VZCZCXRO1079
PP RUEHDE
DE RUEHAD #1865/01 3120716
ZNR UUUUU ZZH
P 080716Z NOV 07
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC PRIORITY 0007
INFO RUEHDE/AMCONSUL DUBAI 7420

UNCLAS SECTION 01 OF 05 ABU DHABI 001865 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR NEA/ARP, EEB/TPP/BTA 
STATE PASS USTR FOR JBUNTIN AND GBLUE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EAGR AE
SUBJECT: UAE DRAFT 2008 NATIONAL TRADE ESTIMATE REPORT 
 
REF: STATE 119765 
 
 
¶1. (U) The following is our draft text for the 2008 National Trade 
Estimate Report.  As instructed, a word document has been e-mailed 
directly to USTR. 
 
Begin Text 
 
UNITED ARAB EMIRATES 
 
 
TRADE SUMMARY 
 
The U.S. goods trade surplus with the United Arab Emirates (UAE) was 
$6.21 billion through August 2007, a decrease of 6.2 percent from 
$6.62 billion in the same period in 2006.  U.S. goods exports 
through August 2007 were $7.03 billion down slightly over 7% from 
the same period the previous year.  Corresponding U.S. imports from 
the UAE were $858.9 million down over 15%.  United Arab Emirates is 
the largest export market for U.S. goods in the Arab world 
 
The stock of U.S. foreign direct investment in United Arab Emirates 
in 2006 was $4.5 billion up from $3.3 billion in 2005. There are 
currently 750 U.S. companies in the UAE. 
 
FREE TRADE AGREEMENT 
 
After consultations with Congress, the United States began Free 
Trade Agreement (FTA) negotiations with the UAE in March 2005.  In 
early 2007, the United States and the UAE announced that they would 
not be able to complete FTA negotiations under the existing time 
frame for trade promotion authority, but that both sides remain 
committed to completing FTA negotiations at some later date. 
 
IMPORT POLICIES 
 
The UAE is a federation of seven emirates (Abu Dhabi, Dubai, 
Sharjah, Ajman, Umm Al-QaIwain, Fujairah and Ras Al-Khaimah).  The 
UAE is part of the Gulf Cooperation Council (GCC), an economic and 
political policy-coordinating forum for the six member states 
(Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE). The 
individual emirates founded the UAE in December 1971.  Over the last 
33 years, the UAE has developed into the second-largest economy in 
the Arab world, with an estimated 2006 Gross Domestic Product (GDP) 
of about $163.14 billion (at current prices); Nominal GDP is 
projected at $184.9 billion in 2007. The UAE Real GDP is expected to 
grow by 7.7 percent in 2007, according to the IMF's Article 4 
report. 
 
The UAE has pursued free market, trade liberalizing policies to 
diversify its economy away from a dependence on oil.  Despite 
possessing around 9 percent of the world's proven oil reserves and 
the fifth-largest proven gas reserves in the world, rapid growth in 
the non-oil economy reduced oil's share of GDP from 60 percent in 
1980 to 35.8 percent in nominal terms. 
 
Tariffs 
 
At a December 2001 Summit, GCC Heads of State adopted an 
across-the-board common external tariff of 5 percent for most 
products. The new tariff regime was implemented in January 2003 as 
part of the GCC Customs Union agreement. The GCC states also agreed 
to develop a list of products to which a higher tariff would apply. 
Currently, the UAE's exceptions to the 5 percent tariff are a 50 
percent tariff on alcohol, a 100 percent tariff on tobacco, and duty 
exemptions for 53 food and agricultural items. 
 
Import Licensing 
 
Only firms with an appropriate trade license can engage in 
importation, and only UAE registered companies, which must have at 
least 51 percent ownership by a UAE national can obtain such a 
license. This licensing provision is not applicable to goods 
imported into free zones.  In addition, not all goods require an 
import license. 
 
 
Documentation Requirements 
 
Since July 1998, the UAE has required that documentation for all 
imported products be authenticated by the UAE Embassy in the 
exporting country.  There is an established fee schedule for this 
authentication. For U.S. exports, if validation is not obtained in 
the United States, customs authorities will apply the fee schedule 
when the goods arrive in the UAE. In the last few years, the UAE 
introduced online electronic services to facilitate procedures. 
 
