Introduction
The present report focuses on the review and critical assessment of the articles devoted to business in the global conditions. This review will help to develop a deeper level of understanding of the principles of economic exchange between countries. In addition, it will update the author’s knowledge of ethical norms and practices.
Summary and Key Takeaways
The first article under analysis is called “Theories and Methods of Regional Integration and Free Trade Agreements.” It is written by Joan Tejedor and published in the Revista de EconomĂa Mundia journal in 2017. The article provides an overview and analysis of the methods that allow assessing the economic effects of Free Trade Agreements (FTAs) between countries. Tejedor argues that globalization became partly the reason for the creation of trade agreements and economic cooperation treaties between countries (226). The origin of global trade agreements Tejedor ties to the earliest post-war agreement known as the General Agreement on Tariffs and Trade (GATT) (228).
As a result of the collaboration within the framework of this organization, countries gained experience in global cooperation in the sphere of trade and elaborated the main methods of control and regulation in the area. For instance, rules for the inclusion of developing countries were established. In addition to that, the adoption of technology and innovation boosted the development and popularity of international investments. The latter will become the major instrument of trade and cooperation between countries that now influence the methods of FTAs’ assessment.
The focus of the paper is the two modeling methods used for the assessment of the economic effects of FTAs such as Computable General Equilibrium (CGE) and gravity model. CGE compares the abstract general equilibrium structure of a market with the existing economic data to measure prices, supply, and demand. Various studies examining the CGE application discussed by the author conclude that it provides a comprehensive set of data that allows making conclusions and predictions about welfare, production, factor returns, trade volumes, etc.
Gravity models, on the other hand, use an ex-post approach to assess the economic effects in a hypothetical environment. Such an approach allows controlling and monitoring the effects of all aspects of FTA measuring their impact on trade. The basic calculation formula estimates the relationship between Gross domestic product and import of goods. As opposed to CGE, the Gravity model does not measure FTAs’ impact on welfare, price, and customs income offering only production trade volume, and dynamic variables. The author concludes that the two methods allow measuring ex-ante and ex-post effects of FDA and both are valuable instruments of economic analysis (Tejedor 238).
The second article under analysis is a report by PRS Inc. that provides assessments of a country’s climate for investment and trade and political conditions. This report is devoted to a detailed assessment of all relevant economic, legal, political, and other peculiarities of the United Arab Emirates. Such a report is aimed to help investors make a decision on putting their money into a certain company or opening their own. The report is divided into two parts “climate for investment and trade” and “country conditions” (PRS Inc. 1). The former includes a discussion of openness to business, regulatory and legal policies, aspects of domestic and international trade, property ownership, etc. The second targets general social, political conditions, brief history, foreign relations, and geography.
The laws and regulations concerning investments are evaluated as evolving. Currently, according to the report, there is a clear preference given to local companies. Thus, in most cases, foreign investors and businessmen are legally obliged to have a local partner or sponsor. However, The WTO membership enables UAE to open its borders to foreigners. The government has passed a series of laws that should simplify the process of foreign capital entry (PRS Inc. 1). In addition, it created a new department in the ministry of economy to handle foreign capital.
Another noteworthy peculiarity of UAE business that a foreigner should know, that any company should have its controlling interest to be owned by a UAE citizen. Such a law was dictated by the events of the 2008-2009 financial crisis that affected local companies. A certain difficulty might arise as each emirate has a slightly different procedure of acquiring a license for conducting business. Emirates also has free trade zones where local ownership is not required. In these zones, there are no import and export taxes. Such areas house 17.000 companies from more than 80 countries (PRS Inc. 4). Labor conditions in the country are evaluated as satisfactory. For skilled foreign workforce, the conditions are more favorable than for unskilled. The latter can enjoy scarce privileges.
