With reference to the essay published three weeks ago that detailed Brexit and its implications on the GCC, we noted there would be a great opportunity to establish a UK-GCC free trade zone. More so as efforts made to do so with the European Union (EU) have been fruitless for more than 30 years ago due to reasons for which the latter is to be blamed for.
True to form, the UK has warmly welcomed the proposal, where last week alone saw two promising signs. David Davis, adviser to the new British Prime Minister Theresa May, has called for taking quick steps to conclude a free-trade agreement with the UAE. Chris Innes Hopkins, Executive Director of the Saudi British Joint Business Council, echoed similar remarks on the sidelines of the Gulf-British economic forum held in London, where he proposed a free-trade agreement between both countries.
Most interestingly, both countries take great interest in striking such a bargain. So the process of concluding an agreement is expected to accelerate, resulting in a positive impact for both economies and those of the GCC and UK as a whole.
However, necessary arrangements should be put in place before the sign-off to avoid certain procedural problems.
Given that GCC states are a single trade zone thanks to the customs union, negotiations in this regard should involve all of the six states, similar to what was done before when they signed free trade agreements with many countries and economic blocs.
And this where the GCC’s General Secretariat can play a pivotal role in leading this initiative. For practical purposes, the UK is still a member of the EU and will remain so until Article 50 of the treaty of Lisbon — on the exit of any EU member — goes into effect.
Obviously, Article 50 won’t be effective until the end of the current year, as has been referred to by the British PM during her visit to Germany and France where she requested a postponement. This means the free trade agreement will not be signed any time soon. But it will ultimately be enforced, so it is necessary to set the tone for the agreement and begin negotiations as soon as possible.
Once it is done, the agreement will benefit both parties. Mutual trade will grow considerably and British products will be given preference in the Gulf markets over other European products.
Gulf-made products will also be given similar preferences in the British market, especially aluminium, petrochemicals and oil derivatives that represent key exports for the Gulf countries but suffer price discrimination as a result of disruptions made by some EU members to a EU-GCC free trade agreement.
Meanwhile, this significant deal will put the EU in the corner with regard to its relations with GCC members as those countries have become commercial and financial hubs that links the east with the west and indispensable for conducting commercial and financial transactions.
As a result, this may push the EU to reconsider its closed attitude that has no economic and commercial basis but are based on unprovoked justifications related to the conditions, internal affairs, stability and security in the Gulf. Those issues are not negotiable in any way whatsoever. Therefore, GCC countries are expected to experience significant economic developments that will come to light once the UK leaves the EU, especially after activating the article 50 of the Lisbon treaty.
The Gulf states could take advantage of these to support their commercial and financial status in the world and serve the main goal of diversifying the economies through export-led developments.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.