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US-Morocco Free Trade Agreement: 20 Years On, Economic Gains Fall Short of Expectations
Two decades after the United States and Morocco inked their Free Trade Agreement (FTA), the economic landscape presents a mixed picture. While bilateral trade has surged from $1.3 billion in 2006 to $5.5 billion in 2023, the anticipated economic windfall for Morocco remains elusive, according to a recent analysis by the Washington Institute for Near East Policy.
The report, authored by Sabina Henneberg, a Soref Fellow at the institute, highlights a persistent trade imbalance that has grown over time. Morocco's trade deficit with the US has nearly doubled, expanding from under $1 billion to approximately $1.8 billion during the agreement's lifespan.
"A persistent even growing trade imbalance indicates that the [FTA's] full economic potential is not being fully realized," Henneberg notes in her assessment.
Morocco's real GDP has seen significant growth, more than doubling from $63 billion in 2005 to $131 billion in 2022. However, this economic expansion appears to be driven by factors largely independent of the FTA, such as favorable agricultural conditions and Morocco's emergence as a "nearshoring" manufacturing hub.
Traditional Moroccan exports to the US have experienced only modest growth under the FTA. Textiles, for instance, increased their share of Moroccan exports to the US from 8% in 2008 to 12% in 2021. In contrast, fertilizer exports witnessed a dramatic rise, jumping from 7% to 23% of total exports during the same period.
The analysis suggests that the trade pact has served political and strategic interests more effectively than economic ones. It has functioned as a mechanism for the US to reward Morocco's counterterrorism efforts and maintain robust ties amid political shifts in the region.
"On balance, the [FTA] appears to have served political and strategic interests more than economic ones," Henneberg observes. She further posits that "given the strategic sectors Morocco has chosen to develop, the agreement may never truly fulfill its potential."
Despite these challenges, the report argues that the US can leverage the agreement to boost Morocco's growth. Recommendations include supporting job-creating industries like light manufacturing, identifying investments that spur environmental and labor reforms, and expanding English-language training within Morocco.
The analysis also points to ongoing concerns about the heavy role of the state in some Moroccan industries and an education system that is not yet producing a high-skilled workforce. It contends that encouraging further market-opening reforms through the FTA framework remains a work in progress.
As the US-Morocco Free Trade Agreement enters its third decade, it stands as a testament to the complex interplay between economic ambitions and geopolitical realities. While the pact has fallen short of its initial economic promises, it continues to serve as a foundation for strategic cooperation between the two nations.