As for country conditions, the article mentions high temperatures and amounts of sunlight with a low amount of precipitation (PRS Inc. 11). Religion, according to the authors, plays a major part in the country’s social life. The political system is federative with the dynastic rule and tribal consensus-based decision-making system. The country also has a Federal National Council which offers rulers consultations on different matters. As for foreign relations, UAE has established diplomatic ties with more than 60 countries. It is a member of the various international organization including WTO, UN, GCC, and others.
Critical Review
The article by Joan Tejedor offers a retrospective review of existing theories and methods of regional economic cooperation and provides a historical background of trade agreements between countries. The authors conducted thorough literature research to develop a solid theoretical background for their methodological study. Despite the fact that the methods were developed some time ago, research is rather timely. Free trade agreements become one of the leading instruments of bilateral cooperation in the sphere of economic exchange.
The author succeeded in providing comprehensive research of the origins of trade agreements. However, there is a certain limitation in this part of the study. The author focuses mainly on the positive impact of free trade agreements, such as mutual economic, development, the commencement of economies of scale, and other issues. The objectivity was not articulated enough as opposite views on this type of international cooperation were not discussed in the article.
The three parts of the paper are perfectly linked together. The structure of the article allows tracing the development of the researcher’s thought process. In his review and analysis of globalization, Tejedor argues that this process leads to integration and cooperation. After that, he continues researching types of such integration and the ways to determine if they are fruitful. The research is also helpful in the way that it allows building a comprehensive understanding of the examined tools. Yet, the reasons for choosing CGE and gravity model as subjects for analysis remain slightly unclear. As the researcher himself states, there is a number of other useful assessment tools. In addition, the author provides multiple opinions on the usability of the methods.
Another positive feature of the article is the detailed description of all core data that can be analyzed through the application of the methods. The information is backed by reputable sources and displayed in the form of a table. It is noteworthy to mention, however, that the information about the two methods is not compared directly. That could be partly explained by the narrative and review-like design of the study. Also in the section where the author explains gravity models, there is a sub-section about data and sources of the data used for the method. This is helpful material to be presented. As a little inconsistency, one could note that no such sub-section was provided for the CGE method.
In conclusion, the author states that the establishment of trade international trade organizations positively influences the emergence of bilateral trade agreements. This statement appears to be true as it is backed by scholarly research. Yet opposite points of view were not properly articulated, which diminishes the scientific value of such an assumption. He also states that researchers developed many econometric assessments for FTAs, yet there is no mentioning of them. There is also no statement as to why only the two examined methods were useful for an analysis of FTAs. As a positive feature, one could note the identification of the limitations of the methods. For instance, the author concludes that the models do not provide the assessment of the social impacts.
All in all, the article appears to be rather useful for learning about globalization, trade, international trade organizations, and certain scales to measure the impact of international trade. A clear train of thought and a vivid outline of key ideas are also the strengths of the study. As for the limitations, the study lacks alternative points of view in the theoretical discussion of globalization and trade agreements. Scientists from the Royal Economic Society, for instance, believe that FTAs not only bring benefits to all countries but also have less obvious and less positive consequences on the economy (Royal Economic Society). Therefore, the study seems to be lacking depth in certain aspects.
A Report by PRS Inc. contains a variety of nuances and details particular to the UAE business climate. This research provides valuable insight into how one can enter the country’s market and what should he or she expect from it. Each section is written in a clear and concise manner reflecting on the key aspects of conducting business. For instance, openness to foreign investment contains multiple takeaways for a foreigner to know if he or she wants to establish a business. Perhaps one of the most important barriers to know about is the law of national ownership. The article did not provide any pieces of advice and was written purely in an informative style. This is a positive feature as such an approach allows avoiding misunderstandings with companies who interpret advice the wrong way. Therefore, the article handles information from the emotionless third-party position. It contains no judgmental statements and fulfills its informative purpose excellently.
Another positive feature of the paper is its many-sidedness. It covers in total 27 different aspects of the country’s domestic and foreign business-related areas of conduct. Such a comprehensive review is an excellent source of evidence for companies and investors who might want to establish a partnership with UAE companies or create their own organization in the country. Moreover, the report could serve as an excellent basic document for creating a business strategy for establishing a business in UAE.
