Opinion: The UAE case study shows why open markets work

Donald Trump's protectionism is self-defeating dogma in an inter-connected world
By design Dubai’s economic policies are the result of a clear strategy
By Bernd Debusmann Jr
Wed 14 Mar 2018 09:25 AM

As the United States lurches uncomfortably towards protectionism and the possibility of a trade war caused by President Donald Trump’s vow to slap stiff tariffs on steel and aluminium imports, businesses across the UAE can breathe a sigh of relief that they operate in a country that has – from the very beginning – been driven by competitiveness and the concept of free trade.

The UAE’s long-standing economic strategy was perhaps best exemplified by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, in 2015.

“This did not happen by accident,” he wrote in the forward of that year’s Emirates Group annual report. “Building on our heritage, our founding fathers charted the path for our nation’s economic progress and prosperity more than 40 years ago. The UAE has always embraced competition and free market principles from our earliest days as a small trading post.

“If we want the best talent, the best companies, and the best opportunities for our country, there is no room for protectionism,” he added. “If we want successful industries, we must invest in the right infrastructure and base our decisions on market need.”

While the success of this strategy is evident throughout the UAE’s economy, it is perhaps most starkly highlighted by the world-leading Emirates airline. Through the UAE’s Open Skies policy, more than 140 airlines now call Dubai International Airport home, flying to hundreds of destinations.

Despite the constant claims to the contrary from American competitors, the fact is that Emirates airlines competes with all these other airlines – for the same passengers flying to the same destinations – in an open marketplace. “No short cuts, no protection, no subsidies,” Sheikh Mohammed said. “It must stand on its own feet and work hard and stay ahead of the competition.”

Foresight

Notably, just last year in April, the UAE’s Minister of Economy, Sultan bin Saeed Al Mansoori, noted that “trade protectionism policies have always served short-term objectives, but their long-term implications are negative.”

Although his remarks came nearly a year before Trump proposed the steel and aluminium tariffs, Al Mansoori’s comments were remarkably prescient to the current situation. In this case, as many analysts have pointed out, Trump’s short-term objective is to fulfill the “America First” campaign promises he made to voters in America’s rust belt.

While the long-term implications – and details of the tariffs – are by no means clear yet, the widespread condemnation, both from abroad and from both sides of the American political spectrum, suggest that things will end badly, with retaliatory tariffs and restrictions imposed on American products in other countries.

Additionally, American consumers, along with the industries that need steel and aluminium, will undoubtedly suffer. After all, this isn’t the first time a similar tariff has been attempted. In 2002, George W Bush imposed tariffs on imported steel, which only resulted in job losses, shortages, increased costs and delays.

Minimal impact

If the tariffs go ahead as planned, it seems fairly certain that their effect on UAE’s steel and aluminium manufacturers will be limited, largely due to the competitiveness and free market principles that characterise the UAE’s larger economy. Emirates Steel, for example, has a customer base in more than 60 countries, while Emirates Global Aluminium has said that it is prepared for whatever market conditions may arise.

Ultimately, the main benefits of the UAE’s embrace of the free market is measured in more than economic success. The main benefactors are the citizens and residents who live and work in the UAE, which has been able to attract some of the most talented people around the world and create a diverse and dynamic economy and society, which allows both businesses and people to thrive.

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