The National | 6 June 2023
’High ambitions’ for UK-GCC free trade agreement talks
by Matthew Davies
A free trade agreement between the six countries of the Gulf Co-operation Council and the UK is moving closer, the outgoing British Trade Commissioner to the Middle East and Pakistan, Simon Penney, has told The National.
As his five-year term as Commissioner draws to a close, Simon Penney said the ambition to get a free trade deal done is high.
“There is an impatience on all of our parts to get things done as quickly as possible. We’re moving on the UK side as quickly as we possibly can. We have a lot of resource deployed on this, he told The National.
UK government analysis has found that a free trade agreement between the UK and the GCC would be expected to increase trade by at least 16 per cent and add at least £1.6 billion ($1.98 billion) a year to the UK economy.
A third round of talks towards an agreement was completed in March in the Saudi capital, Riyadh. The next round is expected to kick-off in July in the UK.
’Ambitious and comprehensive agreement’
Mr Penney pointed to the recent negotiations the UK undertook with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the 11-country trading bloc which includes Australia, Canada, Japan and Singapore, as an example of the “level of ambition the UK has” when negotiating towards a free trade agreement with the GCC.
Joining the CPTPP has given UK businesses access to an Indo-Pacific trading area worth about £11 trillion.
Mr Penney told The National that the primary objective in the trade negotiations with the GCC is to have “an ambitious and comprehensive agreement”.
“We’re not looking for something that’s thin and light, and called a trade agreement. We’re looking for something that is going to be cutting edge and it’s going to be fit for purpose in the year 2023 and beyond.
“It’s quite hard for me to say how long it’s going to take, but all of the sound bites that are coming from our discussions would indicate an alignment of ambition around content and timing.
“If you look at the UK election cycle, we will be having an election at some point in the not too distant future. It’s certainly our Prime Minister’s ambition and our Secretary of State’s ambition to get an agreement done sooner rather than later.”
Trade deals are notoriously slow creatures, and in most cases take years to conclude. Most involve at least eight rounds of talks.
It has been nearly a year since the negotiations for a UK-GCC free trade agreement were launched. It could be at least another year before they are concluded.
Negotiations for a GCC free trade agreement with China started nearly 20 years ago and have yet to conclude. Talks between the GCC and South Korea kicked off in 2007 – the seventh round was held in February.
“There’s a lot of that’s been spoken and written about the GCC’s lack of progress in concluding agreements in the past,” Mr Penney told The National.
“But we’re not judging the GCC based on what’s gone before, we’re judging them on what’s going to come looking forward and certainly the meetings that we’ve had most recently with our Secretary of State [Kemi Badenoch] would suggest that the ambition remains high, and the enthusiasm remains high.
“Only time can tell, but where we’ve got to so far, and if we look at the things that we’ve already covered off and agreed, it does give us cause for optimism,” he added.
However, while the process of negotiations for a free trade deal between the GCC and the UK continues, some of the six Gulf states are forging ahead with separate trade arrangements.
Since 2021, the UAE has pursued several trade, investment and co-operation deals on its own – called Comprehensive Economic Partnership Agreements (Cepas).
The UAE has Cepas with Turkey, Indonesia, Israel and India, which combined are expected to grow its exports by more than £100 billion over the next decade.
“We will have to be realistic here,” Mr Penney told The National.
“If you take the six members of the GCC, they’re all at different stages of their own economic journeys, they’re at different stages on social agendas.
“And we want to be able to capture a higher ambition in some countries over others, for example.
“So, what we have mentioned to all the Gulf countries is that if you have a higher level of ambition in certain chapters of the free trade agreement, where you feel that you could go further, then we would welcome that.
"So, that will be the opportunity to introduce flexibility in the various different chapters that make up the free trade agreement.
“We haven’t quite got to that stage yet, because we’re still at the stage of negotiating the GCC-wide agreement which would then provide that baseline for those further discussions to occur.”
UK-GCC free trade agreement is the ’prize’
The priority for the UK government, Mr Penney insisted, is a GCC agreement, rather than six separate bilateral trade deals with Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman.
Principal among the reasons for this is the aim of frictionless trade for British companies across the Gulf region.
“If you export from the UK into Saudi Arabia, you know that your goods or services can then be re-exported across the Gulf without any barriers, because it’s a common terms agreement”, Mr Penney said.
“The minute you start introducing bilaterals into that mix, it gets harder for businesses because, depending on what the terms of those bilaterals are, you could potentially see other member states that are putting tariffs or quotas on those goods when they get re-exported to the rest of the Gulf.
“By far and away, the first prize is a GCC agreement – that’s something our Prime Minister has been very clear that he needs to get done. So, it’s respecting the customs union that is the GCC, but also being able to introduce flexibility where it’s possible to do so – that’s really the prize that we’re aiming for,” he added.
The maze of trade negotiations is complicated at the best of times. In the case of the Middle East, Mr Penney believes his successor as UK Trade Commissioner will need to employ a range of skills.
The key feature I would say of the Gulf compared to many other regions that my colleagues work in is that you cannot separate politics from business in the same way as you can in say Europe or the Americas, quite simply because the governments of the Gulf are omnipresent in industry,” he said.
“So, the reason I say that is because my advice to my successor would be to focus on the politics of trade and investment, as well as the commerce of trade and investment.
“So, you’re going to need to be very focused on the government-to-government interrelationship in a way that you might not be in some western economies.
“Be politically savvy, and be able to build relationships across the Gulf, politically as well as commercially.”