Bloomberg | 26 May 2010
GCC Members Suspend Free-Trade Talks With Europe
By Glen Carey and Wael Mahdi
May 26 (Bloomberg) — The six-member states of the Gulf Cooperation Council suspended free-trade negotiations with the European Union that have been going on for about two decades after failing to overcome obstacles to an agreement.
“In view of the fact that there was no progress as the European side held its previous position, the council countries have suspended the negotiations,” GCC Secretary-General Abdul Rahman al-Attiyah said in a speech posted on the Gulf bloc’s website today. It didn’t provide further information.
Free-trade negotiations between the 27-nation EU and the GCC, which includes Saudi Arabia, the world’s largest oil producer, and the United Arab Emirates, have faltered over disagreements on tariffs, petrochemical subsidies and foreign companies holding majority stakes in GCC companies. Attiyah’s statement dated May 25 was made as German Chancellor Angela Merkel tours the Persian Gulf.
“Negotiations on the free-trade agreement were suspended because EU countries added a clause depriving GCC countries the right to impose duties on EU exports in the future,” Abdel Aziz Abu Hamad Aluwaisheg, Director General of the External Economic Relations Department at the GCC, said in an interview. “We’ve agreed on almost everything with the EU and removing this clause is the only obstacle in our way.”
German Support
The agreement has been under negotiation since 1991, according to information on the website of the European Union. GCC member states have resisted attaching any political conditions, such as improved human rights, to an agreement with the EU.
Merkel arrived in Saudi Arabia’s Red Sea city of Jeddah yesterday from Abu Dhabi for talks with King Abdullah and other Saudi officials on expanding economic, energy and political relationships with the Gulf region.
Germany supports the establishment of a European free-trade agreement with the GCC, Merkel said today during a speech to a Saudi-German business forum.
The GCC announcement is a way of “telling the Europeans that they have to make progress,” said John Sfakianakis, chief economist at Banque Saudi Fransi. “The biggest issue is subsidies for petrochemicals and other sectors that are based on cheap energy in the region. The Europeans have to realize that this is the region’s competitive advantage.”
Saudi Basic Industries Corp., the largest petrochemical maker in the world, buys feedstock for its petrochemicals at fixed prices from state-owned oil company Saudi Aramco. Most of its rivals outside the Middle East use naphtha, a more expensive feedstock that is linked to the price of oil.