Customs Valuation 
 
 
ABU DHABI 00001865  002 OF 005 
 
 
The UAE notified the WTO Customs Valuation Committee in October 2004 
of its customs valuation scheme. 
 
STANDARDS, TESTING, LABELING AND CERTIFICATION 
 
As part of the GCC Customs Union, member countries are working 
toward unifying their standards and conformity assessment systems, 
and have progressed considerably towards the goal of a more 
comprehensive unified food standard, a process which could take a 
few more years to complete. Each country currently applies either 
its own standard or a GCC standard, causing confusion among some 
U.S. businesses. 
 
In October 2002, the UAE created the Emirates Authority for 
Standardization and Metrology (ESMA), established under the auspices 
of the Ministry of Finance and Industry to manage issues of 
standardization arising from the GCC Customs Union. In September 
2007, ESMA announced that it has been accepted as the UAE 
representative to the Worldwide System for Conformity Testing and 
Certification of Electro-technical Equipment and Components 
(IECEE)'s Member Body. 
 
 As of early 2006, ESMA had 1,810 standards.  Ninety-five percent 
are based on GCC standards and 5 percent are based on UAE standards. 
On October 20, 2007, ESMA announced that it has approved 500 new 
standards in the UAE, covering foodstuff, chemical and petroleum 
products, textiles, electrical and mechanical products and 
construction; 98 percent of the approved specifications were 
initially GCC specifications, 47 of which were adopted by the UAE. 
 
In the absence of national standards, suppliers may follow 
international standards.  In addition, ESMA launched its own 
conformity assessment program, the Emirates Conformity Assessment 
Scheme (ECAS), on selected products that currently applies to toys, 
detergents, paints, lubricants, oils and automobile batteries, food, 
chemical and petroleum products, textiles, electrical and mechanical 
products and construction.  ECAS assesses whether domestically 
manufactured products meet national or GCC standards, or 
international standards if neither national nor GCC standards exist. 
 The UAE asserts that the ECAS is a voluntary program and is only 
applicable to domestically-produced goods, but the scope and 
parameters of ECAS lack clarity and transparency. In October 2007, 
ESMA's Director General, Walid Al Mansouri stated that ESMA would 
submit 48 new compulsory standard specifications to the UAE Cabinet 
to issue regulations pertaining to foodstuff such as consumption, 
consumer health, allowed amounts of lead, cadmium and salt. Other 
regulations will cover safety requirement for electrical appliances, 
domestic pesticides, diapers, CNG pumping stations and motorcycles. 
 
 
Not all UAE national and GCC food standards are consistent with 
international standards published through the Codex Alimentarius 
Commission (CODEX), Office of Epizootics (OIE) and International 
Plant Protection Convention (IPPC) organizations.  However, 
regulators are taking steps to more broadly adopt international food 
and agricultural standards.  The GCC has approved new labeling and 
shelf-life standards that would eliminate the long standing 
requirement that at least one-half of a product's shelf-life be 
valid when a product reaches the port of entry.  The UAE is expected 
to adopt this standard once finalized by the GCC.  The new standard 
would still require both a production date and an expiration date on 
non-perishable food items; thereby requiring U.S. producers of these 
products to re-label their products exported to the GCC at an 
additional cost. 
 
In September 2007, the Secretary General of GCC Standardization 
Organization, Dr. Rashid bin Fahad, announced that member states of 
GCC Customs Union have studied a draft regulatory procedure to make 
it mandatory to test goods imported into GCC countries to ensure 
safety and quality standards. The new measures would allow customs 
clearance of only those imported goods which are manufactured 
according to international standards and specifications. 
 
Control of the country's food standards resides in the General 
Secretariat of Municipalities (GSM) and the Emirates Authority for 
 
SIPDIS 
Standardization and Metrology.  These two entities develop food 
standards through a technical advisory committee, although, on 
occasion, individual municipalities or Emirate-level authorities 
still apply food standards independently of broader national 
authorities.  Most recently, an Emirate briefly required the 
labeling of foods with biotechnology enhanced ingredients; the GSM 
quickly reversed the action.  GSM control over the actions of 
individual municipalities appears to be improving.  However, when 
enacted, differing local standards can be confusing for U.S. 
exporters and their UAE importers. 
 
