLAWSON, Florida BRENDAN F. BOYLE, Pennsylvania
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
C O N T E N T S
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Page
WITNESSES
Ms. Elizabeth Richard, Deputy Assistant Secretary, Bureau of Near
Eastern Affairs, U.S. Department of State...................... 5
Mr. Scott Nathan, Special Representative for Commercial and
Business Affairs, Bureau of Economic and Business Affairs, U.S.
Department of State............................................ 13
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Ms. Elizabeth Richard: Prepared statement........................ 7
Mr. Scott Nathan: Prepared statement............................. 15
APPENDIX
Hearing notice................................................... 36
Hearing minutes.................................................. 37
The Honorable Gerald E. Connolly, a Representative in Congress
from the Commonwealth of Virginia: Prepared statement.......... 38
PROMOTING U.S. COMMERCE IN THE MIDDLE EAST AND NORTH AFRICA
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WEDNESDAY, JULY 22, 2015
House of Representatives,
Subcommittee on the Middle East and North Africa,
Committee on Foreign Affairs,
Washington, DC.
The committee met, pursuant to notice, at 10 o'clock a.m.,
in room 2172 Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen (chairman of the subcommittee) presiding.
Ms. Ros-Lehtinen. My opening statement, and I usually never
start without Mr. Deutch being here, since he's usually beating
me, and I'll ask Mr. Issa for as long as he can to take over,
and then I'll be back.
So, after recognizing myself and Ranking Member Deutch when
he comes for 5 minutes each for our opening statements, I will
then recognize any other member seeking recognition for 1
minute.
We will then hear from our witnesses, and without objection
the witnesses' prepared statements will be made a part of the
record. And members may have 5 days to insert statements and
questions for the record subject to the length limitations in
the rule.
The chair now recognizes herself for 5 minutes.
The Middle East and North Africa is a region rife with
conflict, instability, insecurity, and uncertainty as the
events of the Arab Spring have shown us, but it also a region
with potential. If some of those nations take the necessary
measures to step out from the uncertainty and instability, and
institute reforms and develop democratic institutions that can
bring them back into the global economy.
My deepest apologies, Mr. Deutch.
The Middle East and North Africa as a region accounts for
about 5\1/2\ percent of the world's total population, a
population that is one of the fastest growing in the world, but
its economic output falls short of expectations contributing
just over 4 percent of the world's GDP.
In terms of U.S. Direct Investment, the Middle East and
North Africa region as a whole accounts for just 1 percent of
the nearly $5 trillion of outward U.S. foreign Direct
Investment. Those numbers are incredibly lopsided, but that
means that there's room to grow, and to expand. But it can only
be done if many of the countries in the region implement much
needed political reforms, economic reforms, rule of law
reforms. Local businesses and foreign businesses alike run into
rampant cronyism, protectionist policies, corruption,
regulatory burdens that stifle economic growth and take away
the incentive for those seeking to do business in the region.
This makes it difficult not only for the governments
themselves to invest in infrastructure and integrate themselves
into the global economy, but it also makes these countries
undesirable for foreign Direct Investment, which in turn
exacerbates their economic struggles and their inability to
reduce their already high unemployment numbers, and the cycle
continues.
This is a region that continues to significantly
underperform in terms of economic output relative to its total
population. That means they become overly reliant on outside
foreign assistance. And one of the largest providers of foreign
assistance is the United States, because these countries are
behind in instituting democratic reform.
In fact, the only democracy in the region is our close
friend and major strategic partner, the Democratic Jewish State
of Israel. It is probably no coincidence then that Israel
enjoys the economic benefits that few countries in the region
do, and that is why it is a great environment for American
businesses to operate and thrive in. But Israel is not the only
country in the region with whom we have strong ties. We have
free trade agreements with five countries, including our
partners, Israel, as I mentioned, Jordan, and Morocco. But
there are others which we can continue to seek ways to expand
our trade and investment opportunities.
Is our policy too concentrated on security matters and not
enough on trade and investment opportunities? We need to find
ways for American businesses to help the economies of the
region grow. If we can do that, we can gain more leverage, and
we can help to promote and support democratic reforms. We need
to work to help foster more hospitable positive environments
for American and other foreign businesses because it is
important that we transition from aid to trade.
Increased trade with the region will help to strengthen
their economies. The aim should not only be for American
businesses to create opportunities and more American jobs, but
to do the same for other countries in the region and help them
become economically sound and less dependent on our economic
assistance.
This has been one of the missing pieces of the puzzle from
the Arab Spring across the region. We need to find ways to spur
privatization, investment, economic growth in these countries
through democratic reforms. If we can get those countries more
involved in the global economy, we may have a chance to see
more countries like Tunisia with a path toward democracy and
maybe finally see less conflict, and greater stability.
So, today we're here to discuss ways in which we can work
to reach a mutually beneficial position for U.S. businesses and
the countries of the Middle East and North Africa through
increased investment and trade. And with that, I will be glad
to yield to my ranking member, my friend, Mr. Deutch from
Florida. And if I could ask Mr. Issa to take over. Thank you.
Mr. Deutch. Thanks, Madam Chairman, and thanks to our
witnesses for being here today.
Over 4 years have past since the protests started in
Tunisia setting off a chain reaction across the Middle East and
North Africa. With varying results, both positive and negative,
the protest led to dramatic changes in the region. The Middle
East and North Africa that we see today are different, in some
ways it's even indistinguishable from before January 2011.
