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Gulf states must open markets, EU’s Mandelson says

Bloomberg | February 25, 2007

Gulf States Must Open Markets, EU’s Mandelson Says

By Matthew Brown and Andrew Critchlow

Feb. 25 (Bloomberg) — Six Persian Gulf states negotiating a free trade agreement with the European Union must open their markets further to EU companies if they are to conclude the 15- year-old talks, EU Trade Commissioner Peter Mandelson said.

``I’m concerned about the cap on ownership of business here,’’ Mandelson said in an interview today in Abu Dhabi, United Arab Emirates. ``You don’t want to bring a business here and find you can only own 49 percent of it.’’

Free trade negotiations between the 27-nation EU and the Gulf Cooperation Council, which includes Saudi Arabia and the United Arab Emirates, have gathered pace in the last year as energy prices soared and trade between the two blocks has risen. The EU had a $22.4 billion trade deficit with the GCC in 2006.

The EU has agreed to reduce import tariffs on aluminum and petrochemicals from the Gulf to zero in an attempt to conclude the negotiations. In return, the EU wants a limit on foreigners owning majority stakes in Gulf companies ended.

``This will take some time to evolve, and I accept that,’’ Mandelson said. ``As long as we’re moving in the right direction, as long as I’m satisfied we are laying the foundations for an increasingly diverse economy to which we have free access on terms and conditions that we expect in other parts of the world, then I’ll be happy with the deal that we eventually negotiate.’’

Gulf Constituencies

Europe recorded a trade deficit of 8.2 billion euros ($10.8 billion) last year, compared with a surplus of 16.2 billion euros in 2005, led by surging gaps with China and Japan and soaring energy costs during the year. It was Europe’s first trade deficit in six years.

Mandelson may struggle to secure an agreement, said Simon Williams, an economist at HSBC Holdings Plc in Dubai.

``If to get backing for an agreement in Europe, EU negotiators need to deliver open access to the region’s economies, and in particular, equal ownership rights with local firms, it’s unlikely to happen soon,’’ Williams said in a telephone interview today.

``The GCC negotiators have their own constituents to keep in mind, and many of them would be strongly opposed to the abolition of local majority ownership requirements or to the end of sole agency agreements,’’ Williams said.

Technical negotiations are taking place between the EU and the GCC in Brussels in the coming week, Mandelson said.


``If we still have unbridgeable differences at the end of this week, it would be difficult to see how we could ever resolve the outstanding problems,’’ Mandelson said at a press conference today with United Arab Emirates Economy Minister Sheikha Lubna al-Qasimi.

Qatar has agreed on ``99 percent’’ of outstanding issues in its negotiations with the EU, its finance minister said in an interview in the Qatari capital of Doha today. Qatar is a member of the Gulf Cooperation Council and an accord with the EU will need agreement by all six GCC states.

Qatar will scrap a rule requiring foreign companies to ask permission from the economy ministry before taking more than 49 percent in local companies, Yousef Hussain Kamal said.

Qatar demanded unrestricted access to the EU’s oil, gas and petrochemicals market, which the EU ``accepted,’’ Kamal said.

Companies expecting to benefit from greater access to Gulf include banks such as HSBC and Standard Chartered Plc, car manufacturers Renault SA, Volkswagen AG, DaimlerChrysler AG, and manufacturers Royal Philips Electronics NV and Adidas AG.

The U.S. and United Arab Emirates, the second-largest Arab economy, suspended negotiations for a free-trade agreement over differences on how the Gulf nation would open its market to U.S. banks and other overseas investors, U.S. officials told Bloomberg Feb. 16.

The temporary halt in talks with a key U.S. ally in the Middle East means the two sides won’t meet a March 31 deadline imposed by Congress if the deal is to be considered under President George W. Bush’s trade negotiating authority, which expires at the end of June.

 source: Bloomberg