The Gulf Cooperation Council (GCC) is increasingly looking eastward to secure trade accords, which in itself reflects the difficulties in concluding free trade agreements with the likes of the European Union (EU).
Talks on Free Trade Agreement (FTA) between the EU and GCC commenced in 2003 when the latter moved to implement the requirements for a customs union, and thereby assume a unified external trade policy.
However, contentious issues rose on such issues as the EU’s reservations with the GCC on political openness, human rights and environmental protection. On trade, there was the subsidy to Gulf-based aluminium and petrochemicals firms engaged in exports to EU economies. Conversely, the GCC was displeased with EU tariffs on aluminium and petrochemical products.
For its part, the US has shown little, if any, interest in reaching a collective FTA with the GCC. Currently, the US has separate FTAs with Bahrain and Oman.
Against this backdrop, it is not surprising to see the Gulf make efforts to clinch trade deals with some Asian countries, which are also showing a similar willingness. This is evidenced in the FTA with Singapore and a framework agreement with Malaysia.
Trade talks are taking place intermittently with China, Japan, South Korea, India and Pakistan.
Notably, the GCC signed the first ever FTA with Singapore back in 2008 only two years after the start of the negotiations. However, the deal went into effect only in September 2013, with the delay attributed to the relatively slow ratification process in Saudi Arabia.
The deal is a comprehensive and covers trade in goods, services, and government procurement. To Singapore’s credit, the agreement extends recognition of halal certification of Majlis Ugama Islam Singapura (MUIS).
Concurrently, the deal grants GCC nationals’ preferential treatment in Singapore’s law, engineering and retail sectors. Clearly, this fits into Singapore’s drive of projecting itself as a gateway to Asia.
Already, available statistics point to a sizeable two-way trade between the two sides. By one account, value of total bilateral trade rose to a sizeable $55 billion (Dh202 billion) in 2012. Also, exports and imports of both sides crossed $30 billion in the first-half of 2013.
Judged on merit, Singapore decidedly deserves to have an FTA with the GCC. The country ranks tops on numerous international indexes, including being the second most open economy in the world after Hong Kong in the 2014 Index of Economic Freedom.
Also, the 2013 version of Corruption Perceptions Index, issued by Transparency International, ranks Singapore as the fifth best in the world, thanks to a culture of zero tolerance of corrupt business practices.
Turning to other Asian countries, GCC states and Malaysia signed a framework agreement on economic, commercial, investment and technical cooperation in 2011. The deal was signed in Abu Dhabi earlier during the UAE’s presidency of the GCC at the time.
It should strengthen trade activities between GCC and Malaysia by making it easier for investors to do business on the other side. Currently, the two-way trade exceeds $30 billion.
Malaysia’s exports include durable goods such as equipment while GCC exports comprise primarily of crude oil and petrochemical products. In addition, a limited trade deal between GCC and China cannot be ruled out. The Chinese like to restrict any possible deal to doing business in goods and thereby exclude services.
Ostensibly, this reflects the fact of China enjoying an advantage in producing and exporting goods thanks to the cost factor. Certainly, trade deals are a way of life in the age of globalisation.