In spite of the strong opposition from the international community, the US and British governments bypassed the United Nations Security Council and started military action against Iraq on March 19.
This war will seriously affect the economy of Middle East countries as well as that of the United States itself, further hurting a global economy that is already in decline.
It will delay the recovery of the world economy by causing a negative chain reaction on the economies and trade of other countries in the world.
In stark contrast, domestic consumption accounts for about two-thirds of US economic growth.
Compared with the growth mode characterized by export-oriented strategy in countries like Japan and Republic of Korea, big countries such as China and the United States have to depend on domestic consumption to support a sustainable and long-term development.
According to the World Bank, the average annual growth rate of the global economy in the 1990s was 2.6 per cent. But it was only 1.1 per cent in 2001 and 1.7 per cent last year.
It is also estimated that the recovery of the world economy would be delayed until 2004.
International tourism and civil aviation have already suffered great losses due to the immediate impact of the Iraq war.
According to World Travel and Tourism Council (WTTC) estimates, a prolonged war will cost the international tourism industry US$30 billion and 3 million jobs.
The International Air Transport Association (IATA) also estimated that aviation companies around the world will lose US$10 billion due to the war. The United States may prove to be a winner militarily owing to its might. But, economically, it could end up the biggest loser.
The war will have an enormous impact on the US budget. Owing to unbalanced revenue and expenditure, its financial deficit is growing. The financial deficit of the US Government is forecast to reach US$199 billion this year. If the US$237 billion budget surplus from the Clinton administration is taken into account, the real deficit of the current government could reach US$463 billion. The budget office of the US Congress estimated the cost of the war would be US$150 billion to US$200 billion, including the costs of post-war construction. The US Defence Department estimates it will be between US$80 billion and US$120 billion. US tourism income and job positions have been reduced by 3.7 per cent and 400,000 respectively, according to WTTC.
The real economic loss for the United States could be an astronomical figure, which includes damage caused by military strikes, the cost of military occupation and re-building Iraq and other related expenses. The general loss could be US$1,924 billion - 19 per cent of the gross domestic product of the United States. The Iraq war may also have a serious impact on the economies of Middle East countries, which are characterized by slow growth and a high unemployment rate (about 14 per cent). Although oil resources in the region are rich, foreign direct investment attracted by Arab countries is less than one per cent of that of the world.
In comparison, the Iraq war and the wild fluctuation in the oil price will have less influence on China's economy.
First, oil consumption is less than one fourth of China's gross energy consumption. And imported oil is only 7 per cent of the gross energy consumption of China. Last year witnessed substantial growth of China's energy industries, except the oil industry. Under the circumstance that domestic energy supply is growing quickly, war will not cause an overall energy shortage in China. It will also fail to spark a substantial rise in energy prices. The oil supply shortage is not the same as an energy supply shortage and the rise in the oil price is not equivalent to the rise in prices of other energies.
Second, the net import rate of oil is only 30 per cent in China. The rise in the international oil price does not mean the domestic oil price will rise accordingly. Any rise in China's oil price is largely attributed to the suppliers who are taking this opportunity to "make a fortune."
Lastly, the major impact on China's economy of the Iraq war comes from a reduction in imports from the United States and the world as a whole.
Owing to the economic interdependence between China and the United States, the decrease in the US economic growth rate has more influence on China than the war. The Iraqi war has highlighted the vulnerability of China in its policy of over-relying on foreign trade to boost its fast-developing economy.
China, as one of the world's key economic powers, should mainly count on domestic consumption rather than external demand to spur its economic growth. The country's booming exports are expected to be dragged down by the Iraqi war. China is the only country among the world's leading economic powers to have a dependence rate of more than 30 per cent on foreign trade. Export losses caused by the war in Iraq will deal a US$4-billion blow to the mainland.
The forecast takes into account the value of total foreign trade and potential loss of contracts related to rebuilding Iraq following the war. A foreign-trade expert estimates that the country's exports to Iraq and its neighbours is worth about US$12 billion. China's potential economic losses in Iraq are related to trade, engineering contracts and debts. This is the first time the mainland has disclosed data on potential economic losses. The estimated economic losses were partly based on exports of US$420 million to Iraq last year. The losses may also include Iraqi trade debt to China of US$466 million and US$880 million in labour exports as well as US$2.7 billion in potential labour exports and project contracts.
