The UAE’s Foreign Direct Investment in US Market

Executive Summary

The trade between the United Arab Emirates and the United States has been increasing in the last decade. Indeed, the United States is the leading trade partner of the United Arab Emirates in the Middle East. The trade between the two countries reached more than $24 billion in 2014. The UAE exports various products to the United States. The exports include Crude Petroleum, Refined Petroleum, Gold, Petroleum Gas, Raw Aluminum, and food and agricultural products such as Dates. One of the leading producers and exporters of Dates in the UAE is the Al Foah Company, which is one the world’s largest producer of Dates. In 2011, the trade volume between the two countries was $18.3 billion, which was a 43% increase over 2010. In 2014, the United States exported approximately $22.11 billion worth of products and services. The trade between the two countries in the same period was $24.92 (The World Bank, 2015). In essence, the United States exported to UAE than it imported from the country. The political, social, economic, and legal environment, as well as demand for Dates and related products in the United States is a major driver of trade between the two countries.

The political environment in the US is stable and dedicated to the rule of law and hence its attractiveness to the United Arab Emirates. The legal framework in the US is also favorable to importers from the UAE since intellectual property rights are highly upheld. In addition, the socio-cultural environment is also a major player in attracting the importation of Dates from the UAE. The country’s population is diverse. Hence, it increases a considerable demand for Dates since there is an increasing health conscious population, which drives demand for the Dates. The importation framework in the US is also favorable due to good infrastructure, as well as the good legal framework that guides the management of the imports sector in the country. Lastly, the US foreign direct investment sector is the world’s largest due to a good investment environment.

Introduction

The United States of America is the world’s largest import market, as well as the top foreign direct investment (FDI) destination. Developments such as the country’s robust economy and highly attractive important environment allow it to maintain competitiveness in the world. The United States imports various products from its trading partners such as technology products, agricultural and food products, and machinery among others. The country is a major trading partner with the United Arab Emirates (UAE). The UAE is the largest export market for the United States. This partnership confirms the close relationship between the two countries (Steenkamp & de Jong, 2010). The leading exports from the UAE to the United States include Crude Petroleum, Refined Petroleum, Gold, Petroleum Gas, and Raw Aluminum.

However, apart from the above products, the country exports other numerous products. One of the products is Dates, which are a major food product in the United Arab Emirates and a significant export product to the United States and the world (Ku-Graf, 2008). One of the major exporters of the Dates is the Al Foah Company, which is among the world’s largest Dates production and exporting companies (Al Foah, 2015). Al Foah is one of the companies that export their Dates to the international markets, including the United States (Faeth, 2009). This paper will investigate how the US market supports exporters and/or encourages foreign direct investment from the UAE.

The Business Environment in the US

The business environment of as country is a function of many factors, which include political, legal, socio-cultural issues and demand for specific products. In this case, several factors in the US business environment promote its trade for Dates among other products with the UAE. Firstly, the political environment is one of the most attractive factors for exporters and investors from the United Arab Emirates and others across the world. The country has a strong democratic political environment where the rule of law is applied effectively. The country also enjoys a major political and economic influence in both the local and international policymaking (Foad, 2010). The steadiness of the country means that investors and exporters are assured of a stable economic situation in the short-term and long-term basis and hence the reason why it is a preferred destination for Dates imports from the UAE. Although the two countries do not have Free Trade Agreements, the Trade & Investment Framework Agreement (TIFA) promotes trade and investment between the two countries (Hill, 2008).

Further, the US-UAE Economic Policy Dialog (EPD) meets twice per year to discuss new and ongoing initiatives aimed at deepening trade between the two countries (Hamilton & Webster, 2015). Some of the key issues that the EPD discusses comprise the reformation of visa procedures for the UAE business operators who tour the US, the abolition or lessening of non-tariff trade obstructions, endorsement of overseas unswerving investment, and the universal financial progress in the Middle East.

Secondly, the economic environment of the United States is a major factor for its attractiveness in the world. The country’s $16.8 trillion economy is the world’s largest because it is supported by robust services and manufacturing industries (Hamilton & Webster, 2015). The stability of the United States economy means that inflation and interest rates are stable, hence allowing investors and traders to make appropriate investment and trade decisions. The high level of disposable income and income distribution means that the country provides adequate market for various products from the UAE such as Dates among others.

The US legal framework is well developed and aimed at protecting the interests of both local and international investors and businesses. However, the country’s legal system is also very strict to protect consumers. In this case, the legal framework in the US requires a strict adherence to the regulations that guide food products and other consumer products (Marx, 2011). The United State’s intellectual property rights regulations are also very strict, which is an advantage for businesses since they are protected from intellectual property violations. As such, the Al Foah’s Dates from UAE are protected from trade misdeeds that can affect their position in the American market.

