Click logo for home page
Item of Interest
March 11, 2004
|
|
|
Breaking
the Ties that Bind? |
|
Executive
Summary
The U.S. share of total Saudi
merchandise import dollars was 15% in 2003. Total American exports to Saudi Arabia fell 3% to U.S. $4.6
billion last year. Benchmarking
U.S. merchandise exports to other petroleum exporting countries
reveals that the United States could capture a 20% share of
total Saudi imports. Also, U.S. service providers are tackling
growing demand for cross border service exports, such as
consulting and oil field services.
Stung by negative trade fallout following 9/11, American
service providers are seeking to capture a potential U.S. $41.2
billion cross border service export opportunity over the coming
decade.
However, a quixotic legislative bill, the Saudi Arabia Accountability Act of 2003
may preempt more than joint Saudi-U.S. task force work and legal
cases presently moving through the U.S. courts system.
It may permanently break the historic ties of
opportunity, trade, travel, commerce, and culture between the
United States and Saudi Arabia.
U.S. Merchandise Exports to Saudi Arabia
U.S. merchandise exports to
global markets increased 3% between 2002 and 2003.
This welcome growth reversed 2001-2002 export declines
averaging - 6% per year. Overall,
U.S. merchandise exports to Saudi Arabia present both good news
and bad news. The
good news is that the United States exported U.S. $4.6 billion
in merchandise to Saudi Arabia in 2003, slowing total export
declines averaging 18% in each of the previous four years.
The bad news is that total U.S. exports to Saudi Arabia
nevertheless declined 4% in 2003.
Third parties
estimate that 2003 Saudi merchandise imports will total U.S. $31
billion. If this
import figure is proven correct by official data releases later
in 2004, it is a clear sign that U.S. exporters can compete and
win a share of the Saudi market.
The 2003 U.S. market share of total Saudi imports is 15%,
the same share as 2002. (See
exhibit #1)
Exhibit
#1 U.S.
Market Share of Total Saudi Imports
(Source:
U.S. Census Bureau and IRmep 2004)
ADD Other
positive news is revealed by a snapshot of the different
categories of goods exported by the United States between 1999
and 2003. Although
merchandise export category weights shifted, the United States
maintained a hold on most high value-added technology goods
categories over the period.
(See exhibit #2) Exhibit
#2 U.S.
Merchandise Export Categories to Saudi Arabia
(Source:
U.S. Census Bureau and IRmep 2004)
ADD As Saudi Arabia continues to
modernize plant and equipment and increase levels of
“Saudization,” machinery imports have risen from 15% of
total U.S. exports in 1999 to 24% in 2003.
Strong Saudi distributors and automotive dealerships have
contributed to increasing vehicle and parts imports from
America. While
household goods and apparel exports have remained essentially
unchanged, Saudi manufacturers have demanded increasing
quantities of raw materials including metal, plastic and wood
inputs. The ongoing
transformation of Saudi Arabia’s defense forces to face new
threats have also contributed to a modest increase in material
purchases between 2001 to 2003.While U.S. IT and
telecommunications equipment manufacturer shares have remained
essentially flat, U.S. aircraft exporters have suffered a
tremendous decline. Aircraft
and parts exports, which accounted for 26% of total U.S. exports
to Saudi Arabia in 1999, dwindled to 5% in 2003 as passenger
ticket sales and air freight declined after 9/11.
U.S. corporations viewing the
overall market speculate on what overall market share goal U.S.
merchandise exporters should set for Saudi Arabia. Is 15% of the total import market reasonable?
The answer, happily, is no.
The U.S. market share for countries exporting more than
U.S. $1 billion in petroleum such as Malaysia, Venezuela, and
Trinidad & Tobago in 1998-2002 averaged 19.05%.
For Saudi Arabia, a country with a history of much
greater joint cooperation, a minimum share of 20% is a realistic
goal. This would
have added an extra billion dollars in exports in each of the
past three years.
The
Rise of U.S. Service Exports
One promising growth area is
cross border service exports.
In each of the past four years, U.S. world service
exports have displaced merchandise exports by 1%.
In 1998, services represented 27% of total U.S. exports
and merchandise 73%. By
2003, services had steadily grown to 30% while merchandise fell
to 70%.
Although recent U.S. service export data for Saudi Arabia is not yet available, U.S. service exports over a ten year period beginning in 2001 grew on average 5.31% per year reaching U.S. $1.79 billion in 2001. These exports have the potential to reach $41.8 billion over the coming decade. If we apply the US Department of Commerce "Rule of Thumb" calculation of 17,000 jobs per billion dollars of US exports, the economic stake the US holds in Saudi imports is stunning. US jobs created by exports to Saudi Arabia total 124,000 in 2004 and are forecast to grow to 177,000 by 2012. Opportunities to participate in Saudi Arabia’s strategic economic development projects are increasing (See Exhibit #3).
ADD Saudi Arabia has made important
moves to increase technical assistance close to home.
In August of 2003, a joint commission of Morocco and
Saudi Arabia announced plans to create a free trade zone, export
Saudi products to the Moroccan market and import Moroccan
products. Saudi
Arabia is also tapping Morocco for expertise and assistance to
unlock more of its own domestic tourism revenues.
