Here’s a couple of headlines from the past 48 hours that caught my eye:
- “Weapons Sales to Iraq Move Ahead Despite U.S. Worries”
- “With $30 Billion Arms Deal, U.S. Bolsters Saudi Ties”
Back before I assumed the exciting Moneybox persona, it always interested me that these Gulf arms deals are invariably dealt with in the foreign policy silo rather than the trade/economics silo. And in fact the U.S. government granting permission for oil rich foreign states to acquire weapons in exchange for money is always treated as a kind of foreign policy concession even though it’s a business transaction and not a gift. Clearly, that’s a valid lense through which to examine the equasion. But in part this is a straightforward trade and economic policy story. Military equipment stands alongside software, music, movies, TV shows, soybeans, and large passenger jets as one of the tradeable sectors in which the United States is a clear market leader with top tier brands. We’re also a large net importer of crude oil. One of the things our foreign policy does is try to recapture the dollars we send to oil exporting nations by trading them military equipment for dollars. If you imagine some utopian Middle Eastern future in which it’s all a bunch of happy democracies peacefully collaborating with each other, that would have negative implications for our trade posture in the area.