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Bahrain - Trade and Diplomatic relations with the US

Diplomatic Relations

The Bahraini-U.S. relationship extends back to 1893 when Americans founded the first hospital in Bahrain . The first American school in Bahrain opened in 1911. Relations between the two countries strengthened after Bahrain gained its independence from the UK in 1971. Areas of diplomatic and security co-operation between the two countries include:

  • Bahrain is an important base for US naval operations in the Gulf region as it is the HQ of the US 5th fleet   
  • Bahrain was a military contributor to the Allied campaign during the First Gulf war against Iraq in 1991
  • The Bahraini government has provided support to the Palestinian cause by using its good offices in the Washington
  • Until the breakup of the USSR the US and Bahraini governments worked together to stop the spread of the Soviet Union 's influence in the region.
  • Bahrain is a clients for US weaponry, especially ships and fighter aircraft.

Currently one of the main areas of co-operation between the two countries is the fight against Terrorism. As a result Bahrain has taken a number of legal and security measures to stop the activities of militant extremist groups. The US meanwhile has offered assistance to the Bahraini government in areas such as training of its security services.  

Trade Relations with the US

With exports totalling $405 million USD to the US and imports worth $300 million USD from the US for the year 2004, Bahrain was therefore a net exporter to the US . The high price of oil is one of the main reasons behind this factor.

The culmination of the economic relations is the signing of the Free Trade Agreement between the two countries on September 14 2004. The agreement will come into effect after approval by the US congress.

Products covered by the Agreement

According to the text of the agreement 100% of bilateral trade in consumer and industrial products will become duty-free immediately upon entry into force of the Agreement. Sectors which will not have 100% tariff removal include agriculture imports from the US where only 81% of tariffs will be removed. In addition, Bahrain and the United States will provide immediate duty free access on virtually all products in their tariff schedules and will phase out tariffs on the remaining handful of products within ten years.

Service sector covered by the agreement

The FTA requires that Bahrain allows market access across its entire services industry. The Agreement uses the so-called "negative list" approach, meaning that all sectors are covered unless specifically excluded.

Key services sectors covered by the Agreement include audiovisual, express delivery, telecommunications, computer and related services, distribution, healthcare, services incidental to mining, construction, architecture and engineering. The Finance sector is also included and this sector is expected to become an important area of activity for US companies as the FTA affords them the right to establish subsidiaries, branches and joint ventures in Bahrain . The only area of the finance industry not covered immediately is the non life insurance sector. This market will join the rest of the Agreement six months after the start of the FTA.

Advantages offered by the FTA to Bahrain

The Bahraini government expects the following advantages to be gained from the FTA:

  • Increase in Bahraini exports to the US
  • Expansion in the manufacturing sector
  • Creation of new industries due to demand from the US market
  • Increase in investment from US companies in the Bahraini economy
  • Improvement efficiency in Bahraini products and services due to increased competition
  • Expansion of Bahrain 's financial sector in line with the Bahraini government's goal of making Bahrain the financial hub of the Gulf region
  • The FTA also allows Bahraini companies to offer services in the US without actually setting up operations there.

Advantages offered by the FTA to the US economy include:

  • Access to one of the Gulf region's expanding economies
  • Competitive advantage for US products gained from removal of duty and tariffs
  • Access into Bahrain 's lucrative Finance and Telecommunication market
  • Access to the growing GCC market (according to estimates intra-GCC trade doubled in 12 years from $7.53 billion in 1990 to $15.14 billion in 2002)
  • Precedent for future FTA with other regional countries

By: Meir Javedanfar - All contents of this page are protected by International Copy Right Laws ©

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