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Export duty halts signing of agreement with EU

Kuwait Times

Export duty halts signing of agreement with EU

23 June 2010

By Ben Garcia, Staff Writer

KUWAIT: Export duty is one pending issue that needs to be resolved before an EU-GCC free trade agreement is signed, disclosed Tomas Dupla del Moral, Middle East and south Mediterranean External Commissioner with the European Commission in an email exchange with the Kuwait Times this week. "The European Union is ready to make an effort at a political level to conclude negotiations and expects the same from GCC countries," he said. This news comes soon after news circulated that the ministers of foreign affairs of the European Union (EU) and the Gulf Cooperation Council (GCC) agreed to continue consultations on the Free Trade Agreement (FTA) with a view of concluding negotiations as soon as possible during EU-GCC ministerial meeting which took place in Luxemburg earlier this month.

Dupla del Moral stressed that the only question that remains to be resolved is export duty. In his words, both sides will need to show flexibility in order to come to an agreement. Experts claim that the FTA creates a better economic environment, increases competition and facilitates the movement of goods within large blocs of countries. By signing an FTA, the EU, home to some 500 million people, and the GCC will create greater opportunities to strengthen trade relations between the two blocs. It will play a significant partner to the GCC. It will help diversify the oil-dependent economies of the Gulf.

According to Dupla del Moral, the comprehensive Free Trade Agreement will benefit both the Gulf region and the EU as it aims to create a preferential relationship between the EU and the GCC in line with WTO principles and disciplines. Benefits will go beyond the enhancement of the parties’ market access in trade in goods which is an important part of a Free Trade Agreement, but it is not the only (or the most) important part.

Currently, the GCC is the European Union’s fifth largest export market and the EU is the top trading partner of the GCC. The trade volume between the EU and the GCC countries totaled to $79 billion in 2009 and is expected to increase under the FTA. The EU trade with the six countries in the Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - has been increasing since the 1980’s, according to the EU website. EU goods export to the Gulf region totals to 61.5 billion euros. The EU goods import from the Gulf region totaled to 30.7 billion euros.

According to the EU website, energy tops the list of fields that the two blocs cooperate with. For example, EU exports to the GCC include machinery and transport materials, power generation plants, railways and aircrafts. The EU imports 70 percent of fuels and related products. With its 27-member states, the EU launched FTA negotiations with the GCC in the early 1990s, although they only took off after the creation of the GCC customs union in 2002, Dupla del Moral said. By the time of the suspension of these negotiations by the GCC in 2008, EU had agreed to most of the text of the FTA and of the market access offers on goods, services and investment and public procurement, he observed.

The Free Trade Agreement also aims at supporting member states of the GCC in their policies of economic diversification by encouraging further economic reforms and offering the potential of bringing increased foreign investments, in addition to increasing dynamics of inward investments in the region," he added. "The Free Trade Agreement will also support the GCC’s decisions to pursue further economic integration to deepen its customs union with a common customs law and a number of trade-economic regulations and to establish a GCC monetary union in the future," he mentioned.

The EU and the GCC are increasingly important and relevant organizations in the world today. Based on the 20th EU-GCC Joint Communique posted in the internet, the two sides have reviewed a number of regional and international issues of mutual interest and reiterated their determination to develop and advance political dialogue between them based on mutual respect with a view to seeking common solutions to the challenges that their respective region faces, fully respecting international law, the United Nations Charter and the relevant UN Security Council resolutions. Both the EU and the GCC countries agreed on the issues surrounding the Middle East, including Iraq, Iran, Yemen, terrorism, piracy, nuclear non-proliferation, the issue of human rights and dialogue between cultures.

Meanwhile, FTA with the Far East is also in the pipeline. Japan is intensifying pressure to the GCC countries to signing FTA with them. In a recent telephonic interview conducted with the Kuwait Times, Takanori Yamashita, Japan Commercial Attache said that Japan wishes to sign the FTA agreement soon with the GCC countries. "That is our desire, but we are still awaiting reply from the GCC side. As of now, we don’t have any certain timetable on the issue. I hope they would consider continuing negotiations and finally sign the FTA soon," he said.

Yamashita admitted that he cannot reveal more details about Japan’s request for negotiations since the matter was centered at their Saudi Arabia mission. Reports from Kyodo news agency says that Foreign Minister Katsuya Okada, Chiaki Takashihi, parliamentary secretary for economy, Trade and Industry and Kuwait Deputy Prime Minister and Foreign Minister Mohammed Sabah Al-Salem Al-Sabah also agreed in Tokyo that the two countries will aim for an early conclusion of talks to sign an accord to facilitate mutua
l investments.

Japan and GCC countries started FTA talks in 2006. But it was suspended due to some issues like formulating auto policy. About half of the GCC-bound products are automobiles while the GCC in return are also supplying oil products to Japan. "If the FTA will be finally signed, both sides will enjoy reduced tariffs on all products therefore making our exchanged of goods dynamic as all products can also flow easily and it can boost trade demands on both sides. I just want to stress as well that GCC and Kuwait in particular are very important market for Japan," he added. Separately, Japan and Kuwait also signed an agreement of cooperation in the areas of renewable energy, energy conservation and the possibility of cooperation in nuclear power generation.