DOI: http://dx.doi.org/10.5564/mjia.v0i12.93 Mongolian Journal of International Affairs No.12 2005: 40-4

Baatar, Ts

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40The Mongolian Journal of International Affairs Number 12, 2005MONGOLIA -US  TRADE  AND  ECONOMICRELATIONS  AND  COOPERATIONBy Ts. Baatar Ph.D (Mongolia)Mongolia and the USA are geographically distant countries, and so thereare obvious restraints for developing relations and cooperation on a largescale. The two countries have developed relations before they established thediplomatic relations in 1987, since  both sought to develop bilateral relationsthroughout the twentieth century.  The foundation for developing intensiveand efficient relations between the two countries was established as part of theglobalization process. Our conception space and time has changed due to thecurrent rapid progress in information technology and transport development.The broad possibilities to maintain relations and exchange information betweenthe government and private organizations of two countries have increasedrapidly.Mongolian-American partnership is based on the shared values ofdemocracy and free market economy services as important factors for thedevelopment of their relations. As a result of the political relations trade andeconomic relations and cooperation have expanded. Today a tendency appearsfor the further intensive development of relations. Businesspersons areexpanding their activities in conformity with the global market economy.Investors from the USA are interested even more in cooperation in Mongolianmining sector.Mongolia gives top priority to the relations established with the USAtaking account of the country’s weight and position in the international arena,and is a reason to consider it as one of the major pillars of the third neighborconcept.Mongolia has been actively striving for deepening the relations andcooperation with the USA in recent years, judging that the relationship has agreat important for strengthening Mongolia’s democracy and market system,as well as expanding its external relations.We can observe that the improved changes are occurring every year inour relations with the U.S. As a result, mutual trust between the two countrieshave been strengthened and Mongolia’s  position in the US foreign policyagenda has increased. In this way Mongolia considers the USA as a “strategicpartner”, and takes new steps and promotes active positions to enhance41The Mongolian Journal of International Affairs Number 12, 2005relations. There have been a number of significant visits. For instance, thePresident of the USA received the Mongolian Prime Minister (November 2001)for the first time even though the country was still in a difficult situation afterthe terrorist attack on September 11, 2001 - a clear demonstration of how theUSA values highly the democratic changes in Mongolia and in its foreignpolicy.  In January 2003 the President of Mongolia visited Washington DC andmet the President of the USA and other high-ranking officials during hisparticipation in the opening ceremony of the UN Literacy Decade campaign.The cooperation between the legislative powers of two countries has alsointensified.  Business meetings and visits of top-ranking delegations becameregular events. The increasingnumber of meetings with leaders, members andother officials from the USA Congress for exchanging opinions has also beenexpanding cooperation. During these meetings the two sides unanimously agreethat Mongolia-US relations are developing intensively, especially in the politicalsector. The importance of expanding the trade and economic cooperation hasbeen expressed by the Mongolian side. Furthermore, Mongolia strongly supportsall action of the USA against the international terrorism and promotes cooperationwithin Iraq rehabilitation operation. These activities are helping to increase ourplace in the USA foreign policy and have become one of the factors influencingimproved relations between our countries.Deputy Secretary of the State Richard Armitage paid a visit to Mongoliain the beginning of 2004. During his visit both sides discussed present relationsbetween the two countries, and made progress several issues of currentinternational relations. A joint statement on bilateral and regional cooperationbetween Mongolia and the USA was signed as a result of the meeting. Politically,the visit was very important since it was marked the first high level visit byAmerican top-ranking official since that of Secretary of State, Madeleine K.Albright in 1998. The American side has expressed its determination to strengthenand expand cooperation between the two sides in all sectors. During Armitage’svisit the Mongolian side requested an increased amount of scholarshipgrantsfrom the USA. Following the Armitage visit, the Embassy of the USA officiallyannounced that it will expend US$ 500,000 in the scholarship program.Mongolians are gratified that the USA is paying more attention to the humancapital serving as a starting point for Mongolian development by increasingtheir investment to this field. In a word, it is a clear evidence of the future driveninvestment. Human assistance has also been rendered through the US PeaceCorps which also contributes to intellectual investment. American management42The Mongolian Journal of International Affairs Number 12, 2005has also been introduced into Mongolia. The Mongolian KHAAN banknarrowly escaped bankruptcy, regained its position, and became the mostprofitable and respected in a short time, thanks to the efforts of Americanbanker Peter Morrow who manages it under contract. It is one of the visibleresults of introducing modern management into Mongolia’s banking  sector.Economic cooperationFrom the introduction of democracy and market economy into Mongolia,the USA has given strong support and today is one of the leading aid donors.TheUSA takes an active role in the annual consultative meetings of Mongolianassistance donors. At the moment almost every sector of the Mongolianeconomy is covered by American assistance and support. As the Americangovernment agency responsible for issues of the international aid, USAIDplays a dominant role in rendering economic assistance, developing bilateralcooperation and ensuring implementation of aid programs.USAID began to implement its aid programs in Mongolia in 1991 and hasprovided emergency assistance equal to US$ 10 millions. As of 1998, the Agencygave Mongolia equipment and technology worth US$ 50 millions for addressingthe urgent matters. At the time USAID programs were usually directed toemergency food assistance and health sector needs. In addition, USAID makescontributions to deepening political and economic reforms.In 2003 USAID promulgated the strategic guidelines on the cooperationfor the next five years (2004-2008).  