Sarkozy can ensure EU and GCC reach trade pact

Completion of the pending plan to sign a free trade agreement (FTA) between the European Union and Gulf Cooperation Council possibly requires the skills of French President Nicolas Sarkozy.

Last week, he brought together more than 40 leaders from the EU, North Africa and the Middle East for launching the 'Union for the Mediterranean'.

Amongst others, the new union aims at improving energy supply, fighting pollution in the Mediterranean, setting up an exchange programme for students, and creating a scientific community between the EU and its southern neighbours.

The meeting in Paris coincided with Bastille Day celebrations marking the French national day, and came shortly after France assumed the EU presidency.

The protracted negotiations involving the EU (currently comprising 27 members) and the six-nation GCC started nearly 20 years ago.

However, real talks between the two sides commenced in 2003 after the GCC became a customs union. The customs union meant that the group has assumed a unified external trade policy.

The GCC has long called on the EU to end protracted negotiations. However, it was the EU that kept placing new restrictions.

For instance, at one point the EU raised the issue of environmental protection in the GCC as a precondition to making further progress.

Traditional EU demands focused on human rights and certainly democracy. Against this backdrop, Qatar's Deputy Premier and Minister of Energy and Industry Abdulla Bin Hamad Al Attiyah has complained of "endless" EU conditions.

Still, there are outstanding trade matters. In 2007, EU Trade Commissioner Peter Mandelson urged for progress 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 pressed for unrestricted access to numerous investment opportunities including the crucial energy sector.

For its part, the GCC likes to see the removal of customs charges on aluminum and petrochemicals products. At the moment, the EU imposes a six per cent customs duty on imports of aluminum from the GCC.

But 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.

The EU demand on removing restrictions on ownership of businesses is a realistic one. Internationals companies deserve to own entire stocks of their businesses without local participation, as they commit resources. Also, the demand fits neatly with efforts to further liberalise the GCC economies.

Yet, there is no consensus within the GCC states with respect to foreign investment in oil and gas. For example, Kuwait has yet to decide on allowing foreign participation in the development of its oil fields.

Kuwaiti parliament continues to block the proposal on the grounds that its constitution bars foreign ownership of the country's hydrocarbon resources. Conversely, Qatar has been welcoming oil majors through production and sharing agreements.

The two sides deserve to create a free trade area if only to judge by their ever growing trade relations. The EU is the largest trading partner for the GCC.

But the GCC represents the fifth largest export markets for EU products. Monetary value of trade between the two blocs had doubled in the last few years, amounting to 90 billion euros in 2007.

Chances are ripe for Sarkozy to use his influence to ensure the signing of FTA between the EU and GCC.

The writer is a Member of Parliament in Bahrain.