A Flawed Strategy for the "War on Terror"

[Dominique R. Poirier]

Tacitus and Tequila,
Unless I missed something at some point, and to my benighted point of view since I’m not at all in economics and trade (I read The Economist from time to time and that's all), all this seems pretty obvious to me.

I justify my point.

In 2003 China superseded Mexico as U.S. main trading partner. Wall Mart alone accounts for 10% of China’s exports to the U.S. and 1% of China’s GDP (Read the March 2004 issue of Commentary).

So, what does China buy that big to the United States in return? Do you see my point?

About Saudi Arabia, the issue is slightly different. It is today the third oil exporter to the United States with 1.458 million barrels per day.

So, in recent years, oil-exporting countries have experienced windfall gains with the rise in the price of oil. A look at how oil exporters “recycle” their revenues suggests that roughly half of the petrodollar windfall has gone to purchase foreign goods, especially from Europe and China (Hmmm), while the remainder has been invested in foreign assets, and more especially in U.S. assets; directly and indirectly.

The way in which oil exporters deploy their revenues has important implications for oil-importing countries. Higher oil prices reduce purchasing power in oil-importing countries and thus are a drag on their growth. But when oil exporters use the revenues from oil sales to increase their purchases of goods from oil-importing countries, these negative effects on growth are reduced. Increased purchases of foreign assets by oil exporters can also help sustain growth in oil-importing countries, albeit less directly. Such asset purchases are a form of lending: In effect, oil importers can sustain their consumption and investment spending by borrowing from oil exporters to finance their higher oil-import bills.

How about this explanation?