Market Monitor Series Dubai Exports and the GCC Forthcoming FTA Dr. Belaid Rettab Tarek Abu Fakhr Data Management and Research Department 2005
Published by Dubai Chamber Data Management & Business Research Tel. 04 2028410 Fax: 04 2028478 www.dubaichamber.ae ISBN 9948 430 04-2
Table of Contents Executive Summary (Arabic)... 1 Executive Summary (English)... 3 1. Introduction... 5 2. Objective... 6 3. Data and Methodology... 7 4. Major Export Product Categories of Dubai and the FTA Countries... 8 4.1 Dubai... 8 4.2 USA... 9 4.3 EU... 10 4.4 China... 11 4.5 India... 12 4.6 Pakistan... 13 5. Export Products and Dubai s Forthcoming FTAs... 14 5.1 FTA with USA... 14 5.2 FTA with EU... 16 5.3 FTA with China... 18 5.4 FTA with India... 19 5.5 FTA with Pakistan... 21 6. Evaluation and Recommendations... 24 Annex A: Top 10 Export Products of Dubai and the FTA Countries by HS 6-Digit Code... 26
ملخص تنفيذي يدرس مجلس التعاون الخليجي التوقيع على عدد من اتفاقيات التجارة الحرة مع الولايات المتحدة والاتحاد الا وروبي والصين والهند وباآستان. يقدم هذا التقرير توصيات بش ا ن المنتج ات الت ي يتوج ب تحريره ا ف ي آ ل م ن الاتفاقي ات الح رة وفق ا لمنظ ور دبي. يتضمن التقرير آذلك قواي م بالمنتجات التي تحتاج إلى معاملة حذرة في سياق اتفاقيات التجارة الحرة. ويبني التقرير توصياته على منتجات الصادرات الري يسية لدبي للعام 2003 لكنه لا يا خذ في الاعتبار التغييرات التي تحدث آل عام في هذه المنتجات. إضافة إلى ذلك على الرغم من أن أدبيات النظريات التجارية تع رف الدولة التي لها "أفضلية تنافس ية" في منتج معين با نها الدولة التي تنتج ذلك المنتج بتكلفة أق ل مقارن ة ب ا ي دول ة أخ رى إلا أن ه ذا التقري ر لا يتط رق إل ى تك اليف الا نتاج لكنه يفترض ظهور الا فضلية التنافسية في نماذج التجارة. لذلك يجب التعامل مع النتاي ج بشيء من الحذر. استوردت دول اتفاقيات التجارة الحرة حصة مشترآة بلغت %32 من إجمالي ص ادرات دب ي الت ي حقق ت 1.8 ملي ار دولار ف ي عام 2003. وآان للاتحاد الا وروبي الحصة الا آبر في هذه الصادرات حيث بلغت %13 تا تي بع ده الولاي ات المتح دة ب %7 الهند %6 وباآستان والصين %3 لكل منهما. وقد شكلت خلاي ط الا لمنيوم الخام أآبر صادرات دبي بحص ة بلغ ت %24.6 م ن إجمالي صادرات الا مارة في العام المذآور. تق وم ال دول المتقدم ة ذات الا ج ور المرتفع ة المش ارآة ف ي اتفاقي ات التج ارة الح رة م ع دول المجل س مث ل الولاي ات المتح دة والاتح اد الا وروب ي بتص دير منتج ات التكنولوجي ا العالي ة وتش مل المف اعلات النووي ة المراج ل الا لات والا جه زة الكهربي ة والمرآبات. من جهة أخرى أوضحت الصين والهند وباآستان التي توجد بها عمال ة رخيص ة نس بيا بع ض التش ابه ف ي ق واي م أعلى منتجات الصادرات خاصة في الوقود المعدني الملابس من غير المصنرة أو الكروشيه. تعتبر خلاي ط الا لمنيوم الخام المنتج الوحيد الذي يوصى هذا التقري ر بتحري ره ف ي آ ل اتفاقي ات التج ارة الح رة القادم ة ويوص ي آذلك باستثناء الا لمنيوم الخ ام غي ر المخل وط م ن اتفاقي ة التج ارة الح رة م ع الاتح اد الا وروب ي فق ط. م ن المنتج ات الت ي يتوج ب النظر في تحريرها في اتفاقيات التجارة الحرة مع آل من الولايات المتح دة والاتح اد الا وروب ي قمص ان (ت ي ش يرت) وقمص ان قصيرة با آمام أو بدونها وما يماثلها من قطن بنطلونات عادية وبنطلون ات بص درية وحم الات متص لة به ا وبنطلون ات با رج ل ضيقة تغطي الرآب وبنطلونات قصيرة (شورت) من قطن للنساء أو البنات وآذلك أح واض غس يل (مج الي) ومغاس ل وقواع د مغاس ل وأح واض اس تحمام وأح واض اس تبراء "بيدي ه" ومقاع د م راحيض وخزان ات تفري غ المي اه (س يفون) ومب اول وأص ناف صحية مماثلة ثابتة من خزف. 1
هنالك عدة منتج ات ص ادرات مش ترآة إل ى الهن د وباآس تان يمك ن تحريره ا وه ي زي وت التزيي ت نفاي ات م ن ال ورق وال ورق المقوى وآ ذلك خ ردة م ن خلاي ط ص لب أو ص لب مق اوم للص دأ وال بلاط وترابي ع م ن خ زف للتبل يط أو التغطي ة (للج دران أو المداخن) مصقولة (مزججة) أو مطلية بالميناء. يوصي التقرير باستثناء اللوبياء والفاصولياء الغير مجمدة من آل اتفاقيات التجارة الحرة القادمة. تتش ابه المنتج ات الت ي يوص ى بدراسة استثناي ها من اتفاقيات التجارة الحرة مع الولايات المتحدة والاتحاد الا وروبي. وهذه المنتجات هي س كر القص ب أو س كر شوندر (بنجر) أو سكروز نقي آيماويا بحالت ه الص لبة دقي ق الحنط ة (قم ح) بع ض ال دهون والزي وت النباتي ة زي وت تزيي ت دهانات أساسها بوليمرات طبيعية نفايات م ن ورق أو ورق مق وى فض لات وخ ردة م ن خلاي ط ص لب أو ص لب مق اوم للص دأ ونحاس وألمنيوم وقضبان وعيدان خلاي ط ألمنيوم. لدى آل من الصين والهن د وباآس تان العدي د م ن منتج ات الص ادرات المش ترآة الت ي يج ب دراس ة اس تثناؤها وه ي: بنطلون ات عادية وبنطلونات بصدرية وحمالات متصلة بها وبنطلونات با رجل ضيقة تغطي الرآب وبنطلونات قصيرة (شورت) من قطن للنس اء