On the other hand, the report has certain drawbacks that complicate and undermine its usability. As such, the article is written as a narrative, which complicates the understanding of the material. The presence of thousands of small but important details makes such structure of the document rather hard to use. According to Siricharoen, the smart delivery of information can make any complicated data look simple and become easy to use and remember (54). For instance, the use of infographics or bullet points could make such a paper into an even more powerful information tool. In the present condition, the structure and narrative style of the paper complicates finding specific information. To a certain extent, such a task is simplified by the informed use of headings and subheadings. Again, under each section, there is a plethora of facts and figures that are easy to lose and hard to find a second time.
Another issue of the paper is its limited use of reliable sources. The article uses predominantly governmental sources of data such as UAE Commercial Guide FY, U.S. Foreign Commercial Service, and U.S. Bureau of Near Eastern Affairs. Basically, the whole article is written using only these sources of information. Other sources are either not stated or not used. Governmental sources, especially foreign ones can provide biased information to other countries, or the authors of the research could interpret it the wrong way. In addition, reliable scientific sources provide information free from political beliefs. The absence of data from such sources undermines the quality of data.
Validation of Methods and Research
Article by Joan Tejedor
The literature review appears to be one of the methods to validate the current study. The author also chose this design for his paper. In the current article, Tejedor uses a variety of credible sources of information. Most of the reference list consists of scientific articles published in reputable peer-reviewed journals. The author uses older studies to trace the origins of the theories, concepts, and methods of economic analysis. Modern studies are also cited to show the timeliness of the reviewed material and its development over time. To narrate the story of the global trade onset Tejedor combines a variety of sources and draws data from multiple ones to confirm a fact or back an opinion. In his study of trade agreements and their impact, the author uses the researches of the authors who assess these agreements from the positive side. To a certain extent, this violates the validity of the statement that FTAs are all about the benefit.
As for the assessment methods discussed in the article, their validity is ensured by many scientists. The author cites different reasons for selecting the models. In addition, the author outlines the positive sides of using the method. However, all the cited materials reflect only the basic appreciation of the tool, while no real-world examples of its application were discussed in detail. Yet, the validity is also strengthened by the fact that the CGE is based upon solid microeconomic theoretical knowledge (Tejedor 234). The author only reveals that certain scientists used this model in application to different settings where it showed good results. In the section about the gravity model, Tejedor mentions that this tool was used for assessing FTAs by at least seven different groups of researchers (237). This appears to validate the study and its methods.
A Report by PRS Inc.
Research is developed by a private company PRS Inc. that specializes in the analysis of political and business risks, forecasting, and country data analysis. It has 40 years of experience in this field of occupation. Among its clients are the research institutes and universities such as Yale, Harvard, Princeton, Stanford, and other prestigious academic institutions (“Clients, Testimonials, Citations”). Also, it monitors central banks, international firms, and agencies. Such characteristics allow considering PRS Inc. and its works valid. In addition, certain statistical information and facts are easily confirmed through a basic internet search. Data credibility is established through the organization’s access to governmental resources due to its partnerships with many departments and bureaus that gather and analyze information. As it was stated earlier, such resources may be biased due to their political affiliation with certain governments’ agendas. Such an assumption seems to cast a shadow on the validity of the data.
As for the methods of research, they are not directly stated in the paper. It could be assumed, however, that the authors used literature review as their primary source of analysis. Most of the paper contains factual information with little evaluation applied. Certain data is hard to find in open sources. Therefore, the validation process can be rather complicated. Inductive logic is used for the assessment of the business and political climate within the UAE. The researchers of the company draw conclusions on the general openness to foreign investment based on the amount and weight of the facts that support them. Each statement is supported by dozens of arguments and facts. No assumptions are left without proof, which testifies to the reliability and validity of the paper.
All in all, there are few facts known about the sources, from which the information for the paper is drawn. This obstructs the validation of the paper. Yet, judging by the fact that the company is experienced, respected, and has reliable partners who trust it, the validity of their research procedures and data credibility can be confirmed.
