US embassy cable - 04ABUDHABI3427

UNCLAS SECTION 01 OF 02 ABU DHABI 003427 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR NEA, NEA/ARP, EB/TPP/ABT FOR EHEARTNEY 
DEPT PASS TO USTR FOR JBUNTIN AND DBELL 
COMMERCE FOR ITA/OTEXA FOR MD'ANDREA 
 
E.O. 12958: DECL NA 
TAGS: ECON, ETRD, KTEX, TC 
SUBJECT:  BASELINE UAE TEXTILES AND APPAREL STATISTICS 
PRIOR TO ELIMINATION OF QUOTAS 
 
REFS:  A. STATE 184238 
 B. STATE 2205 AND PREVIOUS 
 
1.  (U) Summary and comment:  Baseline statistics are 
provided regarding the UAE textile and apparel industry in 
response to ref A.  In advance of the elimination of the 
worldwide textiles and apparel quotas in January 2005, UAE 
officials are very concerned that an absence of quotas on 
China will essentially eliminate the UAE's ability to 
compete; however, if some requirements are placed on China, 
UAEG officials believe the UAE textiles and apparel sectors 
will thrive and expand.  Officials are anxious to learn the 
new requirements for importing into the United States, and 
whether there will be any quotas placed on low-cost textile 
producing countries (specifically China and Vietnam).  End 
summary and comment. 
 
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Baseline Textiles and Apparel Statistics 
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2.  (U) Responses are keyed to ref A. 
 
3.  (U) In 2002, the total industrial production in the UAE 
was $10 billion, and in 2003, it was $10.9 billion.  Data 
was not available regarding the total textile and apparel 
production. 
 
4.  (U) In 2002, textiles and apparel comprised 7.44% of 
the UAE's imports, 5.9% of its non-oil exports, and 4.95% 
of the country's re-exports.  In 2003, textiles and apparel 
comprised 7.79% of the UAE's imports, 6.26% of its non-oil 
exports, and 5.07% of its re-exports, according to Central 
Bank statistics. 
 
5.  (U) In 2002, there were 273,000 individuals employed in 
the manufacturing sector, which comprised 13.06% of the 
total workforce.  Of the manufacturing employees, 2.12% 
were employed in textiles (3,976 individuals), and 15.8% 
were employed in the apparel industry (28,401 individuals), 
according statistics produced by the Department of Ministry 
and Finance. 
 
6.  (U) In 2003, there were 297,800 individuals employed in 
the manufacturing sector, which comprised 13.6% of the 
total workforce.  Of the manufacturing employees, 2% were 
employed in textiles (4,187 individuals), and 14.53% were 
employed in the apparel industry (28,568 individuals). 
 
--------------------------------------------- - 
Sectors Contribute to Economic Diversification 
--------------------------------------------- - 
 
7.  (U) Ministry of Economy officials tell us that the 
textile and apparel sectors are a key element to the UAE's 
efforts to diversify its oil-dependent economy.  Currently, 
there are 180 garment factories in the country.   The bulk 
of their production is exported to the U.S. and the EU. 
One ministry official noted that in addition to revenue 
generation, the number of workers in country due to the 
textile industry contributes to the overall health of the 
economy because they live, work, and spend money on the 
economy. 
 
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Factory Relocation Not a Concern in a Quota-Free World 
--------------------------------------------- ---------- 
 
8.  (SBU) As reported in ref B, the number of textile 
manufactures in the UAE has tripled since the mid-1990's, 
due in large part to the establishment of free zones in 
Dubai and the northern emirates.  Indian, Chinese and other 
traditional textile manufactures moved to the free zones to 
take advantage of the UAE's existing textile quota with the 
United States.  We anticipate that some of these 
manufactures will return to their homelands once the quota 
system is eliminated because of the lower production costs 
in those countries.  UAEG officials recognize that some 
companies may decide to relocate based solely on cheaper 
production costs, but they are confident that many 
companies would remain in  even return to e UAE because 
the UAE is able to offer better infrastructure, services, 
and security. 
 
----------------------- 
Anxiety Regarding China 
----------------------- 
 
8.  (SBU) Ministry of Economy officials are concerned about 
the future of the textile and apparel sector in the UAE 
after the elimination of quotas due to increased Chinese 
competition.  One official indicated that the UAE's ability 
to compete in a post-quota environment is dependent on what 
regulations are imposed regarding fees and duties, and 
whether quotas remain for countries like China and Vietnam. 
He bluntly stated that if there were no barriers for China, 
"the UAE will have a tiny piece of the pie, and China will 
have the rest." 
 
9.  (SBU) Ministry officials are optimistic that if there 
is some regulation on China, UAE textile manufactures will 
be able to thrive and compete in the global market.  One 
official stated that local manufactures have been obligated 
to produce at lower levels because of the quotas, but that 
UAE production capabilities are actually much greater.  He 
emphasized that if China still had quotas but the UAE did 
not, the UAE could produce and export more products.  He 
also candidly told econoff that if the UAE entered into an 
FTA with the United States and textiles entered the U.S. 
duty free, the UAE textile sector would not only survive, 
it would expand. 
 
10.  (U) POC for textile and apparel issues will be ECONOFF 
Amanda Curtis.  Email: curtisae@state.gov. Phone: +971 02 
414 2542 
 
Sison