Over these years, our Government has attempted to position
itself and to direct our foreign aid in a way that would best
promote the democratic principles that we cherish here in the
United States.
We often talk about the soft power that we use, commonly
through civil society groups and NGOs to promote good
governance, rule of law, equal treatment for women, and respect
for religious minorities, among many other values. In this
hearing, I look forward to hearing our witnesses discuss the
role that the U.S. Government plays in promoting a mutually
beneficial economic policy with our allies in the region.
An important element for any country strategy for meeting
the needs of the people including here in the United States is
economic growth. A country that prioritizes job creation and
developing a robust economic infrastructure that encourages
innovation, entrepreneurship, foreign investment, and expanded
trade relations will find support from its population. Simply
put, an expanded and more widely accessible economy can
contribute to a country's success, and of great importance in
the region especially, its stability.
For these reasons, it's important the U.S. Government do
what it can to help countries improve their national economies.
That's why our Embassies in the region are staffed with
liaisons working to improve bilateral commercial ties. Of
course, we wouldn't act unless there was a mutual benefit, a
substantial return on our efforts.
In this case, I think those benefits are clear. Each
American private sector firm and business that benefits from
this support will hopefully return the profits and jobs created
to meet the new demands back--to meet those new demands back to
the United States. In addition, a more prosperous country that
offers more economic possibilities for its people will find
greater stability.
For a region experiencing significant population booms
reaching working age, enticing the youth, many of whom might
come from difficult regions, enticing them with attainable
economic opportunities can help rebuff lures to turn to
extremism and join ranks in terrorist groups like Ansar al-
Sharia or ISIS. And for a region with such severe security
threats, the United States should invest in any options
available to us that can contribute to the security and the
stability of our allies.
Understandably, destabilizing security threats and attacks
discourage trade and investments. This is reflected in our
fluctuating bilateral trade volume since 2010. In some cases,
it has rebounded well. For example, U.S. exports to Egypt
slipped in the years when the country was dealing with
political uncertainties. In 2014 it returned to pre-2012
levels. Today our exports to Tunisia have risen significantly.
Since the revolution, obviously, we pay close attention to the
results of the recent attacks. But it's important to remember
that growing ones economy isn't simply increasing trade or
foreign investment. We should not forget that many of the
revolutions in the region were encouraged by large populations
who did not feel the ripple effect of foreign commerce in their
lives. That's why public trust in the government is also
essential.
If the people of a country don't see the benefits of
expanded and more international commerce in their country; for
example, if the profits and jobs remain solely among a small
elite class, then the same grievances that we heard so loudly 4
years ago will remain unabated.
A country without the institutional framework for handling
expansion into new sectors or increased demand volume for
exports and imports will not run efficiently, and won't
maximize the positive financial impact on the country.
The government also needs to insure that they are fostering
future generations of educated citizens able to continue the
specialized work of modernizing an economy. Without proper
worker protections and equal access for women, a modern economy
cannot approach full efficiency and maximization of resources.
These are important considerations for countries amid their
political transitions, but we should also be cognizant of best
practices so that we can be prepared to take on the rebuilding
and the changes that will come in Syria, in Libya, and in
Yemen.
I look forward to the witnesses' testimony which I hope to
hear what steps are being taken to support U.S. commerce in the
region, while at the same time considering the other factors in
play to insure that the expanded commercial ties benefit the
entire country in all regions from the bottom to the top.
I thank the chairman, and I yield back.
Mr. Issa. I thank the gentleman. And, briefly, the 1 minute
I would be given by the chair were she still here. t his is an
important hearing and it will in many ways go unnoticed.
Every day ISIS is in the front lines of discussion while,
in fact, the areas that have fomented so much of this
opportunity for extremism sometimes doesn't get looked at
properly.
Today, our witnesses are, in fact, two individuals who are
at the front line of dealing with the pre-event portion of it,
the diplomatic portion. Over the years, whether it was
Ambassador Welsh, Ambassador Satterfield, or William Burns, all
of Ambassador Burns, all of them have had similar jobs, or in
some cases the identical job you have. Each of them has been a
mentor to me, and acutely understood what it will take in order
to fix the problem. So, as I listen to your statements and
follow-up with questions, I will be asking, and I will be
interested to know now that, as Mr. Deutch mentioned, now that
the Arab Spring has proven that eliminating a dictator and
replacing them with democracy is not the answer. It may, in
fact, be an important step in some cases, but the institution
of real rule of law, civil rights, and the opportunity in an
entrepreneurial, economic way to go from a lack of prosperity
to prosperity; in other words, the have nots having the
opportunity to eventually be the haves, and not to the
exclusion of others, the rising tide that in America raises so
many out of poverty, or out of middle class, or out of the
upper middle class and does not exist in Africa or most
portions of the Middle East, in fact, will be a critical part
of what I'll ask for today.
And with that, it's my pleasure to introduce our panel of
witnesses. First, I'm pleased to introduce Ms. Elizabeth
Richard, who serves as the Deputy Assistant Secretary of State
for the Bureau of Near Eastern Affairs. Previously, she served
as the DCM or Deputy Chief of Mission in Sana'a. Boy, that was
an esoteric place to be that you can tell us more about, and
the border coordination in Islamabad. She also was the Deputy
to the Special Ambassador for War Crimes and Special Assistant
Undersecretary for Political Affairs. Welcome.