GOVERNMENT PROCUREMENT 
 
The UAE grants a 10 percent price preference for local firms in 
government procurement.  The UAE requires companies to register with 
 
ABU DHABI 00001865  003 OF 005 
 
 
the government before they can participate in government 
procurements.  To be eligible for registration, a company must have 
at least 51 percent UAE-ownership. This rule does not apply to major 
projects or defense contracts where there is no local company able 
to provide the goods or services required.  Established in 1990, the 
UAE's offset program requires defense contractors that are awarded 
contracts valued at more than $10 million to establish commercially 
viable joint ventures with local business partners that yield 
profits equivalent to 60 percent of the contract value within a 
specified period (usually seven years).  There are also reports, as 
well as anecdotal evidence, indicating that defense contractors can 
sometimes satisfy their offset obligations through an up-front, 
lump-sum payment directly to the UAE Offsets Group.  This 
requirement is designed to further the UAE objective of diversifying 
its economy.  To date, more than 40 such joint-venture projects have 
been launched, including, inter alia, a hospital, an imaging and 
geological information facility, a leasing company, a cooling system 
manufacturing company, an aquiculture enterprise, Berlitz Abu Dhabi 
and a firefighting equipment production facility.  Two of the 
largest offset ventures are an international gas pipeline project 
(Dolphin) and the Oasis International Leasing Company, a British 
Aerospace offsets venture.  The UAE is not a signatory to the WTO 
Agreement on Government Procurement. 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
The UAE has made the protection of intellectual property a priority 
in recent years.  The UAE repealed previous copyright, trademark, 
and patent laws and issued improved legislation in 2002, providing 
high levels of protection for U.S. intellectual property. In 
addition, an agreement between the UAE and U.S. pharmaceutical 
companies provides for de facto patent protection for a number of 
U.S. patent-protected medicines. 
 
The 2002 copyright law grants protections to authors of creative 
works and expands the categories of protected works to include 
computer programs, software, databases and other digital works. 
Efforts to combat computer software piracy in the UAE have been 
successful.  According to 2007 industry estimates, the rate of 
software piracy in the UAE is the lowest in the Middle East, 
estimated to be 34 percent.  The UAE is recognized as the regional 
leader in fighting computer software piracy; although industry 
stakeholders believe the UAE could be doing more to combat piracy. 
 
The UAE also revised its Trademark Law in 2002.  The law confirms 
that the UAE will follow the International Classification System and 
that one trademark can be registered in a number of classes.  The 
law provides that the owner of the registration shall enjoy 
exclusive rights to the use of the trademark as registered and can 
prevent others from using an identical or similar mark on similar, 
identical or related products and services if it causes confusion 
among consumers.  It remains unclear, however, how the UAE provides 
for the protection of geographical indications required by the WTO 
Agreement on Trade-Related Aspects of Intellectual Property Rights 
(TRIPS). 
 
The UAE published the official and final version of its long-awaited 
Patent Law in November 2002.  The Patent Law provides for national 
treatment for intellectual property owners from other WTO Members, 
product and process patent protection, and enforcement of 
intellectual property rights utilizing civil and criminal procedures 
and remedies.  In October 2003, the Ministry of Health issued a 
circular providing protection of test and other data against unfair 
commercial use in the UAE for pharmaceutical products for up to five 
years or until a patent is granted or rejected in the UAE, whichever 
period is shorter.  This is an improvement over the previous 
situation, but protection of test data should not be dependent on 
patent protection. 
 
The UAE is also considering legislation for data protection, privacy 
and other IP-related issues and has consolidated its Intellectual 
Property Rights offices into the Ministry of Economy. 
 
SERVICES BARRIERS 
 
Insurance 
 
About half of the current 47 insurance companies in the UAE are 
foreign-owned.  In 1989, the UAE government banned additional 
foreign insurance companies from opening due to a perception that 
the market was saturated.  In 2004, the Ministry of Economy and 
Planning announced that it would open its insurance sector to new 
foreign insurance companies and in June 2005, the UAE submitted a 
proposal to the World Trade Organization allowing new foreign 
insurance companies to open a branch - not a subsidiary - in the 
UAE.  Any new foreign insurance companies will be required to meet 
high international rating criteria and to offer new products to the 
market.  As of March 2007, no new foreign insurance companies had 
entered the market. 
 
