~ EU, GCC officials discuss political ties and regional developments ...
June 9, 2011Agreement delay has damaged trade
Mohammad Al Asoomi writes: EU's delay in signing a free trade agreement after 20 years of negotiations has led to a decline in trade between the EU and the GCC
Until recently, the European Union (EU) was ranked as the top trading partner of the Gulf Cooperation Council (GCC), but the EU's delay in signing a free trade agreement after 20 years of negotiations has led to a decline in trade between the two.
We had earlier warned that this delay would negatively impact commercial ties between the EU and the GCC, especially as alternatives emerged as a result from major changes in international economic relations.
However, the EU is foc-using more on minor details than on expanding its interests in the region, which has one of the highest growth rates in the world.
Obviously, the EU's repeated postponement of the signing of the FTA is an attempt to protect its petrochemical products as well as the aluminium and petrochemical products of its allies in East Europe.
This protectionism could put the EU's trade relations with the GCC, the world's biggest oil exporter, at risk.
The ‘Old Continent' does not speak openly about this issue. Instead, it has been focusing on achieving successes in political issues, such as public liberties and human rights.
However, the US has adopted the same human rights-based approach — except in the case of rights of the Palestinian people — and had earlier signed free trade agreements with some GCC countries. This shows that the excuses being made by the EU are baseless.
China and India are adopting policies unlike those of the EU. By doing this the emerging Asian countries managed to move ahead of the EU. The policies of these countries have resulted in increasing trade volume.
Relative stakes
The issue here is not trade figures, which rose between the GCC countries and all countries around the world, but is about the relative stakes of these countries, which gives an indication of the relative importance of each country.
The stakes of China and India in the GCC's non-oil trade never exceeded 15 per cent before 1980. This percentage drastically jumped to nearly 40 per cent in 2010. The stake of the EU countries dropped sharply during the same period.
Apart from increasing trade exchange, the GCC-India-China relations have grown because of the efforts of those countries to build a broader economic partnership.
Many joint venture projects were set up in China and India, particularly in energy.
For example, Kuwait recently signed a deal worth $9 billion (Dh33 billion) that will set up a refinery and a petrochemical plant in China in 2012. Other GCC countries have signed similar agreements with the two Asian countries.
New restrictions
Despite these positive and significant developments between the two parties, China and India are making some of the same mistakes as the EU.
It has been recently noticed that both China and India have put new restrictions on GCC petrochemical exports. This indicates the possibility of a decline in their stakes in GCC foreign trade in the future.
GCC countries may take similar measures against imports from China and India, even though such imports currently enjoy significant competitive capabilities in GCC markets, even though India's and China's future growth will depend greatly on imports of Gulf oil.
The situation of China and India will be similar to that of Japan, which almost completely relied on its oil imports to achieve its economic rise after the Second World War.
However, we do not wish that the relations between the GCC, and the two Asian countries would reach this point.
This is because the common interests between the GCC and India and China are many and complex.
This kind of cooperation will serve the interest in both and allow them to have greater cooperate within international bodies such as the International Monetary Fund, World Trade Organisation and United Nations organisations.
Solutions ~ It is imperative that both sides work together to arrive at common understandings so as to remove the trade-related obstacles between them.
One solution would be to speed up the process of signing free trade agreements between the GCC countries and the two Asian giants. Even more important is that GCC countries welcomed the signing of such agreements with these and other emerging countries.
Dr Mohammad Al Asoomi is a UAE economic expert.
http://gulfnews.com/business/opinion/agreement-delay-has-damaged-trade-1.819236