Second, we welcome Mr. Scott Nathan, who is the Special
Representative for Commercial and Business Affairs for the
Bureau of Economic and Business Affairs. In the past, he has
worked as the Chief Risk Officer in the private sector at the
Bob Post Group in Boston, and served as the economic advisor to
the Governor of Massachusetts, who will remain nameless, but a
governor.
And with that, Ms. Richard, you're recognized for more or
less 5 minutes.
STATEMENT OF MS. ELIZABETH RICHARD, DEPUTY ASSISTANT SECRETARY,
BUREAU OF NEAR EASTERN AFFAIRS, U.S. DEPARTMENT OF STATE
Ms. Richard. Thank you very much, sir. Thank you, thank
you, Mr. Ranking Member and members of the subcommittee who may
join us later. Thanks very much for the opportunity to testify
here today.
Those of us who work on the Middle East and North Africa
are all too familiar with the distressing news that routinely
comes out of the region. But as this subcommittee knows all too
well, the region faces deep structural challenges that feed the
historic instability that we're seeing today.
However, what's too often overlooked and what seldom gets
enough publicity is the good news story of the growing economic
opportunities for American business in the region.
Over the past 4 years alone, U.S. trade with the Middle
East and North Africa has grown on an average by $1 billion a
year, and it's reached $197 billion just last year. And U.S.
exports to the region are at an all time high, and our trade
deficit with the region is rapidly shrinking.
American businesses can and do make an immediate and
lasting impact on the region. Simply by investing and creating
jobs in the Middle East and North Africa, American businesses
can help make the region stronger, and that ultimately
strengthens the American economy, as well.
Let me be clear that jobs alone will not solve the problem
of violent extremism, but they can provide opportunity and
purpose for a very large population of at-risk people,
including youth.
Moreover, facilitating U.S. businesses access to markets
around the region is a crucial part of Secretary Kerry's
economic diplomacy. A central mission of all our Embassies is
to fiercely advocate on behalf of American enterprises.
Ambassadors and our Embassy staff frequently sit down with
American businesses to advise, strategize, and work with them
on local business opportunities. They'll meet personally with
economic ministers if there's a public solicitation that U.S.
business can bid on.
For example, in April, Ambassador Joan Polaschik after
numerous talks with Algeria's Minister of Transportation helped
GE finalize a $20-million deal with the state-owned railroad
company. In Iraq, Ambassador Stuart Jones and the U.S. Embassy
team relentlessly advocated with high-ranking officials there,
and 2 weeks ago finally the grain board of Iraq announced that
it would spend $37 million to buy 63,000 metric tons of rice
grown here in the United States is Louisiana, Missouri,
Arkansas, and Texas. In Egypt, our Embassy in Cairo
successfully advocated on behalf of the Great Lakes Dredge and
Dock Company which has won a $135-million contract for work in
the Suez Canal. And countries in the Middle East and North
Africa have become some of Boeing's largest markets. Over the
past few years, customers there have purchased or placed orders
with Boeing worth more than $130 billion; 200 777 Aircraft
which include 300 American-made GE engines were ordered just
last year alone.
Ranking Member Deutch, Mr. Congressman, 41 American
companies with ties to Florida have foreign subsidiaries in the
region, and companies from every part of our country do
business there.
Interestingly, and I think this is important, many of them
are immediately recognizable to people in the region as
American. For example, Arby's has opened a franchise in Iraq,
and Nestle Tollhouse is poised to begin business there soon.
Johnny Rockets, ReMax, Pizza Hut and 26 other franchises will
open for business in Tunisia thanks in large part to the work
that the U.S. Embassy has done with the Tunisian Government and
other stakeholders to liberalize franchising laws.
Obviously, these successes alone will not solve the serious
challenges this region faces, but we need to make headway, and
we need our business community to play a leading role in
addressing the deep economic problem this region faces.
So, I thank you very much for the opportunity to testify
today, and I look forward to your questions.
[The prepared statement of Ms. Richard follows:]
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Mr. Issa. Mr. Nathan.
STATEMENT OF MR. SCOTT NATHAN, SPECIAL REPRESENTATIVE FOR
COMMERCIAL AND BUSINESS AFFAIRS, BUREAU OF ECONOMIC AND
BUSINESS AFFAIRS, U.S. DEPARTMENT OF STATE
Mr. Nathan. Thank you, Mr. Issa, Mr. Deutch, and other
members of the committee. I appreciate the opportunity to
testify today.
Despite the challenges facing this region, there are still
many opportunities for business, and my testimony will focus on
what the State Department is doing to help U.S. firms seize
these opportunities.
The business and investment climate in these countries can
be difficult, but we are working with the private sector and
our partners to try to reverse this trend, create more jobs,
and spur inclusive growth. By investing and employing more
people, U.S. firms play an important role in helping transform
the economic landscape of the Middle East and North Africa.
Because of their high standards and business practices, U.S.
firms often set an example that helps catalyze broader change.
They participate in local American Chambers of Commerce and
other business councils helping to give important private
sector voice to the reform agenda.
My chief responsibility as the Department's Special
Representative for Commercial and Business Affairs is to help
level the playing field for our companies to win more contracts
and enter new markets. In my 16 months as Special
Representative, I visited the Middle East and North Africa
three times, and I will return to continue our efforts to
strengthen commercial linkages next week.
To assist the economic transitions in the region, we're
taking a three-pronged approach that presses for policy reform,
support our companies in pursuing commercial opportunities, and
helps the development of local entrepreneurs and SMEs.
