Cutting Off Aid to Arab World Hurts U.S. Business

An Egyptian protester holds his national flag in front of the parliament as riot police block the entrance to the building to
An Egyptian protester holds his national flag in front of the parliament as riot police block the entrance to the building to prevent members of the recently-scrapped legistlature from entering in Cairo on June 19, 2012. The Supreme Council of the Armed Forces (SCAF) has issued a constitutional declaration claiming legislative power after a constitutional court ruling ordered parliament dissolved, a move seen as the ruling military's bid to grab new powers. AFP PHOTO / KHALED DESOUKI (Photo credit should read KHALED DESOUKI/AFP/GettyImages)

Congressmen called for cutting aid to Libya and Egypt. If the cry to cut aid had not erupted due to such tragic circumstances, this would be laughable since just last year, Congressman Dreier called for an Free Trade Agreement with Egypt to increase good will. As usual, I got nervous about Congressional threats to cut off aid as a rebuke for negativity in the Arab world. It looked like punishment would be meted out against the whole classroom, and not just against the misbehaved (okay, "degenerate") kids.

At first glance, it would seem pretty reasonable for a government (like ours) to take a step back from aid pledges to other governments (like Egypt's or Libya's) when an international incident involves American deaths. The U.S. prides itself on taking action. Remember when we launched strikes against Sudan and Afghanistan in response to the 1998 Tanzania and Kenyan US embassy bombings? Aside from the 12 American deaths, over 5,000 were injured. Our response involved a lot of firepower. But Al Qaeda got the message -- I think.

At second glance, we could simply consider the taxpayer's perspective. We should not be "spending money that we don't have" in other countries, as pundit Mike Cafferty asserts. In February we heard this before when American NGOs faced trouble in Egypt. Political rhetoric called for halting aid to punish Egypt for imprisoning Americans.

However, discontinuing aid might not make pragmatic sense when considering all of our American interests: military, commercial, and agricultural.

"Cutting off U.S. aid to Egypt is an empty threat," responded a more seasoned analyst, Hala Arafa, who talked me down from my "worry ledge." Arafa is a retired Program Review Analyst from the International Bureau of Broadcasting. She was used to hearing this about Egypt, and convinced me that the threat is political posturing. Economically speaking, the U.S. would not gain from discontinuing aid to Egypt -- or any other Arab country, for that matter.

Egypt's ambassador to the U.S., Mohammed Tawfiq agrees, as he emphasizes the reinforcing role of U.S. military AND economic aid to Egypt, "This aid serves the interests of America in the region...will achieve the strategic interests of the United States." Both American and Egyptian reviews of the U.S.-Egypt aid relationship draw similar conclusions.

A closer look at the stakeholders explains why. Our American stakeholders range from defense business to farmers.

The military component of U.S. aid to Egypt provides economic benefits for the larger military industrial complex. American defense companies make up the first group of those who would be adversely affected. For example, look at Lockheed Martin, which has relied on Egypt as a regular customer. Another example is General Dynamics, which signed a $395 million contract in 2011 -- despite our uneasiness with Egypt's Supreme Council of the Armed Forces. Non defense companies, like Chrysler and Honeywell, also benefit from the aid deal. Consequently, many U.S. jobs depend on the aid agreement.

The third American group that has a stake include American federal employees in the Department of Defense, Department of State, U.S. Agency for International Development, Department of Commerce, and the Department of Agriculture. Yes, the Department of Agriculture.

Aside from military aid, most of the economic aid the U.S. provides dedicates a large amount towards agricultural export of U.S. goods to Egypt, like wheat and corn. American farmers make up the fourth group of our American stakeholders who would be negatively affected if the aid relationship disappeared. Ironically, Egypt's economists know this and question why non-military aid continues to flow into Egyptian programs that have nothing to do with poverty alleviation. Remember, Egypt ranks at 113 out of 187 countries on the Human Development Index. Egypt's development is below Mexico and Iran. Unfortunately, since the Arab Spring, Egypt dropped in its HDI ranking due to the falling standards of living that unions and other civil society groups witnessed.

Also, because of our friendly aid agreement, the U.S. benefits by priority access to Suez Canal. For example, U.S. Navy warships get "expedited processing" through the Suez Canal.

Consider the following:

1) The above weapons keep the American military industrial complex going. 2) Several Government Accountability Office reports, dating back to 1981, show that the economic aid (and recently another GAO report from 2006, according to GAO-06-437 ) hardly makes an impact. 3) The threat of suspending aid is repeated at least once, if not twice every year, and it never materializes.

Adding up these three considerations, one cannot help but wonder out loud if this is an empty threat. And if it is applicable to other Arab countries receiving aid.

The Camp David Accords pretty much protect Egypt from the fate of losing U.S. aid, Arafa reminded me. But what about Libya? There's no such "gentleman's agreement" that applies to Libya. We just normalized relations with Libya this century.

In the180-degree flip from cozy FTA discussions to angry threats, I cannot help but wonder if the Congressmen expressing outrage saw the reports from their own legislative analysis regarding the U.S. philosophy on aid to the Middle East. I am specifically referencing the 2010 Congressional report that opened with, "U.S. aid policy has gradually evolved from a focus on preventing Soviet influence from gaining a foothold in the region... to strengthening Israel's military and economy and using foreign aid as an incentive to foster peace agreements between countries in the region." In a nutshell, the aid to Egypt, Libya, Tunisia -- and even non-Arab Spring countries, like Jordan -- must continue as long as Israel's security is in jeopardy.

Building on the theme of regional security, let us look beyond the traditional military understanding. Security also means socio-economic discontent. Other Arab countries, like Syria, Tunisia, Jordan, and Libya, also dropped in HDI since the Arab Spring protests started in 2011. Aside from Syria, they have historically received U.S. aid. If we disrupt this historical trend, then we'd better have a backup plan that meets the above goals since we have already grown dependent on Arab governments' business.