أو البن ات وعط ور ومي اه تجمي ل (توالي ت) وأح واض غس يل (مج الي) ومغاس ل وقواع د مغاس ل وأح واض اس تحمام وأحواض استبراء "بيديه" ومقاعد مراحيض وخزانات تفريغ المياه (سيفون) ومباول وأصناف صحية مماثل ة ثابت ة م ن خ زف والق وارير الض خمة (دمجان ات) وقن اني وق وارير ودوارق وبرطمان ات وغيره ا م ن الا وعي ة المماثل ة م ن زج اج ودعام ات (مساند) ومعدات مماثلة للسقالات أو لهياآل المنشا ت المو قتة أو لدعامات المناجم من حديد وصلب. إن المنتجات التي يوصي التقرير بتحريرها هي تلك التي يبدو أن ل دبي فيه ا أفض لية تنافس ية وتعتب ر ف ي غاي ة الا همي ة للا م ارة حيث أن حجم صادراتها إلى دول اتفاقيات التجارة الحرة يمكن تعزيزه إذا تم ترويجها وتطويرها بشكل أفضل. ف ي ه ذا الس ياق يمكن للحكومة أن تقدم دعمها عبر مجموعة واسعة من الخدمات التي تشمل: - توفير المعلومات حول سياسة التج ارة الخارجي ة الت ي تنتهجه ا ال دول الا ط راف ف ي اتفاقي ات التج ارة الح رة وقوانينه ا التجارية - تطوير وتوزيع معلومات الا بحاث التي تجرى عن السوق في دول الاتفاقية - تنظيم البعثات والمعارض التجارية في دول الاتفاقية - تعزيز تطوير الكفاءة - تقديم الاستشارات الاقتصادية - تقديم المساعدة في تمويل الصادرات من جهة أخرى يتوجب تقييم ا ثار اتفاقيات التجارة الحرة على المنتجات الت ي أوص ى التقري ر باس تثناي ها وبالت الي الت ي لا تتمت ع دبي با فضلية تنافس ية فيه ا قبي ل التوقي ع عل ى أي م ن ه ذه الاتفاقي ات وذل ك حت ى لا يتض رر المنتج ون المحلي ون م ن التحري ر المباشر للتجارة. 2
Executive Summary The Gulf Cooperation Council (GCC) is working on signing a number of the free trade agreements (FTAs) with USA, EU, China, India, and Pakistan. This report advises on products recommended for liberalization in each of the forthcoming FTAs from Dubai s perspective. It also lists products in need of an attentive treatment in the context of the FTAs. The report, however, builds on major exports products for the year 2003 and does not take into consideration year-to-year changes in these products. Moreover, although trade theory literature defines a country with comparative advantage in a certain product as one which produces that product at lower opportunity than any other country, this report does not go into production costs, but assumes the comparative advantage to be demonstrated in trade patterns. Therefore, results should be treated with some caution. The FTA countries imported a combined share of 32% of Dubai s $1.8 billion exports in 2003, of which the EU had the biggest share of 13%, followed by the USA with 7%, India with 6%, and Pakistan and China with 3% each. Dubai s top export product was unwrought aluminium alloys, with a share of 24.6% of the Emirate s total exports in the said year. The developed high-wage FTA countries, USA and the EU, tend to export more high-tech products including nuclear reactors, boilers, machinery and mechanical appliances, electrical machinery and equipment, and vehicles. On the other hand, China, India, and Pakistan, in which labor is relatively cheap, showed some similarities in their top export products lists, specifically in mineral fuels, and knitted and unknitted articles of apparel and clothing. Unwrought aluminium alloys are the only product recommended to be liberalized in all the forthcoming FTAs, while unwrought aluminium non-alloys are only excluded from the EU FTA. Products to be considered for liberalization in the FTAs with both USA and the EU are knitted t- shirts, singlets and other vests of cotton; unknitted women s trousers, overalls, breeches and shorts of cotton; and ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures. 3
India and Pakistan had many common export products considered for liberalization. These are lubricating oils; waste and scrap of paper or paperboard, and of iron and steel; and glazed ceramic flags & paving, hearth or wall tiles. Shelled non-frozen beans are the only product recommended to be excepted from all the forthcoming FTAs. Most of the products to be considered for exception from the FTA with USA are similar to those with the EU. They are refined crystal sugar in solid form; wheat flour; some vegetable fats & oils; lubricating oils; paints; polyethylene in primary forms; waste & scrap of paper or paperboard, iron & steel, copper, and aluminium; and non-alloyed aluminium bars and rods. China, India, and Pakistan had many common export products to be considered for exception. These are cotton