The European Union (EU) was one of the first blocs with which the GCC stated discussions to establish a free trade agreement over 30 years ago. Those efforts faced obstacles due to the EU's blending of economic and non-economic issues, eventually leading to a long-standing freeze on the initiative.
During this period, the GCC signed numerous FTAs with various nations and economic blocs. The agreements provided the GCC with access to affordable, high-quality markets and new export channels, while the EU's tendency to interject non-economic concerns into purely economic matters resulted in missed opportunities.
The situation has evolved following UK’s exit from the EU, after the Brexit vote. This opened the door for an imminent free trade agreement between UK and the GCC, which is expected to enhance trade and investment relations between the two.
Need to close FTA deal fast
It appears that the EU is now attempting to make up for lost time, especially as the GCC has gained increased economic and geopolitical influence over the past two decades, becoming significant players in international trade and regional crisis resolution.
Therefore, the first European-Gulf summit is scheduled to start October 16 in Brussels. It aims to address longstanding challenges and align positions on various issues. A key priority will be to revisit the potential for establishing an FTA between the EU and the GCC.
Christophe Farnaud, EU Ambassador to Saudi Arabia, Bahrain, and Oman, stated, “In addition to the shared goal of the EU and the GCC to advocate for a two-state solution between Palestine and Israel, the EU is strongly committed to reaching a free trade agreement at this stage, given the robust economic ties between the two sides.”
He added that while some technical aspects need to be addressed, the EU does not have reservations or unresolved technical issues, as these were addressed in previous negotiations.
Similarly, the GCC countries also have no reservations or technical hurdles, as their concerns have been addressed. This puts the onus on the EU to separate economic and trade issues from unrelated matters, as other countries and blocs have done, and as Britain is doing.
Only by focussing on the purely economic aspects, as the ambassador highlighted, can these longstanding challenges be resolved. The GCC countries have consistently handled these negotiations professionally, distancing themselves from the internal political considerations of each party involved.
Other nations bypass EU in trade volumes
It’s worth noting that in the 1990s, the EU was the GCC’s top trading partner. However, over the years, it lost this position to China and India, which are now the GCC’s leading trading partners. In 2023, merchandise trade between the GCC and the EU was valued at $187 billion, while trade with China reached $287 billion according to Chinese customs data and with India $185 billion. This shift is significant as the EU now comprises 27 countries following the UK's departure.
Although it may be difficult to envision the European Union moving away from intertwining economic and non-economic issues, past experience suggests that the GCC countries remain committed to keeping these matters separate.
This is especially true given that the GCC countries are now in a much stronger economic and geopolitical position than they were thirty years ago and have multiple alternatives, such as the impending FTA with the UK, which also recognises the significance of this arrangement.
What is needed now is greater flexibility, a clear separation of tracks, and a professional approach to supporting the economic, trade, and investment relations between these two major blocs, the GCC and the EU, to foster these relations to a new, advanced level, as noted by the EU ambassador.
