UAE weighs price of trade pact with US

ABU DHABI - The United Arab Emirates is mulling whether to make political concessions to the United States and win a market of 300 million consumers in a free trade pact that has eluded both countries for nearly two years.

By (AFP)

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Published: Sun 4 Feb 2007, 5:03 PM

Last updated: Sat 4 Apr 2015, 9:48 PM

Several rounds of negotiations on the free trade agreement (FTA) have failed to produce a deal and sources close to the talks cited US conditions involving UAE measures to improve its human rights record and authorize labour unions.

In return, Washington promised to open up its markets to UAE exports to ease a painful trade deficit and support Abu Dhabi’s bid to acquire technology needed for an ongoing programme to diversify its economy and lessen reliance on oil sales.

A spokesman for the US embassy in Abu Dhabi told AFP that the two sides will meet on February 9 but did not say where, and it was not clear if the meeting would amount to a full-fledged round of negotiations.

‘The United States and UAE officials are meeting on February 9 to discuss next steps on the FTA and the US-UAE trade and investment relationship,’ the spokesman said.

‘We are studying some US proposals and will respond to them,’ said a UAE finance ministry source.

The source gave no details of the proposals but diplomats close to the negotiations that started in early 2005 said they included demands for the UAE to allow the establishment of workers’ unions and take more measures to improve its human rights record.

‘These are political demands but there were other conditions as well,’ one Western diplomat said, requesting anonymity.

‘They include further measures to protect intellectual property, the opening up of the UAE oil sector to US companies on production sharing basis, tearing down all barriers to US products and permitting American firms to have 100 percent ownership in UAE projects.’

The US made similar demands before it finalized FTAs with the UAE’s Gulf partners Bahrain and Oman.

But economists in the region said the situation is different in the UAE because it is a federal system with varied corporate laws, is the second largest Arab economy, and its foreign population is a majority.

A spokesperson for the US Trade Representative in Washington told AFP that the latest discussions had focused on investment.

‘Negotiations since last March have been focused on addressing areas of major concern and specifically on the investment chapter. A number of meetings have taken place on this subject,’ Gretchen Hamel said.

‘USTR has been actively engaged with UAE officials on how to address the FTA negotiations and move our trade and investment relationship forward. We have met several times in the last two months with UAE officials on this subject,’ Hamel said.

The UAE has publicly ruled out paying a political price for a trade pact with Washington.

But the economists stressed that differences between the two sides must be sorted out in the next couple of months if the Bush administration is to get the deal through Congress before its ‘trade promotion authority’ expires at the end of June.

The differences widened following the furore over the 2006 Dubai Ports World’s purchase of some US port operations, which was opposed by Congress and forced the government firm to sell the US assets.

‘I believe a FTA between the UAE and the US is still possible despite some obstacles,’ said Gulf-based economist Mohammad Al Asumi.

‘The UAE realizes it will largely benefit from this agreement as it will open up a vast US market of 300 million people, boost its exports and investment to that market, strengthen its position as a re-export centre, allow it to attract US capital and technology and expand trade, economic and political relations between the two countries.’

The FTA will also be advantageous to Washington as it will remove obstacles to US investments in the UAE and eliminate a five percent customs duty on American products, which in turn will boost their competitiveness in the Gulf region.

The UAE is already the third largest Middle East market for American products after Saudi Arabia and Israel but its exports to the US have been hampered by trade barriers.

US exports to the UAE leaped 54 percent to around 10.05 billion dollars in the first 10 months of 2006 while its imports from the UAE grew by only two percent to 1.12 billion dollars, according to US Department of Commerce figures.

This widened the Gulf country’s trade deficit to a record 8.9 billion dollars compared with nearly 5.3 billion dollars in the first 10 months of 2005.

US exports to the UAE include vehicles, aircraft, equipment and machinery, electrical appliances and other industrial and farm products, while the UAE’s exports involve aluminum, jewelry, garments and other light products.

More than 500 US companies operate in the UAE, with total investments of around 1.5 billion dollars. But in contrast with Saudi Arabia, the UAE’s oil supplies to the US have remained negligible, not exceeding 5,000 barrels per day over the past decade, according to the energy ministry.

The UAE still imposes curbs on full foreign project ownership.

‘The US is a country of significant weight in the UAE’s foreign trade,’ the finance ministry source said.

‘By removing trade barriers, the FTA will lead to a further increase in the volume of trade exchange ... UAE exports will have the opportunity to enter the US market duty-free.’

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