UAE Trade with the Rest of the World - Example

UAE Trade with the Rest of the World of Your Table of contents Introduction...................................................................... Central Aspects of UAE Trade......................................... Exports from UAE............................................................ Import............................................................................... Trade Routes, Agreements & Issues................................. Recommendations............................................................. Conclusion ........................................................................ References......................................................................... Executive Summary The report analyzes the major trends and processes of international trade in the United Arab Emirates. To this end, the report critiqued the main elements and processes of imports and exports to and from the United Arab Emirates. The research identifies that the export process of the UAE is mainly steeped in the sale of crude oil. However, the country is seeking to diversify its export base and also integrate other forms and processes of trade. To this end, the UAE has set up a system of re-exporting products to developing countries from the developed world. The UAE also seeks to promote other sectors and processes of industrialization and this forms another significant share of the countrys export. In spite of the investments into infrastructure, the UAEs position as a geostrategic location is threatened. This is because other nations are opening up and becoming major export and import destinations that are becoming major export and trade destinations. The UAE can survive this threat to its re-export industry by maintaining a proactive approach to study the geopolitical circumstances and make appropriate adjustments. Introduction The United Arab Emirates is a federation of seven Emirates, Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Qaiwain, Fujairah, and Ras Al-Khaimah. The emirates came together as an independent nation in December 1971 and the countrys economy has developed into the second largest economy in the Arab world with one of the highest gross domestic products in the world (OTR, 2014). The countrys wealth and financial success can be attributed primarily to the oil wealth which brings a lot of revenue to the country. However, aside petroleum exports, UAE has many forms of trade with foreign nations. This report examines and analyzes international trade conducted between the UAE and other nations in this world. To this end, the paper will evaluate the central aspects of UAE trade and imports and exports as well as trade routes and agreements that keep the countrys international trade industry in motion. Central Aspects of UAE Trade Most of the United Arab Emirates income and revenue is from the export of petroleum (Singh, 2010). The United Arab Emirates has about 98 billion barrels in oil reserves and the reserves are estimated to last for a period of about 93 years (Singh, 2010). The country exported about $118 billion worth of oil in the year 2012 (OPEC, 2013). The country however came up with a policy to diversify the economy in order to export to different countries around the world. This is because it was apparent that the United Arab Emirates will run into several risks if it relied so much upon the export of petroleum. Based on this issue, the UAE announced that it will focus on other diversified methods and processes for exporting products to different countries around the world. The countrys diversification efforts led to the growing and expansion of their non-oil export processes (Bitar, 2012). On the average, the UAEs non-oil continues to increase at the rate of 15% per annum and due to this, it is clear that the UAEs export process will be more dependent on other processes and systems rather than oil. Due to the prosperity of the UAE mainly because of the high volumes of oil, the UAE has a lot of money and the economy is somewhat prosperous. The country has one of the highest gross domestic products and due to this, the country makes high volumes of imports and this is meant to meet local needs and expectations. Exports from UAE In spite of the UAEs quest to diversify the economy, the economy depends heavily on two main activities for exports. The first is the area of exporting petroleum which remains a significant percentage and aspect of the nations economy (Oxford Business Groups, 2012). The other significant aspect of UAEs export is in the area of re-exporting. The United Arab Emirates is involved in re-exporting of products from the world. The re-exporting industry of the United Arab Emirates is ran through the process of importing from the developed world and exporting into the developing world. This has formed the basis of the exporting process and system through which the country trades with foreign nations around the world. And based on this re-exporting system and process, the UAE which has little natural resources aside petroleum and natural gases exports a lot of products to different countries around the world. As of 2013, there was an estimated $370 billion of exports that occurred from the United Arab Emirates (CIA Factbook, 2014). This put the country on number 18 in the global classification. This places the UAE at an extremely high level in relation to other nations in the region. From the statistics, it appears that although the UAE is attempting to diversify the economy, 45% of the exports of the country is from crude oil. The country also makes significant revenue from natural gas and reexports. There is also export from dried fish and dates. The UAE focuses on petroleum, reexports and other local products that the country has in huge quantities. In terms of export partners, Japan is the highest recepient of Emirati exports. Japan receives 15.4% of the UAEs exports. After Japan, India comes second with 13.4% of Emirates exports. Iran and Thailand comes next with 10.7% and 5.5% respectively. Also, Singapore takes 5.5% of Emirati export whilst South Korea also receives 13.5% of Emirates exports. The countrys re-export industry is fueled by various types of free zones that have been declared within the country. Figure 1: Dubai Exports and Imports (Source: Kumar, 2012) Dubai is the leading Emirate of the country. And Dubai is a major destination for re-exports. This is because the Emirate has developed its structures and systems for receiving and re-exporting products. The United Arab Emirates makes high volumes of over $100 billion in imports. However out of these imports an average of $40 billion of the products are prepared for onward export and this involve the export and sale of the products to foreign countries like India and Japan where they are sold for extra money (Kumar, 2012). Export is at about $30 billion of the products that are brought in. However, Figure 1 above excludes petroleum exports from Dubai. However, the country is trying to diversify and industrialize the economy and this has led to a quest to cut down on reliance on the petroleum industry for exports. However, the UAEs position with major nations like the United States, Australia and the developed world is growing and being enhanced. This is because the UAE has been building and improving its trade relations with these bigger nations and the country seeks to attain the best and the highest levels of trade with foreign nations around the world. In relation to the developing world, the UAEs re-export program and process has led to the creation of Free Zones