shirts, trousers, overalls, breeches & shorts, singlets & other vests; perfumes & toilet waters; ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures; carboys, bottles, flasks, jars, pots, phials & other containers of glass; and equipment for scaffolding, shuttering, propping or pit propping of iron or steel. The products recommended for liberalization are those in which Dubai seems to have a comparative advantage, and are crucial for the Emirate as their export volume to the FTA countries could be enhanced if they are well promoted and developed. In this context, the Government can provide support through a wide range of services which include: - providing information on the FTA countries foreign trade policy, trade laws and regulations; - developing and distributing market research information on the FTA countries; - organizing trade missions and fairs to the FTA countries; - enhancing competency development; - offering business counseling; and - providing export financing assistance. On the other hand, the implications of the FTAs on the products considered for exception and hence in which Dubai stands at a comparative disadvantage ought to be assessed prior to any FTA conclusion, so that local producers do not get severely hit by trade direct liberalization. 4
1. Introduction A strong and performing external sector has always been linked with growth enhancement of world economies. Among other factors, export performance is affected by market access conditions, which in turn are determined by the extent of trade liberalization. Further to the commitment of the GCC towards further development and liberalization of its economic and commercial relations with different countries and international economic groups, it is working on signing a number of the free trade agreements (FTAs). Countries with which FTAs are forthcoming have been chosen according to the volume of reciprocal trade and include USA, EU, China, India, and Pakistan. The objective of this project is to identify export products in which Dubai has a comparative advantage in each of the countries/regions in order to give those products priority in trade liberalization. It also aims at identifying export products in which Dubai stand at a comparative disadvantage, and hence need to be treated attentively. In addition to this introductory section, the report contains five other sections. Section 2 defines the objective of the study while section 3 explains the data and methods used in carrying out the project. Section 4 lists the major export product categories of Dubai and the FTA countries, and section 5 recommends products for liberalization and for attentive treatment in the FTAs from Dubai s perspective. Finally, section 6 closes with an evaluation and recommendations. 5
2. Objective The objective of this project is to identify export products in which Dubai has a comparative advantage in each of the FTA countries in order to give those products priority in trade liberalization. It also aims at identifying export products in which Dubai stand at a comparative disadvantage, and hence need to be treated attentively. The report will aim at answering the following questions: 1. What are the major export product categories of Dubai and the FTA countries? 2. What are the export products which Dubai needs to liberalize in the forthcoming FTAs? 3. What are the export products which Dubai needs to treat attentively in the forthcoming FTAs? 6
3. Data and Methodology Data on Dubai s world exports and those to each of the FTA countries was used as released by Dubai Department of Ports & Customs. Export data of the FTA countries was collected from United Nations Commodity Trade Statistics Database (COMTRADE). The report looks at major export products of Dubai to each of the FTA countries, and recommends their liberalization in the forthcoming agreements. Major export products are those which individually accounted for a minimum of 1% of Dubai s total exports to each country, and the Emirate is hence assumed to bear a comparative advantage in these products in the relevant country. On the other hand, Dubai is assumed to stand at a comparative disadvantage in those products which are on the Emirate s top worldwide export list, but are not among the major exports to the FTA countries. The report hence recommends impact assessment of liberalizing these products prior to their liberalization. For the purpose of this report, which builds on data for the year 2003, the European Union (EU) refers to the EU prior to enlargement as the 10 new Member States joined in 2004. The EU hence includes only the following 15 Member States: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom. 7
