The United Arab Emirates have recently announced their plans of growing food natively rather than importing it from other nations.
The majority of the nation is desert, however, so, why would they grow their own food?
The oil-producing state has imported food from other nations in the past to be more efficient by saving resources.
This is because their specialisation in oil production has enabled them to produce oil at extreme levels of efficiency, leading to high output.
This excess oil can be then exported to other nations that do not produce oil for revenue, the nation then uses this revenue to import food, a good they do not produce.
This food is imported from nations that are extremely efficient at producing food, so, because there are nations who are producing everything efficiently, the output is maximised and waste is reduced.
Consequently, the UAE receives food at a lower cost and they make more profit from their oil exports, in other words, everyone is happy.
This process is a result of the comparative advantage that countries develop which is as a result of specialisation and free trade, however, despite its ruthless efficiency, specialisation has its flaws.
And this major flaw has been highlighted during the COVID pandemic as major global supply chains have seen slowdowns and setbacks.
Because of these setbacks, the UAE has experienced a decrease in food imports, so, their specialisation is causing them to bear increased costs as they are over-reliant on foreign nations for their food produce.
This overdependence on other nations is one flaw of globalisation, if a few nations cannot do their job properly, the rest may suffer.
So, to take matters into their own hands, the UAE has decided to begin growing their own food.
They plan on increasing their domestic production by about 30-40% in the next 10 years.
The idea of growing your own food when you specialise in oil goes against comparative advantage and specialisation, by the sounds of it, the UAE is beginning to decentralise its industries with this drastic change.
Although this decision does result in greater levels of self-sufficiency, it also bears increased costs in the form of greater quantities of resources being wasted.
This is because the majority of the UAE is desert, so, using precious land, labour and capital on doing a half-assed job of growing plants in the desert is not a good use of resources when they could be utilised towards very profitable oil production.
And, since the UAE specialises in oil, this profitability further increases.
Ultimately, the decision is down to the UAE to make, however, it does seem like a much more political move than an economic one.
This is because the chances for another supply chain slowdown to occur which is capable of causing severe cost increases is quite low, the COVID pandemic is a “black swan” event, so, growing food in the desert inefficiently doesn’t make much sense logically or economically, so, the UAE's decision could be driven by politics, a personal motive, or straight-up lack of confidence in the modern worlds method of trade.
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