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US-Saudi Arabia Trade Relations: Establishing Alliance On A Lot of Economic Concerns
How The Alliance Began

Often referred to as the Kingdom of Saudi Arabia (KSA), Saudi Arabia is the largest Middle Eastern country. In fact, it occupies four-fifths of the Arabian Peninsula. The contributions of petroleum to its prospering economy was not discovered until 1936. Before the said period, the business focused on tourism with the pilgrims visiting Mecca and Medina. The primary crop which was regarded back then was the dates.

Up to now, Saudi Arabia is still on the top ranks when it comes to production of dates though oil is number one in its economy. In its quest to establish an industrial state, the government utilized its earnings from petroleum in creating infrastructures in the country. Its labor force is characterized to be capital-intensive rather than labor-intensive. This is due to a very small size of manpower. To support the requirements for manual contribution in production, several overseas workers are also open to serve the industries of Saudi Arabia.

Crude oil and other petroleum products make up about 92% of Saudi's exports to other foreign trade partners. Back in 1990, the country significantly produced 5.5 million barrels of oil a day. Now, the country has achieved 100% share in the Arabian-American Oil Company (ARAMCO). Its industrial centers located in the Persian Gulf and Yanbu are powered by natural gas piped in from the oil fields. Other essential industries include oil refining, fertilizers, petrochemicals, iron and steel, cement, processed foodstuffs and electrical equipment.

Since Saudi Arabia is located on a dessert, there is lack of water supply. Despite this fact, the government pushed efforts to reduce dependence on importation of foods by financing the agricultural sector. These led to raising the standards of living even in the rural areas.

The United States considers its friendship with Saudi Arabia very important. This is because of the latter's possession of the world's largest oil reserves. The friendship started to flourish when the US established its own US embassy in Jeddah and a US consulate in Drahran in 1944. This have strengthened the diplomatic ties which actually began in as early as 1933. Both nations focused on regional security, importation and exportation of oil and sustainable development.

Major Exports and Imports between Saudi Arabia and US

Obviously, Saudi Arabia's most regarded exports to other countries in world trade are petroleum and petroleum products. Its imports from other trading partners include machinery and equipment, foodstuffs, textiles, motor, vehicles and chemicals. Its major export partners are the United States, Japan, South Korea, China, Singapore and Taiwan while its major suppliers are US, Japan, Germany, China and the United Kingdom.

For the ten-month period ending October 2008, US exports to Saudi Arabia amounted to $9.76 billion whereas the imports from the latter to the former amounted to $49.56 billion. The discrepancy is very high because of the large contribution of crude to the total. The following figures for 2007 speak about the trade balance between these two nations:

  • Arabian Exports to US. For the year 2007, total exports of Saudi Arabia to US went as high as $35.63 billion. Topping the list of commodities was crude which makes up 94.95% of the year's total at an amount of $33.83 billion. Other products on top of the list were: other petroleum products; liquefied petroleum gas; industrial organic chemicals; fertilizers, pesticides and insecticides; fuel oil; US goods returned and reimports; other precious metals; plastic materials; and finished textile industrial supplies. The last goods made sales of $18.23 million which is .51% of the year's total.
  • Arabian Imports from US. The goods coming from US sold in the Arabian market may not have gained outstanding sales compared to the exports of the latter to the former. However, with 2007's total of $10.40 billion, the products are commendable as well. Topping the list under this category were new and used passenger cars which made an income of $2.13 billion equivalent to 20.48% of the year's earnings. Other commodities on the list were: industrial engines; drilling and oilfield equipment; other industrial machines; generators and accessories; electric apparatus; other chemicals; miscellaneous domestic exports and special transactions; excavating machinery; and civilian aircraft. Civilian aircraft made a fair share in the market with total sales estimated at $173.85 million which is equivalent to 1.67% of 2007's year-end total.
  • Fastest-Growing US Exports to Saudi Arabia. With the data collated by the US Census Bureau, remarkable goods from US sold in the Arabian market were noted for 2007 as compared to what it made in 2006. Leading the list of the many products along this line was nonmonetary gold which made total sales of $20.34 million with an excellent increase of 678,100% from 2006. Other products on this list were: soybeans; bodies and chassis for passenger cars; gem diamonds; and wheat. Wheat surprisingly made an increase of 950% than what it made in 2006 even with a very minimal sales amount of $57 thousand.
  • Fastest-Growing US Imports from Saudi Arabia. While US goods to Saudi Arabia made good marks in the market, the imports from the latter to the former were commendable as well. Under this category, military aircraft and parts topped the list with sales percentage increase of 3,916.67% from 2006 with an amount of $470 thousand. Other goods which made raves in the market were: cookware, cutlery, house and garden wares and tools; telecommunications equipment; copper; and drilling and oilfield equipment and platforms. The last commodities were sold for a total of $705 thousand in 2007 which is 1,068.18% higher than how it faired in the market for 2006.
Major Trade Agreement between the Two Nations