4. Export Characteristics of Dubai and the FTA Countries 4.1 Dubai Dubai exports in 2003 stood at a total value of $1.8 billion. Among the FTA countries, the EU imported the biggest share of the Emirate s exports, which amounted to 13%. As much as 7% of Dubai s total exports were destined to USA, 6% were to India; while Pakistan and China had a share of 3% each (Figure 1). All in all, a combined share of 32% of Dubai s exports went to FTA countries, which elucidates the importance of these countries and explains the Emirate s thrust towards signing FTAs with them. Figure 1: Share of Dubai Exports to FTA Countries Other, 68% EU, 13% USA, 7% China, 3% India, 6% Pakistan, 3% Aluminium and articles thereof topped the export product categories list, constituting 36.1% of Dubai s total exports. Articles of unknitted apparel and clothing accessories came second, followed by sugars and sugar confectionery, each with a share of 5.8% of the Emirate s total exports in 2003. The top ten product categories, which also included plastics, ceramic products, and iron and steel, had a combined share of 73% of total exports (Table 1). Table 1: Dubai Top Export Products by HS 2-Digit Code, 2003 Code Product Trade Value Million($) % of Total 76 ALUMINIUM AND ARTICLES THEREOF 647 36.1% 62 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED. 104 5.8% 17 SUGARS AND SUGAR CONFECTIONERY 104 5.8% 27 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES; MINERAL WAXES 100 5.6% 39 PLASTICS AND ARTICLES THEREOF. 79 4.4% 69 CERAMIC PRODUCTS 78 4.4% 72 IRON AND STEEL. 72 4.0% 73 ARTICLES OF IRON OR STEEL 45 2.5% 61 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED OR CROCHETED 43 2.4% 70 GLASS AND CLASSWARE 41 2.3% Top 10 1,312 73.2% Total 1,792 Source: Dubai Department of Ports & Customs 8
4.2 USA USA total exports amounted to $723.6 billion in 2003, with the top ten product categories collectively contributing to 69% of total exports. Nuclear reactors, boilers, machinery and mechanical appliances topped the list with 18%, followed by electrical machinery and equipment (15.6%) and vehicles (9%). Other top export product categories included optical instruments, aircrafts and spacecrafts, plastics, and organic chemicals (Table 2). Table 2: USA Top Export Products by HS 2-Digit Code, 2003 Code Product Trade Value Million ($) % of Total 84 NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF. 130,763 18.1% 85 ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND 112,593 15.6% ACCESSORIES OF SUCH ARTICLES. 87 VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING- STOCK, AND PARTS AND ACCESSORIES THEREOF. 65,181 9.0% OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING, 90 CHECKING, PRECISION, MEDICAL OR SURGICAL INSTRUMENTS 44,032 6.1% AND APPARATUS; PARTS AND ACCESSORIES THEREOF. 88 AIRCRAFT, SPACECRAFT AND PARTS THEREOF. 39,630 5.5% 39 PLASTICS AND ARTICLES THEREOF. 28,932 4.0% 29 ORGANIC CHEMICALS. 23,204 3.2% 99 COMMODITIES NOT ELSEWHERE SPECIFIED. 22,733 3.1% 30 PHARMACEUTICAL PRODUCTS. 15,938 2.2% 71 NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES, PRECIOUS METALS AND ARTICLES THEREOF; IMITATION 15,232 2.1% JEWELLERY; COIN. Top 10 498,238 68.9% Total 723,609 Source: United Nations Commodity Trade Statistics Database (COMTRADE) Further detailed lists (by HS 6-Digit Code) of top 10 export products of each of the FTA countries, as well as Dubai, are attached to this report as Annex A. 9
