Emirates Business 24/7 | Tuesday, September 02, 2008

Gulf states urged to end trade talks with EU

by Nadim Kawach

A former Saudi official yesterday urged Gulf oil producers to halt their prolonged free trade negotiations with the European Union (EU) and opt instead for separate agreements that will serve the region’s interests.

In one of the strongest Gulf attacks on the EU, Abdullah Al Quwaiz said the Europeans are not interested in signing a free trade agreement (FTA) with the six Gulf Co-operation Council (GCC) states because they insist on raising human rights and other political issues as preconditions for any accord.

Quwaiz, former Saudi Finance and National Economy Ministry undersecretary, said more than 15 years of negotiations about a FTA with the EU have not produced results despite what he described as the GCC’s strong interest in reaching a trade pact with the EU, the Gulf’s largest economic partner.

In an article published in several Gulf Arabic language newspapers, Quwaiz accused the Europeans of blocking an agreement with the GCC although it has remained one of their largest markets and a major investor in EU members.

"There has been progress on most issues except those which have nothing to do with our economic relations," said Quwaiz, who also served as an economy undersecretary for the GCC since it was created in 1981 until 1995.

"Those issues include EU demands to discuss democracy, human rights, weapons of mass destruction and immigration. As the GCC countries are serious about reaching an agreement, they agreed to those demands. But during another round of negotiations in November 2007, the EU came up with another demand, which stipulates that either party has the right to suspend the FTA if the other party fails to honour its commitments in the political aspect."

Quwaiz, a well-known Gulf economist who has also served as Chairman of the Abu Dhabi-based Arab Monetary Fund, said he was convinced a FTA with the EU would not serve the interests of the business community in the GCC states.

"If the GCC countries wish to improve their negotiating position with the EU, it will be better for them to do this through the World Trade Organisation (WTO) as they will find allies who will support their demands. So, what is required now is to halt the FTA negotiations with the EU and begin serious discussions about issues that touch upon the daily lives of our citizens and businessmen. Such discussions should contribute to attracting more EU investments into the GCC states and redress our trade imbalance with the Europeans."

Quwaiz said his proposed talks must cover the following points:
– Devising a joint industrial programme encompassing the private sector from both sides.
– Cancelling visa requirements between both parties.
– The EU should encourage and support the creation of educational and training establishments in the GCC to train them on EU technology.
– Revising all bilateral agreements on avoiding double taxation between the two sides given their limited impact on GCC investors in the EU.
– Amending flight schedules between the two regions to facilitate movement of citizens and investors.
– Considering the possibility of linking the two regions in such sectors as oil, gas, water, electricity, communications and shipping.
– The EU should desist from creating any obstacles on GCC investments, mainly their sovereign wealth funds.

"These agreements could replace the proposed FTA as they could serve both sides better," Quwaiz said.

According to figures by Quwaiz and other GCC sources, the EU is the largest exporting bloc to the GCC but their investments in the region have remained negligible, not exceeding one per cent of the EU’s capital outflow. This is in contrast with the GCC overseas assets, which are concentrated in the West.

Between 2002 and 2006, the cumulative foreign investments by the GCC into EU totalled nearly $100 billion were pumped into the EU. In contrast, the EU capital flow into the GCC stood at only around $2.6bn in 2006.

In statements this month, another GCC official accused the EU of blocking the FTA negotiations, which have been under way since 1990.

"There is a need to sign this agreement for the creation of a free trade zone as soon as possible in order to expand trade exchange and investment between the two sides," said Abdul Rahim Naqi, Secretary General of the Federation of GCC Chambers of Commerce and Industry. "This agreement must cover all products and services without any exception."