First, we're engaging with our Government partners through
trade agreements and economic policy dialogues to support their
market-oriented reform agendas, and to facilitate greater
business ties with the United States. Creating jobs and
opportunity through private sector-led expansion is critical to
the future success of the region.
We push for open trade and investment policies that will
promote sustainable growth and enable American businesses to
have fair access to these growing markets. Our two-way trade in
the region more than doubled over the last 5 years, and around
a quarter of our exports to the region were sent to our five
free trade agreement partners; Israel, Morocco, Oman, Bahrain,
and Jordan.
Under the FTA with Israel, for example, bilateral trade
reached approximately $38 billion in 2014, up from $2.6 billion
when the agreement began 30 years earlier. In Jordan, our FTA
enabled a local company, PETRA Engineering, to purchase over
$15 million worth of equipment from U.S. SMEs just this year
alone, and every air conditioning unit they produce and export
around the globe uses components made in the United States.
Second, we're hoping to connect our private sector with
promising opportunities and we're doing what we can to position
our companies to succeed. A high priority for Ambassadors and
Embassy teams in the MENA region and around the world is to
advocate for U.S. companies bidding on foreign government
procurements.
Last year our advocacy efforts contributed to over $45
billion worth of sales in the region supporting thousands of
jobs in a dozen states. For example, Bechtel won a $3.1 billion
contract in Saudi Arabia last year to design and construct new
metro lines in Riyadh assisted by advocacy from then Ambassador
James Smith and Secretary Kerry. Divida Health Care Partners
won a $1.3-billion contract to provide dialysis services after
strong mission Saudi Arabia support. In 2014, State Department
advocacy helped secure Florida-based Blumberg Grain, a contract
to provide 93 storage and processing sites across Egypt. At the
recent Egypt economic development conference, General Electric
announced a $1.6-billion deal to provide more than 2 gigawatts
of power generation equipment, most of which is now operating
and helping Egyptians meet their peak summer demand.
Third, we're helping to support local private sector
development from the ground up through programs that bolster
SMEs and entrepreneurs. Just one example, for the last few
years, Coca-Cola has partnered with the State Department and
the Kelly School of Business to host a summer entrepreneurship
program for 100 college students from across the MENA region.
These future business and civic society leaders returned to
their countries with new skills and contacts better enabling
them to start businesses and create jobs. On a much larger
scale, President Obama's Global Entrepreneurship Summit helps
deepen ties between business leaders, NGOs, academics, and
aspiring entrepreneurs. And GES has been twice held in the
region. Last year in Morocco, we instituted a day devoted to
helping youth and women entrepreneurs.
To conclude, I've discussed only a small sample of our
economic engagement with the Middle East and North Africa.
Sustainable economic development in this region is integral to
defending our nation's interests and insuring the security of
all Americans. Our private sector plays a key role in this, and
we're there to support them.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Nathan follows:]
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Mr. Chabot. Thank you very much. We appreciate your
testimony here this morning, and we'll now recognize members
for 5 minutes, and I'll begin with myself.
The--in May 2011, the President announced the launch of the
Middle East and North Africa Trade and Investment Partnership
Initiative with the proposed goals of facilitating regional
trade, promoting integration with U.S. and European markets,
and helping to construct a regional trade agreement. He stated,
``This strategic objective was to create an economic force for
reform and to assist with democratic transitions in the Middle
East,'' yet, very little has been said about the partnership
since its launch, and there's no mention of it at all in the
President's latest trade policy agenda, or either of your
testimonies. What is the status of the partnership, and why was
it not included in the President's trade policy agenda? And
I'll open it either one of you. Mr. Nathan.
Mr. Nathan. Sure. Thank you very much, Mr. Chabot.
In terms of our work with our partners in the region on
trade, we have numerous bilateral dialogues in which the
possibility of economic reform to lay the groundwork for a
trade agreement is underway. Just this year we had economic and
strategic dialogues with Morocco. We're doing so with Israel
and the UAE, but in order to move forward with trade agreements
either on a bilateral or a multilateral basis, we need to see
progress on the reform agenda broadly.
Mr. Chabot. Thank you. Let me move to another question
here.
Where are we in meeting in the partnership strategic
objective, and if it's not yet been that, does the President
plan on extending the partnership's mandate?
Mr. Nathan. I can't give you a status report on where we
are on the objectives. What I would recommend is that we have
our experts from our trade area come up and brief you on that,
specifically.
Mr. Chabot. All right. Well, we would appreciate the
administration get back to the committee with answers to that.
Mr. Nathan. Absolutely.
Mr. Chabot. Many countries in the region are working hard
to diversify their economies. Which countries have been more
successful at this diversification, which need to do more, and
how is the United States helping in their efforts? Ms. Richard?
Ms. Richard. Sir, I think Israel is a terrific example of a
country that's done exactly that. Over the past 30 years, the
diversification, the investment in the private sector, the
investment in technology has allowed Israel to play on par with
the developed world and with the West. There are a couple of
others that are starting to make progress. I think Tunisia is
working very hard in this direction, and we have quite a bit of
engagement with the Tunisian Government on exactly this point,
the need to diversify their economy beyond some of the
traditional agricultural products, and some progress has been
made there.
Mr. Chabot. Do you think that the recent terrorist attack
in Tunisia will have any impact on their progress in that area?
