End the Saudi-Bahrain FTA Row
16 January 2005
By Abdulaziz Sager
DUBAI, 16 January 2005 - As a Gulf Cooperation Council (GCC) citizen, it is extremely disappointing to note that the controversy surrounding Saudi Arabia’s objections to the Bahrain-US free trade agreement (FTA) is threatening the future of the GCC economic integration. The fact that the crisis is serious was exposed in the disagreement hijacking a vast duration of the Manama summit, raising questions about the future of the grouping.
The GCC countries have always shared a simple but powerful idea: they have believed that through greater cooperation with one another, and with appropriate help from key partners, they stand a reasonable chance of reaching their near- and long-term goals.
More than 23 years after the establishment of the GCC to realize political, economic and collective security objectives, it is now the fundamental right of the people that the organization not only survives, but transcends the initial reasons for its establishment and guarantees development and integration in the region.
The Saudi-Bahraini row emerging out of the FTA is playing out in US favor. For decades the US has been a major power in the region in the name of security. In maximizing the security threat perception, the US involvement in the region is now omnipotent. It has a hand in every pie. Given that status, there is little room for contradicting US interests and diktats.
The US deal with Bahrain is a classic case of negotiating with an individual country rather than a bloc. The US realizes that negotiating at a bilateral level gives it immense bargaining power contrary to the preferential terms the GCC countries could extract if they negotiated collectively.
The controversy surrounding the Bahrain-US FTA needs to be resolved in the interest of each of the parties concerned and the GCC as well. Adding to the worry is the brewing rift over the alleged deliberate delays in allowing Saudi products into Kuwait. As a result, crisis management is the need of the hour and a damage control mechanism is the only way out.
Bahrain emphasizes that the economy and finance ministers of five GCC States (excluding Saudi Arabia) agreed at a meeting in Manama in December that free trade deals between GCC members and US would be an "exception given the American refusal of the concept of collective negotiation".
Hence, Saudi Arabia dropping its objections or imposing five percent duty on US goods re-exported from Bahrain are not the only ways out for the moment. Since the agreement has already been finalized, and is expected to win easy approval in the US Congress, the Bahraini Parliament should go ahead and ratify the pact, which is anyway expected by the end of the month. But the GCC should enforce a caveat - one that Bahrain should commit itself to fulfill - which states that the deal will not come into force till all the other GCC countries have signed similar agreements with the US.
As a concession and a goodwill gesture, Saudi Arabia should revoke its suspension of a donation of 50,000 barrels per day (bpd) of oil to Bahrain enforced in July pending talks on sharing the output of the joint offshore field of Abu Saafa.
Such a face-saving formula would take us back to the appropriate and desired stage where the GCC states could collectively negotiate FTAs with the United States, as is being done with the European Union, China, Jordan and Lebanon.
The present dispute should also slow down the FTA talks between the other GCC countries and the US. Since the situation in the region has changed and differences are now surfacing unlike in the past, it is high time for the GCC countries to reactivate the recommendations and principles which have been advocating team spirit.
Bahrain should also realize that better coordination with its neighbors can yield equal, if not better, results in the realm of trade by reinforcing collective unity. The garment and textile sector, for example, that is facing a crisis and accounts for more than 60 percent of Bahrain’s exports to the US and contributes to more than three percent of the manufacturing GDP in Bahrain, can definitely find a profitable market even among its neighbors.
The fact that intra-GCC trade doubled in 12 years from $7.53 billion in 1990 to $15.14 billion in 2002 and the Arab free trade zone came into effect on Jan. 1, are reasons enough to feel optimistic about the opportunities for collective regional growth.
(Abdulaziz Sager is chairman, Gulf Research Center, Dubai.)