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Wednesday, April 30

U.S. exporters look to rekindle '80s market

By Chuck Raasch | GNS

WASHINGTON - Fifteen years ago, Wisconsin livestock dealer Bob Carey sold 6,000 dairy heifers to Iraq. Now that the war is over and Saddam Hussein is out, Carey would like to get back in.

``I look forward to it opening up,'' said Carey, who contacted a business partner in Florida last week about rekindling Iraqi business. ``It may take a year or two, but I think we might be shipping a lot to them.''

But while exporters like Carey are dusting off old Iraq-related contacts in the U.S. government and abroad, postwar turmoil and other changes make it a challenging market for U.S. companies. Some reasons:

- Increased competition. U.S. wheat and rice growers shipped up to $1 billion a year in grain sales to Iraq in the late 1980s. Most of it was heavily subsidized by U.S. taxpayers, aimed at a country whose climate forces it to import up to three-fourths of its food. But other continents have stepped into the breach since then, most notably Australia on wheat and Asia on rice.

``How do you sell?'' in the new Iraq, asked Jim Willis, president of the U.S. Rice Producers Association. ``How do you get to the developing market?''

- Iraq's infrastructure problems and huge international debts and compensation claims, estimated by the Center for Strategic and International Studies at $383 billion, are major obstacles. Some experts believe it will take $5 billion to $10 billion just to upgrade Iraq's oil industry from years of neglect.

- The free enterprise system has withered under Saddam. The United Nations estimates that 90 percent of Iraq's people have been dependent upon government food handouts through the oil-for-food-program set up under the United Nations' economic embargo after the Persian Gulf War in 1991. The program was set up to try to allow Iraq to sell limited amounts of oil for humanitarian assistance such as food and medicine.

``You have to let the process develop,'' said Willis, who helped negotiate rice sales to Iraq in the '80s. ``For example, the former Soviet Union republics. They were under a dictatorship for a long time. Even though they tried to create a free democracy, a free enterprise system, they didn't know how.''

- Iraq's new government must not only re-establish trade-friendly bureaucracies, it must set up a legal system that can enforce contracts.

Still, Iraq is a rarity, far different from other recent war-torn nations like Afghanistan and Somalia. Though still viewed as a developing nation, Iraq's population of about 23 million is better educated and the country has a deep well of wealth in a known reserve of 100 billion barrels of oil.

``I think the forgiveness and the forbearance of the international community will be critical'' on lessening Iraq's debt load, said Bart S. Fisher, an international trade lawyer and consultant to the 10-month-old U.S.-Iraq Business Council. ``Basically, the international community has to give Iraq breathing space to grow, and I think they will.''

Fisher, who helped negotiate U.S. business deals with Iraq in the 1980s, predicted it would be about a year before outside corporations would begin doing big business in Iraq. He said he sees the greatest potential for U.S. agriculture, insurance and telecommunications. Some traders may be willing to engage in debt for equity swaps, Fisher said.

``I see a lot of jockeying among countries,'' Fisher said. ``Turkish companies, Japanese companies. There is excitement about the possibilities that place offers.''

Fisher knows the region's trading risks. When Iraq invaded Kuwait in 1990, he represented a company that was filling a barge in Houston with rice for shipment to Iraq. When the United States slapped a trade embargo on Iraq, it took Fisher eight months to divert the sale to Turkey.

Carey, the Wisconsin livestock dealer, had a similar experience. He had a pending sale of another 10,000 Holsteins that got quashed by the 1990 embargo. His business had been truly multinational. Air France shipped the original 6,000 heifers in a fleet of 747s.

He doesn't know what became of them after the first Persian Gulf War. Carey can't get in touch with contacts in Iraq, and for weeks he vainly searched newspaper and television coverage of the war in Iraq for any evidence of the distinctly black-and-white Holsteins.

When he visited Iraq in the 1980s, Carey said he was impressed with the Iraqis' agricultural prowess. The young cows went to an irrigated 240,000-acre state farm between Kut and Nasiriyah.

``They had beautiful corn and beautiful alfalfa that was every bit as good as we grow here in Wisconsin,'' Carey said.

Willis, the rice association president, said that by the end of the 1980s, Iraq and U.S. rice industry officials had trade missions at least every other month. Iraqis traveled extensively here to research packaging and nutrition. Willis helped Iraqi nutritionists develop better ways to freeze rice after the Americans discovered many Iraqis owned large deep freezers.

The U.S. rice industry hopes it has an ace in the hole in re-establishing an Iraqi market. The southern long grain rice grown in Arkansas, Texas and other states is especially fit for traditional Iraqi dishes.

``It is a harder cooking, drier rice than Asian rice,'' Willis said. ``Now that they have had Asian rice for some time now, have they developed a taste for it? I don't know.''

As part of its postwar aid package, the U.S. Agency for International Development has shipped rice to Iraq over the past month. But it amounts to only about a tenth of the 350,000 metric tons that was sold there in some years in the late 1980s.

When the aid pipeline inevitably gives way to more normal commerce, Willis said, ``We have to find out ... who's in charge? We have to go back and build a market.''