The US President Mr George W. Bush has called for the creation of a US-Middle East free trade area within ten years.
Such an arrangement would reward nations that pursue broad political and economic reforms, he said.
"I propose the establishment of a US-Middle East free trade area within a decade to bring the Middle East into an expanding circle of opportunity," Mr Bush said in a speech at the University of South Carolina's graduation ceremony.
He said that his proposal would "bring the Middle East into an expanding circle of opportunity," drain the swamps that breed extremist violence, and pave the way for creating a Palestinian state at peace with Israel by 2005.
"If the Palestinian people take concrete steps to crack down on terror, continue on a path of peace, reform and democracy, they and all the world will see the flag of Palestine raised over a free and independent nation."
The United States already has free trade deals with Israel and Jordan, and is working to finalize, by year's end, an accord with Morocco.
With US Secretary of State Colin Powell bound for the Middle East, Mr Bush said that all parties to the ailing peace process must assume responsibilities to build on the so-called "road-map" to peace the US released to all sides on April 30th.
"Israel must take tangible steps now to ease the suffering of Palestinians and to show respect for their dignity. And as progress is made toward peace, Israel must stop settlement activity in the occupied territories.
"Arab nations must fight terror in all forms and recognize and state the obvious once and for all: Israel has a right to exist as a Jewish state at peace with its neighbors," said Mr Bush.
The US leader, at times faulted for not investing more time and energy in the peace process, said Mr Powell carried "my personal commitment: America will work without tiring to achieve two states, Israel and Palestine, living side-by-side in security in prosperity and in peace."
AFP