GCC, EU closer to FTA deal
BY ISSAC JOHN (Chief Business Reporter)
13 February 2007
DUBAI - Prospects of an imminent conclusion of the long-awaited Free Trade Agreement (FTA) between the Gulf Cooperation Council and the European Union are getting brighter with the expected visit to the UAE by the EU Trade Commissioner Peter Mandelson in a couple of weeks.
The stalled trade talks, which got revived last year, made headway last month when negotiators from the GCC and the EU completed "a constructive round of negotiations" on the creation of a free trade area between the two regional groups.
The talks held in Brussels, which touched on all key areas - including movement of goods and services, investment and public procurement - have brought both sides closer to a final deal which is expected to be clinched during Mandelson’s visit to the UAE and Saudi Arabia from February 24.
Last month Mandelson, welcoming the constructive and positive atmosphere of the latest round of negotiations, said both sides are in a position to resolve final issues and complete an EU-GCC FTA deal in the near future.
Yesterday, Juma Al Kait, director of WTO Affairs at the UAE Ministry of Economy, was quoted by Bloomberg as calling on other GCC countries to press ahead with the deal.
"A delay in signing the accord means additional challenges for the GCC in negotiations and less favourable terms," he was quoted by the news agency.
"Current circumstances must be exploited to sign the accord, especially since the current EU president Germany has the political will to make the accord a reality," Al Kait said.
Leaders and senior officials from both trade blocs have been calling for the quick conclusion of the deal which is expected to open a new era of economic, trade, investment and commercial activities between the world’s two prosperous regions. During her recent visit to the UAE, German Chancellor Angela Merkel said that it is time to conclude the FTA that will boost trade between the two strong economic regions. UAE leaders also have reiterated their keenness to conclude this agreement.
The GCC and the 25-member EU signed an Economic Cooperation Agreement in 1988 which laid the framework for the elaboration of a bilateral free trade agreement between the two regional blocs. Formal negotiations began in 1990 and were expected to be concluded in late 2006. However, the talks got bogged down when the EU brought up new issues that really shouldn’t have been a part of an FTA agreement: human rights, political reform and anti-terrorism strategies.
Market access, government procurement and application of the investment protection and guarantees criteria, are some of the key issues on which negotiations came to a stalemate. For instance, the EU asked to invest in the Gulf energy industry, heavily protected by local governments, while Gulf countries asked to ease up conditions attached to rules of origin for qualifying GCC products.
According to sources close to the discussions, the two sides have agreed on relaxing rules related to investments and rules of origin.
In October last year, Italy’s Minister for International Trade and European Affairs Emma Bonino used a visit to Saudi Arabia to predict that a deal could be agreed before the end of 2006. Bonino called for the GCC to show more "flexibility" and said that the negotiations between the EU and GCC were proving more arduous than those which preceded the unilateral signing of FTAs by individual GCC states with other nations, such as Bahrain’s flagship FTA with the United States.
The GCC is currently the EU’s sixth largest export market and the EU is GCC’s first trading partner. In 2004 the EU exports to the GCC were around €40 billion whereas the EU imports from the GCC amounted to around €25 billion. The EU’s exports to the GCC cover a wide range of products, the largest part of which is machinery and transport materials such as aircraft, electrical machinery and mechanical appliances. EU imports from the GCC are largely confined to fuels and derivatives. GCC countries currently benefit from preferential access to the EU market under the EU’s Generalised System of Preferences.
The FTA negotiations, which started in 1990 faced a standstill pending the decision from the GCC in 1999 to move towards a Customs Union by March 2005. The EU adopted a new set of negotiating directives in July 2001, including services and other areas included in recent FTAs.