TALKS: THE ONLY WAY OUT
AFTER A SIX-YEAR STALEMATE OVER THE SUSPENDED NEGOTIATIONS FOR AN EU-GCC FREE TRADE AGREEMENT (FTA) AND A RECENT MEETING BETWEEN THE TWO BLOCS CANCELLED, THE EUROPEAN UNION (EU) AND THE GULF COOPERATION COUNCIL (GCC) SHOULD BEGIN FOCUSING ON A MEANINGFUL
The six-year-old stalemate over the suspended negotiations for na EU-GCC Free Trade Agreement needs to be given a thought by the European Union and the Gulf Cooperation Council by having a meaningful dialogue to clear snags and misunderstandings.
Combining few absolute and comparative advantages with visionary foresight, integrating with one another and recognising current economic and geopolitical realignments, the role and strength of moderate, prosperous and outward-looking sheikhdoms like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE in the global political economy should not be underestimated.
Vested interests in securing a steady, uninterrupted supply of oil and natural gas at affordable prices, coupled with expansion of trade and the GCC having adopted some concepts from the European integration process, led to closer cooperation between the two blocs, though negotiations for an FTA, a balanced and capable means to improve and liberalise bilateral trade, failed yet to materialise to benefit the two blocs.
Creating better economic conditions, enhancing competition and facilitating the movement of goods, services and investments, the envisaged EU- GCC trade deal is expected to deliver viable commercial opportunities. But what about the actual balance of benefits?
With customs duties at an average of about 4%-5% for the EU and the GCC, respectively, and the highly trade-dependent GCC states only having few goods to be exported in significant quantities, import tariffs need to be slashed to zero levels and non-tariff barriers to trade will have to be reduced or eliminated. Otherwise GCC products such as fuels, hydrocarbons and goods with, so far, low and medium-range technology will not benefit much from enhanced market access to the EU.
Export of value-added, high-tech intensive goods, like heavy machinery, aircraft, medical equipment etc, is already significant for the EU, and is expected to rise across various sectors, provided the GCC states scrap rules on foreign ownership outside the designated free zones and let their energy, services, labour and investment markets become fully unrestricted.
Thus, for the long-awaited EU- GCC trade deal to be successful, concessions need to be realistic commensurate to underlying interests, opportunities and limitations to both sides, and take into account that non-tariff barriers to trade appear to be more trade restrictive than import tariffs.
Classical import tariff issues and a series of technical, market access-related factors such as dual pricing, rules on origin, public procurement etc, have been subject to a negotiation process eventually suspended by the GCC for reasons of scant results, and the EU constantly bringing up new demands is interpreted as interference in domestic sovereignty/indirect criticism of GCC regimes.
In an attempt to throw momentum behind the stalled trade talks, the EU decided to lift preferential market access assigned to GCC states for reasons of promoting the sustainable development of their infant economies.
With the EU import tariff for GCC aviation fuel set at zero level instead of the late 2013 have now announced 4.7%, the two blocs to find common ground for a decisive decision on export duties, reportedly the last remaining issue for a deal to pass.
Miles to go
In line with its trade policy towards its trading partners, the EU is against imposition of export duties, making the contentious, unresolved issue a question of how far the envisaged trade deal with the GCC will be able to restrict the freedom to use trade measures in the future.
The EU seems to have softened its initial position, allowing export duties to be used up to a certain proportion of products. Some GCC states appear to be inflexible though, keen on the right to maintain the possibility to levy export duties to guarantee their expanding and future downstream industries whose resources are possibly prone to price fluctuations on the export market, or scarcity on the home market.
Although engagement for an EU- GCC trade deal took place at a time when domestic market liberalisation and regional integration of the Gulf was in the early stages, economic performance and financial strength have gone up considerably, making the latter more assertive and assigning them status and influence.
Airlines in the EU face increased competition and financial problems, offering opportunities for the cash-rich Gulf carriers to expand their reach in the EU. Subject to