logo logo

GCC-EU Free Trade Agreement: a political imperative

Duai Quality Group Newsletter

June 2005

GCC-EU Free Trade Agreement a political imperative

Dr. Christian Koch — Program Director of GCC-EU Relations at the Gulf Research Center, Dubai

Good news came out of the April 5 Joint Council and Ministerial Meeting in Bahrain between the member states of the Gulf Cooperation Council and the European Union. Both sides have committed themselves to conclude the long awaited Free Trade Agreement “without undue delay” and agreed that a new round of what has been termed “final” negotiations will take place from June 7 to 9 in Brussels. The end of 2005 has been designated as the last possible target date for the FTA. To this end, EU Trade Commissioner Peter Mandelson has let it be known that there are “no fundamental obstacles to overcome.”

To bring the FTA talks to a close after almost 15 years of on-and-off negotiations would indeed be a tremendous boost to GCC-EU relations. The joint communiqué released after the conclusion of the Manama talks indicated that “the early completion of the FTA negotiations would represent a significant step towards the establishment of a deeper GCC-EU relationship.” What is meant by this is that the FTA is no longer simply an economic document aimed at boosting trade ties between the two blocs by increasing access to markets. Its completion has also become a matter of political significance, especially in light of the recent determination by the United States to conclude bilateral free trade agreements with several GCC countries - an agreement with Bahrain has already been concluded and negotiations are underway with Oman, Qatar and the UAE.

The key reason for the prolonged GCC-EU negotiations over a free trade accord was the EU’s insistence that the GCC states first establish a customs union to integrate their economies, a hurdle overcome with the deal agreed upon during the 2001 GCC summit in Muscat, which articulated that the union was to come into effect on January 1, 2003. In the agreement, it is clearly stated that “no member state may grant to a non-member state any preferential treatment exceeding that granted herein to member states, nor conclude any agreement that violates provisions of this agreement.” The bilateral deals currently being forged and pursued by the US thereby threaten once again to undermine a possible GCC-EU accord. Trade Commissioner Mandelson has mentioned that “these agreements risk undermining the proper functioning of the GCC customs union and hence the EU-GCC free trade agreement negotiations.” If this was indeed to be the case, a further delay in the GCC-EU accord would in effect extend virtual veto power to the US over key foreign relations decisions made by the GCC countries in addition to seriously questioning the EU’s determination to have its own policies and decisions implemented without outside interference. That, in turn, could mean significant damage to the GCC as an institution and the effective end of the EU’s political role in the Gulf region.

The way to counter the momentum of the US bilateral push would be to quickly bring to conclusion the deal between the GCC and the EU and through such a mechanism reinvigorate the multilateral approach to regional relations. As far as the GCC is concerned, such an agreement would strengthen the institution at a time in which it is coming under increased scrutiny in terms of its achievements and relevance. The FTA would send a powerful message about the regional integration process with the GCC serving as a catalyst for the continued development and cooperation of the region. Without such a process, it is difficult to envision how such ambitious projects as the common market in 2007 and the single currency in 2010 can be achieved. It is thus time for the GCC States to seriously commit themselves to real progress on the FTA with the European Union and to stop putting national prerogatives ahead of regional interests.

For the European Union, the associated benefits of a FTA are even greater. In addition to prompting concrete movement towards open markets and economic diversification, the FTA will give substance to the EU Strategic Partnership Initiative with the Mediterranean and the Middle East adopted by the European Council in June 2004 and show that the EU is serious about establishing a deeper and more constructive relationship with the region. It would also assist in reinvigorating the Barcelona process - the EU’s policy towards its southern Mediterranean neighbors - where, following a ten-year period, progress has stalled and an associated EU-Mediterranean Free Trade Accord appears a distant prospect. An FTA also sends a powerful message of support for the political reform process that has begun to take hold in the GCC States. As such, a realization has to take hold within the EU that the political and economic benefits of a GCC-EU agreement are far more advantageous in the future than if the current momentum was once again allowed to stall. In this regard, it is time for the EU to stop making additional demands and seeking concessions, and instead abide by the rules and principles of free trade that it has championed. The EU’s protectionist attitude towards petrochemicals and aluminum is no longer in line with present political imperatives.

Finally, a GCC-EU agreement would focus the region’s energies on supporting multilateral arrangements for peace, stability and prosperity rather than continuing on the bilateral framework of the past that has so far made little progress. By overcoming its historical divisions and animosities, the EU is a model character for those parts of the globe that want to focus on the benefits of globalization by promoting and encouraging cooperation. By finally bringing about the GCC-EU free trade agreement, a step in the right direction can be achieved.

 source: Dubai Quality Group