The United States socio-cultural environment is another area that influences its standing in the global market as the leading export destination. Firstly, the society is culturally integrated with different cultural and religious practices evident in the country. Further, the country has a considerable number of immigrants from the Middle East and other areas of the world (Magee & Magee, 2008). Such diversity means that there is a significant ready market for Dates for the immigrant population. Another important driving factor for the marketability of Dates in the US is the health consciousness, which is growing in the country. As such, more people are adopting natural foods that can help them in reducing or fighting lifestyle conditions that are rising in the country (Ku-Graf, 2008). Dates are well known for their high nutrient content and low fats, and hence their attractiveness in the US market.

The Importing Framework

The United Arab Emirates does not have organs such as Free Trade Agreements (FTA) that allow the country to receive preferential treatment by the United States. However, over the last decade, the trade volume between the two countries has increased drastically, thus leading to increased demand for close cooperation (Marx, 2011). For instance, the Trade and Investment Framework Agreement (TIFA) between the two countries, which was signed in 2004 is a major step towards streamlining trade (Porter & Rivkin, 2012a). Through TIFA, the two countries pledge to support cooperation and trade between themselves, hence resulting in higher trade to benefit each other. In addition, the Economic Policy Dialog (EPD) provides a platform for the two countries to meet and discuss policy issues that are geared towards promoting trade between the two countries (Hamilton & Webster, 2015).

The United States is an advanced country with highly developed infrastructure that increases the ease of doing trade for both local and international businesses. For instance, the country’s airports are among the best in the world. This situation allowed easy transportation of products from the United Arab Emirates to the United States (Liu, 2008). The United States has various direct-flight agreements with major UAE airlines. They guarantee ease of movement of people to and from the country. Such direct flights also allow products from the UAE to be transported within a very short duration to the market in the United States (Fayyad & Daly, 2010; Moran, 2012). The massive capacity of seaports in the United States ensures that bulky products are handled fast and efficiently, hence causing little or no inconvenience to business people.

The United States’ authorities that deal with trade, including the importation and exportation of products, are centralized under the United States Customs and Border Protection. The centralization of the authorities under one umbrella is a major advantage that importers to the country enjoy. Such centralization ensures fast and efficient processing of tariffs and other requirements for the importation of products and services into the United States (Foad, 2010). The United States and Border Protection organ also implements tariffs, duties, and taxes paid by the various importers in the country (Porter & Rivkin, 2012a). The United States imposes an 8% tariff on all Dates and dried food products coming into the country (The World Bank, 2015). Such a rate is not very prohibitive and hence the reason why the USA is a significant export destination for Dates from the United Arab Emirates. Overall, the low tariff rates for food and agricultural products in the United States and the centralized management of the customs and trade sector have acted to promote ease of doing business in the United States.

Treating Foreign Investment

The United States is a highly lucrative trade and business environment for any investor in the world. The fact that the country is the leading recipient of FDI shows that it has measures that attract foreign direct investment. One of the most important reasons why the United States is a lucrative destination for FDI is its laws and regulations that protect the interest of investors in the country (Hamilton & Webster, 2015). Laws such as intellectual property laws, anti-fraud laws, and anti-smuggling laws among others have allowed the country to receive the much-needed confidence by investors across the world. In 2012, the country received a total of $3.9 trillion worth of assets from foreign companies and individuals (The World Bank, 2015). Further, the DFI totaled to $166 billion in the same year. Such increased FDI shows the attractiveness of the country as a FDI destination in the world.

Various factors drive an increase in FDI into the country. For instance, the ease of doing business due to strong legal framework is a major factor (Foad, 2010). Further, the ease of setting up a business in the country is a major driving force for foreign direct investment. The predictability and stability of the regulatory framework, including intellectual property protections have also allowed the country to be very favorable to investors and multinationals that wish to expand into the United States (Porter & Rivkin, 2012b).

Conclusion

The trade between the United States and the United Arab Emirates is robust since it amounts to more than $ 24 Billion. The political, socio-cultural, legal, and economic environment factors in the United States are favorable and hence the reason why the UAE exports large quantities of products, including Dates as food and agricultural products. In addition, the importing framework in the United States protects importers through an elaborate regulatory framework that guarantees protection, hence ensuring that they can compete fairly in the US market. For instance, the country’s intellectual property laws are very strict as a way of securing investor’s rights in the country. The United States also has excellent infrastructure, which ensures that products can be circulated around the country with ease. The country has also put in place important measures, which have led to its favorability for foreign direct investment.

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