 
ABU DHABI 00001865  004 OF 005 
 
 
In 2006, the UAE President issued Federal Law No. 16 of 2006 
amending some provisions of Federal Law No. 9 of 1984 on insurance 
companies and agents.  The new amendments stipulate that established 
insurance companies in the UAE, or those which shall be 
incorporated, must take the form of a public joint stock company. 
At least 75 percent of the capital in such companies must be owned 
by UAE nationals and the other 25 percent may be owned by a 
foreigner. 
 
Banking 
 
The UAE has 21 national and 25 foreign banks. In 2007, Abu Dhabi 
announced the establishment of Al-Hilal Bank; a new government owned 
Islamic Bank.  Two leading national banks based in Dubai, Emirates 
Bank International and National Bank of Dubai, merged. 
 
Following a banking crisis caused by accumulated bad debts after the 
oil boom in the mid 1980s, the Central Bank stopped granting 
licenses to new foreign banks.  In September 2003, however, the UAE 
Central Bank announced that it would allow the operation of more 
banks from other countries on a reciprocal basis.  The Central Bank 
is also considering allowing foreign banks operating in the UAE to 
set up new branches provided that they employ UAE nationals. In 
January 2007, the UAE Central Bank Governor announced that the 
Central Bank has received applications from some foreign financial 
institutions (including Chinese and Indian banks) to establish 
branches in the UAE. 
Figures by the Central Bank show national banks enjoy a stronger 
financial position than foreign banks, with national banks' assets 
at nearly $213.82 billion compared with foreign banks' assets of 
around $59.13 billion in June 2007.  Banks operating in the Dubai 
International Financial Center, which opened in 2004, operate under 
a different civil and commercial law regime predicated on English 
common law, and are not subject to the above restriction on new 
banks, but are subject to UAE criminal law. 
 
Agent and Distributor Rules 
 
The UAE's Commercial Agencies Law changed substantially in 2006.  As 
originally written, it required that all commercial agents be either 
UAE nationals or companies wholly-owned by UAE nationals.  The 
foreign principal was allowed to appoint one agent for the entire 
UAE or for a particular emirate or group of emirates.  Once chosen, 
agents/distributors had exclusive rights and the law provided that 
an agent could be terminated only by mutual agreement of the foreign 
principal and the local agent.  In 2006, the UAE made important 
changes to the Agencies Law.  The amendments include: (1) limiting 
an agency contract to a fixed time period, the length of the 
contract between the principal and the agent; (2) requiring mutual 
consent to renew an agency agreement; (3) allowing either party to 
file for damages; (4) eliminating the Ministry of Economy's Trade 
Agencies Committee, which handles agency disputes; and (5) allowing 
the import of "liberalized goods" without the agent's approval.  One 
of the most important changes of the amended law for foreign 
investors is that now either party can terminate an agency agreement 
at the end of the contract.  Since 1996, the UAE has not recognized 
new agency agreements in the food sector.  In an effort to curb 
price manipulation and allow unrestricted imports of basic food 
products, the UAE eliminated trading agency requirements for basic 
food products in August 2006.  The food products covered by the 
decision include milk, frozen vegetables, baby formula, chicken, 
cooking oil, noodles, rice, flour, fish products, tea, coffee, 
cheese, pastries and diapers.  For some food products deemed 
non-essential, agency agreements in existence prior to this period 
are still recognized.  The restrictive laws currently governing 
agency relationships are under discussion in the proposed United 
States-UAE Free Trade Agreement. 
 
