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Will the UAE sign the trade deal alone?investment monitoring

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The United Arab Emirates (UAE), the second largest economy in the Arab world, is increasingly pursuing stand-alone bilateral trade agreementbypassing the Gulf Cooperation Council (GCC), the regional political and trade bloc led by Saudi Arabia.

These stand-alone bilateral agreements are designed to attract inward Foreign Direct Investment (FDI) Enter the UAE, which hopes to maintain its status as a regional financial and trade hub and diversify its economy. The UAE primarily competes with Saudi Arabia in attracting foreign direct investment and tourism to the Gulf region, which has been negotiating a number of free trade agreements (FTAs) with major global economies such as China.

UAE pushes for trade deal on its own

Since late 2021, the UAE has been actively pursuing its own bilateral trade agreement.term of office Comprehensive Economic Partnership Agreement (CEPA), these treaties are aimed at strengthening the UAE’s international strategic relations and enhancing its position as a global trade and logistics hub. CEPA is an important part of the UAE Global Economic Partnership Strategywhich aims to increase the size of the national economy from Dh1.4trn ($380 billion) to Dh3trn over the next ten years.

UAE signed the first CEPA with India The agreement was signed in February 2022 after negotiations were launched in August 2021. The agreement provides greater access for UAE exports by reducing or eliminating tariffs on more than 80 percent of products. The agreement aims to generate $100 billion in bilateral trade over five years.

The UAE has signed similar CEPAs with Israel and Indonesia, and ratified the latest CEPA with Turkey in May 2023. Under the deal with Turkey, the two sides hope to increase bilateral trade to $40 billion over the next five years. More talks are underway with countries including Thailand and Malaysia.

These bilateral trade deals take place despite the UAE’s membership in the six-nation Gulf Cooperation Council. The other members are Saudi Arabia, Bahrain, Qatar, Oman and Kuwait. The Riyadh-based entity, which has a population of 56 million and a combined gross domestic product of $1.6 trillion, is negotiating its own free trade agreements with major trading partners including China, South Korea and the United Kingdom.

Robert Mason, a non-resident fellow at the Arab Gulf States Institute in Washington, D.C., said the UAE could negotiate and develop CEPA much more quickly than a free trade agreement reached through the Gulf Cooperation Council, which could take decades. “because [CEPAs] Being comprehensive, they will boost the UAE economy in multiple ways, including enhancing market access through preferential tariffs, and in some cases, such as the UAE-Israel CEPA, establishing digital trade rules and protecting intellectual property rights,” he said.

Is there a growing rift between the UAE and Saudi Arabia?

Over the past two years, both the UAE and Saudi Arabia have introduced policies through their national visions that they hope will attract increasing numbers of tourists and foreign investors. While these policies are primarily aimed at improving each country’s respective business climate, both countries have been accused of trying to undermine the other’s economic development.

For example, in October 2021, Saudi authorities directed all foreign companies to officially establish their regional headquarters in the country by 2024 or risk losing lucrative government contracts. The move was widely seen as targeting the UAE, prompting foreign companies to relocate to Saudi Arabia from Dubai, the commercial and financial hub of the Gulf region.

Also in 2021, Saudi Arabia revised tariffs on imports from GCC countries. It excludes preferential tariff concessions for goods produced in the free zone or imported by Israel. The amendment is largely seen as targeting the UAE, where the free zone plays a key economic role and has recently established economic ties with Israel.

Beyond the rift between the UAE and Saudi Arabia, economic integration in the GCC has had a complicated history. For example, GCC members Oman and Bahrain established bilateral free trade agreements with the United States in 2006 and 2009, respectively.

Despite the GCC’s customs union and common market, deeper economic integration remains elusive. In 2003, member countries agreed to form a monetary union with a single currency by 2010. The project ultimately failed due to macroeconomic disagreements among member states and a dispute between Saudi Arabia and the United Arab Emirates over the location of the union’s central bank.

“The GCC is not very strong as a political and negotiating unit, especially now, as Gulf states compete more openly for investment and new opportunities as they diversify,” said Karen Yang, a senior research scholar at Columbia University’s Global Center. Energy policy.

All eyes on China

The GCC has signed only a handful of free trade agreements so far, despite starting negotiations with several countries. Those trade talks have been idle for years due to factors such as intra-Gulf competition and national economic priorities.

However, since the Covid-19 pandemic, Gulf leaders have restarted free trade agreement negotiations with major trading partners, one of which is China.

Although the EU began negotiating with the world’s second-largest economy in 2004, negotiations have largely remained idle. Relations between the GCC and China have improved in recent years, however, under the leadership of Saudi Crown Prince Mohammed bin Salman. In December 2022, Riyadh hosted the GCC-China Summit, and the GCC-China signed a number of investment cooperation agreements. Analysts such as Nasser Saidi believe that suggestion A free trade agreement between the GCC and China could be signed as early as 2024. He believes a free trade agreement with China will be a game-changer in the Middle East, boosting trade and investment.

Thus, it appears that larger economies would prefer to deal with the GCC as a whole rather than a bilateral trade agreement on a country-by-country basis.Likewise, the UK in June 2022is eyeing a multibillion-dollar deal with the G6.

“The GCC is clearly a large and important market for countries like the UK and China, so a bilateral agreement is bound to undercut efforts to push for more valuable deals, including with Saudi Arabia, where there are important security and energy relationship, and less and less – to find the oil economic opportunity,” Mason said.

Can the UAE go it alone on trade deals?

The UAE is likely to continue plotting its own separate trade pact as it seeks to attract further FDI into new areas as part of its economic diversification ambitions. The country’s rise as a center for investment, business and tourism in the Middle East means it will be an attractive proposition for almost any country or economic bloc looking to forge stronger trade ties.

However, it appears that the larger economies would prefer a free trade agreement with the GCC rather than a bilateral free trade agreement with the UAE, meaning Abu Dhabi has to watch its relationship with Riyadh to enjoy the benefits of such a trade agreement. The result is China.



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