Theoretical Concepts and Practical Application
Article by Joan Tejedor
The CGE and gravity model appear to be rather far from reality, yet they are capable of producing results that are applicable to the real world. Under CGE, researchers build an abstract model, a simulation of a real situation. As evidenced by Plummer et al., the model is capable of producing results usable for dynamic assessment of supply and demand, and other parameters (11). The model is also capable of predicting consumer preferences and future trade volumes. The predictive and analytic properties of this tool can be used for testing various subjects of agreement. This could help shape tailored FTAs that are suitable for both sides. Evidence-based data gathered from mathematical analysis or real-world data implemented as a part of CGE can be used for the examination of tariffs. As a result of such assessment, countries can either increase or decrease them.
This model, however, is used for forecasting and cannot possibly include all of the factors and variables in the equation. Political landscape changes or natural disasters can easily create disturbances in the economy of either country. Therefore, ex-ante model results should be used with caution and implemented rather as advisory material but not as a primary basis for decision-making.
The gravity model seems to be more grounded in practice. The ex-post approach provides more reliability and allows making better assumptions about the possible economic benefits or drawbacks of FTA or regional trade agreement. Its practicality is based on the fact that all data that is placed in the equation is real and relates closely to international trade. The model takes into account distance, actual GDP, currency exchange rates to calculate how FTA impacts production and trade volume, imports, and exports. However, the model does not take into account the terms of trade, use of capital, labor conditions, and other parameters that can also change the country’s economics. Therefore, the practical application of the model is limited to an assessment of narrow areas of impact. In exchange for that, it offers pretty accurate and reliable data that can be used for making evidence-based decisions while entering or shaping a new FTA.
The usability of free trade agreements as a theoretical concept cannot be questioned. It is a powerful tool that helps countries with similar states of economic development or mutual trade interest overcome barriers such as high transaction costs. Yet there in the real world, there are also cases when FTA can do more harm than good. If the two countries entering into FTA have very diverse economies (one is developed, and the other is emerging), this could bring negative side effects. One of them is the decreased cost of labor in a developed economy. The low-skilled and low-paid labor force from a developing economy could stream into a developing country to have better salaries as compared to their own country. Such a process harms the domestic workforce in the developed economy where they can lose their job to a more economically viable third-world employee. This situation could be observed in a variety of countries such as the U.S., Germany, France, etc.
A Report by PRS Inc.
The paper defends no specific theory and applies no concepts to evaluate. It is rather an essential statistical manual that is used to get a sense of how open the country is to foreign investment. Therefore, in the framework of this report, it is possible to assess only the practical application of the whole work. In this aspect, the paper is excellent for almost any applicable type of use and any user. For instance, one of the most common uses of this data on Emirates is academic research. The primary purpose of the article seems to be to provide both general and specific information about the country to a person who wants to know more about how the business is done in UAE.
In addition to that, a reader will know what laws and regulations apply to foreign firms and what ways there are to establish a company or invest money in this country. An academic who chose UAE as a subject of his or her research can use and cite this source as credible and reliable. It also gives them the privilege of having a large amount of statistical data almost free of any analysis, theory, paradigms, and other things. It allows a researcher to create his own interpretation and understating of the data, create his own assessment system, theory, and make assumptions or projections. The format of the paper relieves them from using someone else’s thoughts involuntary when reading and citing it. Such academic freedom establishes the paper’s applicability for almost any research in spheres that even barely touch the topic of business, law, or politics. It can potentially inspire the interest of researchers from around the world to devote their academic efforts to studying UAE in a variety of aspects. This greatly benefits the usability and significance of this work.
Apart from that, the paper can also be helpful to business analysts. Analytical organizations and firms have to have reliable, accurate, and relevant data to make perfect economic projections for short and long periods of time. The paper by PRS Inc. provides a unique opportunity to have all relevant data in one place, in a single paper. This simplifies the work of business analysis and, consequently, their clients.
