GCC MISSES THE TRADE DEAL OPPORTUNITY
Bound to meet annually under the EU-GCC Cooperation Agreement of the late 1980s, the GCC reportedly cancelled the 24th GCC-EU ministerial meeting, scheduled to be held on June 23, following a statement supported by several European countries, that apparen
The GCC reportedly cancelled the 24th GCC-EU ministerial meeting, scheduled to be held on June 23, following a statement supported by several European countries, on the human rights situation in Bahrain during a recent gathering of the United Nations Human Rights Council (UNHRC) in Geneva.
The UNHRC statement in Geneva expressed concern at the human rights situation in Bahrain, citing, among others, long prison sentences for exercising rights to freedom of peaceful assembly and of association, ill-treatment and torture in detention facilities, and other rights violations.
With the high-level meetings between the European Union (EU) and the Gulf Cooperation Council (GCC) usually discussing a series of issues of mutual interest or concern, like energy, financial crisis and climate change, it is possible to say that in addition to addressing looming threats and continued instability in the Gulf and the wider Middle-East, the opportunity to try to find common ground for a decisive decision on the last few remaining obstacles of the long-awaited EU- GCC Free Trade Agreement (FTA) is missed.
EU- GCC FTA could make a difference
Buoyant on good money derived from oil and natural-gas exports and steadfast leaderships having decided on regional integration, domestic market liberalisation, economic diversification and international competitiveness, the harsh desert countries like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates have steadily worked to reach economic growth.
GCC states have decided to sign-up for the multilateral free trade supervising World Trade Organisation (WTO), and are willing to be an integral part of the emerging multi-polar global political economy, that resulted in enhanced market access opportunities for other WTO-members in wealthy, and fast-growing GCC markets.
Indeed, removing cumbersome customs procedures, or reducing the costs of moving goods and services across international borders via trade facilitating agreements means increased commercial opportunities for those engaged in import and export.
Economic globalisation, or gangs of Ben-
gali brick-layers using U.S.-made cement with Chinese-manufactured concrete reinforcing rods on construction sites supervised by British engineers on behalf of local real estate developers are just as common across the GCC as modern, well-equipped national airlines composed of multiple-nationality cabin crews from Qatar and the UAE picking up passengers in major European airports for business and leisure travel around the globe.
Looming threats and the continued insecurities of the post-9/11 world have led to impediments to trade in services, though for the physical transfer of cross-border services, providers have been subjected to stricter security policies and tougher immigration legislation.
European companies cite restrictive foreign ownership as a barrier to investment in the GCC, and GCC investors have highlighted cumbersome visa policies for business travelers as a challenge facing Gulf-investors in the EU. As a result of this a series of both tariff and non-tariff barriers to trade were identified as negotiable items in the envisaged trade deal between the two regional blocs.
Real negotiations for an agreement providing progressive and reciprocal liberalisation of trade between the EU and the GCC began following an announcement in 2001 of the creation of a GCC customs union. But with results eventually falling below expectations, and having created strong economies, and then reasoning that the EU should not see and patronise the GCC as a weak economic bloc since the EU constantly brought up issues and demands that had nothing to do with trade, or the economy as such, more assertive GCC states decided to suspend the bilateral trade talks at the end of 2008.
In order not to lose interest, and to keep informal contacts between negotiators alive, a EU- GCC Joint Action Program was agreed upon in 2010, but failed to deliver meaningful results.
Recognised as economies in development but classified last year as high-income countries for three consecutive years by the World Bank, the preferential access assigned to the six-nation GCC was lifted by the EU, which spans 28 member states.
Despite economic and financial set-backs caused by the credit crunch, and notwithstanding the political dialogue having led to snags and misunderstandings, EU- GCC trade continues to perform well, with the observation though that a sound, comprehensive, WTO-compatible EU- GCC trade deal could make an interesting difference.
Breaking new ground
Already subject to the enhanced commercial possibilities made possible by the forces of economic globalisation, the time is right to begin to reflect on a series of existing realities and to comprehend the consequences of permanent failure.
Still financially and economically constrained on their credit crunch-affected home markets, European companies continue to win mega-projects across the GCC, but increasingly face competition from others.
Already disappointed and having the option to shake bilateral trade hands everywhere, the EU should realise that economically prosperous and financially wealthy GCC states are not only able to position themselves in a rather unique bargaining position, but are also able to become more straightforward in refusing a trade agreement on terms dictated by the EU.
Energy markets and geopolitical alignments have changed substantially, some becoming practically autonomous, others remaining critically dependent on external oil and natural-gas suppliers.
Although the political component and the human rights dialogue cannot be ignored given the mandatory status of these notions in EU trade agreements, the sought trade deal is about enhancing commercial opportunities and other areas of cooperation, not on GCC states seeking association to the EU.
In the process of accomplishing economic diversification and acquiring international competitiveness, GCC states need to ensure fair and equitable market access to remunerative markets for those goods they plan to manufacture.
Not interested nor trade policy bound in interfering with the domestic policies of their trading partners, Asian countries seized the momentum and reinforced their commercial ties with GCC states.
Realising that they have an actual need to secure vital imports for expanding economies with fast-growing populations, GCC states are also having an imminent interest to find ways to preserve vast but eventually depleting oil and natural-gas reserves for both domestic back-up and profitable export.
Knowing that GCC exports to the EU will remain low compared to EU exports to the GCC and recognising that it is reasonable to say that the hereditary ruled GCC states are responsibly run and in the process of gradually transforming themselves politically, the EU could, perhaps, consider a degree of flexibility.
GCC states, not only being a significant trading partner with expected growth across various sectors but also ever more an important geopolitical player and a growing regional diplomatic actor, and taking into account that increased economic and political interdependence coupled with ever more global information connectivity is likely to intertwine global economic factors with domestic politics, both the GCC and the EU, should, with a wink to the Arab Spring uprisings, the atrocious civil war in Syria and the renewed sectarian violence in Iraq, realise that regional calm and domestic stability is a vital concern for both and that therefore a realistic and meaningful security dialogue can be of mutual beneficial interest.
Thus, it is due to growing economic and political interdependence between states and countries, the process of EU enlargement acknowledging Turkey's candidate status and Cyprus already accepted as member state, that the EU is today closer connected to the Gulf and the wider Middle-East than ever before.
But not having prioritised the GCC in the past, missing a member state able to put the GCC firmly on the EU-agenda, and understandably being concerned over Russia and Ukraine today, Brussels, should not only pay attention to clinching a EU-US Transatlantic Trade and Investment Partnership, but also put its energy into accomplishing deeper, institutionalised relations with the sheikhdoms on the Arabian-side of the Gulf
BY JOHANN WEICK who analyses and teaches GCC-EU relations in Brussels, Belgium and Dubai, UAE.