The Middle East Policy Council, based in Washington, DC, does many things to advance its mission of contributing "to American understanding of the political, economic and cultural issues that affect U.S. policy in the Middle East." Among them is organizing a series of panel discussions, the Capitol Hill forums, that bring together distinguished specialists to examine issues of interest to policymakers. On April 7, 2006 the 43rd forum in this series tackled the question: "How can the U.S. Re-open for Business to the Arab World?"  MEPC President Chas Freeman moderated the panel. 

Today we are pleased to bring you the third installment from the panel, the presentation by Dr. James Edward Lewis, a senior fellow at the Center for Strategic and International Studies.  We thank the MEPC for allowing us to share it with you. The remainder of presentations will be provided over the next several days.

If you agree that this forum series is important to improving the relationship between the United States and the Arab world we suggest you visit the MEPC web site to learn how you can support this important organization. [ http://www.mepc.org/about/support.asp  ]

[For information on the next forum in the MEPC Capitol Hill Conference Series -- "Is There a Responsible Exit from the Strategic Ambush in Iraq? (April 21) -- contact MEPC/Maria Arruda (202) 296-6767 or e-mail: [email protected]  ]

How Can the U.S. Re-Open for Business to the Arab World?
MEPC Capitol Hill Forum
Part 3 - Dr. James Andrew Lewis

Introduction by Ambassador Chas Freeman:  We have in fact four excellent panelists. Monty Graham is a senior fellow at the Institute for International Economics here in Washington, and also an adjunct professor at Columbia. Jim Lewis, he's here at CSIS. And again, Jim, thank you for this use of the facilities. And his specialty really is precisely the one that we are talking about - the balance between homeland security issues and economics, which is a growing field, I imagine. And I look forward to his remarks. Don De Marino probably needs no introduction to people knowledgeable about the Middle East. Don has been involved over many years with business in this part of the world, and is currently chairman of the National U.S.-Arab Chamber of Commerce. And Bill Reinsch, finally, who I very much welcome here, is the president of the National Foreign Trade Council, which is the voice of the business community on many of these issues, that is, political skullduggery and malevolent interference with business are what Bill fights everyday. With these few words, I'd like to ask Monty to come up and lead off..

[Dr. Graham's presentation]

Let me invite Jim Lewis to the podium. 

Dr. James Andrew Lewis: Thank you, and I'm happy to be here. You're going to hear a lot of common themes today, but I'm also probably going to say a few things a little bit different, so let me start. 

The first is, you know, the Dubai Ports episode was unexpected and it was unfortunate, but we want to put the effect on investment in the U.S. on the larger global context. One of the concerns we ought to have is Congress seems to be continually adding structural impediments to the ability of foreigners to invest in the U.S., but we don't want to lose sight of a couple of key factors. First, one way to think about this is of the low-risk economies, and the mature, developed economies. The U.S. is the fastest growing. And of the fast-growing economies -- economies like China and India -- the U.S. is the lowest risk of the fast-growing economies. So from that perspective, this is still going to be an attractive market for people to invest in, and that hasn't changed. 

Second, think about the example of Argentina - largest default in the history of the universe, and a couple of years later investors are flocking back. It's not a perfect example but there is a lot of money in the system and the U.S. is going to remain attractive, despite the efforts of our Congress. 

Now, the immediate effect of the Dubai incident, the financial implications are to devalue U.S. assets, including the dollar, without any benefit to security. And if you're curious we can go through the mechanism, but the effect of this is to reduce the value of things American. Fewer foreigners will be willing to bid on them. This isn't helpful, and it's probably not what Congress expected. So I started out by asking myself, why would you do something that's essentially irrational? And I think the answer to that would be politics, as we've heard. Dubai was very much driven by electoral politics, but there's two issues that shaped the discussion. Both of these issues involved negative perceptions held by Americans. 

The first is the perception of globalization. This isn't a problem that's unique to the U.S. We don't have students burning cars in the streets of Washington, but it's a problem that many countries share and it's a problem that shapes American thinking. The ironic thing about this is globalization is the result of long-standing U.S. foreign policies. This is the world we have sought to build, right? To promote free trade, the rule of law, openness, self-determination, democratic rule. These go back more than a century for the United States, and some parts of our plan have worked well - the WTO, the IMF. Other parts - the U.N. - perhaps haven't worked as well as we might have hoped. But overall we've benefited from globalization. 

One thing to note, though, is every few decades there is a periodic reaction in America to globalization. And you can see it in the '70s, you can see it in the '50s, you can see it in the period between the world wars where people say, gosh, this is the wrong thing to do; we are losing more than we are getting out of this. And the arguments that openness and integration actually increase our security and wealth, they're kind of counter-intuitive. When you tell people a more open, engaged America makes us safer and wealthier, it doesn't follow a very simple model, and so it's unappealing to many people. Part of that is because openness creates a very complex set of risks. It's hard to measure these risks, it's hard to manage them, and it's always tempting to take the easy solution. Of course, for Congress, this temptation is almost irresistible. So we've got this problem with that perception of globalization. 

