Blow to UAE-US FTA hopes
BY ISSAC JOHN (Deputy Business Editor)
1 July 2007
DUBAI - The June 30 expiration of the Trade Promotion Authority (TPA), which allowed the Bush administration to negotiate trade agreements that cannot be amended by Congress, has shattered all hopes of a revival of the stalled US free trade negotiations with the UAE and other GCC countries.
The Democratic-controlled Congress made clear on Friday it was taking back its constitutional trade authority from President George W. Bush, a day before his special power was set to end.
The TPA, also known as “fast-track,” was extended for two years in 2005 and expired at midnight yesterday. It was in August 2002, the US Congress passed the Trade Act of 2002 giving the president Trade Promotion Authority.
The UAE and US sides had been under pressure to conclude the free trade agreement (FTA) by March 31 to enable Bush administration to get US Congressional approval before the current term of the TPA expired on June 30.
The FTA talks, widely expected to give a new push to the booming bilateral trade have been going since 2004, with the latest round held in London in February. The UAE-US trade was $13.3 billion in 2006, with the UAE importing $11.92 billion worth of American goods.
On February 9, UAE and US officials met in London and renewed their commitment to expedite the talks with the view of ultimately reaching an FTA and, eventually creation of a free trade zone.
"Although both sides were aware that the FTA could be indefinitely delayed if the talks could not be concluded by March 2007, it had to be stalled due to several contentious issues," an analyst said. Despite achieving progress in many aspects, notably in the areas of standards, environment, e-commerce, penetration to markets and copyrights, the issues on which differences persisted included US demands for UAE labour market reforms and opening of the services sector. The US also wanted the UAE to change the Companies Law to allow 100 per cent foreign ownership across the whole country and not just in the free zones. The political controversy over DP World’s forced exit from the US also clouded the prospects of a deal.
In the Middle East, the US currently has pacts with Bahrain, Oman and Morocco. "A US-UAE FTA would not only have further enhanced the current two-way trade relationship, but also would have boosted direct foreign investment," the analyst said. The UAE is a major capital exporter to the US, and its third largest trading partner in the Middle East.
The UAE Ministry of Finance and Industry said in March that the two sides would build on the progress made so far to clear the rest of the hurdles. "The two sides have agreed to redouble efforts to resolve the outstanding issues, notably issues related to digital economy and other issues that are still impeding the smooth flow of trade between the two countries," a ministry statement said.
The expiration of the TPA also could deal a major blow to the nearly collapsed Doha Round of World Trade Organisation (WTO) talks.