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Landmark deal between GCC and EU

By Nadim Kawach




Gulf Arab oil producers are expected to sign a landmark Free Trade Agreement (FTA) with their main economic partner, the European Union, this year after more than 16 years of tough negotiations, the Government announced yesterday.

Dr Mohammed Khalfan bin Kharbash, the UAE Minister of State for Finance and Industry, said the two sides would meet again some time this year and finalise the agreement after tackling a few outstanding issues.

Speaking during a GCC industry conference titled Petrochemical Sector: Vision for 2020 in Abu Dhabi, Kharbash said the agreement would benefit both sides as it would ensure stable oil supplies from the Gulf for Europe and also bring investment into the Gulf Co-operation Council’s (GCC) industrial sector and open up new markets for its petrochemicals and other products.

But the EU came under fire at the conference, with a Qatari minister saying Europe has hurt the Gulf petrochemical industry by blocking access to its market.

In a question-and-answer session at the two-day conference, Kharbash said the negotiations between the six-nation (GCC) with the EU for a free trade accord had taken more than 16 years but added that real talks began only three years ago following the launching of the GCC customs union.

“We are currently holding negotiations for trade and economic agreements with several blocs and countries, including China, India and Pakistan. Such agreements will open up new markets for our products and give a strong push to our industrial sector,” Kharbash said. “I expect the GCC will sign a free trade agreement with the EU [this year]. This agreement is vital for us, as it will open up major markets for our products. The EU will also benefit from this agreement as it will boost GCC investment into Europe and ensure them stable oil supplies,” he added.

Kharbash said the negotiations had lasted so long because the GCC is seeking “more privileges and exemptions for our products, mainly petrochemicals”.

He gave no details of such exemptions but according to Qatar’s Minister of Energy and Industry, the GCC petrochemical sector has been hurt by what he described as the customs barriers imposed by the EU.

“There are giant petrochemical projects planned or under construction in the Gulf but we feel there are many obstacles, mainly the numerous customs and other barriers imposed by the EU,” the Qatari minister said.

“They have too many terms and conditions. Every time, they come with new excuses for not signing the agreement and with requirements that are almost impossible to meet. Let’s hope we have come to the end in this endless story.”

The EU is the GCC’s top economic partner, with two-way trade exceeding $50 billion in 2006. Gulf states are also major oil suppliers to Europe, which is expected to increase reliance on Middle East oil in the long term.

GCC officials hope the FTA with the EU would boost their petrochemicals and other exports and at the same time trigger an influx of investment from the EU, which will help support the region’s economic diversification programmes.

During a visit to Bahrain this month, an Italian official said the FTA with the GCC would be signed in a few weeks. Ugo Intini, Italy’s Deputy Foreign Minister, said he had met with the top EU official supervising the EU-GCC FTA process and assured him that things were on the right track.

“In my point of view, we need to sign the agreement first and can do some final exercises to address some small issues. You can’t wait for negotiations to linger on for years.

“Both sides are serious and many outstanding issues have already been addressed the at last round of talks held in Saudi Arabia in May.

“We feel that things should move forward to serve both sides in a real manner,” Intini said.


A meeting due to be held in the UAE to approve a draft free trade agreement between the Gulf Co-operation Council and the European Union has been postponed. The delay happened because a message sent by EU Trade Commissioner Peter Mandelson to the GCC countries arrived too late, said Jom’a Al Ket, the ministry’s Director of International Trade and Free Trade Agreements. The communication urged the states to accelerate efforts to reach agreement on two issues relating to competition and export charges.