Trade and Commerce
Trade and commerce has an underlying effect on the economy of the world as a whole. The effects of this phenomenon result from the different economic principles put in place by governments and other agencies to ensure international trade is free and fair. Krugman and Wells (2012) cite a number of economic policies that are fundamental components of international trade.
In the current paper, the author discusses various economic policies, such as price ceilings, price floors, and tariffs. The policies are discussed in the context of the United Arab Emirates (UAE).
The author examines minimum wage and rent laws in UAE as components of price ceilings and price floors. The author also analyses a number of policies formulated by the World Trade Organisation (herein referred to as WTO) and the recently concluded Bali talks.
Government Policies in UAE: Price Floors, Price Ceilings, and Unit Taxes
United Arab Emirates’ Policy on Minimum Wage
The law
Labour regulations in UAE are outlined in Federal Law no. 8 of 1980 (UAE labour law, 2001). The minimum wage is covered in chapter 3 of this law. The law sets a cap on the wage that a labourer can seek from their employer in form of remuneration. The law defines wage as the cumulative costs incurred by an individual as living expenses. The cost is arrived at using a formula stipulated in the labour contract.
The law and minimum wage
According to UAE Labour Law (n.d.), minimum wage is not clearly defined. However, minimum wage is generally set at Dhs.4000. The assumption is that an individual will not be able to sustain their life below this income level.
Eligibility to minimum wage
The law on minimum wage covers all persons working in the UAE. The implication is that all industries that provide employment in the country are covered by this law (UAE labour law, 2001).
Industries concerned
The law is applicable to all industries operating within the UAE (UAE labour law, 2001). The booming logistical, oil, and hospitality sectors are some of the areas covered by this law.
The binding power of the minimum wage law
Regardless of the legitimacy of the law on minimum wage, it is not binding to certain industries and occupations. The law stipulates that civil servants, members of the security forces, domestic workers, and farmers are not covered by this policy (UAE labour law, 2001).
Minimum wage laws in other Gulf Cooperation Countries
According to Peck (2010), Gulf Cooperation Countries (herein referred to as GCC) is a group made up of 6 nations. They include Oman, Qatar, and the UAE. The others are Saudi Arabia, Kuwait, and Bahrain. Out of the six countries, it is only Saudi Arabia, Qatar, and the UAE that have put in place legal structures to address the issue of minimum wage.
Rent Control Laws in Abu Dhabi and Dubai
Implications of the rent control laws
Krugman and Wells (2012) explain price ceilings as situations where the government puts a limit on the highest cost of a commodity. The rent laws in Abu Dhabi and Dubai are examples of this economic policy. Law no. 33 of 2008 (BetterHomes, n.d.) stipulates the permissible levels of increase in rent.
For instance, the law provides for a maximum of 5% increase in rent for a property that was previously rented out at 36% of its value. What this means is that the rent laws in these two cities constitute a price ceiling policy.
Overview of the rent control laws
Bowman (2013) points out that in Abu Dhabi, rent control laws require the tenant and the landlord to agree on rent. In the absence of this agreement, the landlord is allowed by law to increase the rent annually by 5%. A ceiling is set to regulate the increase. However, the law is silent on how high the rent should be maintained.
With regards to Dubai, BetterHomes (n.d.) cites the city’s caveat on increasing rent. The caveat covers people who were renting property valued at 25% below the average index in 2009. The element of price ceilings is observed in Dubai since the authorities forbid rent increments for certain groups of tenants.
Trade and Trade Tariffs
Trade Regulations
Globalisation has made international trade an essential component of world economies. Trade regulations may hinder the process of international trade. Krugman and Wells (2012) cite the introduction of certain tariffs as potential barriers to international trade. Consequently, it is important to enhance uniformity in trade regulations. Oversight bodies, such as the WTO, are formed to address this issue.