Ms. Richard. I don't think it will have any impact on the
government's commitment to diversify, but I think the fact that
the tourism industry took such an immediate and significant
hit, has only highlighted the need to further diversify that
economy. I think that they are completely devoted to continuing
to work on that.
Mr. Chabot. Thank you.
The United States has a number of trade investment
framework agreements with countries in the region. How many of
those are likely to develop into something more, and are there
any countries that we consider concluding a free trade
agreement with that we don't currently have?
Mr. Nathan. So, in terms of countries that we might enter
into free trade agreements, I can't specifically comment on
what the prospects are with an individual country, but what I
can say is that in all of our dialogue, either formal or
informal, with countries in the region we're pressing forward
with the reform agenda, providing technical assistance on the
change in laws to move toward more market-oriented regulations,
cutting through bureaucracy, protection of intellectual
property rights, all the things that lay the basis for then
taking the next step toward a free trade agreement.
Mr. Chabot. Okay, thank you. I think I've got time to get
one more question in here before my time expires.
While Saudi Arabia is our largest trading partner in the
Middle East by overall volume, it's mainly due to U.S. oil
imports, of course. What's preventing additional U.S. exports
and investment in other economic sectors, and what is State
doing to encourage additional opportunities for U.S. commerce?
Mr. Nathan. So, as I mentioned in my testimony, we've been
advocating hard. Our Ambassadors and posts on the grounds, as
well as Washington-based principals to win contracts for
American countries in Saudi Arabia. I cited a few examples.
There's always progress that could be made on transparency
and openness of procurement processes, and opening up of the
business and investment climate. But, for example, Saudi Arabia
already is the third largest importer of automobiles from the
United States, so it's a high indication of opportunities to
diversify our trade with Saudi Arabia.
Mr. Chabot. Thank you very much. My time has expired. The
ranking member, Mr. Deutch, is recognized for 5 minutes.
Mr. Deutch. Thanks, Mr. Chairman.
Ms. Richard, you spoke about the--you gave us some big
picture data points on the growth of our economic
relationships. And, Mr. Nathan, you spoke about individual--you
gave some examples of individual companies who have benefitted,
but if you could--I would love to hear you tell us what you're
most excited about. I mean, this is what you do every day. What
are you most excited about in the region and opportunities for
American business?
Ms. Richard. Maybe I can start with that, sir. And thank
you for the question, because there's a lot to be excited
about. And I think that's--we're very thrilled to be there--to
be here today for exactly this reason. There is so much bad
news coming out in the press that you can't believe anything
good is happening, but there is a lot. And I think one of the
things, we always talk about the youth demographics here as a
problem, and an obstacle, and a danger, and something that can
be exploited by terrorists, and that's all true. But it's also
an incredible opportunity, and I think if you look at some of
what's being done on the small and medium enterprise scale,
particularly as regards technology, there is a lot that's
happening, and it's very exciting.
It is moving around a little bit some of the moribund
economies, some of the things that keep these economies from
developing like lack of transparency, poor regulatory
environment and the like. And it's also really opened up an
avenue for women to join the workforce. Women in the workforce
in the Middle East is the lowest level in the world. In Africa,
for example, about 63 percent of the labor force is women; in
the Middle East it's 21 percent. But technology has given an
opportunity for women, and especially young people to work
beyond those obstacles. So, for example, we can have women
running a business from their home. They can employ other women
who are also working from their home. And we have some really
interesting programs to help with this, Tech Women, Tech Girls.
We bring female entrepreneurs to the United States to sit with
their counterparts here and learn how to do this. So, I think
the opportunity side of what's going on with this huge youth
population and the opportunity for U.S. business to take
advantage of that is huge.
Mr. Deutch. Great, thanks. Mr. Nathan.
Mr. Nathan. So, I echo my colleague's comments about the
opportunities in entrepreneurship. There's just fantastic
opportunities there for us to make progress, and empowering
youth, women, disadvantaged communities by giving them the
tools, the ability to reach their human potential through
starting a business, and helping them navigate through what is
often a very challenging environment of bureaucracy.
But I want to return to what we do on commercial advocacy.
It's really in many ways the bread and butter of what my office
focuses on. There are many parts of the U.S. Government which
help support this, the Department of Commerce and elsewhere
around the interagency, but I'm a competitive guy. I'm a deal
guy. I like to win, and the idea of helping U.S. companies
compete on a level playing field and win contracts that not
only help on the ground in the region bring examples of good
business practice, but also strengthen our own economy at home
and create jobs. That's a win-win. I know how much our
Ambassadors on the ground are committed to this idea. They like
to win, and they're competitive, as well.
Mr. Deutch. All right, thanks.
Can we just get back to something you both just mentioned,
which was some of the positive aspects on the ground in
society. Is it too soon for us--well, can you identify positive
social trends? Is it too soon to describe trends we've seen
with respect to advancement for women, or more opportunities
for young people in countries where we've seen increased
economic ties with the United States?
Mr. Nathan. So, I'd say that I think from a statistical
point of view it's probably too soon to prove that out. There
are plenty of anecdotes, however. I mean, one that I'll just
highlight, under the Global Entrepreneurship Program that we
coordinate out of the Office of Commercial and Business
Affairs, we've recently signed up an entrepreneur in residence,
the first regional entrepreneur for the Gulf Region. She's a
woman, a star on reality TV in Kuwait, has a huge social media
following, and really serves as in a large-scale way a mentor
to women throughout the region about the possibility of
empowering themselves through business. It's anecdotes like
that that I think give me hope for the future.
