Merkel backs talks on pact with GCC

Angela Merkel, the German chancellor, has pledged to revive plans for a free-trade agreement between the EU and the GCC. Mrs Merkel made the commitment to the proposed union during a speech to a Saudi-German business forum in Jeddah yesterday. Her comments came as a GCC official appeared to cast doubt on the prospect of a resumption in the negotiations, which broke down last year.

"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," Abdulrahman al Attiyah, the secretary general of the GCC, said in a speech posted on the GCC's website yesterday. Talks between the EU and the GCC faltered after almost two decades of intermittent negotiations. The breakdown occurred partly because of export duties the GCC wanted to impose on a number of goods. The EU maintained the duties were at odds with the intention to liberalise trade.

A previous sticking point was the GCC's unwillingness to agree to European demands relating to political and human rights. Ending tariffs on goods and services traded between the GCC and one of its biggest commercial partners is seen by economists as a way of boosting trade after the global financial crisis. Trade ties were first formed in 1989 between the GCC and the EU's forerunner, the European Economic Community, with the signing of a pact to co-operate more closely on economic and political issues.

Exports from the GCC to the 27-member EU dropped by 37 per cent to ?21.7 billion (Dh98.16bn) last year. Oil made up the bulk of GCC exports, which included chemicals, live animals and beverages. EU exports to the GCC are varied but include machinery, power plants, locomotives, aircraft, electrical machinery and mechanical appliances. Mrs Merkel arrived in Jeddah on the third day of a four-day trip to the Gulf region. Germany supported the establishment of a European free-trade agreement with the GCC, she said.

* with agencies [e-mail]