The World Trade Organisation
The need to regulate international trade necessitated the formation of the WTO. The body was formed in 1995 (World Trade Organisation, 2011). The organisation is a global body that is charged with the responsibility of creating and enforcing rules of trade among the member countries. The body is composed of key stakeholders in international trade. It acts as a platform on which various issues related to international trade are discussed.
The organisation is characterised by different agreements arrived at through rigorous negotiation processes. Each of these agreements is usually ratified by the legislative bodies of the member states (World Trade Organisation, 2011).
The major objective of WTO is to enhance fair international trade practices. The legitimacy of the organisation is attained through various core principles. The principles include non-discrimination, transparency, and binding and enforceable commitments.
Trade ministers drawn from member countries met recently and ratified a new treaty in Bali (Mehra, 2013). The treaty was an indication of the commitment by WTO to establish a level playing field in international trade. With the help of technocrats from WTO, the ministers arrived at an agreement aimed at improving trade through a universal consensus.
The Bali Trade Agreements
As aforementioned, WTO is a platform through which stakeholders in international trade engage each other to address issues that affect the global economy. Accordingly, the body has designated special sittings through which trade ministers meet to discuss various trade related policies (World Trade Organisation, 2011).
Here, trade ministers meet to negotiate and deliberate on various treaties. According to Mehra (2013), the most recent session was held in Bali between 3rd and 6th December, 2013. It was the 9th session.
The Bali session was a follow-up to a previous one held in Doha (Mehra, 2013). The objective of this session was to establish a consensus between the developing nations with regards to a number of issues related to trade.
Fergusson (2011) points out that these talks were seen as the long awaited solution to the Doha Development Agenda talks that commenced in 2001. At the core of these talks was the need to harmonise various tariffs and other trade policies.
The major agreement in the ‘Bali Package’ was in the area of trade facilitation (World Trade Organisation, 2013). In this regard, the ministers ratified the proposal to hasten custom procedures. In addition, the ministers called for increased transparency in custom practices.
The trade facilitation aspect of the agreement was meant to reduce bureaucracy and corruption through the adoption of technology. Developing nations stand to benefit from the infrastructure envisaged in this treaty.
Another agreement realised from the Bali talks involves food security. The trade ministers reached a consensus on matters to do with agriculture (World Trade Organisation, 2013). The ministers agreed to shield nations that stock their produce for the purposes of food security from penalties.
The contents of the agreement revolved around key issues like non-violation complaints and electronic commerce. The agreements on regular work also covered proposals for ‘aid for trade’ where developing nations are to be assisted in terms of trade (World Trade Organization, 2013).
Effects of the Bali Agreements on the UAE
The Bali agreements are highly regarded owing to the fact that they are binding and enforceable (Mehra, 2013). Consequently, nations like the UAE are affected by these agreements with regards to agriculture and e-commerce. Bowman (2013) cites the growing need to address the issue of food security in the region.
Currently, the odds are against the UAE and Dubai since they rely on the generosity of food producers to import food products to the region.
References
BetterHomes. The rental increase cap- An update on tenancy law. Web.
Bowman, D. (2013). Abu Dhabi rent controls and lease renewals. Web.
Fergusson, I. (2011). World Trade Organisation negotiations: The Doha Development Agenda. Washington D.C.: Congressional Research Service.
Krugman, P., & Wells, R. (2012). Microeconomics. New York: Worth Publishers.
Mehra, T. (2013). In Bali, ministers put the world back into the WTO. Web.
Peck, C. (2010). The A to Z of Gulf Arab states. Lanham: Scarecrow Press Inc.
UAE Labour Law. UAE labour law. Web.
UAE labour law: Federal law No. 8 of 1980 labour law and its amendments. (2001). Web.
World Trade Organisation. (2011). Understanding the WTO. Geneva: World Trade Organisation Information and External Relations Division.
World Trade Organisation. (2013). Days 3, 4 and 5: Round the clock consultations produce ‘Bali Package’. Web.