Mr. Deutch. Ms. Richard.
Ms. Richard. Yes, I would second that. And if I might from
my own experience in Yemen for the 3 years from the start of
the Arab Spring and 3 years on, one of the things I saw among
the younger people is a willingness, and ability, and comfort
level to sit with each other, to collaborate with each other
among the youth, and among men and women, which is very, very
different. And in quite a very conservative country as Yemen
is, it was very interesting to see this through the Arab Spring
protests and through the national dialogue process, which ended
up with young men and young women sitting together to try and
create a new constitution for the country.
Mr. Deutch. Thanks. And to the extent--this is very helpful
to the extent that there are American businesses who hearing
all of the wonderful opportunities you discussed would like to
learn more. I mean, what's the best place? Where should members
direct them to go for the best and central location for this
information?
Mr. Nathan. Well, there's a--I mean, the best source of
information about opportunities on the ground are our posts,
our missions, our Embassies, the Ambassadors and their teams.
But whether it's the State Department, the Commerce Department,
or other parts of the Government here in Washington, we have
many programs through our Web sites that provide that sort of
information.
Mr. Deutch. Any in particular, Ms. Richard? Thanks.
Ms. Richard. No, I would agree with that. This is an
absolute priority for Secretary Kerry. Economic diplomacy is
foreign policy, and so the State Department is a great place to
start. Our colleagues at the Department of Commerce also spend
an awful lot of their time and energy doing this, and as Mr.
Nathan said, our Ambassadors live and breathe to do exactly
this.
Mr. Deutch. Let me try it a different way.
Mr. Nathan. I can mention one specifically.
Mr. Deutch. Please, yes.
Mr. Nathan. So, we have a program called the Direct Line
for Business. It's instituted in 2012. It allows SMEs and other
businesses here to connect with our posts on the ground to
consider particular opportunities. The Ambassadors and their
teams through webinars or conference calls can relate business
opportunities. We've had 30 of these webinars just in the MENA
region alone. They're focused on opportunities like the health
care sector in Oman, or the security sector in Libya.
Mr. Deutch. Finally, Ms. Richard, that's helpful if the
business is not quite at that point, they just want to learn
more and they went to State.gov, what should they look for? I'm
just trying to really----
Mr. Nathan. So, at State.gov, there's the Commercial and
Business Affairs tab, and Business USA.
Mr. Deutch. That's what I want.
Mr. Nathan. Thanks.
Mr. Deutch. Okay, thanks very much. I yield back.
Mr. Trott. I want to thank the ranking member for holding
this hearing, and also thank the witnesses for testifying. And
I now recognize myself for 5 minutes.
Either witness, the United States' decreased reliance on
Middle Eastern crude oil has caused the price of oil to fall
below $50 a barrel. Is that negatively impacting our
relationship with countries in the region, either witness would
be great?
Ms. Richard. Let me start and simply say no, it has not
really affected our relationships. Our relationships across the
region are based very, very much more than simply on oil, and I
think you see that today. What I would say that is the change
in the price has changed the dynamics in the region a little
bit, depending on whether you're a net producer or a net
importer. But, fundamentally, we have such a broad range of
interests in that region that this is only one aspect of it.
Mr. Nathan. I would say, I mean, it probably goes without
saying, but the effect of lower oil prices on the budgets and
economies of some of the countries in the region has been
detrimental.
Mr. Trott. With respect to Egypt, the efforts to privatize
state-owned industries has slowed in recent years due to legal
challenges. What's the--how has that impacted U.S. commerce,
and what are we doing to try and move the privatization process
along in Egypt?
Ms. Richard. That's an absolutely excellent question,
because that is a fundamental problem for that economy. Egypt
is a country with a moribund economy, with a very small, as in
scale private sector. The private sector is actually quite
closed, and there are many, many significant problems. If you
look at a recent World Bank study, for example, on the
constraints to growth, they are macroeconomic instability,
regulatory instability, political instability, and corruption.
And these four elements are present in Egypt in a significant
way, so we are working very hard with the Egyptian Government
to help them recognize these key areas that need to be worked
on, to open up the economy not just for U.S. business, but for
their own companies to grow.
Mr. Nathan. Can I just briefly add to that?
Mr. Trott. Please.
Mr. Nathan. I had the opportunity to travel with Secretary
Kerry to Egypt in March for the Egypt Economic Development
Conference. It was really an event that highlighted that
aspiration to move forward with the reform agenda, and to
create more opportunities for business. There were many, many
American companies there. The U.S. Chamber of Commerce hosted a
huge event, and many deals, whether Coca-Cola, PepsiCo, GE were
all announced at this event. So, there still are great
opportunities in Egypt, and we're working hard at multiple
levels to help them with the reform agenda to make sure that
not only is their economy strengthened, but U.S. companies have
a chance to compete.
Mr. Trott. And how would you assess President Sisi's
efforts to deal with the economic problems and attract foreign
investment in Egypt?
Mr. Nathan. So, as I just mentioned, the conference that
happened in March was an event that I think was very personally
important to President Sisi. Many leaders from around the
region, many businesses from around the globe attended it. He
was front and center the whole time, and I think really drove
the agenda. There's a lot of challenge, as my colleague
mentioned, in Egypt, but I think there's no shortage of energy
devoted to pushing forward with the reform agenda and the
economy.