4.3 EU 1 With Germany as the world's largest exporter in 2003, the EU s total exports to the world totaled $2,823 billion, displaying a top ten export product list comparable with that of the US. Again, nuclear reactors, boilers, machinery and mechanical appliances topped the EU s list with 15.5%, followed by vehicles (12.7%) and electrical machinery and equipment (9.8%). The EU s top ten product categories, which also included pharmaceutical products, plastics, mineral fuels, oils and waxes, added up to 62% of the Union s total exports in 2003 (Table 3). Table 3: EU Top Export Products by HS 2-Digit Code, 2003 Code Product Trade Value % of Total Million($) 84 NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF. 438,251 15.5% 87 VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING- STOCK, AND PARTS AND ACCESSORIES THEREOF. 358,526 12.7% ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS 85 THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS 276,726 9.8% AND ACCESSORIES OF SUCH ARTICLES. 30 PHARMACEUTICAL PRODUCTS. 130,754 4.6% 39 PLASTICS AND ARTICLES THEREOF. 112,070 4.0% 27 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES; MINERAL WAXES. 99,480 3.5% 29 ORGANIC CHEMICALS. 97,663 3.5% OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING, 90 CHECKING, PRECISION, MEDICAL OR SURGICAL INSTRUMENTS 93,551 3.3% AND APPARATUS; PARTS AND ACCESSORIES THEREOF. 99 COMMODITIES NOT ELSEWHERE SPECIFIED. 80,404 2.8% 48 PAPER AND PAPERBOARD; ARTICLES OF PAPER PULP, OF PAPER OR OF PAPERBOARD. 66,776 2.4% Top 10 1,754,202 62.1% Total 2,822,950 Source: United Nations Commodity Trade Statistics Database (COMTRADE) It of relevance to note that the EU enlargement, which took place on May 1, 2004, increased the EU s population by more than 80 million; i.e. an increase of some 20% to the EU s consumer base. 1 For the purpose of this report, which builds on data for the year 2003, the European Union (EU) refers to the EU prior to enlargement. 10
4.4 China China s market-oriented economic reforms since 1978 have made its exports more sensitive to market signals, helped in granting it accession to the WTO in December 2001, and enabled it to become one of the major players in the international market, and the 4th largest trader in the world. China s exports in 2003 totaled $438.2 billion with 20% being electrical machinery and equipment. Nuclear reactors, boilers, machinery and mechanical appliances contributed to 19% of total exports. Prevailing as the world s largest clothing exporter and second largest textile exporter, unknitted and knitted articles of apparel and clothing accessories had respective shares of 5.7% and 4.7%. China s top ten exports had a collective share of 66% of total exports (Table 4). Code 85 84 62 61 95 Table 4: China Top Export Products by HS 2-Digit Code, 2003 Product ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES. NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF. ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED. ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED OR CROCHETED. TOYS, GAMES AND SPORTS REQUISITES; PARTS AND ACCESSORIES THEREOF. Trade Value Million($) % of Total 88,957 20.3% 83,377 19.0% 25,079 5.7% 20,678 4.7% 13,279 3.0% 64 FOOTWEAR, GAITERS AND THE LIKE; PARTS OF SUCH ARTICLES. 12,955 3.0% FURNITURE; BEDDING, MATTRESSES, MATTRESS SUPPORTS, CUSHIONS AND SIMILAR STUFFED FURNISHINGS; LAMPS AND 94 LIGHTING FITTINGS, NOT ELSEWHERE SPECIFIED OR INCLUDED; ILLUMINATED SIGNS, ILLUMINATED NAME-PLATES AND THE LIKE; PREFABRICATED BUILDINGS. 12,895 2.9% 27 90 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES; MINERAL WAXES. OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING, CHECKING, PRECISION, MEDICAL OR SURGICAL INSTRUMENTS AND APPARATUS; PARTS AND ACCESSORIES THEREOF. 11,114 2.5% 10,558 2.4% 39 PLASTICS AND ARTICLES THEREOF. 9,978 2.3% Top 10 288,871 65.9% Total 438,228 Source: United Nations Commodity Trade Statistics Database (COMTRADE) 11
4.5 India India remains one of the countries with the most restrictive trade regimes, and its average tariff remains one of the highest in the world. A range of non-tariff barriers continues to be in use, including some import bans, import restrictions through state trading monopolies, and stringent standards or certification requirements. Overall, measured by the IMF s trade restrictiveness index, India stands at 8 (on a scale of 1 to 10) compared with 5 for China and 4 5 for other countries in East Asia. India s exports have grown faster than GDP during the last few decades. In 2003, total exports stood at $63 billion with pearls and precious stones and metals topping the exports list with a share of 16.8%. Next came mineral fuels, oils and waxes (5.9%), followed by unknitted articles of apparel and clothing accessories (5.5%) and organic chemicals (4.4%). India s top ten export product categories had a combined share of 54.4% of the country s total exports (Table 5). Code 71 27 62 Table 5: India Top Export Products by HS 2-Digit Code, 2003 Product NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES, PRECIOUS METALS AND ARTICLES THEREOF; IMITATION JEWELLERY; COIN. MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES; MINERAL WAXES. ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED. Trade Value Million($) % of Total 10,605 16.8% 3,688 5.9% 3,498 5.5% 29 ORGANIC CHEMICALS. 2,789 4.4% 61 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED OR CROCHETED. 2,668 4.2% 72 IRON AND STEEL. 2,559 4.1% 84 NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF. 2,475 3.9% 52 COTTON. 2,435 3.9% 85 ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES. 1,876 3.0% 87 VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING- STOCK, AND PARTS AND ACCESSORIES THEREOF. 1,722 2.7% Top 10 34,315 54.4% Total 63,029 Source: United Nations Commodity Trade Statistics Database (COMTRADE) 12
4.6 Pakistan Pakistan's exports have moved from primary products to manufactures, in which it has a heavy and growing reliance on low technology products (primarily textiles and clothing). Pakistan s exports in 2003 totaled $12.7 billion with cotton exports accounting to as much as 23% of the country s total exports during the said year. Other textile and worn clothing articles came second with a share of 18.5%, followed by knitted and unknitted articles of apparel and clothing accessories with respective shares of 11.5% and 7.8%. Pakistan s top ten export product categories amounted to a high share of 80% of its total exports in 2003 (Table 6). Table 6: Pakistan Top Export Products by HS 2-Digit Code, 2003 Code Product Trade Value Million($) % of Total 52 COTTON. 2,911 22.9% 63 OTHER MADE UP TEXTILE ARTICLES; SETS; WORN CLOTHING AND WORN TEXTILE ARTICLES; RAGS. 2,345 18.5% 61 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED OR CROCHETED. 1,458 11.5% 62 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED. 988 7.8% 10 CEREALS. 639 5.0% 42 ARTICLES OF LEATHER; SADDLERY AND HARNESS; TRAVEL GOODS, HANDBAGS AND SIMILAR CONTAINERS; ARTICLES OF 479 3.8% ANIMAL GUT (OTHER THAN SILK-WORM GUT). 54 MAN-MADE FILAMENTS. 454 3.6% 89 SHIPS, BOATS AND FLOATING STRUCTURES. 313 2.5% 27 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES; MINERAL WAXES. 296 2.3% 95 TOYS, GAMES AND SPORTS REQUISITES; PARTS AND ACCESSORIES THEREOF. 264 2.1% Top 10 10,146 79.9% Total 12,695 Source: United Nations Commodity Trade Statistics Database (COMTRADE) Finally, it is important to note that India has the most diversified export product categories, as its top ten exports accounted only for 54.4% of its total exports, compared to the FTA countries range from 62.1% in the EU to 79.9% in Pakistan in which exports are least diversified. 13
5. Export Products and Dubai s Forthcoming FTAs 5.1 FTA with USA Dubai s exports to USA stood at a total value of $119.9 million in 2003. The major export products to USA accounted for a combined share of 63% of Dubai s total exports to USA in 2003. These products included unwrought aluminium non-alloys (20.1% of total exports to USA); unwrought aluminium alloys (19.4%); and ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures (6.5%). Other major products included blouses, shirts, trousers, overalls, breeches & shorts, singlets & other vests; equipment for scaffolding, shuttering, propping or pit propping of iron or steel, and frozen shrimps & prawns (Table 7). Table 7: Products Considered for Liberalization in the FTA with USA 14
On the other hand, products in which local producers are at a comparative disadvantage with USA consisted mainly of refined crystal sugar in solid form; wheat flour; sweet biscuits; some vegetable fats & oils; shelled non-frozen beans; lubricating oils; paints; perfumes & toilet waters; polyethylene in primary forms; waste & scrap of paper or paperboard, iron & steel, and aluminium; glazed ceramic flags & paving, hearth or wall tiles; carboys, bottles, flasks, jars, pots, phials & other containers of glass; and non-alloyed aluminium bars and rods (Table 8). Table 8: Products Considered for Exception from the FTA with USA 15
