1. Nader Habibi Crown Center for Middle East Studies Brandeis University
GCC Trade Patterns: Market Shares of Leading Exporters in GCC Imports of Manufactured Goods and Machinery
Nader Habibi
Crown Center for Middle East Studies
Brandeis University

2. Growing Significance of the Arab Import Market
Source: IMF DOT (MENA-annual-imports from world)

3. Key Topics & Questions
1) Recent trends in market shares of the US, European and Asian countries in GCC countries
2) Determinants of market shares in GCC Countries (Economic and Non-economic factors.)

4. Economic Factors Cost Quality Market Power Bilateral Trade Agreements
(Made in China = Cost Effective, Inexpensive)
Quality
National Reputation
(Made in Japan=Quality)
Market Power
Commercial Aircraft Market, Supercomputers
USA, Germany, Japan
Bilateral Trade Agreements

5. The US trade policy towards Middle East (Arab countries)
Free Trade Agreements
Negotiations Started
Negotiations Concluded
FTA Entered into Force
US-Jordan FTA
Oct
Dec. 2001
US-Morocco FTA
Jan. 2003
Oct. 2004
Jan. 2006
US-Bahrain FTA
Sep. 2004
Aug. 2006
US-Oman FTA
Mar. 2005
Jan. 2009
US-UAE FTA
Not yet

6. Role of non-economic factors in Market share
Diplomatic relations
Trade leverage
(Use of trade to promote non-economic goals)
Popular sentiments about an exporting country’s image

7. EU4=UK + Germany + France + Italy

11. Market shares as shares of the total exports of USA, EU4 and Asia4
Market shares represent shares of the total exports of nine countries to each Middle Eastern country. (These nine countries are: China, Japan, USA, UK, France, Germany, Italy, India and Korea.

12. Market shares represent shares of the total exports of nine countries to each Middle Eastern country. (These nine countries are: China, Japan, USA, UK, France, Germany, Italy, India and Korea.

13. Market shares as shares of the total exports of USA, EU4 and Asia4

15. Statistical Analysis Impact of non-economic factors
Importing Countries :
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE, GCC,
Arab= (GCC+ Morocco, Libya, Egypt, Tunisia, Algeria, Syria, Jordan)
Exporting Countries:
-France, Germany, Italy, the UK, (EU4= FRA+GER+ITA+UK)
-China, India, Japan, Korea , (Asia4 = CHN+IND+JPN+KOR)
-USA
Data: UN COMTRADE: Import-Export data (US$)

16. Seemingly Unrelated Regressions (aggregated model)
A three-equation SUR model for each importing country (One equation for each export partner)
1)Asia4 (China, Japan, India, Korea)
2)EU4 (UK, France, Germany, Italy)
3)USA

17. Strong conclusion: US gained market share after liberation of Kuwait
Strong conclusion: US gained market share after liberation of Kuwait. Week Conclusion: US lost market share after Sept. 11 and invasion of Iraq.
Four European Countries (EU4)
United States (USA)
ASIA (Asia4)
Direction of change for significant coefficients for SURE model with Difference Equations
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
UAE
GCC
Arab
(13)
Dummy (Intifada, September 11)
USA
EU4
EU4*
EU4, Asia4
Asia4
USA*
Dummy (Iraq war II)
Dummy (Oil Boom)
Dummy (Gulf War I)
Dummy (Asian Financial Crisis)
Blue Font: A Positive and Significant Coefficient, Red Font: A Negative and Significant Coefficient, *: P-value close to 0.1 (weak significance)
Underlined abbreviations: The Coefficient is significant but it comes from an equation that is not statistically significant.

20. End

21. Source IMF (Mena-annual-importsfromworld)

22. Determinants of market shares: Competitive Price, Diplomatic Relations, National Image
Economists: Economic forces and relative prices matter most (Cost, quality,..)
Political Scientists: Diplomatic relations and strategic considerations are equally important. (Culture, diplomatic relations, attitude,..)
Relative weight of these factors for Arab importers?

