Could the next U.S. free trade agreement be with Tunisia?

Could the next U.S. free trade agreement be with Tunisia?

House Rules Committee chairman David Dreier (R-CA) announced last week during a visit to Tunis that he intends to head an initiative to propose a free trade agreement between the United States and Tunisia, which experienced a popular uprising in 2010 and held democratic elections in October.

"One of the most effective ways the United States can offer support to the Tunisian people as they work to solidify democratic gains is by expanding trade and commercial ties," Dreier, who is also the founding chairman of the House Democracy Partnership, said in an emailed statement yesterday. "Spurring economic growth through increased trade would … help to create the resources necessary for sustainable democratic development and prosperity in Tunisia."

According to congressional sources, Dreier first discussed the topic with Tunisian Prime Minister Hamadi Jebali at the Davos meeting of the World Economic Forum in March, just months after Dreier introduced a bipartisan resolution calling for a free trade agreement with Egypt and the Office of the U.S. Trade Representative relaunched Trade and Investment Framework Agreement (TIFA) talks with Tunisia. Even though Dreier’s proposal has yet to gain a substantial congressional base, he is partnering with House Committee on Foreign Affairs senior member Rep. Gregory Meeks (D-NY) and Ways and Means Committee member Rep. Erik Paulsen (R-MN).

As Brookings Institute Saban Center on the Middle East director Tamara Wittes noted, there’s a growing feeling of congressional support for Tunisia.

"I think there’s a tremendous amount of support on the Hill for Tunisia," she told The Cable. "I think members of Congress understand how important it is to have a successful model in North Africa for the other countries struggling with democratic reform."

U.S. Chamber of Commerce vice president of Middle East and North Africa affairs Lionel Johnson agrees that Tunisia has a lot of potential.

"The Tunisian government is the one in the region that shows the most promise," he told The Cable. "We’d like to see talks begin in early 2013."

Washington has already pledged to help Tunisia with short-term economic problems like debt and unemployment.  In March, it was announced that the United States would transfer $100 million to Tunisia, which faces a $25 billion debt, and in June the parliament in Tunis voted in favor of a bill allowing for a $400-450 million sovereign bond issue "with up to 100 percent of the principal and interest guaranteed by the U.S. government," enabling Tunisia to "borrow at almost risk-free rates." The State Department’s Middle East Transitions office is pursuing a series of "smaller but important steps."  

"There are investment regulations, border controls, and other regulatory changes that could help facilitate trade between the U.S. and Tunisia," Middle East Transitions program director William Taylor told The Cable. "What we’re hoping is that by taking some of these steps earlier on, they might get some of these trade benefits sooner than if they were wrapped into one large negotiation for a free trade agreement."

Ultimately, though, a free trade agreement stands to make a significant economic impact on Tunisia, which counted the United States among its top five trading partners in 2010.

"There’s a lot that the U.S. is already doing with economic and technical assistance to support the growth of the private sector in Tunisia, so an FTA would complement that because it would be mutually beneficial," Wittes explained. "Over the long term, we know that Tunisian economic health is going to come through a robust private sector that will help to cement a democratic transition. This is not an FTA that’s going to have a massive impact on the U.S. economy. It will, however, have an important impact on the Tunisian side."

Senate Foreign Relations Committee ranking Republican Richard Lugar (R-IN) says he thinks Tunisia will become a strong economic partner for the U.S.

"Most successful middle-income countries want deeper bilateral trade relationships," he said at an event on Wednesday. "Countries that undergo successful transitions often … become our best allies and trading partners."