Telecommunications 
 
As of January 1, 2005, the UAE revoked the monopoly rights of the 
Emirates Telecommunications Corporation (Etisalat) and allowed for 
the creation of a second telecommunications company.  On May 6, 
2005, the Telecommunications Regulatory Authority (TRA) announced 
that it had approved the establishment of a second, largely 
government-owned, telecommunications company, Emirates Integrated 
Technology Company, which will operate under the trade name Du.  The 
UAE government currently owns 40 percent of Du.  The rest of the 
company is held equally by Mubadala Development Company (20 
percent), TECOM Investment (20 percent) and by the UAE public (20 
percent).  Neither foreign nor local telecommunications companies 
are allowed to own shares in Du; nor are companies whose foreign 
ownership exceeds 50 percent.  Local press reports have quoted the 
TRA Director General as stating that the duopoly will continue until 
2015 when the market will be further liberalized. In February 2007, 
Du began mobile phone operation, with half million subscribers as of 
July 2007. Du provides fixed line services through an arrangement 
with Etisalat. 
 
 
 
ABU DHABI 00001865  005 OF 005 
 
 
INVESTMENT BARRIERS 
 
Except for companies located in one of the free zones, at least 51 
percent of a business established in the UAE must be owned by a UAE 
national.  A business engaged in importing and distributing a 
product must be either a 100 percent UAE-owned 
agency/distributorship or a 51 percent UAE-owned/49 percent 
foreign-owned limited liability company.  Subsidies for 
manufacturing firms are only available to those companies with at 
least 51 percent of the capital owned by a UAE national. 
 
The laws and regulations governing foreign investment in the UAE are 
evolving slowly.  There is currently no national treatment for 
investors in the UAE.  Non-GCC nationals cannot own land, but the 
Emirates of Dubai and Ras al Khaimah are currently offering 
so-called freehold real estate ownership to non-GCC nationals within 
certain areas.   In August 2005, UAE President Sheikh Khalifa bin 
Zayed Al-Nahyan, acting in his role as the ruler of the Emirate of 
Abu Dhabi, signed Abu Dhabi law number 19 of 2005 concerning real 
property, which was published in the Abu Dhabi Gazette in September 
¶2005.  The law provides that UAE nationals may own land and 
interests in land throughout the Emirate of Abu Dhabi.  GCC citizens 
will be able to own land within designated investment areas. 
Non-GCC nationals will have the right to own buildings, but not the 
land, in investment areas.  Investors must enter into a leasehold 
arrangement to rent buildings.  Foreign investors may purchase 79 of 
the 128 issues on the UAE stock markets, Abu Dhabi Securities Market 
(ADSM) and Dubai Financial Market (DFM). 
 
Under UAE law, foreign investors are allowed to own up to 49 percent 
of a company.  However, company by-laws in many cases prohibit 
foreign ownership.  Specific sectors where there is a need for 
foreign expertise or where local investments are insufficient will 
be liberalized to allow 100 percent foreign ownership.  Some of the 
sectors which may be liberalized are education, health, professional 
services and computer-related services. 
 
In August 2007, the UAE issued Federal Law No. 10 (2007) which 
amended listing requirements for family owned companies. 
Family-owned businesses can now list on the UAE's two stock markets 
by listing a minimum stake of 30 percent of the company.  Founders 
can now maintain a 70 percent stake.  This law amends the general 
rule of the Federal Companies law, which stipulated that the maximum 
stake that the founders of a public company could hold in a publicly 
listed company was 45 percent. 
 
Dispute resolution continues to be a problem due to foreign 
investors' concerns that pursuing international arbitration may 
jeopardize the investor's business activities in the UAE and a 
reluctance to take disputes to the domestic court system. 
 
ELECTRONIC COMMERCE 
 
In 2002, the Emirate of Dubai passed The Law of Electronic 
Transactions and Commerce, which protects certain electronic records 
and signatures, and some electronic communications.  This law also 
provides penalties for any person who knowingly creates, publishes 
or otherwise makes available a false e-signature or certificate, or 
provides false statements online for fraudulent or any other 
unlawful purpose.  In 2006 the UAE issued a comprehensive national 
law on Information Technology Crimes, which criminalizes a broad 
range of fraudulent activities affecting commerce.   The Emirate of 
Dubai has established the Dubai Technology, Electronic Commerce and 
Media Free Zone (TECOM), which houses both Internet City and Media 
City, two subdivisions which cater, respectively, to the information 
technology and media sectors. 
 
 
End Text. 
 
Sison