5.2 FTA with EU In 2003, exports to the EU accounted for a total volume of $236.3 million. The top exports to the EU constituted a share of 74.1% of Dubai s total exports to the country. These included unwrought aluminium alloys (30.5%); glazed ceramic flags & paving, hearth or wall tiles (9.7%); and equipment for scaffolding, shuttering, propping or pit propping of iron or steel (4.8%). Other products were perfumes and toilet waters; ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures; articles of gold jewelry; blouses, shirts, trousers, overalls, breeches & shorts, singlets & other vests cast articles of iron and steel; and sweet biscuits (Table 9). Table 9: Products Considered for Liberalization in the FTA with EU 16
Products in which the EU displayed a comparative advantage included refined crystal sugar in solid form; wheat flour; some vegetable fats & oils; shelled non-frozen beans; lubricating oils; paints; perfumes & toilet waters; polyethylene in primary forms; waste & scrap of paper or paperboard, iron & steel, copper, and aluminium; unwrought aluminium non-alloys; and nonalloyed aluminium bars and rods. Once again, this list seems quite comparable with that of the US (Table 10). Table 10: Products Considered for Exception from the FTA with EU 17
5.3 FTA with China Dubai s exports to China stood at a total value of $57.4 million in 2003. The major export products to China accounted for a combined share of 94.5% of Dubai s total exports to China in 2003. These products included unwrought aluminium alloys (44.6%); polyethylene in primary forms (22.5%); unwrought aluminium non-alloys (9.7%); and copper waste & scrap (6.2%). Other major products included aluminium waste & scrap; aluminium reservoirs, tanks, vats & similar containers, not fitted with mechanical or thermal equipment; raw skins of sheep or lambs with wool on; and cuttle fish (frozen, dried, salted or in brine) (Table 11). Table 11: Products Considered for Liberalization in the FTA with China On the other hand, products in which local producers are at a comparative disadvantage with China consisted mainly of cotton shirts, trousers, overalls, breeches & shorts, singlets & other vests; refined crystal sugar in solid form; sweet biscuits; some vegetable fats & oils; shelled nonfrozen beans; paints; perfumes & toilet waters; glazed ceramic flags & paving, hearth or wall tiles; ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures; carboys, bottles, flasks, jars, pots, phials & other containers of glass; and equipment for scaffolding, shuttering, propping or pit propping of iron or steel (Table 12). 18
Table 12: Products Considered for Exception from the FTA with China 5.4 FTA with India In 2003, exports to India accounted for a total volume of $113.2 million. The top exports to India constituted a share of 80% of Dubai s total exports to the country. These included unwrought aluminium alloys (43.2%); waste & scrap of copper (7.6%), aluminium (7.3%), and paper and paperboard (4.6%). Other products were aluminium non-alloys; waste and scrap of iron and steel, zinc, and stainless steel; gasoline and other lubricating oils; quicklime (calcium oxide); and glazed ceramic flags & paving, hearth or wall tiles (Table 13). 19
Table 13: Products Considered for Liberalization in the FTA with India Products in which India displayed a comparative advantage included cotton shirts, trousers, overalls, breeches & shorts, singlets & other vests; refined crystal sugar in solid form; sweet biscuits; some vegetable fats & oils; shelled non-frozen beans; perfumes & toilet waters; ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures; carboys, bottles, flasks, jars, pots, phials & other containers of glass; equipment for scaffolding, shuttering, propping or pit propping of iron or steel; and bars, rods & profiles of aluminium, not alloyed (Table 14). 20
