FTA With GCC Within Reach - EU
Khalil Hanware, Arab News
JEDDAH, 18 March 2006 - A free trade agreement (FTA) between the Gulf Cooperation Council (GCC) and the European Union is within reach, EU Trade Commissioner Peter Mandelson told Arab News in a telephone interview from EU headquarters in Brussels.
He said GCC negotiators were in Brussels last week completing technical talks on a free trade accord. “I see no real obstacles to the conclusion of the pact,” said Mandelson.
He added that if the agreement were reached, it would have economic and political benefits for both sides.
“Politically the agreement will further strengthen relations, and economically it will give a boost to trade between EU and GCC countries,” Mandelson said.
Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates make up the GCC.
“It is a two-way process,” he said. “In December we pushed hard for these negotiations through ministerial contacts and our own negotiation to strike a deal. We are trying to make an agreement collectively with GCC countries that will benefit both sides. No preferential access will serve the GCC objective to make their economies more dynamic.”
The GCC and the EU first signed a framework economic cooperation agreement in 1988. The GCC states met one of the EU requirements when they launched a customs union in January 2003, but implementation has hit serious snags. The GCC plans a common market in 2007 and a monetary union and single currency by the start of 2010.
The GCC is critical of high taxes levied by the EU on its refined oil products and aluminum, as well as its massive trade deficit with Europe.
“The main objectives of the free trade agreement are a progressive and reciprocal liberalization of trade in goods and services aiming at assuring a comparable level of market access opportunities, consistent with the relevant provisions of the WTO and taking into account the level of development of the GCC countries and fostering economic integration between the parties, with a view to diversifying and increasing mutual trade,” Mandelson said.
The GCC is currently the EU’s sixth largest export market and the EU is GCC’s first trading partner. In 2004 the EU exports to the GCC were around 40 billion euros whereas the EU imports from the GCC amounted to around 25 billion euros.
The EU exports to the GCC are diversified with focus on machinery and transport materials (56 percent), in particular power generation plants, railway locomotives and aircraft.
EU imports from the GCC consist mostly of fuels and derivatives (70 percent of total EU imports from the GCC countries). GCC countries currently benefit from preferential access to the EU market under the EU’s Generalized System of Preferences (GSP).
EU investments decreased in the Gulf region (including Iraq and Yemen) from 1.8 billion euros in 2001 to 600 million euros in 2003. EU capital has increased from 0.4 percent of total EU outward stock in 2001 to 0.9 percent in 2003.
The Gulf investments in the EU increased from 100 million euros in 2001 to 800 million euros in 2003.