Business | Economy
GCC's trade deal with European nations is step in right direction
The Gulf Cooperation Council (GCC) made the right move by signing a free trade agreement (FTA) last week in Norway with the European Free Trade Association (EFTA).
- Special to Gulf News
- Published: 22:43 June 27, 2009
The Gulf Cooperation Council (GCC) made the right move by signing a free trade agreement (FTA) last week in Norway with the European Free Trade Association (EFTA).
The deal signals the GCC's determination to pursue a vigorous external trade policy with economic regional groupings and individual countries. In late 2008, GCC states signed the first ever FTA as a group with Singapore. Separate negotiations with EFTA and Singapore lasted three years each.
The deal with EFTA calls for removing trade restrictions and covers trading in goods and services and addresses matters related to governmental procurement and protection of intellectual property rights. The two-way trade amounted to $7 billion (Dh25.6 billion) in 2008, up from a mere $2 billion in 1999.
The EFTA comprises Switzerland, Norway, Iceland and Liechtenstein. None are European Union members. To be sure, some EFTA members enjoy outstanding global rankings, with Norway enjoying the third largest per capita income on the basis of purchasing power parity after Luxembourg and the United States. For its part, Iceland emerged as the leading country in the 2008 Human Development Index report, published by the United Nations Development Programme.
In addition, the accord with EFTA should serve as a marketing tool for GCC countries.
The deal suggests that European countries like Switzerland and Norway seem pleased with laws and procedures in place in GCC countries. Still, the deal with the EFTA could facilitate the highly sought after objective of signing an FTA with the EU. In reality, GCC trade statistics with the EFTA are modest, comprising about one quarter of two-way trade with the EU. The 27 EU member states enjoy more than $15 billion trade with the GCC. The EU is the largest trading partner for GCC.
Nevertheless, EU member states remain adamant with regards to signing an FTA with the six-nation GCC. In an abrupt decision in late 2008, the GCC's General Secretariat suspended talks with the EU in order to signal its displeasure with derailed negotiations.
The decision was meant to apply pressures on the EU to modify its conditions prior to signing a deal with the GCC. At the moment, EU countries insist on addressing issues related to human rights and democracy as preconditions for signing a trade accord with GCC states.
Talks between the two sides started in 1988 though comprehensive negotiations only commenced in 2003 after the GCC earned the status of customs union.
Also, the GCC countries further strengthened their negotiation powers after adopting a unified external trade policy with non-members at the end of the Abu Dhabi summit in 2005. Such a policy became essential after Bahrain and Oman signed separate FTAs with the US. In addition, GCC states demand removal of customs charges on aluminium and petrochemical products.
The EU imposes a six per cent customs duty on imports of aluminium from the GCC. However, the EU remains wary of governmental support such as under-priced gas to GCC producers, a matter that grants them unfair advantage against their European counterparts, notably countries joining since 2004.
Some 12 countries joined the EU in the last five years including Romania, Poland, Hungary and the Czech Republic, the last of which serves the rotating presidency.
All indications suggest that GCC states are determined to sign trade deals with other countries, with talks underway with China, Japan, South Korea, Pakistan, Australia and New Zealand.
Turkey and Iran are pushing for trade deals with the GCC states. In fact, Iran is likely to press for closer economic cooperation with its neighbouring GCC countries after the fallout of presidential elections. Iran needs to focus on economic challenges notably youth unemployment.
- The writer is a Member of Parliament in Bahrain.
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