ARAB-US RELATIONS - Feb. 4 - US Trade Policy 'Isolates Muslim States'.

The Washington-based Progressive Policy Institute (PPI) issues a report saying that US trade policy risks isolating the Muslim states that are on the front line in the war on terrorism. The report warns that the Muslim World has been "the blank spot on the map of the Bush administration's trade policy". It adds: "That policy risks undermining, rather than supporting, the war on terrorism". The failing economies of many Muslim states have been repeatedly acknowledged by the White House as fertile recruiting grounds for terrorist groups. But critics say the US has done little to tackle the problem, and has been stingy with trade concessions to some of its closest allies in the war on terrorism. Pakistani FM Kursheed Kasuri said last week that "economics is the key to fighting terrorism", and criticised Washington for failing to offer greater trade concessions. (Pakistan had hoped for about $1 bn in additional sales of textiles and clothing to the US to offset the costs of the war on terrorism, but - under pressure from its own textile industry - the US granted just $143m). The PPI study says most of the large Muslim states have become increasingly isolated from the global economy over the past two decades. The Middle East's share of global foreign direct investment, for example, has fallen from about 5% in 1985 to just 1.4% in 2002; its share of global exports also fell from 13.5% to 4.6% between 1980 and 2001. Most of the causes are internal, a consequence of oil-dominated economies, high barriers to trade and investment, and political tensions that discourage regional trade. Seven of the 10 largest Arab League members, including Syria and Saudi Arabia, remain outside the WTO, as does Iran. But the study says the US trade policies have worsened the Muslim World's isolation. The five largest Muslim countries - Bangladesh, Egypt, Indonesia, Pakistan and Turkey - already face high barriers on exports to the US. These countries sell mostly light manufactured goods like clothing and fabric. That situation will worsen as the US negotiates further trade deals offering tariff-free access to the US for Latin America, Africa and Asia. At the same time, the removal of quotas on textiles will help the largest producers, such as China and India. Washington has offered few initiatives to counter this trend, the study says. Morocco is the only Muslim state to be currently in line for a free trade agreement with the US. State Secretary Colin Powell announced an initiative to encourage economic reform in the Middle East in Dec. 2002, but pledged just $29m.