Its main objectives are to continue supportto Mongolia’s sustainable economic development based on free marketeconomic relations and ensuring capability of governance.Also it strives to help Mongolia by providing a favorable environmentfor private investment. USAID assists an emerging market economy becauseof Mongolia’s sustainable development and social welfare depend on domesticand foreign direct investment into the private sector, as well as export-orientedtrade. Other activities run by USAID in Mongolia are dedicated to combatingcorruption, improving budget expenditure management, and providing economicopportunities in local areas. As statistics indicate, the private sector accountsfor over 80 percent of Mongolian economy and GDP is at US$ 1 billion.  Percapita GDP amounts to US$450 for a population of 2.4 million.  Americanassistance is helping to raise the living standard of the population, and toincrease per capita incomes. USA administration considers many factors in43The Mongolian Journal of International Affairs Number 12, 2005investment in Mongolia, stressing development and strengthening the marketsystemt.These supports  have resulted in the improvement of the investment andbusiness environment, reduction of the public administration bureaucracy,implementation of reform in the taxation system, continuation of privatizationof  state property, sustaining the legislative and investment environment, andensuring that the legal framework for attracting the foreign and domestic directinvestment is improved in the above sectors.The Government of Mongolia has declared at high level meetings that itwould support cooperation with USAID as before in order to expand even morethe relations and cooperation established with the USA in democracy, freemarket system, human rights, trade, investment, security, law implementation,culture, education, and other sectors.The USA also is implementing the two-way programs on technicalassistance appropriate to the development goals of Mongolia.  One such exampleis Mongolia’s eligibility for Millennium Challenge Account. The draft documentsto be introduced to MCA were sent to Millennium Challenge Corporation. Inthese documents, which were developed with active participation of the nation’srepresentatives and approved by the Government, are contained the mainobjectives and strategic goals of the suggested projects and programs. In thebeginning of this year the delegation from the Corporation visited Mongolia inorder to be acquainted with the Mongolia’s present situation and to clarify theprojects.The main four sectors included business development, the NationalCouncil of MCA selected education, health and infrastructure as the otherthree.Mongolia-US trade relationsIn recent years both Mongolia-US economic cooperation and traderelations has been progressing significantly. The USA is not only one of thefive leading investment countries in Mongolia, but also one of its large tradepartners.With regard to the legal frameworks of Mongolia-US trade relations, thetwo countries have concluded a bilateral trade agreement in 1991, an agreementon mutual protection and encouragement of investment in 1994.  More recently,(July 2004) Mongolia and the U.S. concluded an agreement on development oftrade and investment. Since 1990 more than 80 companies have been established44The Mongolian Journal of International Affairs Number 12, 2005in Mongolia with American investment and they have introduced investmentsequal to $38 millions into the economy of the country.  In the period 1996-2004American investments grew by $2.6-10.5 millions annually. In the last period,the amount of Mongolian exports increased by four times, largely consisting ofknitted and woolen production. It also is closely associated with the US exportquota on preferential tariff reductions set for Mongolian products. This quotaexpired in January 2005, and could result in a drastic decline in the amount ofMongolian exports to the USA. Thus there is a possibility that Mongolia-UStrade will decrease. Notwithstanding this reason, it is important that the USAcompensate these deficits by expanding cooperation in other directions. USAremains interested in introducing investments into Mongolia. But to succeedin competing for foreign investment, Mongolia will have to make itself moreattractive to American investors through providing Government sustainability,eliminating bureaucracy and properly adhering to international agreements andstandards. Currently, the USA is ready to make more investments in Mongolia.The following table shows how the trade of both countries has progressed inrecent years.Mongolia-US trade (1999-2004)                                   (In millions of US$)    1999    2000     2001    2002    2003       2004 (As of September) Export   78.0 130.2 144.5 165.7 142.9     113.6 Import   31.5  28.4  14.9 23.4 23.5       34.8 Source: Statistical Bulletin of Mongolia.The table shows a tendency of annual growth in our exports to USA whileimports from the USA fluctuate. As of September 2004 the combined tradeturnover increased by US$148.4 millions, or 30 percent compared to the previousyear.Over this period Mongolian exports to the USA reached US$113.6 million.up 18.2 percent compared to the previous year.The direct investment from USA tends to grow usually in the miningsector. It may be associated with the Minerals Law of Mongolia, which providesa favorable environment for the foreign investment.Negotiations for a Free Trade Agreement with the U.S. is underway. AnAgreement on Trade and Investment, a model agreement for  the FTA was45The Mongolian Journal of International Affairs Number 12, 2005concluded in July 2004. In addition, representatives are working to conclude an“Agreement on Avoidance of Double Taxation”. An FTA will be important forincreasing and diversifying export goods, expanding investment, and reducingor eliminating tariffs.Mongolia’s woolen garment exports will be reduced due to the expiringannual quota of export textiles to USA at the end of 2004.  Therefore, concludinga Free Trade Agreement with the USA remains an urgent need in order toexplore other exports, increase trade, and expand American investment.

Mongolia-US Trade and Economic Relations and Cooperation

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Mongolia-US Trade and Economic Relations and Cooperation

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