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Drop FTA with US, GCC tells Bahrain

Drop FTA with US, GCC tells Bahrain


24 November 2004

RIYADH - Gulf Arab states angered by Bahrain’s decision to sign up to a free trade pact with the United States say it should back away from the deal and honour a regional agreement, a Gulf official said yesterday.

Washington and Bahrain signed a deal in September abolishing external tariffs, giving it trade advantages over fellow Gulf Cooperation Council (GCC) member states which had signed a customs union fixing tariffs at 5 per cent.

Foreign and finance ministers of the six-nation GCC will discuss the deal, which is yet to come into force, at a meeting early next month after finance ministers failed to resolve the issue in Jeddah in October.

“The Bahrain-US agreement is in clear violation of the GCC economic agreement, whether in doing away with the GCC customs union common tariff or in granting the US more favourable treatment than it grants GCC member states,” said the official involved in the talks, who spoke to Reuters on condition of anonymity. The official said all member states - Saudi Arabia, Kuwait, the UAE, Qatar, Oman and Bahrain - were also committed to collective rather than bilateral negotiations with trade partners.

A 2001 Gulf Arab regional agreement prohibits members from “granting preferential treatment exceeding that granted to member states” or from concluding any deal which violates any part of the agreement.

“Everyone, including Bahrain, agrees that this is what is required from the treaty, but political pressures (on Bahrain) proved to be too strong,” the official said.

“Bahrain has already signed a free trade agreement to the chagrin of most GCC members, especially Saudi Arabia.” Youssef Mahmoud, director of economic planning at the finance ministry, denied Bahrain was coming under pressure. “I am unaware of such pressures from the GCC, neither of their non satisfaction,” he told Reuters.

Critics of the deal say it is political reward for the close support which Bahrain, home to the US Navy Fifth Fleet, has provided the United States. Trade Representative Robert Zoellick has praised the tiny island state as an “oasis of progress” in a region “swept by the bitter winds of extremism”.

Neighbouring Saudi Arabia, the only Gulf country with a land link to Bahrain, is the least liberalised and by far the biggest of the Gulf Arab economies and fears US goods imported tariff-free into Bahrain will be re-sold within its borders.

Those fears escalated after Zoellick said that Bahrain had opened its services market to U.S. products “wider than any previous Free Trade Agreement partner”.

US exports to Bahrain totalled $500 million last year and the new agreement opens the door for more aircraft, machinery, vehicles, food and pharmaceutical sales as well as banking, insurance and telecoms services, he said.

Washington plans talks on similar agreements with two other GCC states, the United Arab Emirates and Oman.

“There may be ways to design free trade agreements that do not violate the GCC Economic Agreement, but that would be difficult, especially the common external tariff of the customs union,” the Gulf official said.

The United States would likely to use the Bahrain deal as a template in its negotiations with the two other states, he said.

 source: Khaleej Times