Record Trade

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Abu Dhabi's long history as a trading power lives on, with non-oil exports reaching all-time highs and a free trade deal with the European Union (EU) set to be finalised by the end of the year.

The emirate's non-oil exports hit a record $1bn in 2007, according to a recent report from the Customs directorate at the Abu Dhabi Department of Finance (DoF). Re-exports, considered a key growth area for trade, reached a value of almost $655m.

Qatar was the emirate's primary non-oil export partner, importing almost $240m worth of such goods, followed by China ($141m) and Saudi Arabia ($136m). The three leading re-export destinations were India ($152m), Oman ($112m) and Qatar ($104m).

Meanwhile, the emirate imported goods worth $5.1bn last year. The largest exporter to Abu Dhabi was Japan ($1.2bn), followed by Saudi Arabia ($899m) and Germany ($708m). Japan and Saudi Arabia have long been trading partners - the former imports almost half its oil needs from the United Arab Emirates (UAE) - but ties with Germany have developed quickly over recent years.

While oil exports still dwarf non-oil ones (their total worth remains uncertain), breaking the $1bn barrier is an important milestone for Abu Dhabi. The emirate has made increasing the share of its gross domestic product (GDP) contributed by non-hydrocarbon sectors a key goal, while retaining its open and export-oriented economic policy.

According to official figures released by the department of planning and economy in April, plastics, rubber and related materials accounted for 45.4% of non-oil exports in the first six months of 2007, by far the largest proportion. Base metals and derivative products were the second-largest export group, accounting for 13.7% of the total, and machinery the third (12.4%).

Given Abu Dhabi's oil resources, the importance of the plastics industry is understandable. However, in the future, other materials are likely to feature prominently. The emirate is looking into developing its shipbuilding industry, while last year the government's investment arm, Mubadala, launched Abu Dhabi Aircraft Technologies with the aim of establishing an aerospace sector. The organisation hopes to create a centre in Abu Dhabi for the maintenance, repair and overhaul (MRO) of aircraft, and could stimulate the emergence of an aeronautical parts industry. Mubadala's purchase in 2006 of a 35% stake in Italy's Piaggio Aero Industries has been seen as the first step to constructing aircraft in the emirate.

Meanwhile, Abu Dhabi is also positioning itself as a transportation hub, capitalising on its geographical location and the resources it is able to invest in infrastructure. This is likely to fuel further development of the re-export market, which also benefits from the UAE's cordial relations with almost all economies in the region and beyond.

Overall trade, and exports in particular, is set to receive a further boost from the signing of a free trade agreement (FTA) between the Gulf Cooperation Council (GCC), of which the UAE is a member, and the EU. The deal has been under discussion since 1990, and has stalled at times over certain stipulations made by Europe. However, at a bilateral meeting on May 26, Benita Ferrero-Waldner, European Commissioner for external relations and European neighbourhood policy, said the parties were "closer than ever to conclusion". Ahmad bin Abdullah Al Mahmood, Qatar's minister of state for foreign affairs, said experts working on the FTA expected the final details to be ironed out by the end of June and the deal to be inked by year-end. With European manufacturers struggling to remain competitive, the UAE's producers, who benefit from low taxes and liberal labour legislation, are set to gain.

The prospects are somewhat less rosy for another FTA on the table, this time a bilateral one between the UAE and the US. In December 2007, the Office of the US Trade Representative (USTR) announced that negotiations over the deal would not be recommenced under the presidency of George W Bush, who stands down in January next year. With a recent upsurge of protectionist sentiment in the US as the country's economy hits tough times, and the end of Bush's powers to "fast track" the legislation, the FTA has been put on ice. Nonetheless, renewed economic growth may convince the next head of the White House to restart the talks with a country that is fast becoming an economic - and trading - giant.

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