This war will seriously affect the economy of Middle East countries as well as that of the United States itself, further hurting a global economy that is already in decline.
It will delay the recovery of the world economy by causing a negative chain reaction on the economies and trade of other countries in the world.
In stark contrast, domestic consumption accounts for about two-thirds of US economic growth.
Compared with the growth mode characterized by export-oriented strategy in countries like Japan and Republic of Korea, big countries such as China and the United States have to depend on domestic consumption to support a sustainable and long-term development.
According to the World Bank, the average annual growth rate of the global economy in the 1990s was 2.6 per cent. But it was only 1.1 per cent in 2001 and 1.7 per cent last year.
It is also estimated that the recovery of the world economy would be delayed until 2004.
International tourism and civil aviation have already suffered great losses due to the immediate impact of the Iraq war.
According to World Travel and Tourism Council (WTTC) estimates, a prolonged war will cost the international tourism industry US$30 billion and 3 million jobs.
The International Air Transport Association (IATA) also estimated that aviation companies around the world will lose US$10 billion due to the war. The United States may prove to be a winner militarily owing to its might. But, economically, it could end up the biggest loser.
The war will have an enormous impact on the US budget. Owing to unbalanced revenue and expenditure, its financial deficit is growing. The financial deficit of the US Government is forecast to reach US$199 billion this year. If the US$237 billion budget surplus from the Clinton administration is taken into account, the real deficit of the current government could reach US$463 billion. The budget office of the US Congress estimated the cost of the war would be US$150 billion to US$200 billion, including the costs of post-war construction. The US Defence Department estimates it will be between US$80 billion and US$120 billion. US tourism income and job positions have been reduced by 3.7 per cent and 400,000 respectively, according to WTTC.
The real economic loss for the United States could be an astronomical figure, which includes damage caused by military strikes, the cost of military occupation and re-building Iraq and other related expenses. The general loss could be US$1,924 billion - 19 per cent of the gross domestic product of the United States. The Iraq war may also have a serious impact on the economies of Middle East countries, which are characterized by slow growth and a high unemployment rate (about 14 per cent). Although oil resources in the region are rich, foreign direct investment attracted by Arab countries is less than one per cent of that of the world.
In comparison, the Iraq war and the wild fluctuation in the oil price will have less influence on China's economy.
First, oil consumption is less than one fourth of China's gross energy consumption. And imported oil is only 7 per cent of the gross energy consumption of China. Last year witnessed substantial growth of China's energy industries, except the oil industry. Under the circumstance that domestic energy supply is growing quickly, war will not cause an overall energy shortage in China. It will also fail to spark a substantial rise in energy prices. The oil supply shortage is not the same as an energy supply shortage and the rise in the oil price is not equivalent to the rise in prices of other energies.
Second, the net import rate of oil is only 30 per cent in China. The rise in the international oil price does not mean the domestic oil price will rise accordingly. Any rise in China's oil price is largely attributed to the suppliers who are taking this opportunity to "make a fortune."
Lastly, the major impact on China's economy of the Iraq war comes from a reduction in imports from the United States and the world as a whole.
Owing to the economic interdependence between China and the United States, the decrease in the US economic growth rate has more influence on China than the war. The Iraqi war has highlighted the vulnerability of China in its policy of over-relying on foreign trade to boost its fast-developing economy.
China, as one of the world's key economic powers, should mainly count on domestic consumption rather than external demand to spur its economic growth. The country's booming exports are expected to be dragged down by the Iraqi war. China is the only country among the world's leading economic powers to have a dependence rate of more than 30 per cent on foreign trade. Export losses caused by the war in Iraq will deal a US$4-billion blow to the mainland.
The forecast takes into account the value of total foreign trade and potential loss of contracts related to rebuilding Iraq following the war. A foreign-trade expert estimates that the country's exports to Iraq and its neighbours is worth about US$12 billion. China's potential economic losses in Iraq are related to trade, engineering contracts and debts. This is the first time the mainland has disclosed data on potential economic losses. The estimated economic losses were partly based on exports of US$420 million to Iraq last year. The losses may also include Iraqi trade debt to China of US$466 million and US$880 million in labour exports as well as US$2.7 billion in potential labour exports and project contracts.
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