Another sphere where the paper is certainly applicable is a trans-national trade. Companies who want to enlarge their operation network and compete for another prominent market may find the paper useful. The statistical data, in this case, can help the board of directors, CEO, and key shareholders decide on whether it will be profitable for the company to establish a business in UAE. However, a certain interest towards the region must be developed, because the article is ordered as requested and after it is paid for.
Private investors are can also be considered an interested party. The research could help them decide on the pluses and minuses of investing in a UAE company or in a foreign company that is ready to establish a venture there. In this case, the information about the laws and regulations that allow foreign ownership and the possibilities of operating in free trade zone will be invaluable.
For the general public, the information in this article would not be as valuable as for the stakeholders listed above. Yet, broadening their horizons will certainly help. Nonetheless, the purchase of such an article could be costly for a single individual. The article could be applicable in the educational environment. College and University professors could use this data to build the plan for their lectures on the politics, economy, or laws and regulations pertaining to the business.
This document could be invaluable for UAE Government and public officials. The research represents relatively bias-free statistical data on their country as seen by a foreign company. PRS Inc. gathers its information mainly from U.S. sources. For UAE officials it could be valuable to have an insight into the weak and strong sides of its policy in relation to foreign business and investment. The responsible organizations could compare the data gathered by the company and their own to find possible inconsistencies in their understanding of the country’s problems and priorities.
The research also has its limitations as per its applicability in all settings mentioned above. Each year the data in the paper becomes older and far from being reliable. UAE is a rapidly developing country, and changes can happen each year. The paper under analysis is dated 2012. Since that time five full years have passed. It may still be relevant, but in 10 years, its applicability for business, research, education, and other things can be put into question. In addition to that, as it was stated earlier, the article consists of 13 pages written with small font containing no bullet points and no infographics. Given the number of facts and statistics the paper contains, it could be hard to read, comprehend, and remember. Therefore, for each stated purpose the information should somehow be restructured to improve its applicability.
The Gap between Ethical Norms and Practices
Article by Joan Tejedor
There seem to be no apparent ethical norms and practices that can be applied to the economic models discussed in the paper. Yet, free trade agreements and regional economic cooperation agreements should be based on international ethical codes. As an example, prior to having any agreement, any country should be guided by principles of mutual respect for different norms and practices of conducting business or talks. The acknowledgment of other party’s diversity is a step towards bridging the gap between the countries in terms of ethics.
A Report by PRS Inc.
The paper states no obvious practical or theoretical questions related to ethics. Yet the work itself can raise certain ethical concerns. For instance, as a sub-genre of academic writing, such a statistical report raises the question of data bias. As it was stated above, the data provided by governmental resources could be biased as a result of corruption or application of the political doctrine. For instance, the information about corruption and bureaucracy can be changed and its influence diminished. It would be unethical for a company to sell such a report to academics or businesses.
Conclusion
Both articles seem to have a strong academic and business application. Despite certain minor problems, they and their methods can be considered valid and relevant. This report enabled the author to gain additional knowledge in the researched spheres and improve critical thinking skill.
Works Cited
“Clients, Testimonials, Citations” PRS Group (n.d.), 2018. Web.
Plummer, Michael, et al. Methodology for Impact Assessment of Free Trade Agreements. Asian Development Bank, 2011.
PRS Inc. United Arab Emirates: Country Conditions: Climate for Investment & Trade. PRS Group, 2012.
Royal Economic Society. “What Do We Really Know About the Effects of Free-Trade Agreements”. 2008. Web.
Siricharoen, Waralak V. “Infographics: An Approach of Innovative Communication Tool for E-Entrepreneurship Marketing.” International Journal of E-Entrepreneurship and Innovation (IJEEI), vol. 4, no. 2, 2013, pp. 54–71.
Tejedor, Joan. “Theories and Methods of Regional Integration and Free Trade Agreements.” Revista de Economia Mundial, vol. 47, 2017, pp. 223–242.