New EU custom duties out of line

The European Union (EU) has fulfilled its threats by imposing more customs duties on its petrochemical imports from the GCC countries as of next year (2014), introducing additional fees of $367 million (Dh1.3 billion) on Gulf exports.

This will consequently reduce the competitiveness of GCC exports in European markets, compared to similar imported commodities, especially from east European countries which enjoy preferable privileges, noting that the value of GCC petrochemical exports to Europe mounted to €7.5 billion in 2012.

The EU has blocked, for more than 20 years, the signing of a free trade agreement with the GCC countries to avoid cancelling customs duties on its imports of petrochemicals and aluminium products that can compete in European markets, thanks to its productive preferences with regard to costs and competitiveness.

The EU justified its recent move on this increase in customs duties that the GCC States have been removed from the list of developing countries, which are given some preferences, to join fast-growing rich countries. Although this constitutes recognition of the progress achieved by the GCC States in the past years, it is not a sufficient justification for discriminatory measures against GCC products.

The EU move affects most important GCC exports other than oil and gas on which the GCC countries rely in their strategic approaches towards diversification of income sources and development of non-oil economic sectors. It is expected that the GCC countries will be investing approximately $ 40 billion in the petrochemical industry over the next three years.

Trade relations

Although the GCC has the right to be proud of the economic progress achieved, this does not give others any excuses to review their trade relations with the GCC countries and impose new restrictions that harm the distinctive relations between both the GCC and European groups, especially that the EU is looking for new sources of income to help them overcome the financial crisis.

Although the GCC States began in recent years to diversify the directions of their exports, focusing mainly on emerging countries in Asia, such as China and India, which accommodate a significant portion of Gulf exports of aluminium and petrochemicals, it is necessary to take action to halt the European extravagance and excessiveness that aim to disrupt GCC imports. This with knowledge that the Gulf markets are important outlets for European exports, which means that the EU endangers its historical trade relations with the GCC States whose relative share in the GCC foreign trade fell to their lowest levels in the past ten years.

For their part, the GCC countries should take the necessary measures to protect their exports to European markets, where the GCC has more than one option to take in this regard. First, the issue can be raised to the World Trade Organisation (WTO), whose laws prohibit discriminatory actions in international trade relations, especially that many countries, including the EU and the United States have previously filed complaints concerning discriminative measures. Second, the GCC nations can take similar collective action against their imports from EU countries, especially if the EU has showed more reluctance with regard to signing the long-awaited free trade agreement with the GCC countries.

Emerging markets

However, it is the best for the GCC countries to take the first step by going to the World Trade Organisation, provided it will be followed by the second step in case the first step has failed.

In any case, the GCC States at the same time need to strengthen their presence in alternative markets, particularly in emerging countries, where the GCC countries are now seeking properly to sign free trade agreements with Turkey, China and India and perhaps with some countries in Africa, Latin America and Russia in the future

Therefore, the GCC States have several options that would allow them to defend their economic and trade interests, which constitute an important part of their quest to diversify their economies by taking advantage of the global trend to open markets and liberalisation of international trade.

Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.