Economy

Talks under way to forge UK-GCC trade deal

August 23, 2022

UK Foreign secretary and possibly the next PM: Liz Truss prioritises Gulf deal

Bilateral trade worth £33bn last year
Estimates suggest FTA would add £600m to UK workers’ annual wages
Sectors to develop include renewable energy and digital commerce

Discussions to broker a trade agreement between the UK and GCC have begun, with the trade commissioner for the Middle East, Simon Penney, describing the Gulf as an “important region” for the UK.

“Today marks the launch of the first round of negotiations towards a UK GCC Free Trade Agreement,” Penney said.

“The GCC is equivalent to the UK’s seventh largest export market, and total [bilateral] trade was worth £33 billion last year,” he added. “A deal will create jobs, drive investment, and increase growth across the UK and GCC.

“It will allow the UK to play to its strengths and work in partnership with this important region.”

Bradley Jones, executive director of the UAE-UK Business Council, told AGBI: “It’s really positive that the talks have now started and momentum is building up.

“A free trade agreement will add at least £1.6 billion to the UK economy over the next decade, and £1.2 billion to the GCC economy.

“In addition to cutting tariffs, a trade deal would also boost efforts to decarbonise and diversify the GCC markets. In the UK, it will support growth and job creation across the country.”

Dr Nayef Al Hajraf, secretary-general of the Gulf Cooperation Council (GCC), voiced hope that the talks would lead to an ambitious FTA and “open new horizons for joint investment”.

Person, Human, Clothing — UK and Saudi talks began last year

In a statement from the GCC Secretariat, he said the first round of the talks, being held via video link, will continue until Thursday.

UK trade secretary Anne-Marie Trevelyan launched free trade negotiations with the GCC in June. The UK estimates that a comprehensive FTA will boost trade by at least 16 percent and contribute an additional £600 million more to UK workers’ annual wages.

UK Trade Minister, Ranil Jayawardena MP, hailed the start of talks, saying: “As a newly independent trading nation, Britain has an incredible opportunity to sell more to markets like those in the GCC.

“The GCC is the UK’s fourth largest trading partner and demand for our great British products and services is booming.

“Now is the time to play to our strengths as a manufacturing powerhouse and make the most of this demand, while promoting emerging areas such as clean technology, digital infrastructure and cyber too.

“The GCC imports virtually all of its food so there is a wonderful opportunity for British farmers and producers in the market.

“There are opportunities for growth in green industries also.”

The GCC has brokered FTAs with Singapore and the European Free Trade Area countries of Iceland, Liechtenstein, Norway and Switzerland, and is in trade negotiations with the EU, Japan, China, South Korea, Australia, Pakistan, India, Turkey and the Mercosur member countries of South America.

“These agreements are expected to play a key role in attracting foreign investment to the region, particularly as GCC countries embark on broad economic transformation strategies to diversify their economies,” said a paper from global research and advisory company Oxford Business Group.

Analysis by AGBI last week of UK Department of International Trade statistics showed that trade between the UK and the GCC countries totalled nearly £35.5 billion for the year to the end of the first quarter of 2022.

But the parties believe an FTA, which offers tax and other commercial incentives, could further boost the trading relationship, and build upon recent agreements struck between the UK and separate GCC nations, including Oman, Saudi Arabia, and Qatar, to strengthen economic cooperation.

Oman and the UK in January signed a Sovereign Investment Partnership (SIP), agreeing to work closer together on increasing investment into both countries.

This past week, news broke that the Omani government has appointed Arwa bint Abdul Rahim al Balushi, a former official at Oman’s sovereign wealth fund, as Oman’s UK commercial and investment attaché, tasked with driving bilateral commerce.

In March, Saudi Arabia and the UK signed a memorandum of understanding to form a strategic partnership council to bolster bilateral investment and cooperation.

Saudi Arabia is the UK’s largest GCC partner, with $13.2 trillion of bilateral trade.

Meanwhile, it was announced in May that Qatar would invest $12 billion in the UK’s economy over the next five years as part of a strategic investment partnership.

According to Oxford Business Group, industry sectors that a UK-GCC FTA could support are not being exploited to their full potential, and could include agriculture and food security, renewable energy, digital commerce and cybersecurity.

While the GCC has successfully signed some FTAs in previous years, attempts to negotiate deals with other countries and trade groups have largely stalled.

GCC negotiations with China have been ongoing since 2004 while discussions with the EU faltered in 2010.

Similar negotiations with New Zealand, Turkey and India have also stalled.

While there is no official timeline for the completion of the UK-GCC negotiations, both sides are reportedly hopeful of securing a deal before the end of 2023. But the talks are expected to be lengthy and complex.