The UAE and the GATS

The UAE, a Gulf Cooperation Council (GCC) country and a federation of seven states (Abu Dhabi, Dubai, Ajman, Fujairah, Ras al Khaimah, Sharjah and Umm al Qaiwain), acceded to WTO membership in 1996, and is therefore signatory to the GATS. The GATS demands а level playing field for national and foreign investors: Most Favoured Nation (MFN) treatment, Article II of the GATS, and National Treatment, Article III of the GATS. The GATS also demands fair competition pursuant to its Article VIII, such that no monopoly-service provision is inconsistent with MFN treatment, and transparency

pursuant to Article III, such that all national laws, regulations, administrative guidelines and international agreements are fully disclosed.

The UAE has earned WTO praise for ‘the openness of its trade regime’, but also a measure of encouragement to:

… pursue its reforms, including further improvement of its multilateral

commitments, with a view to enhancing the transparency and predictability of its trade regime, and its adherence to WTO principles.230

The UAE is still to correct ‘its limits on foreign equity participation’, and ‘the absence of competition legislation’, and the possibility that its ‘importing activities and distribution services’ might have remained ‘reserved for exclusive national agents’.231 Despite this WTO chiding, it is a simple fact that the UAE’s Agency Law232 is not fully GATS- compliant: While the UAE was free under GATS Article II(3) to offer preferential treatment to GCC countries as part of a Regional Trade Agreement, it is no longer free to do so, for the ‘grace’ period for full compliance by developing countries expired for it in 2005. It can no longer, to be WTO-compliant, give preferential treatment to national agents in areas where foreign suppliers of services are also active. The Agency Law, which allows the preferential treatment of national agents in the services sector, has nonetheless not been modified. This is potentially actionable, but no WTO member state has brought the matter before the DSB.

230 _{WTO, ‘Trade Policy Review: United Arab Emirates (UAE)’, 24-26 April, 2006,}

http://www.wto.org/english/tratop_e/tpr_e/tp263_crc_e.htm.

231 _Ibid.

3.3.1 The Dubai Ports World showdown

Although GATS compliance is formally required of all WTO member states, and the UAE’s Agency Law is, as just noted, not fully GATS-compliant because it allows the preferential treatment to national agents active in its services sector, it is not at all clear that there is a real-world obligation for UAE compliance here. Instead, it may be that the national treatment obligation imposed by the GATS is simply not politically viable.

Indicative of this is the furore that erupted in the USA when the UAE’s Dubai Ports World Company, having bought the British-owned Peninsular and Oriental Steam Navigation Company (P&O) as of 2 March 2006, acquired control of the facilities of six US east-coast ports. Technically, vis-à-vis the GATS, the UAE was in a position to refer to the DSB, on ‘national treatment’ and ‘most favoured nation’ heads of action, any US discrimination against it as a buyer of P&O and the attendant rights, particularly since most US foreign ports are foreign operated.233 That, however, has not happened. Instead, Dubai Ports World voluntarily turned over operation of the ports in question to a ‘US entity’.234 _{(Incidentally, another US occurrence of political uproar in the face of a}

prospective foreign purchase happened when the Chinese company CNOOC made a bid to purchase the US oil company UNOCOL.)235

In the light of political showdowns of this kind, it is unlikely that the UAE will be taken to task for its own GATS national treatment (NT) or most favoured nation (MFN)

233 _{Kaplan, Eben, ‘The UAE purchase of American port facilities’, Council on Foreign Relations, 21}

February 2006, http://www.cfr.org/publication/9918/.

234 _{Alfano, Sean, ‘Dubai Company Gives Up On Ports Deal: Move Comes As GOP Leaders Warn Bush that}

Congress Will Block Takeover’, CBS News, 9 March 2006.

shortcomings. Having been denied a benefit of a GATS obligations, and having accepted the denial without demur, the UAE has earned a kind of ‘exempt’ status – not, of course, in terms of the GATS, but in real-politics terms. Indeed, the weakness of the GATS NT and MFN provisions are dramatically exposed in this showdown, their backs broken, as it were, by the power of national politics.

3.3.2 The UAE and its GATS benefits

Not only has there been a massive increase of investment in the UAE’s service sector, but the UAE has itself become an exporter of services. It has a large international air service (Emirates Airlines), an internationally competitive telecommunications company

(Thuraya), the world’s fastest-growing free zone (Jafsa), and a bank (Dubai Islamic Bank) that has acquired significant international reach by instrument of the sukuk, a Sharia’h-compatible set of instruments that are now listed both on the Dubai International Financial Exchange and the London Stock Exchange. To boot, UAE investors, mostly from Abu Dhabi, and together with Qatar investors, owned a 32 percent controlling share236 _{of Britain’s Barclays Bank until it sold its stake in mid-2009, having doubled its}

value.237

The UAE governments have created several new free-trade zones, intending to propose themselves as а ‘global hub’ for portfolio management services, for gold bullion trading and a centre for technological research and development. To this end, they eased the

236 _{Flanagan, Martin, ‘Middle East Backers will “pay what it takes” to block Barclays Bailout’, Scotsman,}

26 January 2009.

237 _{Reece, Damian and Dunkley, Jamie, ‘Barclays shares fall as Abu Dhabi Sheikh sells holding’,} Telegraph, 2 June 2009.

foreign direct investment (FDI) rules regarding specific real-estate projects, especially in Dubai.