Gulf Weekly | 6 May 2009
GCC-EU FTA hits roadblock again
K S Sreekumar
Free Trade talks between the GCC and the European Union (EU) have been suspended again after the two sides failed to reach an agreement on human rights and customs duties on GCC exports to Europe.
This is the second time in recent times that this talk is getting stalled for one reason or the other.
Last December, the GCC suspended the two-decade-old negotiations over the EU’s hesitancy to sign a draft agreement that Gulf officials said included many ’concessions’ by their governments.
Officials at the 19th annual meeting of EU and GCC foreign ministers held in the Omani capital last week say the problem was with a conditional clause stipulating ’suspension’ of the agreement if the GCC states failed to respect human rights.
Different formulae were tried to get over the stalemate but none of them seemed to work.
The EU’s external relations commissioner, Benita Ferrero-Waldner, says: "For the moment the negotiations are suspended."
She adds, however, that the two blocs of nations would be working on the "resumption of talks".
She did not mention a time frame, but the Arab and European officials are due to meet again next year.
For all practical purposes, have the talks failed?
No says Bahrain’s Minister of State for Foreign Affairs Nizar Al Baharna. The efforts to resume free trade talks have not failed, because the GCC states had no problem with addressing human rights concerns, he says.
"It’s like zigzag, we can’t say that it had failed," he says, referring to the various proposals to formulate an alternative wording of the clause.
If signed, the free trade agreement would be the first of its kind between two political and economic blocs. In entering economic agreements with other countries the EU seeks to encourage free-market and democratic reforms, but the GCC states say they need to carry out political reforms at their own pace.
The EU is still hopeful about resuming the stalled FTA talks with the GCC soon. "We are hopeful that we can get it done this very year," says Ferrero-Waldner.
The history of the FTA talks goes back to 1988 when the EU (then called the European Community) and GCC signed a so-called ’co-operation agreement’ in order to institutionalise and boost their multidimensional relations.
The agreement included, among others, a provision to enter negotiations that would lead to the conclusion of a Free Trade Agreement (FTA) in order to further strengthen ties. It would have been the first region-to-region FTA ever to enter force worldwide.
After 20 years of negotiating, however, no such agreement has been signed.
What are the major impediments that have been hampering the FTA negotiations?
There are basically technical issues left to resolve such as export duties. The EU is hesitant to grant concessions as this might be used by other countries that the EU is negotiating with (such as Russia) to demand similar treatment, i.e. a concession to the GCC on export duties, will mean Russia will want the same.
The GCC also still want the trade imbalance addressed more effectively. Human rights are not really an issue and can be resolved as the principle is not disputed by either side. What is required at this stage is a little more flexibility on the EU side to see how they can meet GCC concerns. The GCC wants to be seen as having their concerns taken seriously and this is not the case so far.
Then, why the FTA; who benefits from it?
The EU and GCC are major trading partners and thus an FTA provides tangible benefits to both sides. Both have things they bring to the table, the European nations in terms of the high-quality manufacturing products, the GCC states with the leading role in the energy and hydrocarbon sector.
To maintain upward movement in trade and provide additional opportunities, an FTA will provide the right framework especially because otherwise also other nations and regions will move into any existing void. For example, the GCC is proceeding with talks with a number of countries including Australia, India, China and Japan.
There are two important reasons for seeing the GCC-EU FTA concluded. One is that it sends a powerful message in the current global financial crisis against protectionism and the other is that it will further strengthen the integration process in the Gulf which is central to security and stability of this vital strategic region of the world.
The GCC as an organisation is still young and only now beginning to develop itself more institutionally. For many of the projects under consideration in the GCC, the EU is a model.
Therefore, the failure to agree on an FTA or the inability to develop other forms of co-operation would be a severe blow to regional integration.
Given the region’s strategic role and the impact that a crisis in the region can have on stability elsewhere, it is essential that further efforts to consolidate regional integration is supported. In the end, both sides benefit.