Economic slowdown persists in Near East-N. Africa-South Africa; American sales will increase as oil market recovers

Business America, August 20, 1984 by William Goodwin

After reaching all time highs in 1981 and 1982, U.S. exports to the Near East, North Africa, and south Asia, as a region, began a decline that has persisted through 1983 and into 1984. This decrease in trading activity reflects the prolonged glut in the world market for petroleum products. U.S. exports to the region totaled $21 billion in 1983. For the first five months of 1984, U.S. exports fell 14 percent compared to the same period a year ago. Despite the recent downturn, the region remains an important market for U.S. goods, one which accounts for over 10 percent of U.S. exports.

The great reduction in oil revenues, resulting from the lower price and constricted demand for crude oil in the world market, has resulted in an economic slowdown throughout the region. The oil exporting countries as well as the non-oil developing countries, which rely on economic aid from their wealthier neighbors, have had to exercise fiscal austerity in response to the economic situation. Many development projects have been scaled down and general imports have been cut back in most countries.

While the oil glut" had benefited U.S. consumers through lower prices, the glut has had a negative effect on U.S. exports to the region. Oil exports did increase in the first half of this year due to the unusually cold winter and fears of a disruption of oil from the Persian Gulf. However, prognosticators agree that the market for petroleum and petroleum products is likely to remain soft well into 1985. Following the eventual recovery of the oil market, U.S. exports will rebound sometime in 1985 or 1986. In the meantime, the financial position of the oil exporters is likely to decline.

The result of the soft world markets for oil and other primary products (such as phosphates, natural gas, etc.) has been an increasingly favorable trade balance for the United States with the region: a $4 billion trade surplus in 1983. Last year, the largest U.S. export markets in the Near East, North Africa, and South Asia, were: Saudi Arabia (our sixth largest market in the world at $7.9 billion), Egypt ($2.8 billion), Israel ($2.0 billion), and India ($1.8 billion). Other important markets include the United Arab Emirates, Kuwait, Pakistan, Iraq, Algeria, Morocco, Oman and Bahrain.

In order to take advantage of the commercial opportunities in the region, the U.S Department of Commerce is sponsoring a record number of trade missions, exhibitions, and seminars in the area in 1984-85. These promotional events are geared toward growth sectors in the region which include: petroleum, agriculture, services, high technology, and manufacturing. In U.S. exports to the Near East, North Africa, and South Asia, the commodities experiencing the greatest absolute increases over the past five years are: wheat, aircraft parts, mechanical shovels, auto parts, seed corn, pumps, air conditioners, floor coverings, electrical measuring equipment, filtering equipment, radiotelegraphic equipment, radio-navigation aids, and electrical switches. Cars and food products have experienced the greatest absolute decline in recent years.

Among the smaller states of the region, the economic and commercial relations between the United States and Jordan are especially strong. The U.S. Agency for International Development, the Export-Import Bank, and the Overseas Private Investment Corp. all have a presence in the Kingdom U.S. exports to Jordan have declined steadily since 1981 due to the general economic slowdown in the region, but future prospects are good. Growth in the economy should continue ahead of the present 5 percent annual pace. The proposed Aqaba-Iraq oil pipeline, if constructed, will benefit U.S. exporters. Jordanians have a preference for American goods and technology, but price competitiveness and prompt service are the overriding concerns. The Commerce Department is sponsoring an engineering/construction trade mission and a food processing video catalog exhibition to Jordan in February 1985, and a telecommunications trade mission in April 1985.

For the first five months of 1984, U.S. exports to Tunisia were up 45 percent over the same period in 1983. Prospects for U.S. firms seeking to penetrate the Tunisian market are bright. Export opportunities exist in foodstuffs, aircraft, and equipment for mining and drilling, irrigation, dairy, data processing, energy conservation, and construction. In addition, upcoming Commerce Department trade missions and video catalog exhibitions to Tunisia include medical/hospital, food processing, hotel/restaurant, agribusiness, and telecommunications.

Qatar is in the midst of a recession caused by drastic reductions in oil earnings, the state's sole source of revenue. As a result, U.S. exports have fallen steadily since 1981. Government spending continues on the priority areas of road and housing construction, and development of a communications system. Qatar's economy will undoubtedly rebound upon development of the North Field natural gas reserves. In anticipation of this project, a Commerce Department Petroleum Production and Exploration Trade Mission will be visiting Qatar in October 1984.