If there is one pact between the two nations which covers all the significant aspects of economy, that would be the Saudi Arabia Diplomatic and Consular Representation, Juridical Protection, Commerce and Navigation Agreement. The pact was signed and was entered into force on November 7, 1933. The following things are embodied in the agreement:

  • Diplomatic and Consular Representation. It was specified under this concern that the diplomatic representatives of both contracting parties shall enjoy the territories of the other. Both shall have the privileges and immunities accorded by the generally acceptable international laws that govern consular representation. Furthermore, consular representatives are given the right to reside in the territorial jurisdiction of the other.
  • Juridical Protection. Under the agreement, territories as well as possessions and nationals shall be given the treatment in accordance with the practices and standards of the other. This is without prejudice to the rights of the other party. Moreover, respect shall be established with the fullest protection to be rendered to all properties, rights and interests and even individuals.
  • Commerce. Unconditional most-favored-nation treatment shall be given to all imports and exports going to and coming from each other's territories. All charges and duties shall be based on international laws and standards to avoid trade disputes in the future. Transit, warehouse and other facilities are also covered under this particular portion of the pact.
Issues that Affected the Relations between the Two Nations

Straining the very strong ties between the two nations include some issues which the government of both nations have not agreed upon. Following the 9/11 attacks of the World Trade Center, Saudi Arabia's relations with US were somewhat on the rocks. This was after finding out that 15 of the suicide bombers responsible for the terrorism were Saudi Arabian nationals. This started the many events that have significantly affected the bond.

In May 2003, a certain terrorist group connected with Al-Qaida launched a violent campaign in Saudi Arabia leading to the death of nine Americans on May 12. On May 1, 2004, two American nationals were killed on Yanbu oil facility situated at the western portion of the country. The series of deaths due to massive attacks led to more security issues which hampered the trade between these two nations.

Trade Opportunities between the Two Nations

Despite all the unfavorable events, Saudi Arabia proved that it is one with US when it comes to the war against terror. This began after the former sponsored the Counter-Terrorism International Conference in Riyadh on February 2005. This marked the start of better days ahead for these two countries coupled with other investment opportunities opened by Saudi Arabia to its comrades in the world economy scene. Aside from the very strong oil import and export relations between Saudi and US, other opportunities include vital sectors of the economy. The latter is encouraged to focus on investing on manufacture-related ventures through Saudi Arabian companies. There are also other small and medium-scale businesses needed to be tapped by the US as well as other international firms. Along this line, the Asian country introduces the basics of the business and cultural environment to help US understand and increase its knowledge on the possibilities of working well together.

Commercial policy and foreign trade should also be understood. Taking a look at the top companies in Saudi Arabia will also be a good way to start the future. There are different financial institutions and trading firms which offer good incentives and pay for American and other nationals from different countries which Saudi's trading partners must take advantage of. Business regulations and procedures are also to be dealt with. All these things are made possible and accessible by www.the-saudi.net/business-center.

US-Saudi Arabia Trade References

Note: Trade statistics, industry links, economic projections and global business resources on this page have been compiled from hundreds of trade related websites, government guides and resources on the Internet. We provide this valuable information for industrial suppliers, manufacturers, exporters and importers seeking to enter or expland business opportunities in Saudi Arabia.

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