GCC inks free trade deal with South Korea
Current Affairs | 29 December 2023
GCC Inks Free Trade Deal With South Korea
The GCC deepens economic ties with major Asian partners, signing its second FTA this year, highlighting commitment to investment and economic diversification.
The Gulf Cooperation Council (GCC) has taken a significant stride in strengthening economic ties with major Asian partners by signing its second free trade agreement (FTA) this year. The recent accord, inked with South Korea, underscores the bloc’s commitment to fostering investment connections and diversifying its economic portfolio.
Tariff Elimination and Trade Coverage
As part of the newly established FTA, South Korea has committed to removing tariffs on nearly 90% of all items, including critical energy resources such as liquefied natural gas (LNG) and other petroleum products.
On the other side, the Gulf states will reciprocate by scrapping tariffs on 76.4% of traded products and 4% of traded goods. This mutual reduction in trade barriers aims to stimulate economic activity and create a more conducive environment for bilateral commerce.
The scope of the agreement extends beyond tariff elimination, encompassing trade in goods, services, government procurement, and cooperation among small and medium-sized enterprises (SMEs).
Additionally, the agreement addresses critical aspects such as customs procedures, intellectual property, and other facets crucial for promoting a seamless and mutually beneficial economic relationship, as outlined in a statement by the GCC.
Background and Challenges in GCC’s FTA Endeavors
Historically, the GCC has faced challenges in navigating the complexities of signing FTAs due to competing priorities within the bloc. Talks with major economies, such as China, have been prolonged, sometimes taking years to reach fruition.
The recent momentum in trade talks can be attributed to the urgent need for Gulf states, heavily reliant on oil and gas revenue, to diversify their economies and explore new sources of income.
Trade between the Gulf and South Korea witnessed a significant increase, soaring from $50 billion to $78 billion between 2021 and 2022, according to data from the Asia House think tank.
Moreover, the GCC’s trade with emerging Asian economies, including China, reached $516 billion in the last year, marking a substantial rise from $383 billion in 2021.
Reviving and Accelerating Negotiations
The FTA negotiations with South Korea, which commenced in 2007, experienced a prolonged hiatus of almost 13 years before being revived last year.
The agreement reflects a historic step towards Gulf economic integration, as emphasized by GCC Secretary General Jasem al-Budaiwi.
This move aligns with the GCC’s broader strategy of expanding its economic reach and fostering stronger trade relations with key partners in the global arena.
GCC’s Global Trade Endeavors
Beyond the South Korea agreement, the GCC has been proactive in advancing its trade agenda. Earlier this year, the bloc signed an FTA with Pakistan, signaling a commitment to diversify its economic partnerships.
Simultaneously, negotiations with China have advanced, and talks with Japan have been restarted.
The GCC is also engaged in FTA discussions with Britain, underscoring its intent to explore diverse markets.
UAE’s Strategic Bilateral Trade Pursuits
Individual GCC member states, such as the United Arab Emirates (UAE), have pursued bilateral trade deals to advance their economic and political priorities.
The UAE’s series of trade agreements since 2021 reflects a strategic approach to enhance its position in the region amid growing competition, particularly with Saudi Arabia.
In October, the UAE and South Korea concluded negotiations for a bilateral trade agreement, adding another dimension to their economic cooperation.
