FTA with EU looks more imminent than ever
Saturday, April 09, 2005
The stage is being developed for a fast-track free trade agreement (FTA) between the six-nation Gulf Cooperation Council and 25-member European Union. The push for the ever FTA between two regional groupings became clear during a ministerial meeting held in Bahrain last week.
The talks in Bahrain focused on three broad matters, namely political issues, cultural exchanges and free trade. As to cultural issues, the EU intends to provide scholarships for students wishing to study in European countries. Ostensibly, the EU aims to spread socio-cultural values such as entrepreneurial skills and tolerance amongst future business and community leaders in the GCC.
Regarding political matters, there was a virtual consensus on points under discussion including fighting terrorism, protecting human rights, supporting elections in Iraq, and resolving the Iranian nuclear case through peaceful means. In fact, the EU seems appreciative of growing openness in the region concerning matters such parliamentary and municipality elections in Bahrain and Saudi Arabia, respectively. Also, the EU is pleased with anti-terrorism measures adopted by GCC states (the push by Saudi security forces against hideouts of terrorists north of Riyadh coincided with the conference).
Nevertheless, economic progress remained the sticking point. However, both sides agreed to try to resolve outstanding issues during upcoming meetings between EU and GCC officials. One such meeting is set for June 7 in Brussels. Clearly, officials have no choice but to overcome differences on the three areas of services, industrial goods and government procurement. For its part, the GCC likes to see the removal of customs charges on export of aluminum and petrochemicals products. 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 final communiqué of the 15th GCC-EU ministerial session advised of political willingness of both parties to try to clinch a deal preferably by year-end. This marked the first time that the EU had all but committed itself to a specific date to sign an FTA with the GCC. For its side, the GCC has long called on the EU to end protracted negotiations that started in late 1980s. 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.
The EU has somehow justified the willingness to reach an agreement on the grounds that the GCC as a group had made substantial progress with respect to economic integration. Specific references were made to the customs union and unification of economic systems and policies. Yet, the GCC became a customs union in January 2003 though the EU remained stubborn in two subsequent meetings.
Possibly, the EU has felt the urge to sign an FTA with the GCC now that the US has moved to reach bilateral agreements with individual GCC states. The US has signed an FTA with Bahrain in September though its implementation awaits Congressional endorsement. Meanwhile, the US has started FTA talks with both the UAE and Oman. Certainly, the EU cannot overlook the ambitious American policy goal of setting a US-Middle East Free Trade Area by 2013.
The EU is the largest trading partner for the GCC. But the GCC represents the fifth largest export markets for EU products. At the moment, the EU enjoys a $17 billion (Dh62.39 billion) trade surplus. However, the gap could be reduced once GCC products get more access to relatively fortified EU. Anyway, if eventually signed, FTA between the EU and GCC would be first between two regional groupings, thus making it a worthwhile effort.
The writer is assistant professor, College of Business Administration, University of Bahrain.