Mr. Trott. Okay. In Lebanon, they're working hard to combat
corruption and the anti-bribery network, and is it--are they
making progress? Is it lending itself to a more commercially
reasonable environment for folks to do business in Lebanon?
Ms. Richard. They are making some progress. It's slow, and
the fact that there hasn't been a President for a long time,
and the government is a little bit stuck is definitely a
problem. The other thing I'd say is a problem, and the Lebanese
economy is incredibly resilient, somehow has posted a very
modest gain this year, I think about 2 percent, which is really
saying something in the environment that exists there now.
The instability in the region and the overflow from Syria,
though, is creating serious problems for them, and they affect
tourism, the tourism sector, they affect investment and the
willingness of investors to go into the country. So, these are
two areas that are extremely vulnerable right now, and I think
that we need to keep working on the macroeconomic part of this,
the laws, et cetera. But the stability issue is also very much
an element here.
Mr. Trott. With respect to Morocco, I think I have time for
one more question. It's the gateway for growing economies in
the African Continent, except unemployment is staggeringly
high. Is there a reason for this disconnect? And, again, are
they making progress in trying to bring the unemployment down
in Morocco?
Mr. Nathan. So, I know that they're very focused on the
question. I was there last November. They hosted President
Obama's fifth Global Entrepreneurship Summit, and two elements
of what you mentioned in your question were highlighted by the
Government of Morocco through this event. One is their place is
a gateway to Africa, and I should mention they're the only
country on the Continent of Africa with whom we have a free
trade agreement. And the second point was doing what's
necessary to spark entrepreneurship. In a clear way the
bureaucracy changed the attitude in the region toward taking a
risk and provide the support and mentorship necessary to make
that possible. It's through small enterprises, through
entrepreneurs that they'll be able to create the jobs to absorb
the unemployment problem that you're talking about. And it was
clear, 6,000 people attended this event in Marrakesh. It was
clear that they had put a lot of effort into that, and were
putting force behind it.
Mr. Trott. All right. Well, my time is expired. I'm not
sure if there are any other members of the committee that have
questions. Ranking Member Deutch, please.
Mr. Deutch. Thanks, I appreciate it. Thanks to both of you
for coming. It's a very positive story that you're telling that
we don't often get a lot of positive news in this committee, so
I appreciate that.
I just wanted to circle back, Mr. Nathan, to the--you both
mentioned the Florida companies that are impacted by all this,
but there's one in South Florida, in particular, Blumberg
Grain. The suppliers for that project are U.S.-based. They are,
as I understand it, mostly small and medium-sized businesses.
How--on a project like that where there are some 93 storage
sites I think you said, how do you--what role can you play to
insure that a company like that, when deals like that come
along, how do we insure that it can be built upon when there
are successes that wind up having the benefits back home for
the suppliers to those companies?
Mr. Nathan. So, thanks for the question, because Blumberg
Grain really is a success story. They attended the conference
in March that I mentioned, the Egypt Economic Development
Conference, and they've had good news since the advocacy that I
mentioned that got them the first contract for the 93 storage
facilities. President Sisi has recently announced a tripling of
the program with this company. It's not only an example of an
innovative solution with U.S. content that is a successful
export, it's also solving a problem for Egyptian society and
the Government of Egypt, which is food security, how to have
better storage and processing at a cheaper price in a more
efficient way throughout Egypt. I mean, it's been a millennial
problem in the region, and Blumberg Grain is bringing a
solution to that. They work closely with our post on the
ground. They work closely with the U.S. Chamber of Commerce and
the local U.S.-Egypt, and Egypt-U.S. Business Councils. They
take full advantage of the opportunities to get in front of the
Egyptian Government, and push forward the advantage of their
product, and we're there to support them.
Mr. Deutch. That's great. I appreciate that. Thanks very
much, Mr. Chairman. I yield back.
Mr. Trott. Well, I don't believe any other committee
members--recognize the gentleman from Virginia for 5 minutes.
Mr. Connolly. Forgive me, Mr. Chairman, I had a markup the
Oversight and Government Reform Committee, and had a bill to be
marked up. And welcome to our panel.
If I could ask maybe some broader geopolitical questions
about commerce in this region, has commerce effectively stopped
in large chunks of the region given insurgencies, and
instability, and violence? I mean, how has it affected our
commerce with Lebanon? Either one.
Ms. Richard. Well, maybe I can start. Absolutely, the
instability in the region has affected commerce, but it
certainly has not stopped commerce. And I think the two of us
today have mentioned, and also in our written testimony, really
a staggering number of success stories that we don't hear about
every day in the press. And I know our Ambassador in Egypt,
Ambassador Beecroft, is currently working on advocacy for I
think about $19 billion worth of deals right now.
Mr. Connolly. Of?
Ms. Richard. About $19 billion worth of deals. The Embassy
in Egypt is advocating right now. Now, that's a very good
news--that's very much a good news story, and there's a lot
happening.
In Lebanon, in particular, I mentioned a moment ago,
Lebanese companies somehow, and the Lebanese economy is somehow
managing to be very resilient in the face of quite a bit of
instability on its borders, and recently posted about a 2-
percent growth. That's modest growth, but that's growth in a
region that's quite challenged right now. But there's no doubt
that this situation is affecting, as I mentioned, investment,
foreign Direct Investment in Lebanon. And it's affecting the
tourism sector, and it's also affecting those sectors that
depend on transportation because so many of the transport
networks throughout the region, intra regional trade depend on
going through Syria.
