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GCC chief hails improving S.N. Korea relations

Seoul Times, Korea

GCC Chief Hails Improving S.N. Korea Relations

19 December 2005

ABU DHABI - GCC Secretary General HE Abdulrahman bin Hamad al-Attiyah has hailed the continuing reconciliation between South and North Koreas and expressed hope that the six-way talks aimed at nuke-free Korean peninsula will bring about fruitful results.

In particular, he underscored the need for important role to be played by China.

Meeting with The Seoul Times on the eve of GCC summit which opened on Dec. 18 for a two-day run in Abu Dhabi, HE al-Attiyah said that negotiations are now under way between GCC and China for earlier conclusion of Free Trade Agreement(FTA).

At the invitation of the Chinese government, six ministers of the member states of the Cooperation Council for the Arab States of the Gulf (GCC) and GCC secretary-general paid a joint visit to China from July 4 to 7.

China and the GCC members have enjoyed sound cooperation in recent years.

When asked to comment on when and how similar agreement could be hammered out between Korea and GCC, he said that a legal framework is now being made in preparation for the FTA agreement with Korea but refused to go into details.

He also told The Seoul Times that he is considering visiting Asian countries including Korea, Japan and the Philippines in the near future, although the date is yet to be fixed.

Leaders of the six members of the Gulf Cooperation Council (GCC) met on Dec. 18 here 25 years after the oil-rich bloc was established, aiming as usual to enhance cooperation while disputes remain undercover.

"Terrorism and Iranian nuclear programme will be high on the agenda" of the summit, said Abdul Rahman Al Attiyah.

Also, among the issues to be discussed are the "extension of the transitional period of the customs union for two more years till 2007 and an additional year for the exemption period of cement imported from outside the GCC," said Al Attiyah.

"The summit will follow up reports on demographic structure, GCC rail and water grid, GCC smart card and expansion of insurance cover to GCC nationals in member states, will come under discussions at the two-day summit," he said.

GCC Secretary General HE Abdulrahman bin Hamad al-Attiyah (left) talks with Min Byung-il. The Seoul Times correspondent in Abu Dhabi on Dec. 17..

The streets of the capital of the United Arab Emirates (UAE) have been adorned with the flags of member states and portraits of their leaders for the summit which will end on Dec. 19 with a joint communiqué.

On the economic side, leaders of the GCC countries, which have signed bilateral trade agreements with non-members, will look into a mechanism to incorporate all GCC members collectively in such agreements.

Such mechanism would however exclude free-trade agreements with the United States, which signed with Bahrain in September 2004 its first agreement with a GCC country.

The US-Bahraini agreement stirred arguments within the GCC.

Saudi Arabia voiced its objections openly, claiming the accord was in breach of a GCC unified economic agreement.

But Saudi objections did not stop other members like the UAE and Oman from seeking their own free-trade agreements with the US.

Leaders are also expected to discuss a two-year extension for the date to start the customs union, which was launched in 2003 with a three-year transition period.

The GCC states have already agreed on several key criteria to bring their economic and fiscal policies closer and also approved setting up a central bank for the group ahead of a monetary union.

The GCC groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates

The Free Trade Agreement (FTA) negotiations between the Gulf Cooperation Council (GCC) countries and European Union (EU) have started since 1988. However, there have been always obstacles that prevented the achievement of a final agreement.

According to a report issued by Dubai Chamber of Commerce and Industry (DCCI) in October 2005, the two parties’ latest negotiations round in Abu Dhabi (UAE) unveiled the possibility of finally concluding the agreement early next year.

Why the EU is so interested in the GCC countries? Latest observed steps and policies of the GCC countries are characterised by one main aspect: opening up their economies to international competition. Perhaps, the FTA negotiations with the USA are a good example in this context. Given the significant economic relationship between the EU and GCC, the former is aware of the on-going liberalisation aimed by GCC countries and wishes to play a major role in it. The on-going negotiations between the GCC and EU reveal that the latter is targeting three major issues, among others: trade in goods and services, foreign direct investment (FDI) and government procurement.

Average import tariff rates on goods in GCC were considerably higher than those in the EU but with the establishment of the Customs Union in 2003 -which encompasses the introduction of a 5 percent Common External Tariff -this disparity is reduced substantially. Of course, the elimination of these tariffs on goods traded between the EU and GCC after according a FTA would impact trade in goods between the two involved parties.

According to the most recent data available about GCC countries, their exports to the EU stood at $11,649 million in 2002, representing 11percent of GCC total exports to the whole world. On the other hand, GCC imports from the EU surpass exports by around two times and half ($29,100 million). The latter figure corresponds to one third of GCC total imports from the world. This fact reflects the high dependence of GCC countries on the EU as a source of their imports.

It is well known that one of the main reasons behind complex trade negotiations is the demand of the GCC to eliminate import tariffs on primary aluminum and petrochemicals. Both products are crucial for GCC economy. Despite this fact, the GCC is not dependent on the EU as regards exports of these two products as they are highly demanded. This reality gave the GCC an additional pressure tool in the negotiations with the EU.

On the other hand, the size of the GCC services sectors is relatively smaller and less developed than in the EU. The EU instead performs well in the services sector, being one of the world’s largest exporters of services. In this context, the EU will unambiguously benefit from the forthcoming FTA with the GCC as the latter is an importer of services.

However, the GCC could enhance their services sectors by taking advantage of the FTA in a number of areas where services liberalization in the GCC could have a direct impact on economic, environmental and social sustainability as for example through consumer protection standards, consumer security and safety, pricing levels, professional training and education, environmental standards, consumer relevant quality, diversity of choices and cultural diversity.

Statistics published by EUROSTAT show that the Gulf investments in EU increased from $ 585 million in 1999 to $1,394 million in 2001. At the same time, the EU investment flows to the Gulf region have been increasing in the recent years and were of $ 1,264 million in 2001. The same applies to the outward stocks. EU capital employed in the Gulf has increased from 0.3percent of total EU outward stock in 1999 to 0.4percent in 2001. The latter modest ratio is expected to grow remarkably if the GCC accept the EU request of opening the investment door in GCC companies by the ratio of 100 percent.