Benefits of free trade still elude Gulf states
Gulf monarchies which have joined the World Trade Organization (WTO) have yet to enjoy the fruits of free trade, from which oil -- their main export -- remains excluded. The absence from the WTO of Saudi Arabia, whose economy represents 65 percent of the combined economies of the six Gulf Arab states, is preventing Gulf countries from forming a lobby to defend their interests within the organization.
Moreover, the reluctance of the Gulf states, notably Saudi Arabia, to fully liberalize their economies, is impeding foreign investments which could diversify these countries' sources of revenue, leaving them heavily reliant on oil.
Gulf Cooperation Council (GCC) members Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates joined the WTO between 1995 and 2000. But GCC heavyweight Saudi Arabia has been negotiating membership terms for six years.
"Saudi Arabia's absence means that 65 percent of the Gulf's economy remains outside the WTO system," Saudi economist Ihsan Bu Halaiga noted. Saudi Arabia's five GCC partners are counting on an early admission of the kingdom, the world's biggest oil producer, to the WTO "in order to renegotiate the status of crude, a strategic commodity" that remains excluded from free trade, he told AFP.
The largest economy after China to remain out of the WTO, Saudi Arabia refuses to compromise on its "unique status" as custodian of Islam's holiest shrines to gain access to the organization, insisting that goods and services banned by Islam will not be allowed into the kingdom.
In addition to the exclusion of oil, Gulf monarchies have also complained about high tariffs imposed by WTO members, chiefly European Union (EU) countries, on their exports of petrochemicals, aluminum and steel.
"The EU is the GCC's biggest trading partner, but the Gulf states are being harmed by relatively high European taxes on their exports, which is not fair," Bu Halaiga said. The volume of trade between the two groupings rose from 37 billion euros ($33.3 billion) in 1999 to 51.5 billion euros ($46.3 billion) in 2000, according to official figures.
GCC investments in EU states are estimated at $122 billion, or 35 percent of the Gulf states' total overseas investments. Investors and firms from GCC states should form "a pressure group to protect their interests and force the EU to treat them more fairly," Bu Halaiga said. "Otherwise, Gulf economies will remain wholly dependent on oil," he warned.
The GCC threatened last April to abandon its planned free trade agreement with the EU that has been under discussion for 13 years, accusing the European bloc of ignoring the Gulf grouping's strategic interests. The EU has made conclusion of the free trade accord conditional on a GCC customs union, which has now been brought forward to 2003 from 2005.
Gulf monarchies are "endeavoring seriously to liberalize their economies and lower customs tariffs, which will be unified in 2003," Bu Halaiga said. But Saudi Arabia has already made it known that upstream oil operations and the audiovisual and telecommunications sectors will not be opened to foreign investment.
In an effort to forge a weighty economic bloc, GCC states decided at a meeting of their finance ministers in Riyadh in mid-October to bring forward the complete implementation of a customs union to 2003 and set 2010 as a target date for monetary union and a single currency.
The GCC states, which now impose customs duties ranging from four percent in the UAE to 20 percent in Saudi Arabia, also approved a five percent common customs duty on imports from other countries. At present, only products of firms fully owned by GCC states are exempt from customs duties within the regional bloc. — (AFP, Dubai)
by Ezzedine Said
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)