The Gulf Cooperation Council (GCC) and the UK launched negotiations on Monday, 22nd August 2022 for a free-trade pact. The initial round of talks on the two-way trade agreement continued till Thursday, August 25.
The opening session of the first stage of the free trade talks was addressed by Dr Nayef Al Hajraf, Secretary-General of GCC who sounded hopeful about the negotiations leading to fruition. The FTA would open new horizons for joint investment, according to a press release by the GCC Secretariat noted.
Dr Al Hajraf also emphasised the importance of friendly relations between the GCC nations and the UK in serving and fulfilling the common interests of both sides.
Leaders of the GCC member states believe that these negotiations would deepen the strategic partnership in all economic, trade and investment fields, highlighted Al Hajraf.
The deal is expected to result in increased trade between the GCC and UK by 16% minimum, enhanced foreign direct investments between the two regions and complete elimination of several tariffs and non-tariff barriers. Tax incentives enjoyed by businesses in the gulf free zones can be a real stimulus and lure UK investors for setting up a company in Dubai free zone.
The food and agriculture sector would be the biggest beneficiary as the majority of GCC import tariffs, currently pegged between 5% and 25%, are expected to be either reduced or removed allowing the imported food-dependent GCC states to support their food security more economically.
Simon Penney, appointed as Her Majesty’s Trade Commissioner (HTMC) for the Middle East and Her Majesty’s Consul General (HMCG) to Dubai, expressed huge optimism about the outcome of the GCC UK FTA sometime back.
He talked about the unfailing political will and conviction of leaders from both sides including noted government and business leaders of all seven countries to present the respective citizens with a comprehensive UK-GCC free trade agreement sooner than later.
He also mentioned the UK GCC Joint Trade and Investment Review which helped both sides identify future opportunities and priorities leading to Round 1 of formal FTA negotiations.
He referred to Brexit and claimed the present moment as the most opportune time as the UK has embarked on a series of trade negotiations with key business partners to build relationships as an independent country.
“We have already agreed to trade deals with 71 countries plus the EU, accounting for £808bn of UK bilateral trade in 2021,” Penney remarked.
“So far this year the UK has launched trade negotiations with India, Canada, Mexico and Israel, as well as the GCC, who themselves are managing several other trade negotiations already underway. With both parties working at pace to reach trade agreements, momentum is on our side,” he noted. A more ambitious trade deal could further increase the trade volume between the two sides, from 16% to 30%, Penney said.
The UK Trade Commissioner to the Middle East also highlighted that his country already enjoyed strong trading relationships with individual GCC nations and every GCC market, with total trade surpassing £33bn in 2021. The GCC is the UK’s seventh largest export market and should this FTA materialize, would pave the way for brighter opportunities for businesses across the UK and the GCC through tariff removal, he said.
Penny believed that an FTA with wider scope could be very rewarding from the GCC perspective as it would facilitate a massive export boost for the region, close to £2bn mainly driven by intermediate goods that make up almost 52% of GCC exports to the UK.
Penney said that the UK services sector, the second largest services exporter across the world is helping gulf nations to realize their visions and dreams. As per him, the services sector contributes more than 50% of UK exports to the GCC region and on fructification of this deal, will certainly drive UK companies towards company formation in Dubai and other parts of the GCC.
He also informed that GCC foreign direct investment (FDI) into the UK touched £15.7bn in 2020, and UK FDI into the GCC totalled £13.4bn in the same year. As per him, once the FTA deal is struck, FDI in both directions will witness a big push and many UK-based entrepreneurs would look for establishing a business presence in the region through a business set up in Dubai and other developed markets.
Simon Penney could see how the two economies, the UK and GCC could complement each other and give added confidence in his belief in a successful FTA shortly.
Penney noted that during Round 1, all areas would be discussed and this first round would be continued for another two weeks into September. Understanding each side’s objectives would be the primary focus of this round.
He said, “We cannot underestimate the process, the effort required, and the hours involved in preparing for and negotiating multiple sessions for every single round”.
“Behind the UK and GCC chief negotiators stand dozens of policy teams all aiming to achieve the best outcome for their businesses and wider economies,” Penney emphasized.
As per him, it is not important how quickly one finalizes an FTA deal but instead insists on how much has been achieved in this deal. He solicited support from business leaders and requested them to stay actively engaged in this process to identify opportunities.
“There is huge political will on all sides to reach an FTA and great business support from across the UK and the GCC to maximise the opportunities ahead. At the end of the day, all sides want a comprehensive, ambitious agreement which plays to our strengths, brings our economies closer, supports our businesses to trade and invest across borders, and ultimately creates jobs and delivers economic growth,” he added.