Table 14: Products Considered for Exception from the FTA with India 5.5 FTA with Pakistan Finally, Dubai s exports to Pakistan were most diversified and reached $60.7 million, of which 72% was accounted by the products bearing comparative advantage. These products included refined crystal sugar in solid form (18.4%); waste and scrap of iron and steel (14.0%) and aluminium (6.6%); and lubricating oils (6.2%). Other major products included unwrought aluminium (alloys and non-alloys); bars, rods & profiles of un-alloyed aluminium; cans for aerating beverage and fruit juices; waste and scrap of paper and paperboard; beverages; gasoline; polyethylene and saturated polyesters in primary forms; glazed ceramic flags & paving, hearth or wall tiles; glassware of a kind used for tables or kitchen purposes; and carton, boxes and cases of paper or paperboard (Table 15). 21
Table 15: Products Considered for Liberalization in the FTA with Pakistan Products in which Pakistan showed a comparative advantage included cotton shirts, trousers, overalls, breeches & shorts, singlets & other vests; shelled non-frozen beans; wheat flour; chocolate & other food preparations containing cocoa; perfumes & toilet waters; ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures; carboys, bottles, flasks, jars, pots, phials & other containers of glass; and equipment for scaffolding, shuttering, propping or pit propping of iron or steel (Table 16). 22
Table 16: Products Considered for Exception from the FTA with Pakistan 23
6. Evaluation and Recommendations Before getting into evaluation of the findings of this report, the following reservations are in order: 1. These results are based on a comparison exercise between major export commodities based on trade statistics for 2003, the most recent available. However, the composition of major export commodities could have changed from year to year. Therefore, results should be treated with some caution. 2. From trade theory literature, a country has a comparative advantage in a certain product if it produces that product at lower opportunity than any country else. However, this report does not go into production costs, but assumes the comparative advantage to be demonstrated in trade patterns. Also here, caution is required. The report recommends the liberalization of Dubai s major export products to each of the FTA countries, and an attentive treatment to those products which are on the Emirate s top worldwide export list, but are not among the major exports to the FTA countries. The developed high-wage FTA countries, USA and the EU, tend to export more high-tech products such as machinery and vehicles. On the other hand, China, India, and Pakistan, in which labor is relatively cheap, tend to export low-tech products such as articles of apparel and clothing. Therefore, it is noticed that most of the products recommended for liberalization in an FTA with USA and the EU, are recommended to be excepted in the FTAs with China, India and Pakistan. These include knitted t-shirts, singlets and other vests of cotton; unknitted women s trousers, overalls, breeches and shorts of cotton; and ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing cisterns, urinals & similar sanitary fixtures. Vice-versa, most of the products recommended for exception in an FTA with USA and the EU, are recommended to be liberalized in the FTAs with China, India and Pakistan. These include 24
lubricating oils; waste and scrap of paper or paperboard, and of iron and steel; and glazed ceramic flags & paving, hearth or wall tiles. The products in which Dubai seems to have a comparative advantage are crucial for the Emirate, as their export volume to the FTA countries could be enhanced if they are well promoted and developed. In this context, the Government can provide support through a wide range of services which include: - providing information on the FTA countries foreign trade policy, their trade laws and regulations; - developing and distributing market research information on the FTA countries; - organizing trade missions and fairs to the FTA countries; - enhancing competency development; - offering business counseling; and - providing export financing assistance. On the other hand, the implications of the FTAs on the products in which Dubai stands at a comparative disadvantage ought to be assessed prior to any FTA conclusion, so that local producers do not get severely hit by trade direct liberalization. 25
Annex A: Top 10 Export Products of Dubai and the FTA Countries by HS 6-Digit Code A.1. Dubai A.2. USA 26
A.3. EU A.4. China 27
A.5. India A.6. Pakistan 28