EU Trade Barrier Impact on the UAE Economy

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If the EU will lift the trade barrier how UAE economy will be benefited by such government policy

The benefits of lifting the trade barrier for the economy of UAE are obvious. In recent years, there is a tendency for the increase in the volume of trade between the countries of the EU and the UAE. Sultan Bin Saeed Al Mansouri, UAE Minister of Economy states that “The volume of trade exchange during the first half of the year 2012 reached around Dh74.397 billion compared to Dh 146.772 billion in 2011” (UAE urges EU to remove trade barriers, 2012).

In spite of the fact that the major trade partners of the UAE are the countries of the Persian Gulf, the UAE, as well as the EU, is highly interested in developing trade relations between themselves. Now the major task of UAE and the European Union is the acceptance of a free trade agreement. The acceptance of this treaty has its benefits for both sides. One of the most important benefits of it is the promotion of economic growth (Froning, 2000). The free trade agreement implies the lifting of the trade barrier, which in its turn presupposes the absence of such deterrents to growth as the imposition of an additional fee. The appearance of new markets will be an obvious benefit for the development of the UAE economy.

Steel industry in UAE that will be benefited by lifting the trade barrier

The UAE has a lot of possibilities for the development of aluminium and steel industries. Takin into account the good geographical position of the country, it is possible to state the UAE can play a “role of a hub for exporting these metals” (UAE urges EU to remove trade barriers, 2012). The steel industry of any country depends on many factors, and first of all, by it’s supplying with raw materials. Only a small amount of countries is self- sufficient in this respect. At the same time, there are many countries that have “imposed restrictions on the export of these raw materials” (Hericourt & Poncet, 2013).

The aim of such measures is to raise prices on the world markets. On the other hand, the aim of these restrictions is to reduce prices on a domestic market and in such a case to support native producer. That is why Saudi Arabia is among those countries, which have banned the export of such raw material as steel scarp (Hericourt & Poncet, 2013). At the same time, the rapid development of the steel industry in the UAE demands a huge amount of raw materials. In this respect, the UAE is an exporting country, and the lift of the trade barrier will promote the further development of the industry.

If trade between both countries increases how it will impact the exchange rate of their currency with the rest of the world

The increase in the level of trade between the UAE and the countries of the European Union will lead to the currency strengthening of these countries. The exchange rate stability depends upon many factors. It is highly affected by export, import and trade balance indexes (Hericourt & Poncet, 2013).

The rise of the exchange rate and the level of international trade of a state are mutually dependent. The currency as any good has its own price. The lifting of the trade barrier promotes the development of trade relations. A great impact on the currency exchange plays the amount of its circulation. The more currency is in circulation. The higher is the price of this currency. The higher the level of international trade, the greater is the demand in currency. Moreover, it should be taken into consideration that the currency should be supplied by GDP. The development of trade relations means the growth of GDP and the strengthening of the currency.