GCC pact with EU stumbles, but could help end trade imbalance

It is unfortunate to witness the proposed free trade agreement between the Gulf Cooperation Council (GCC) and the European Union (EU) facing gloomy prospects.

Last week, general-secretary of the GCC, Abdul Rahman Al Attiyah, announced suspension of negotiations until further notice. He stipulated the EU signing a draft accord as a condition for resumption of talks.

The extraordinary development reflects growing disappointments within the GCC's general-secretariat in Riyadh. Attiyah and other GCC officials had high hopes of reaching a deal during the French presidency of the EU. President Nicolas Sarkozy enjoys a special relationship with the Qatari Emir Shaikh Hamad Bin Khalifa Al Thani.

Both France and Qatar surrender their respective presidency of the EU and GCC by year-end. The Czech Republic assumes presidency for the first time since joining the EU in 2004. Oman gets the rotating presidency of the GCC by virtue of hosting the group's annual summit which starts tomorrow.

The GCC's new tough stance with the EU follows the recent signing of a free trade agreement with Singapore after three years of negotiations. Many GCC officials wrongly argue that negotiations with the EU started some 20 years ago, or specifically in 1988. However, actual talks between the two sides commenced in 2003 after the GCC reached a customs union. To the EU's delight, the customs union means the GCC has assumed a unified external trade policy.

In fact, the GCC needs a trade pact with the EU for several reasons. For one, an accord could help end the trade imbalance. The European side enjoyed a surplus of some $15 billion (Dh55.09 billion) in 2007. It remains a leading trading partner for the GCC. The GCC represents the fourth largest trading partner for the EU.

Another reason is that a trade pact gives the GCC unrestricted access to 27 economies in Europe.

Market access

The EU includes mighty economies like those of Germany, France, Italy and the UK. In other words, it is probably understandable for the EU to place some conditions on parties seeking unhindered access to its vast markets.

While visiting the region in 2007, EU Trade Commissioner Peter Mandelson and his team focused on four issues, namely market access, rules of origin, government procurement and application of the investment protection and guarantees criteria within the GCC.

The European side presses for unrestricted access to numerous investment opportunities, including the crucial energy sector.

For its part, the GCC would like to see the removal of customs charges on aluminium and petrochemical products. At the moment, the EU imposes a 6 per cent customs duty on imports of aluminium from the GCC.

However, the EU remains weary of governmental support such as under-priced gas to GCC producers, a matter that grants them unfair advantage against their European counterparts, notably Eastern European nations members that joined since 2004. Some 12 countries joined the EU in the last five years including Romania, Poland, Hungary and the Czech Republic.

Lack of concrete progress on proposed trade accord between the EU and GCC could serve the cause of Doha Round. The World Trade Organisation (WTO) launched the Doha Round in the Qatari capital in late 2001.

WTO officials argue that bilateral and regional agreements undermine prospects for concluding multilateral accords by serving as substitutes. Often, the stronger sides like the EU in this case place conditions on the weaker ones.

- The writer is a Member of Parliament in Bahrain