The European Union has a double-standard attitude over its free trade negotiations with Gulf oil producers and this has obstructed an agreement between the two sides, according to a semi-official study.
Although a surge in European exports to the GCC has widened the trade gap, the absence of a free trade accord could hit the EU's market share in the region, said the study by Emirates Industrial Bank (EIB).
Failure to reach an agreement despite nearly 20 years of negotiations has already given rise to the market share by other key exporters to the GCC at the expense of the EU, mainly China and India, EIB said.
"There are some EU members who lack the minimum requirements demanded by the EU in the field of liberalisation of goods and services trade. This shows the EU is following a double-standard policy in its dealing with the GCC not only in the political field but also in economy," the study said.
"There is a need for the GCC countries now to reach a midway in demands by the EU and protect their interest. Since the GCC has dealt flexibly with the EU demands, the Europeans have to deal flexibility and rationally with its non-economic demands, which cannot be imposed on the GCC at present."
The study blamed the EU for the failure to reach agreement and the for the GCC's decision late last year to suspend the negotiations on the free trade zone, nearly 20 years after they were launched in 1989.
It said GCC nations had met most of the EU's demands during the negotiations. "Despite reforms undertaken by the GCC countries over the past few years, the EU then started to raise the ceiling of its demand with the primary aim of blocking Gulf exports to its markets since such exports would become highly competitive after the EU removes tariffs on them in line with the free trade pact," the study said.
"Besides those exports, mainly aluminium and petrochemicals, it should be noted that the EU members are making massive earnings from the taxes they impose on the GCC crude oil exports to their consumers. In some years, such earnings exceeded the GCC's total oil revenues," it said.
"All these figures show that failure to sign that agreement could hurt the EU's commercial status in the GCC and the Gulf exports to Europe despite their growth, the share of the GCC exports to the GCC has receded in the past few years compared to the GCC's total imports," noted the report.
"This has given rise to the EU's main rivals, India and China, whose exports to the region have largely advance. Unless the negotiations for the trade agreement are revived, the EU-GCC trade exchange could be hurt further in the coming period."
But EIB's figures showed the EU remained the GCC's largest economic partner, with its export value jumping by around 276 per cent in seven years to $93.7 billion (Dh344bn) in 2007.
Growth in its imports from the GCC was far slower, rising by around 109 per cent to $38.8bn from $18.6bn in the same period. As a result, the trade balance surplus enjoyed by the EU rose to around $55bn in 2007 from nearly $6.35bn in 2000.