The UAE–US Free Trade Agreement (FTA) has only 12 weeks to be finalised otherwise it could be delayed for an unlimited period of time.
Due to the Bush administration losing power in Congress to the Democrats earlier this year the FTA needs to be approved by the end of March before the Republicans’ power to approve trade deals expires in June.
David Bohigian, US assistant secretary for market access and compliance said that unresolved issues included the opening of various UAE sectors for foreign investment. Bohigian, who visited the UAE at the end of last year, said that the opening of infrastructure industries to foreign direct investment (FDI) and allowing foreign ownership in local businesses would be key points to clinch a successful deal between the US and the Emirates.
“The UAE has to change its rules to encourage more FDI from the US,” he said. “An FTA will signal the global investor community that the UAE has proper systems in place to ensure property and investment protection,” he added.
The UAE however is hesitant to open up various sectors, particularly telecoms and banking. Sultan Bin Said Al Mansuri, public sector development minister, told the Arabic daily Al-Hayat that the UAE would not allow foreign investment within the telecoms sector before 2010.
“We must give the current operators the chance to develop before we allow new ones in,” said Al Mansuri.
UAE Central Bank Governor Sultan Nasser Al Suwaidi remarked that the banking and finance sector would face tough competition once the country signs FTAs with the US, EU and other countries. Al Suwaidi said that although local banks are performing well, they would have to compete with banks equipped with the latest technology that will eventually try to capture their business. Previous talks stalled in early 2006 due to the Dubai Ports Worlds (DP World) acquisition of six US ports — a deal that was heavily politicised due to alleged ‘security concerns’. DP World sold off the US entities to AIG last December, however FTA talks remained unsuccessful throughout the whole of 2006.
Another key challenge is the US’s stand on the Emirates’ labour law. The US is urging the UAE to apply international standards to its workforce, which would affect low-wage expatriate labour workers.
UAE Vice President and Prime Minister and Ruler of Dubai Sheikh Mohammed Bin Rashid Al Maktoum announced earlier that the UAE would “not pay a political price for any trade agreement, with the US or any other country”. Labour rights also blighted Washington’s FTA talks with Qatar, which led to negotiations being frozen in April 2006. FTA agreements signed by the US with Bahrain and Oman at the beginning of last year, however, included a major section on labour rights. The UAE is a major capital exporter to the US, and its third largest trading partner in the Middle East. Globally the UAE is the US’s 19th largest trade partner with bilateral trade between the UAE and the US rising from US$3bn in 2004 to US$9.5bn in 2005. The proposed deal is part of a wider US initiative to create a regional free trade zone in the Middle East by 2013 that would link 22 Arab nations, Israel and the US. US president George W. Bush has promoted the trade deal as a symbol of American commitment to the Arab world, and as a means of bringing stability to the region. According to Bush the trade deal would bring the Middle East into an “expanding circle of opportunity”. According to the Office of the US Trade Representatives, the following Middle East trade agreements have been reached: US–Israel FTA (1985), US–Jordan FTA (2001) US–Morocco FTA (2006), US–Oman FTA (2006), US–Bahrain FTA (2006).For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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