The effect of international trade on UAE Economy

The effect of international trade on UAE Economy Name: Institution: Date: About three decades ago the economy of United Arab Emirates was among the least developed countries, but over time there has been a noticeable improvement in the standards of living. The discovery of oil helped the country to bypass the theoretical stages of development, but other sectors also developed during this period (Abed, 2001). With oil and gas being the backbone of the economy in the country, there has been diversification to other industries. Thus, international trade is now important for the economic growth and development of the country. In 1971 the merger of seven states led to the formation of UAE, Abu Dhabi became the capital city and Dubai is the second biggest city, but also the business center of the country (Abed, 2001). The role of international trade has always had a profound economic impact on the United Arab Emirates. Historically, the country was impoverished and mainly relied on fishing, trading and nomadic farming. Prior to the discovery of oil the main economic activity in the international market involved the exports of pearl (Dobransky, 2011). Thus, from early on international trade facilitated the economic growth of the country, but at this period the economy was not fully open to outsiders and the limited levels of economic integration meant that the economy was not developed. In addition, the country could not export finished products as the manufacturing industry was not vibrant enough. The export of oil especially in the 1970’s has facilitated the growth and opening up of the economy. The economic situation of the UAE is depended on the oil prices, whereby the sale of crude oil allows the country to import goods from her trading partners. In addition, an emphasis on infrastructural development facilitated the export capability of the country, where neighboring countries have used the nation as a transit hub for their exports. Equally, the internati...