Obama: Trade Key to Middle East Engagement

The American president urges economic support and reform to consolidate the revolutions in Egypt and Tunisia.

President Barack Obama announced on Thursday that the United States would boost economic aid to those countries in the Middle East that recently ridded themselves of longtime dictatorships. In a speech that covered the wide range of Middle Eastern policy, the president recognized that economic growth was imperative to consolidating the political changes achieved by protesters in the streets.

According to Obama, a lack of economic freedom and opportunity fueled the protests in Tunisia and Egypt earlier this year where a majority of the population is under the age of thirty yet youth unemployment rates are extremely high. “Too many in the region wake up with few expectations other than making it through the day,” he said, “and perhaps the hope that their luck will change.”

Throughout the region, many young people have a solid education but closed economies leave them unable to find a job. Entrepreneurs are brimming with ideas but corruption leaves them unable to profit from them.

While modest reforms initiated by the previous Tunisian and Egyptian governments produced some improvements and enabled the very generation that took to the streets to demand political change to enjoy an eduction, the growth forecasts for these countries have been revised downward as a result of the unrest. Tourism, which is a major sector in both nations, is suffering while foreign investment has decreased. Tunisia expects a budget deficit equaling 5 percent of GDP this year while Egypt faces a 10 percent shortfall.

In order to alleviate Egypt’s fiscal predicament in the short run, the president promised to relieve it of up to $1 billion in debt and lend or guarantee another $1 billion in borrowing needed to finance infrastructure and support job creation. In the long run, however, the country will have to implement reforms to enhance entrepreneurship and trade.

“We think it’s important to focus on trade, not just aid,” said Obama, “and investment, not just assistance.”

The goal must be a model in which protectionism gives way to openness; the reigns of commerce pass from the few to the many and the economy generates jobs for the young.

American support for democracy will therefore be based on ensuring financial stability, he added, “and integrating competitive markets with each other and the global economy.”

The president called upon the International Monetary Fund and the World Bank to present plans to stabilize and modernize the Tunisian and Egyptian economies. He urged Congress to create “enterprise funds” to invest in Tunisia and Egypt, modeled on funds that supported the transitions in Eastern Europe after the collapse of the Soviet Union.

Finally, he proposed to cooperate with the European Union to further liberalize trade and refocus the European Bank for Reconstruction and Development to support the reform process across North Africa and the Middle East.

The heaviest lifting is still to be done by the future Tunisian and Egypt governments. As bureaucratic overreach and bribery hugely impede entrepreneurship and undermine the necessary legal predictability, “the corruption of elites who steal from their people; the red tape that stops an idea from becoming a business; the patronage that distributes wealth based on tribe or sect” has to end, said the president.