However, Morocco, and most other countries, do not yet
present any dire threat to U.S. expertise in upstream energy
development, systems integration, and consulting for business
process improvement and defense transformation in head to head
competition. Unfortunately, America may
effectively be cutting itself out of these joint Saudi-U.S.
projects as an inky fog alleging Saudi support for terrorism and
shadows of the Palestinian conflict descend upon the
U.S. Senate.
The
Saudi Arabia Accountability Act of 2003
The Saudi
Arabia Accountability Act of 2003 is one of the most
disturbing pieces of legislation introduced last year.
Introduced in the House by the honorable Mr. Specter (R-PA), Mr.
Schumer (D-NY), Mr. Graham (R-SC), Mr. Wyden (D-OR), Ms. Collins
(R-ME),
Mr. Graham (D-FL), and Mr. Bayh (D-IN), the bill weaves together a
group of thinly documented allegations which could inflict
collective punishment on future Saudi-U.S. relations.
The bill relies heavily on the
reputation of the Middle East Media Research Institute (MEMRI),
a selective news retrieval organization headed by former Israeli
intelligence operative Colonel Yigal Carmen, funded by three
anonymous donors providing 51% of MEMRI’s funds (See
IRmep Policy Brief, America’s Middle East Think Tanks: What
Went Wrong?) and closely associated with US
Neoconservatives. MEMRI
scours texts in Arabic to find the negative and damning passages
to translate and later present out of context. A MEMRI report
(with no peer review) alleges Saudi sponsored organizations
funneled over U.S. $4 billion to finance the Palestinian Intifada
that began in September 2000.
Newspaper clippings quoted as evidence in the bill
speculate on Saudi support for Hamas “citing United States and
Israeli sources.”
Although the alleged crimes in
the bill are unusually sketchy and vague, the sanctions are not.
If enacted into law, the bill would restrict the travel
of Saudi diplomats to a radius of 25 miles around a limited
number of U.S. consulates, prohibit exports of many U.S. defense
and other commercial manufactured wares, “to secure full Saudi
cooperation.”
Many American entrepreneurs and legislators see this bill as premature at best. While many of the issues the legislation seeks to confront are currently working their way through the U.S. court system and joint Saudi-U.S. task forces, this bill seeks to “pre-empt” their results and create “facts on the law books.”
The
Future of Saudi-U.S. Trade
American executives and other
stakeholders are working diligently to repair U.S.-Saudi ties.
9/11 was a terrible day that must never be repeated.
However, the Saudi Arabia Accountability Act of 2003 now
looms as a final aftershock that will break what remaining
cultural and commercial ties 19 terrorists could not.
Instead of accomplishing the Accountability Act's goal of
preemptive attack on the relationship between Washington and
Riyadh, we should be creating the environment for expanded
cooperation, communication, exports and the creation of US jobs
and a healthier economy. Americans who reject vitriol, haste and simple solutions
to complex problems are hoping common sense prevails where this
bill will not.
Also:
Saudi
Accountability or US Job Elimination Act?
IRmep Policy Brief, March 1, 2004
Preceding
his tenure at Yankee Group, Smith taught graduate level finance and
marketing courses for five years at Colombia's most prestigious business
school, the Colegio de Estudios Superiores de Adminstración (CESA). He
coordinated executive seminars, exchanges, simulations and programs
between CESA and Harvard, Berkeley, and other Smith
received his Master's degree in International Management from the ABOUT IRMEP IRmep produces research,
publications, commentary, focused policymaker educational events
and research tour programs to the Middle East. The heart of the
IRmep's work is academically, not ideologically, driven research.
The Institute's network of analysts is composed of experienced
university research academics with reviewers in the international
business and diplomatic communities. The majority
of IRmep's base financial support derives from the donations of
concerned individuals who are alarmed by the current direction and
authors of US regional policies. IRmep also receives industry
support from corporations that have faced increasing barriers in
developing their Middle East consumer and enterprise markets in
the current policy environment. To access
current research and learn more about America's real interests in
the Middle East, visit http://www.IRmep.org
write us at info@IRmep.org
or call (202) 342-REAL (7325)
ABOUT THE AUTHOR
Grant
F. Smith
is the Director of the Institute for
Research: Middle Eastern Policy (IRMEP) in
The Institute for Research Middle Eastern Policy (IRmep) is a
Washington D.C. based think tank working to research, define,
communicate and promote America's real interests in the Middle
East. Founded in 2002, the Institute became an independent
non-profit IRS recognized tax-exempt organization in 2003. IRmep
promotes the peaceful settlement of regional and international
disputes by returning the U.S. to a higher foreign policy role:
that of a just, secular, and development oriented regional
influence.
| Related Material |
Saudi-American Forum
eMail: info@Saudi-American-Forum.org
Web: http://www.Saudi-American-Forum.org
© 2004
Users of the The Saudi-American Forum are assumed to have read and agreed to our
terms
and conditions and legal
disclaimer contained on the SUSRIS.org Web site.