I'm also worried about a larger problem that troubles me more. It's the question of competence, as you've heard, and perhaps generational change. What if the U.S. is no longer capable of helping to direct the system that it built? The current leadership, really on both sides of the aisle, doesn't inspire confidence. And of course you've seen the performance of the Republican side on the Dubai Ports issue. I note - and Bill Reinsch has heard me complain about this several times - on the Democratic side occasionally I get things from Democrats explaining how CAFTA is a threat to the American worker. You know, people are questioning the ability of our current political leadership to manage these complex risks and this complex process of international engagement. You know, it's not clear if this is just a temporary phase, if this is just one of these periodic reactions, or if it's a larger trend, but it is very troubling for the U.S. 

The second perception that we ought to think about, though, is the U.S. perception of the Middle East. And sometimes you hear about the Arab street, and you can read Zogby polls about how Arab views of the U.S. are declining. Well, this was the American street, and Dubai ran directly into the American street. It was unfortunate that a perfectly benign business arrangement came so close to the Danish cartoon episode because this only reinforced the attitude, and the American street, if you will, does not trust the Middle East. 

I was a little surprised by this because I was arguing very strongly that the Dubai proposal posed no risk to the U.S., and should go through. The reaction you got from a range of people was very surprising and very strong. And our politicians of course seized on this distrust - this very real distrust - to gain electoral advantage and to bash the administration. It's an unsophisticated feeling. It's a perception that doesn't take into account the full range of the situation and of the region, but it is sort of a fundamental belief, and it's going to be very difficult to change. 

So I think these two perceptions shape the political environment, and they make the environment for openness unappealing. My question is how do we change that? How do we -- in response to the question that prompted this session -- how does the U.S. open for business in the Arab world? 

You know, I think it's easier to affect the first perception, the fear of globalization. This is a recurring internal debate, and because it's internal and because globalization is ultimately in the United States' self-interest, and because we've won it two or three times before, I'm moderately optimistic that we can win it again, all the things said about the current political leadership on both sides. At the end of the day I think Americans will recover and decide they can live with openness. 

Affecting the second perception -- the perception of the Middle East -- is going to be more difficult, in part because it's not purely an internal issue. It will require different actions, external actions, changes in the Middle East, but for the near term I would say focus on winning the debate on globalization, getting people to think about why this is in America's interest to be open, and that should help us get back on course. 

Thanks. 

Ambassador Freeman: Thank you. Wonderfully brief, and some, I think, very sage and interesting observations, which we'll take to heart. I can't resist your mention of the second objective, which I agree probably is the harder one affecting perceptions of the Middle East. At the very moment when perceptions of the Middle East are worst, the level of effort by people in the Middle East to educate Americans about their realities has never been less. And unfortunately it is a common characteristic of Arab culture that when confronted with difficulties, people fade away rather than come forward and join the battle. The typical response is to disappear. And this is in fact what some American businesses are now experiencing. They're just not even contacted or aware of opportunities. Rather than people complaining and making a loud noise, they just don't show up. So this is ironic and I think unfortunate because this is a moment when greater rather than lesser efforts ought to be made. 

James Andrew Lewis is a senior fellow and director of the CSIS Technology and Public Policy program. Before joining CSIS, he was a career diplomat who worked on a range of national security issues during his federal service. Lewis's extensive diplomatic and regulatory experience includes negotiations on military basing in Southeast Asia, the Cambodia Peace Process, the Five Power Talks on Arms Transfer Restraint, the Wassenaar Arrangement, and several bilateral agreements on security and technology. Lewis was the head of delegation, Wassenaar Experts Group for advanced civil and military technologies, and a political adviser to U.S. Southern Command (for Just Cause), to U.S. Central Command (for Desert Shield), and to the U.S. Central American Task Force. He was responsible for the 1993 redrafting of the International Traffic in Arms Regulations, the 1997 regulations implementing the Wassenaar Agreement, numerous regulations on high-performance computing and satellites, and the 1999 and 2000 regulations liberalizing U.S. controls on encryption products. Since coming to CSIS, he has authored numerous publications, including Globalization and National Security (2004), Spectrum Management for the 21st Century (2003), Perils and Prospects for Internet Self-Regulation (2002), Assessing the Risk of Cyber Terrorism, Cyber War, and Other Cyber Threats (2002), Strengthening Law Enforcement Capabilities for Counterterrorism (2001), Preserving America's Strength in Satellite Technology (2001), and China as a Military Space Competitor (forthcoming). His current research involves digital identity, innovation, military space, and China's information technology industry. In 2004, Lewis was elected the first chairman of the Electronic Authentication Partnership, an association of companies, nonprofits, and government organizations that develops rules for federated authentication. He received his Ph.D. from the University of Chicago in 1984.  (Source: CSIS.org)

• Prospects for Business in the Arab World - Panelists Examine Post-'DPW' Environment - By Patrick W. Ryan - SUSRIS IOI - Apr. 13, 2006

How Can the U.S. Re-Open for Business to the Arab World? - MEPC Capitol Hill Forum

• Part 1 - Ambassador Chas Freeman - President, Middle East Policy Council

• Part 2 - Dr. Edward M. Graham, Senior Fellow, Institute for International Economics (as of 4.15)

• Part 3 - James Andrew Lewis, Senior Fellow, Center for Strategic and International Studies (as of 4.16)

• Part 4 - Don N. De Marino, Chairman, National US-Arab Chamber of Commerce (as of 4.17)

• Part 5 - William A. Reinsch, President, National Foreign Trade Council (as of 4.18)

• Part 6 - Panel Questions and Answers (as of 4.19)

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• Discuss This Issue on SUSRIS 

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