Gulf states take harder line with EU over free-trade agreement

Catherine Ashton, the high representative of the EU for foreign affairs and security policy, and Sheikh Khalid bin Ahmed bin Mohamed Al Khalifa, the Bahraini minister for foreign affairs, address a prShow more

The stakes have been raised in attempts to revive talks between the GCC and the European Union over a free-trade agreement after Arabian Gulf states threatened not to renew a cooperation deal between the two blocs.

The GCC will not sign a new joint cooperation programme with the EU that involves sharing information on topics ranging from finance to climate change until both sides resolve differences over a trade agreement, the Kuwait News Agency quoted Ghanim Al Buainain, Bahrain's minister of state for foreign affairs, as saying. The current three-year programme is due to lapse this year.

Mr Al Buainain was speaking ahead of the GCC-EU Joint Ministerial Council meeting in Manama yesterday to discuss issues including the trade deal and the conflict in Syria.

His comments suggest a fresh urgency on the part of the GCC to achieve a breakthrough in stalled negotiations over a free-trade agreement (FTA).

"Despite the strenuous efforts made by all parties, we should now strive harder to overcome the remaining obstacles to finalise signing of what would be a free-trade agreement between the two major blocs in the free world," said Shaikh Khalid bin Ahmed bin Mohamed Al Khalifa, Bahrain's minister for foreign affairs, and chairman of the meeting in a speech during the event.

A lowering of tariffs and other fees as part of an FTA is viewed as a key tool in beefing up the flow of goods between two blocs. The EU is the GCC's fifth-biggest trading partner, representing 13.5 per cent of trade.

Both sides started discussing an FTA more than two decades ago but negotiations faltered most recently over Saudi Arabia wanting to retain the right to impose duties on its exports. The kingdom wants to be able to apply tariffs on its petrochemical exports as a way to ensure its products are not sold too cheaply abroad.

Giyas Gokkent, the chief economist of National Bank of Abu Dhabi, said a deal would likely benefit both sides. "The GCC would be keen to open up the European market further for its products but it will require give and take in order to reach a balance."

Jarmo Kotilaine, the chief economist of Bahrain Economic Development Board, said an agreement would "support economic diversification efforts by securing important markets and fostering bilateral investment flows.

Against a backdrop of slack economic growth in the euro zone, the EU is keen to inject impetus into freeing up the flow of goods into and out of its member states.

It is due to start formal trade talks this month with the United States on a similar deal, which could be worth an estimated US$265 billion to the two sides and the rest of the global economy.

"The GCC is an increasingly important partner, not least because our bilateral trade has increased by 45 per cent since 2010 to reach €145 billion [Dh692.99bn] annually," said Catherine Ashton, the EU's high representative for foreign affairs and security policy, ahead of yesterday's meeting.

In a statement carried by the Bahrain News Agency, Michael Mann, her chief spokesman, said the only pending issue on trade talks was taxes to be levied on exports.

In what has been viewed as an attempt by the EU to reinvigorate trade talks, the EU announced last month it would levy a 4.7 per cent duty on jet fuel from the Middle East.

A large chunk of GCC exports heading to the EU are made up of petrochemical raw materials and feedstock, used for plastics and other materials, along with aluminium products.

The joint cooperation deal between the two sides "provided a practical framework for joint activities", said Mr Mann.