Academic journal article Journal of International Business Research

The Competitive Advantage of the United States versus China in the Gulf Cooperation Council (GCC) Countries

Academic journal article Journal of International Business Research

The Competitive Advantage of the United States versus China in the Gulf Cooperation Council (GCC) Countries

Article excerpt

INTRODUCTION

A salient feature of globalization is a process by which business firms of different nationalities recognize, explore, and exploit opportunities in worldwide markets. A country encourages its business firms to participate in globalization so that the nation can enjoy many benefits, including accelerated economic growth. Refusal to participate, although difficult to do, is deemed to be economic suicide. Countries get involved in globalization in various ways. Trade, investment, and technology transfer are the most common forms. Many internal and external factors dictate the form of involvement in globalization. The intensity of participation, through exports for instance, is typically governed by a country's competitiveness. Competitiveness manifests itself in the ability of the country's business sector to deliver innovative goods and services in international markets, an output that meets customers' expectations in terms of quality, reliability, and price.

A measure of competitiveness is the status of the country's merchandise trade balance over a reasonable period of time. A country's consistent trade deficit, for example, could indicate the absence (or weakening) of its competitiveness. On the other hand, a consistent trade surplus could signify the existence and/or growth of the country's competitiveness. The long-term position of a country's trade balance is a representation of its international market share. In general, increasing international market share is consistent with a trade surplus for the country concerned while diminishing market share is consistent with a trade deficit.

Over past decades, there have been numerous business and other linkages between the United States and the Gulf countries through, for example, trade, technology transfer, joint ventures, portfolio investment, and military cooperation. The purpose of this paper is to assess the United States' market position, relative to that of China's, in the Gulf Cooperation Council (GCC) countries between 1999 and 2009. The discussion is confined to merchandise exports to the GCC members. The paper's focus on the GCC countries is for the following reasons:

* The United States and the GCC countries have long been in a strategic alliance to achieve common goals such as the stability of the Gulf region and its security. As Abdelal et al. (2008) pointed out, the U.S. has always provided the security umbrella to protect the GCC regimes.

* The growing economic influence of China in the Middle East, Africa, and elsewhere around the world is often perceived by political circles to be a threat to the United States' vital global interests.

* The Unites States and China have increasingly become, in recent years, key competitors vying for the same markets around the globe.

* The GCC countries supply about 21 percent of the world's annual petroleum needs, and 14 percent of the annual needs of the United States (EIA, 2011).

* The rising price of petroleum will mean more wealth going to the GCC countries. This wealth will, in part, be spent on imported goods from around the world. This makes the study of demand patterns and resource allocation to identify future market opportunities especially important to U.S. companies.

OVERVIEW OF THE GCC MEMBERS

The Gulf Cooperation Council, which came into existence in 1981, encompasses six Arab Middle Eastern countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The achievement of economic integration and the preservation of the region's security have been the primary goals of Council's members. Islamic religion, Arabic language, and a Bedouin cultural value system are the most striking similarities among the native people of these countries. The similarities are profound and have long been recognized. As Gardner (1959) observed, the Arab Gulf is a cultural area of its own.

With an estimated 63 percent (458 billion barrels) of the Middle East petroleum reserve, these oil-rich states are affluent and, as a group, are in a position to wield significant global economic influence, especially at a time when a barrel of petroleum is about $100. …

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