Delay in WTO agreements opens new opportunities for the UAE

DUBAI — The unrealistic deadlines to complete various WTO agreements in 2006 has opened a new window of opportunity for the UAE in the form of extended time frame to conclude preferential trade agreements, according to a recent economic report by the National Bank of Dubai.

By Babu Das Augustine (Assistant Editor)

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Published: Fri 31 Mar 2006, 10:23 AM

Last updated: Sat 4 Apr 2015, 3:41 PM

The WTO Ministerial Conference in Hong Kong agreed to complete the Doha Round of trade negotiations in 2006. A series of deadlines were set, largely in recognition of the expiration of the US administration's authority to negotiate trade agreements in the middle of 2007.

While the war of words between the US and Europe on subsidies appears unending and deadlines for agreements being extended, the US seem to be prioritising its fast track negotiations to implement many of the foreign policy-motivated free trade agreements that it expects to sign in 2007.

“For the UAE, the lack of progress in the WTO agreements provides a golden opportunity to push forward to conclude its bilateral free trade agreement (FTA) with the US and other industrialised nations,” the NBD report said.

Given the current WTO impasse, the UAE considers FTAs to be a central pillar of its economic policy, in the hope that preferential trade agreements with leading industrialised nations will allow entrepreneurs to exploit their comparative advantages. The leadership hopes that the FTA will encourage further partnerships with US companies within the private sector.

In the past, the UAE government had sought to establish strong trading links with powerful allies such as the UK, the US and France, but more recently Germany, Russia and Australia.

“The recent Dubai Ports World spat serves to underline the importance of concluding the FTA with the US. At stakes are important gains from enhanced competition in the domestic market, for both consumers and producers,”

FTAs are expected to result in lower prices for imported goods and services while UAE's exports get preferential treatment in the markets of FTA partners. NBD expects the financial sector to benefit maximum from FTAs.

“For the banking sector, the expectations are that FTAs will lure US and foreign banks into the UAE market given that during the last five years, the profitability of UAE banks exceeded that of the US. Consistently, high ratios of return on assets and return on equity will make the UAE banking sector attractive to US banks.”

Along with the FTAs, it is expected that the domestic economy will become more transparent and will pave the way for more sophisticated regulations. “The sooner the local financial market will achieve the level of international markets, the earlier it will get integrated and the easier it will be for the banks to play leading role in tapping international financial markets,” the report said.

As part of the FTA initiatives the UAE is also opening up its markets. The strategy is built on the proven idea that succeeding in global markets requires more competitive and open domestic markets.

“Reform that sharpens competitive pressures provides powerful incentives for firms to become more efficient, innovative and competitive."

"These improvements can boost the productivity of entire industries and often bring sharp and swift price reductions and improvements in the quality and range of products and services to the benefit of consumers and user industries,” the report said.

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