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UK debates merits of GCC bloc trade versus separate deals

Cleverly and Al Nahyan UK GCC Wam
The UK's James Cleverly and UAE's Sheikh Abdullah bin Zayed Al Nahyan have held many discussions on bilateral trade, including this week in London
  • Doubts about UK-GCC trade deal due to individual state differences
  • Tailored bilateral agreements allow states to be more ambitious
  • Fourth round of negotiations due in London later this year

The UK’s International Trade Committee has voiced doubts about the country’s ability to strike a free trade deal with the GCC.

As negotiations approach a fourth round, a new report from the cross-party committee that scrutinises spending policies of the Department for International Trade raised a number of issues.

These include differing net-zero targets, agri-food import controls and intellectual property provisions across the GCC. It also highlighted concerns over human rights, weak environmental standards and the absence of a uniform policy on services.

“We question whether the UK should pursue a free trade agreement with the GCC as a bloc, or whether it would be more efficient, effective and in the interests of the UK to pursue tailored bilateral agreements with the individual GCC states,” the committee said in its report conclusions.

It added that bilateral agreements would “allow us to push individual states further to be more ambitious rather than settling for a lowest common shared standard”.

Ongoing discussions

Negotiations with the GCC – the alliance of Saudi Arabia, the UAE, Kuwait, Qatar, Bahrain and Oman – were launched in June 2022. A fourth round is due to take place in London later this year.

The UK government forecasts that a trade deal could be worth £1.6 billion more a year to its economy. The GCC is equivalent to the UK’s seventh largest export market and its demand for international products and services is expected to grow by 35 percent by 2035 to £800 billion.

The Department for International Trade conceded in a written response to the committee that the GCC talks posed “unique challenges” but added that the UK government has experience of negotiating with multiple blocs.

But TheCityUK, representing the financial and professional services industry, said the lack of a uniform GCC position on services liberalisation will “complicate” trade negotiations.

“The Gulf states are not homogenous,” said Freddie Neve, senior Middle East associate at think thank Asia House.

“They are at different stages in their economic diversification journeys, have different strategic and economic priorities and different regulatory environments, which can hamper the GCC’s ability to negotiate from a united standpoint.

Neve added that the distribution of economic power within the GCC is not even, and individual members could seek to block certain provisions, depending on their unique economic considerations.

UK GCC tradeReuters/Leon Neal
UK Prime Minister Rishi Sunak talked trade deals with Saudi Arabia’s Crown Prince Mohammed Bin Salman at the G20 summit in Bali last November
‘Tough nut to crack’

The UK government said in a statement on Wednesday that both sides look forward to the fourth round of negotiations.

It said they agreed to “build on the excellent bilateral trade and investment relationship and continue simultaneous bilateral discussions, in the form of annexes or side agreements to the GCC FTA, to explore ways to agree on UAE-UK specific matters”.

Earlier in the week on Monday, the UK’s secretary of state for foreign, commonwealth and development affairs, James Cleverly, hosted Sheikh Abdullah bin Zayed Al Nahyan, UAE minister of foreign affairs and international cooperation, in London.

Last year, Lord Udny-Lister, co-chairman of the UAE-UK Business Council, told AGBI that the UK-GCC trade deal would be a “tough nut to crack”.

While the GCC has signed free trade agreements with Singapore and the European Free Trade Association, attempts with other nations including China, the EU, New Zealand, Turkey and India have largely stalled.

Neve said this may account for why the UAE has concentrated on negotiating comprehensive economic partnership agreements bilaterally with countries such as India and Indonesia.

However he added that some GCC countries may prefer to negotiate a GCC-wide free trade agreement as it “could make it easier for that country’s businesses to operate between jurisdictions within the GCC”.

The UK’s committee report came ahead of the 64th meeting of the GCC Trade Cooperation Committee in Muscat this week.

It discussed key issues including establishing a GCC Customs Union before the end of 2024, unifying trade laws and encouraging investments in joint projects.