State trade with Middle East, Muslim markets declining

By Mike Sunnucks
The Business Journal of Phoenix
Updated: 5:00 p.m. MT June 11, 2006

State exports to the Middle East and large Muslim markets have dipped since the start of the Iraq War in 2003.
Arizona trade with Saudi Arabia, Pakistan, Kuwait, Indonesia and Israel has decreased since 2003, and overall Middle East exports from the state are down in 2005 from 2002, 2003 and 2004 levels, according to trade statistics from the U.S. Department of Commerce.
"Arizona exports to the region declined more than 34 percent between 2004 and 2005," said Arizona Department of Commerce Director Gilbert Jimenez.
Those markets all have seen terrorist attacks in the past few years and are at the center of the international conflict between the U.S. and Islamic militant groups led by Al Qaeda. That has discouraged some Arizona companies from entering those markets and trying to export to those countries, according to economists and business advocates.
Overall, Arizona exports to the Middle East totaled $219 million in 2005. That is down from $249 million in 2003, when the Iraq War began, and $334 million in 2004.
Despite the downward regional trend, Arizona exports have increased to Iraq and Afghanistan to supply war and reconstruction efforts. There was no U.S. trade with Iraq before the U.S. ousted Saddam Hussein and because of post-Gulf War trade embargoes. There also was little American economic interaction with Afghanistan before the 2002 invasion that unseated the Islamic fundamentalist Taliban regime and sought to root out Al Qaeda operations.
Eric Nielsen, director for the U.S. Commercial Service trade office in Tucson, said international tension and terrorism does scare off some businesses and exports. But another factor is the differences in operating procedures.
"I think that (terrorism) scares a certain number of people off," Nielsen said.
But he said Middle Eastern and Muslim countries also have different legal systems and economic cultures, creating barriers for Western and U.S. firms.
"It's just a very different business culture," he said.
Nielsen argues that terrorism and anti-American sentiments in certain parts of the world more likely will result in less business travel to those regions, more secure operating procedures and greater reliance on international partners than Arizona and U.S. companies totally passing on export opportunities.
The U.S. State Department has travel warnings issued for 29 countries in which terrorism or internal strife and civil wars threaten Western tourists and businesses. The list includes Saudi Arabia, Indonesia, Israel, Pakistan, Iraq, Iran, Afghanistan and the Philippines, where there has been terrorist activity and Islamic separatist groups. Arizona trade to the Philippines also has dipped in recent years, according to the 2005 trade numbers.
The declines are bad news for U.S. efforts to forge greater economic ties to Middle Eastern and Muslim markets. The Bush administration has talked up the notion of greater economic links as important to improving relations with the Muslim world.
Sherry Azzarella, communications director for the Arizona Small Business Association, said it is difficult enough for smaller and medium-sized companies to expand internationally, let alone in countries where there is tension and conflict.
"It stands to reason and pure logic that there would be a decline in export/import activity due to security issues and the economy of trust between denoted countries in the midst of such a war," Azzarella said.
Middle Eastern and other Muslim markets such as Indonesia and Pakistan are not traditionally top trading partners for Arizona when compared to major export markets such as Mexico, Canada and Europe.
Jimenez said there are some export opportunities to the Middle East for state companies.
"It is my understanding that the Middle East is seeking products in the environmental, information technology and communications sectors and general consumer goods," said Jimenez.
Top Arizona exports to those regions include electronics and computers, industrial machinery, transportation equipment and military hardware to U.S. allies such as Turkey, Egypt and Israel.
© 2006 The Business Journal of Phoenix

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