23. Evidence on role of non-economic factors
Summary(1989):The volume of US trade is sensitive to political factors and it trades more with countries that are considered more (politically) friendly .
Dixon W.J. and Moon B.E. (1993)
“Goods are differentiated by the nation of origin and demand for them is substantially influenced by the relations between nations” p.22
Summary, R.M. (1989, February) “A political-economic model of US bilateral trade”. Review of Economics and Statistics, v. 71, i.1. pp
Dixon W.J. and Moon B.E. (1993) “Political Similarity and American Foreign Trade Patterns” Poltical Research Quarterly V.46, i.1. pp.5-25

24. North Korea’s Imports from China and Former Soviet Union
Lim &Kim (2002)
Korea’s diplomatic relations with two communist rivals affected their relative market share in some basic commodities such as fuels.
Aggregate imports were insensitive to political factors.
Lim,Kang-Taeg and Kim, Jae-Young, “Economic and Political Changes and Import Demand Behavior of North Korea”, Journal of Economic Development, Vol.27, Number 1, June 2002

25. Impact of Diplomacy on Trade: Evidence
James M Lutz (1995)
Eastern European countries followed the lead of Soviet Union in trading with Developing Countries
(Correlation analysis)
When USSR expanded trade with a developing country the Eastern European countries followed with a one year lag.
James M Lutz , East European trade with the developing world: soviet diplomatic partner or economic self-interest. James M. Lutz Pages 333 – 362 vol.9 , No.3, 1995

26. Impact of Diplomacy on Trade: Example in the Arab World

27. Market shares of four European countries in Arab Countries (3-year averages of annual market shares)
Saudi Arabia
0.27
0.28
0.26
0.24
0.23
0.22
0.21
UAE
0.25
0.32
Kuwait
GCC
Arab Countries (b)
0.31
0.30
0.29
Middle East
0.33
0.36
0.34
Latin America
0.14
0.13
0.12
0.11
0.10
0.09
Africa
0.42
0.40
0.37
0.35
Developing Countries
0.19
Source: Nominal Import Data from UN Comtrade; b) The Arab countries in this analysis are : GCC countries, Morocco, Libya, Egypt, Tunisia, Algeria, Syria, Jordan Data reflects the aggregate market shares of United Kingdom, France, Italy and Germany

28. Market shares represent shares of the total exports of nine countries to each Middle Eastern country. (These nine countries are: China, Japan, USA, UK, France, Germany, Italy, India and Korea.

29. Market shares represent shares of the total exports of nine countries to each Middle Eastern country. (These nine countries are: China, Japan, USA, UK, France, Germany, Italy, India and Korea.

32. Results based on Three-equation SUR models
Four European Count. (EU4)
United States (USA)
ASIA (ASIA4)
Direction of change for significant coefficients for SURE model with Difference Equations
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
UAE
GCC
Arab 13
(Intifada, September 11)
ASIA4
USA
(Iraq war II)
EU4
ASIA4, EU4
(Gulf War I, Kuwait)
(Asian Financial Crisis)
Blue Font: A Positive Impact, Red Font: A Negative Impact
Underlined abbreviations: The Coefficient is significant but it comes from an equation that is not statistically significant.
Asia4: China, Japan, India, Korea, EU4: France, Germany, Italy, UK

33. Based on 6-equation SUR (USA,EU4,China,Japan, Korea and India) for each importing country/region
Four European Count. (EU4)
United States (USA)
China (CH)
Japan (JAP)
Direction of change for significant coefficients in SURE model with Difference-Log Equations
Bahrain
Kuwait
Oman
Qatar
Saudi
Arabia
UAE
GCC
Arab 13
(Intifada, September 11)
(Iraq war II)
JAP
EU4 US
(Gulf War I, Kuwait)
EU4, USA
USA
USA, JAP CH
(Asian Financial Crisis)
Blue Font: A Positive Impact, Red Font: A Negative Impact
Underlined abbreviations: The Coefficient is significant but it comes from an equation that is not statistically significant.
EU4: France, Germany, Italy, UK

34. Question: Are Arab import markets sensitive to diplomatic relations?
Intifada, September 11 and invasion of Iraq led to a loss of market share for the United States in Saudi Arabia and in the aggregate imports of Arab countries (No conclusive result for other Arab countries. )
Although the US and European powers both participated in liberation of Kuwait, the corresponding period ( ) is associated with higher market share for the US only.
Asian exporters (China in particular) have steadily increased their market share in Arab countries since 2001.
Appreciation of euro against dollar has not benefited the US. It has benefited China.