FTAs mark a return to the bad old days

16 September 2005
Later this month, a new round of negotiations is to be held between representatives of the UAE and the US about a free trade agreement (FTA) between the two countries.
Later this month, a new round of negotiations is to be held between representatives of the UAE and the US about a free trade agreement (FTA) between the two countries.

It looks like Washington has targeted the federation to be third in line in the Gulf for an FTA after Bahrain, which signed a deal last September that is still to be ratified by Congress, and Oman, which is working on a similar compact.

If an agreement is reached, the UAE will be by far the biggest Middle East prize for America's trade diplomacy. In 2004, the federation exported more than $60,000 million worth of goods and imported above $40,000 million. This makes it the largest market in the Middle

East and second only to Saudi Arabia in terms of total trade.

Figures for the first half of 2005 show astounding developments are taking place. Dubai's imports rose by 60 per cent over the same period of 2004. Similar, if less dramatic, patterns are being recorded by the federation's other six emirates.

The US market share is modest but rising. It sold goods worth $4,000 million in 2005 and its imports from the UAE totalled $1,143 million. In H1 2005, American exports were 120 per cent up on the figure recorded in the same period of 2004.

A GCC finance ministers' meeting in May ruled that FTAs with the US were acceptable. This means the issue is now less contentious than it was at the end of last year, when Saudi Arabia said that all bilateral deals were in breach of GCC agreements. It is telling, nevertheless, that Oman has still failed to sign a US FTA deal despite suggestions that this would be done in June.

Scant progress

The larger issue is whether bilateral trade deals of this kind are ever a good thing. The World Trade Organisation (WTO), set up in January 1995, was designed to reduce trade barriers on a multilateral basis in all areas, including in services and agriculture.

Its progress since then, however, has been appalling. The declaration following the November 2001 Doha WTO meeting set 1 January 2005 as the target date for the completion of most negotiations. This has been missed and there is little prospect of a deal being reached in the foreseeable future. Attempts by the WTO to simplify the process of securing regional deals have also borne little fruit.

The EU was the first champion of regional FTAs. But in the Gulf, which accounts for the majority of Europe's trade with the Middle East, the progress has been risible. Negotiations for an EU-GCC FTA have been ongoing for more than 15 years, with no end in sight.


The US' GCC free trade campaign was launched into the vacuum created by the failure of the WTO and the collapse of the EU's regional free trade initiative. What makes it different is that no attempt has been made to reach an agreement on a region-to-region basis, which should have involved all the signatories to the North American Free Trade Agreement (NAFTA) and the GCC.

So what we are seeing is a revival of country-to-country bilateral deals. And close examination of their wording shows that they have little to do with free trade and everything to do with giving the US an unfair advantage. This is totally in breach of the spirit of the WTO agenda that America is supposed to believe in more than anyone else.


It may be a more practical approach than attempting to get groups of countries to settle their differences. But the truth is that America's free trade initiatives have more in common with the dog-eat-dog world trade conditions before the 1947 General Agreement for Tariffs & Trade (GATT).

The US government says that it is dealing with realities, not dreams of multilateral trade bliss. It is also trying to cope with China's crude campaign to break into world markets using every means at its disposal.

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