By Arab News
Is the Gulf Cooperation Council finally back on track to sign a long awaited and highly significant free trade deal with the European Union?
Last week’s EU visit by GCC Secretary-General Abdulatif Al-Zayani may appear to have been overshadowed by the continuing crisis in the euro zone, but in the longer term it may prove to have been of very real importance to relations between the two blocs.
As long ago as 1989, the GCC and the EU signed a cooperation agreement in which, among provisions for cultural, educational and research links, was Article 11 that set down the ultimate goal of free trade. In the meantime, member countries of both bodies would accord each other Most-Favored-Nation treatment. A quarter of a century later and even the most-favored-nation treatment of trade has been implemented patchily and the full-blown free trade agreement still seems a long way off.
The causes of this lie on both sides. EU member states had bilateral relations with individual GCC countries. It was often easier to continue with these established trade and diplomatic channels than to work through the untried link at the GCC.
For its part, the GCC was still evolving somewhat slowly. It needed to establish its own internal market and customs union before it was practical to seek effective trade links with the EU. Besides which, Saudi Arabia, the largest member of the GCC did not become a full member of the World Trade Organization till 2005.
With the best will in the world, most observers, even perhaps a year ago, would have written off a real advance in GCC-EU relations as unlikely.
So what has changed? The EU’s financial problems and the crisis in the euro zone have caused Brussels to reassess its global relations. The Gulf, once seen as a key provider of energy and a fine market for EU goods, has emerged as a valuable source of investment capital for European banks and institutions at a time when Europe’s ability to finance itself has become ever more of a problem. Therefore, put bluntly, it pays Brussels to blow the dust of the old 1989 cooperation agreement and start giving more serious focus to its relations with the GCC.
There is, in addition, a second good reason for the EU’s renewed interest in a free trade deal with the Gulf. As the balance of economic power shifts toward Asia, the Middle East is geographically well able to switch the greater art of its attention to Asian markets. A growing proportion of GCC oil and gas output is going East while return trade flows, particularly from China, India and Malaysia, are on the increase.
Nothing is going to stop this fundamental geographic economic shift. Nevertheless, the EU remains the world’s richest trading bloc. Brussels has realized that beyond the short-term gains in investment flows into European businesses, banks and government bonds, it can secure its position, perhaps for a good while longer, by forming strong economic links with other geopolitical trading blocs.