GCC-EU trade drops by $8bn as talks pause

Olga Volodina/Alamy via Reuters

• Total trade down 4% to $180bn
• Saudi Arabia-EU trade down 9%
• EU seeks ‘alternatives’ to GCC agreement

Trade between the GCC and the European Union fell by 4 percent last year to $180 billion, as the two trading blocs struggled to agree terms for a free trade agreement.

Figures shared exclusively with AGBI by Eurostat, the EU’s statistics authority, show Saudi Arabia was the bloc’s biggest trade partner from the GCC, with exports and imports totalling $74 billion, down 9 percent on 2022, followed by the UAE at $60 billion, up 13 percent.

The EU, which remained the the GCC’s second biggest trading partner, behind China, described trade volumes for 2023 as “robust”. 

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It said growth opportunities existed in logistics, education, healthcare, energy, real estate, manufacturing, tourism, green technology and services, financial services and the digital economy.

However, free trade talks between the EU and GCC have stalled, with officials and observers pessimistic about the prospects of a breakthrough any time soon.

• EU looks for alternatives as trade talks with GCC stall

• UK election adds urgency to GCC trade talks

• UK and Turkey open fresh trade negotiations

Europe is an important source of tourism for the GCC region, with Dubai alone welcoming 773,000 visitors from Western Europe in the first two months of 2024, more than one in five of the total of 3.7 million international visitors.

Together the EU and the GCC make up 20 percent of the global economy, 17.5 percent of global trade and more than half of global foreign direct investments. 

Combined foreign direct investment stocks rose to $470 billion in 2022, the latest figures available.

Johannes Hahn, the EU commissioner for budget and administration, said last week that the EU was actively seeking alternative avenues for economic cooperation with GCC states because of the failure of trade talks.

Talks began in 1990 but an agreement was never reached and the talks were halted in 2008.

Reports last month suggested that the UAE was quietly urging the EU to start separate negotiations, something denied by Abu Dhabi.

Keith Boyfield, senior fellow at the Euro Gulf Information Council, based in Rome, told AGBI: “EU-GCC trade negotiations have made erratic progress.

"In May 2022 the European Commission opted to reboot negotiations on a free trade agreement, but again progress has stumbled. This is linked to the EU’s rather patronising approach to human rights issues, which have riled GCC diplomats.

“It would be accurate to say GCC members have found the EU’s approach to trade negotiations to date overly bureaucratic.”

Boyfield said that the idea of bilateral trade agreements with individual GCC members may well have a greater chance of success. 

Hahn, asked whether the EU would be interested in bilateral a FTA with the UAE, stressed the importance of exploring all opportunities.

Luca Saviolo, head of the EU-Mena Relations Observatory at the European Student ThinkTank, said challenges such as human rights, labour standards and  petrochemical industry interests were barriers to a trade deal.

On the other hand, Saviolo said, lack of political integration, regional security threats and the misalignment of expectations between the GCC and Brussels have reduced the room for positive developments and agreements. 

Last year the UK’s International Trade Committee voiced doubts about the country’s ability to strike a free trade deal with the GCC, questioning whether it would be more effective to pursue tailored bilateral agreements with the individual GCC states.

Boyfield said: “The EU may seek to follow this recommendation and see if they can make greater progress on a bilateral basis.

"Certainly, given the minimum progress over the last 36 years, they have little to lose.”

Last month Simon Coveney, Ireland’s minister for enterprise, trade and employment, said he wanted his country to become a jumping point for GCC states to the EU market. 

Around 16,000 Irish citizens live and work in the GCC, predominantly in the UAE.

“We want the UAE, and indeed others in this region like Saudi Arabia and Kuwait, to see Ireland as a gateway into the EU market,” Coveney said.