throughout the country. The country has many Free Zones and the largest one is the Jebel Ali Free Zone and this contains over 1,000 countries that are involved in various activities which include several re-export entities (Shoult and Terterov, 2012). The Free Zones areas include businesses that are 100% foreign owned and this include major entities that support the re-export process and import from foreign nations and send it to specific nations in the developing world (IBP, USA, 2012). Many nations in Africa rely on the United Arab Emirates as a gateway to the developed world (Greenaway, 2010). Due to this, the reexport program of the UAE works for them and they are able to move to the country and source for products which they in-turn export to their individual nations. Import The United Arab Emirates has become a major destination for other countries exports and this has a direct relationship with the increment in gross domestic product. In 1962, UAEs export relied heavily on pearl and fishing exports to attain foreign exchange. However, over the years, the UAEs economy has attained high GDP status due to the oil export that has gone on and increased significantly over the years. In the 1990s, the United States was a major trade partner with the UAE and they were responsible for 8% of the imports of UAE (IBP, 2012). This included products and services from the US and these imports played a role in improving the quality of life for the Emirati people. The import system and process of the United Arab Emirates involves a strong network of free zones which is steeped in the the port systems and structures that have been utilized to bring in products from foreign nations. Figure 2: Export and Import Data for UAE The United Arab Emirates imports high volumes and huge quantities of refined petroleums and other minerals. There are other technical equipment that the country imports and this is used to help the country to modernize its systems in line with the national policies of the UAE. UAEs major import partners include India and Iran and these countries provide products and services that are used for the improvement of the nation. However, many of these products from India and China are re-exported to other developing countries. Trade Routes, Agreements & Issues The UAE is a member of the World Trade Organization and this enables the country to gain access to various multilateral agreements that are used for gaining access to other nations and other economies. The UAE has also developed its port system and port processes in order to gain goods and export goods at a fairly easier rates. There are numerous free zones that are located next to major ports of entry in the UAE to enable the countrys merchants to export and import so easily. The Khalifa Port and the Mina Zayed ports are the main points for the export and transmission of products to and from the Arab Emirates. The Port Jebel Ali at Dubai provides a direct linkage to the free zone and this allows the country to re-export products and deal with issues and matters. The Dubai International Airport provides the opportunity to enable the country to connect with other parts of the world. It was declared the busiest airport in the first half of 2013, ahead of the Heathrow Airport. This shows that the countrys transportation system and process has become enhanced and improved to enable the country to play a central and leading role in global trade matters. With the quality of port infrastructure in the United Arab Emirates, there are few countries that can stand and compete with the UAE in international trade. This is because the country has major ports that can accommodate a huge volume of trade and commerce. This makes the UAE a preferred destination and transit point for trade. The fundamental issue with the UAE is that it acts as a geostrategic position in international commerce. This has led to major investments and a focus on epxanding to include different countries as beneficiaries of their re-export system. This is because the UAEs international trade is fundamentally not focused on attaining products for use in the UAE. Rather, most of the products are re-exported. This makes the country more of a transit point. However, in spite of this effort and these infrastructural investments, there are many emerging and growing centers in the region. This include nations like Oman, Bahrain and Iran and with changes in international politics, it appears that new destinations will open up and more and more nations will stop relying on imports from the UAE. The Arab Emirates is therefore at a risk of losing their status and position as a major transit point for international trade between the developed world and the developing world. Recommendations In order to remain as a major trade destination and trade route, the UAE will need to play a proactive role in the conduct of international trade and arrangements. They will need to check changing conditions and matters in the international community and make adjustments to ensure that they become a preferred destination for international trade. It is only through this that the UAE can continue to remain a major trade center and maintain a relatively stable volume of imports and exports. . Conclusion The research identified that the United Arab Emirates trade with foreign partners is mainly steeped in the export of crude oil. This is because the country has major deposits of crude oil and is a ranking member of OPEC. The UAEs imports have been enhanced because of the growth of the countrys GDP growth and enhancement over the past 4 decades. Additionally, the UAEs primary export and import system is hinged on the fact that the country seeks to become a geostrategic location that supports the export and re-export of products from the developed world to the developing world. The UAE has enhanced its international trade profile by building major port infrastructure and creating free zone areas in the various emirates. The biggest threat faced by the country is the fact that there are newly growing and thriving nations that are creating ports like UAE. This stands to threaten the states re-export program and reduce the countrys export and import volumes significantly. References Bitar, Z. (2012) "UAE Trade to Reach AED3.62 trillion in 2012" Business - General [Online] Retrieved: http://gulfnews.com/business/general/uae-trade-to-reach-dh3-60tr-in-2012-1.1125290 Retrieved: 13th March, 2014. CIA Factbook (2014) "United Arab Emirates" [Online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ae.html Retrieved: 13th March, 2014. Greenaway, D. (2010) The World Economy: Global Trade Policy 2009 Hoboken, NJ: John Wiley and Sons. IBP USA (2012) Arab League League of Arab States Business Law Handbook New York: IBP Kumar, R. R. (2012) The UAEs Strategic Trade Partnership with Asia: Focus on Dubai Available at: http://www.mei.edu/content/uae%E2%80%99s-strategic-trade-partnership-asia-focus-dubai Retrieved: 13th March, 2014. Office of the US Trade Representative (2014) United Arab Emirates [Online] Available at: http://www.ustr.gov/countries-regions/europe-middle-east/middle-east/north-africa/united-arab-emirates Retrieved: 13th March, 2014. Organization of Petroleum Exporting Countries (2013) United Arab Emirates [Online] Available at: http://www.opec.org/opec_web/en/about_us/170.htm Retrieved: 13th March, 2014. Oxford Business Groups (2012) The Report: Dubai 2011 Oxford: OBG Shoult, A. and Terterov, M. (2012) Doing Business with the United Arab Emirates. London: GMB Publishing. Singh, R. (2010) International Trade Operations Delhi: Excel Books Read More