Mr. Connolly. Sure. I would also--to what extent is
personal security a barrier, as well? I mean, businessmen and
businesswomen, and investors are willing to take risks up to a
point, but if my own personal security is always at risk where
I stay, where I eat, when I travel, who I meet with, there are
plenty of places to invest and do business with that don't put
me in that kind of risk. And have my family back home really
worried sick about my personal security. To what extent is that
a serious barrier in encouraging U.S. deals, trade, investment?
Ms. Richard. Let me just have one personal story here. I
can tell you from having served, a career foreign service
officer and my last three postings have been Sana'a, Yemen,
Islamabad, Pakistan, and Kabul, Afghanistan. So, I can tell
you----
Mr. Connolly. Somebody loves you at the State Department,
obviously, Ms. Richard.
Ms. Richard. I did something right or wrong.
Mr. Connolly. Yes, you did something----
Ms. Richard. But I can tell you, yes, risk is absolutely an
issue, but one can work in these areas. And I think American
companies are looking at these markets. Look at Egypt, 90
million people, that is a vast market for consumer goods and
for all kinds of commerce. So, they're looking at those,
they're assessing their security, of course, and we work very
closely through our OSEC councils to collaborate with U.S.
companies. Our Ambassadors meet with them regularly to talk
about risk, but there's a lot of opportunity here. And
companies, I think, are making smart decisions.
Mr. Connolly. Mr. Nathan?
Ms. Richard. Mr. Nathan.
Mr. Nathan. I really don't have anything to add to that. I
was going to mention the role that our posts on the ground
through the OSECs play in helping businesses.
I guess what I would say is that we meet with businesses
all the time that are looking for assistance in pursuing
opportunities through the region, and the question you raised
does not come up. I think in------
Mr. Connolly. Does not?
Mr. Nathan. Does not come up, and I think the reason is
that many of these companies have operated in this region and
elsewhere around the world for years where there are security
challenges. And that doesn't make it easy, but it means that
they've become to some extent accustomed with how to deal with
it. It does act as a tax on doing business. This is true in any
region where there's instability. But, nonetheless, the
opportunities are such that they continue to pursue them.
Mr. Connolly. Well, I'm somewhat--I mean, I worked in the
private sector for 20 years until I came up here, and I can
tell you, the two companies I worked for were both
international, and we did our own assessment of risk. Now,
maybe that's what happens, we decide we're not going to play in
certain venues and you don't ever meet with us. And, as I said,
I mean, I understand that especially in more dicey parts of the
world the risk factor is higher, of course. But I guess I'm
asking to what extent does it become a real high barrier for a
U.S. presence? I was with some folks who have been multiple
times, many multiple times to Afghanistan and, candidly, the
security situation has just plummeted in the last few years,
and you can't do business. I mean, it's very--I mean, maybe you
need to stay in the compound. If you stay there, you have to
hire armed guards. If you're outside the green zone you're at
risk, you could be targeted. You're very aware of it, and
they're having trouble recruiting anybody who wants to frankly
work in that kind of environment.
Mr. Nathan. Yes.
Mr. Connolly. At any rate, I just--I think it's good to
hear that we're still doing business in the region, and there
are deals to be had and we haven't abandoned. But I'd love to
get more of a sense of--but with rising instability in certain
parts of the region, the rise of ISIS and, you know, outright
warfare, and what's going on in Syria, and dislocations, and
refugee populations swelling, and so forth, has that
appreciably shown itself in data in terms of U.S. economic
presence to a trade investment and the like? And I'd be very
interested in following that. Thank you, Mr. Chairman.
Mr. Trott. The gentlewoman from New York is recognized for
5 minutes.
Ms. Meng. Thank you, Mr. Chairman, Mr. Ranking Member, and
to our witnesses for being here today.
I have a question about in general localities in states
such as California has had water shortage and drought issues. I
know that in the region, Middle East in general, but
particularly Israel has had a lot of success in groundbreaking
technology and usage of techniques in water shortage situations
of their own. So, I know that there's been some conversation
and some action, but I was wondering your thoughts on
potentially more areas of collaboration between Israel and
localities or states, such as California, and what more could
be done on a Federal level, how we can be more helpful?
Mr. Nathan. So, I would just mention that our collaboration
mostly at a private sector to private sector level with Israel
could not be stronger. If you look at collaboration in research
and development and innovation, the relationship between the
high-tech community in the United States, much of which is in
California, but spread throughout the country and the high-tech
sector in Israel is incredibly strong. U.S. firms locate
research and development centers in Israel because of the high
level of talent.
After China, there's no country that has more NASDAQ listed
companies than Israel, a reflection of the innovation and
dynamism of their private sector in the high-tech area. So, I
think there's some that we can do to provide the backdrop and
framework for that. We've had our very first free trade
agreement with any country was with Israel. It's celebrating
its 30th anniversary. There's exchange from a scientific and
academic point of view. We have policy dialogues, economic
policy dialogue with Israel in a very robust way. But I think
really, ultimately, it's the private sector collaboration and
deep linkage between the two countries that's going to produce
the type of results you asked about.
Mr. Trott. Thank you. Well, I don't believe there are any
other members of the committee that are here with questions. So
unless the ranking member has any other questions, or gentleman
from Virginia, we thank you for your insight and your testimony
this morning, and the committee stands adjourned.
Mr. Nathan. Thank you very much.
[Whereupon, at 10:56 a.m., the Committee was adjourned.]
A P P E N D I X
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