EU should be flexible on Gulf trade deal

Tuesday, 9 November 2010 04:21 - - {{hitsCtrl.values.hits}}

Dubai (Reuters): Gulf oil producing countries would sign a long-delayed free trade agreement with the European Union immediately if the bloc shows flexibility over export duties, a Gulf Cooperation Council official said.

Both camps started negotiating a free trade agreement two decades ago but the talks have repeatedly faltered over issues ranging from export tariffs the Gulf States want to retain the right to impose, to human rights concerns raised by the EU.

“Something like 99 per cent of the FTA text has been approved by all sides, the only issue is export duties,” Abdel Aziz Abu Hamad Aluwaisheg, GCC director general of international economic relations, told Reuters in an interview.

“If the Europeans agree tomorrow, we can sign it tomorrow,” he said on the sidelines of a conference in Dubai.

EU officials have said the Gulf’s insistence on keeping the right to impose export tariffs hurt European manufacturers who would buy raw materials at higher prices than their Gulf peers.

They urged the GCC, the world’s largest crude exporting region, to stop the practice of dual pricing.

“Europeans believe export duties limit supply of primary commodities to their markets, but it’s all hypothetical,” Aluwaisheg said. “Sometimes I call this a theological discussion, because there are no export duties on primary products or anything.”

“None of the GCC countries impose export duties now on petrochemicals. But we would like to retain it, should we need it,” he said.

Analysts say that export tariffs serve as a mechanism for the Gulf countries to prevent oversupply of petrochemicals and therefore keeping prices from falling.

The bulk of the Gulf’s exports to the EU are petrochemical raw materials and feedstock, used for products such as synthetic rubber and plastics. Aluminum is also a major Gulf export.

Aluwaisheg also said export tariffs did not contravene World Trade Organisation rules.

“If the WTO in the future decides to put some limits (on export tariffs), we will abide by it,” he said. The GCC suspended free trade negotiations with the EU in April 2009 and officials have since held informal talks. The two sides agreed in Luxembourg in June to continue consultations, but they did not include the issue in their agenda.

Aluwaisheg said negotiations would resume “if the European side shows some flexibility”.

“Hopefully they will put the issue of export duties in their perspective and realize it’s really a minute issue compared to benefits that all sides are going to realize with the FTA.”

He said the free trade treaty would help mutual trade grow, adding the Gulf states hoped it would increase access for their petrochemicals and aluminum to the European markets.

EU officials have said that Saudi Arabia, the world’s top oil exporter, was the country that insisted the most on maintaining the right to impose export tariffs.

The United Arab Emirates foreign minister said in April his country would make speeding up of a free trade deal with the EU a priority during its upcoming presidency of the six-nation GCC.

The EU exports to the Gulf stood at 57.8 billion euros in 2009.