Partner Content

EU-GCC Trade cooperation: Elevating it to the next level

12 November 2024

The Euro-GCC Economic Initiative Launch Event being organized on the 12th and 13th of November in Bucharest is taking place amidst big geo-political changes. Not only is the European Commission shaking up its team with a new college of commissioners under the leadership of Ursula Von Der Leyen (mark II) and the European Parliament and the Council of Ministers set to implement a new strategic partnership with the Gulf, but we have also just witnessed the re-election of President-Elect Donald Trump.

These changes will mark a change in approach to geo-political tensions, international trade and above all, new cynergies and dynamics. All this points to a plethora of opportunities starting with the certainty that Donald Trump will  restore relations with the Arab Gulf but also through the possibility of the creation of a free trade zone between the the Gulf Cooperation Council and the European Union as reiterated in the first EU-GCC Summit held a month ago.

The present and future will not be all rosy. The GCC members still view the European Union as divided and not talking with a single voice. Discussions and negotiations on a regional free trade zone have been stalled for almost 30 years while all ongoing discussions on a shengen visa for GCC nationals were halted following the Qatargate corruption scandal saga. Furthermore, disagreements on human rights, humanitarian law, and justice together with the parties' individual position on Iran and Israel are viewed as stumbling blocks to further enhanced cooperation. 

One must also add that many fear that all hands will be on deck to focus on war-torn countries such as Ukraine and the Middle East and other important regional issues from Iraq to Syria, Lebanon and Yemen leaving no room to other areas such as trade, people to people relations and climate, amongst others. 

That is why such initiatives like the one being organized during these two days by a team of eternal optimists, founders and directors at the Euro-GCC Platform for Economic Initiative, including the undersigned, can help charter the way to elevating trade, eduction and cultural exchanges to the next level.

The current state of play

But lets pause for a while and dissect the current state of play between the GCC and the European Union. Two years ago the European Parliament and Council drafted a new blueprint on a strategic partnership with the Gulf. Unilaterally and without much discussion with the other side, the European Union identified six areas or clusters to focus on, namely trade and investment, green transition and energy security, regional stability and global security, humanitarian and development issues, reform and human rights, and institutional cooperation.

The mixed reaction from the six monarchies of the Gulf Cooperation Council (GCC) and therefore Saudi Arabia, the United Arab Emirates (UAE), Qatar, Bahrain, Kuwait and Oman was justified. On one hand, this was a move in the right direction and cooperation in such areas identified above was definitely welcome. But the downside was that the latter were not extensively consulted during the process. Making matters worse, the GCC members viewed the document as too high level and not detailed enough to charter its implimentation. It was boiled down to a wish list without the necessary tools for action, key performance indicators, milestones and benchmarks. Many questioned whether the EU was in a frenzy to restore its relations with the GCC in the context that the former needed a quick substitute to Russian fossil fuels. 

Mutual benefits

It was therefore positive to see that the strategic partnership feature prominently in the official statement a month ago and  endorsed by all parties as a win-win vision. Because even in the absence of a regional free trade zone, trade between the EU and the GCC has remained robust, with trade exchange worth EUR 170 million as of last year. And even if Asia has overtook Europe to become the key trade partner with the GCC accounting for 11.1% and 15.9% of all GCC trade, respectively, for the EU, fuels and mining products remain the key imports from the Gulf (82.3% in 2023), with exports being more diverse: food amounting to 10.5%, machinery and transport equipment 41.4%, and chemicals 16.3% of EU exports to the GCC. 

Kudos to the EU for walking its talk in apppointing its own representative to push further irs interests and fast track the implementation of its goals by Luigo Di Maio, an Italian politician who has been serving as EU Special Representative for the Gulf region since 1 June 2023. His efforts would surely be enforced with the establishment of a European Union chamber of commerce in the GCC to strengthen the European private sector’s role in the Gulf economic transition programmes.

The stumbling blocks

Which are the main stumbling blocks to further cooperation one might ask. They are many and I would focus on three, namely trade, energy and people to people interaction.

A regional free trade agreement

The obstacles that prevent the EU and the GCC from signing an FTA since 2008 are the EU’s lack of flexibility when it comes to the inclusion of clauses on human rights and the GCC’s insistence on maintaining the right to impose export tariffs. Given that the matter has been practically stalled for all these years the UAE has signalled its preparedness to sign an individual trade agreement with the EU. This piecemeal approach might be the best way forward in the circumstances. Another option would be to focus on ways to liberalise trade and investment in those sectors where the EU has a strategic added value as a trading partner for the GCC, and vice versa. These sectors are linked to the energy transition and the European Green Deal, including desalination technologies, green building, and renewable energy, amongst others.

CBAM

A new, significant stumbling block in EU-GCC trade will be the Carbon Border Adjustment Mechanism (CBAM), as the EU will tax imports that rely on polluting, energy-intensive industrial processes to balance out the high costs imposed on European producers to cut emissions. CBAM will impact some key Gulf exports, such as steel, aluminium, fertilisers and cement. 

Climate and Energy transition

In fact, on the energy side, European cooperation in terms of technology transfer is critical with the GCC determined to make their industry more climate neutral. Notably, the EU aims to become the first carbon-neutral continent by 2030, and all GCC countries except for Qatar have announced net-zero goals by 2050/2060. The GCC states understand that the energy transition, including renewable energy deployment, is creating wide-spread opportunities for climate change mitigation and adaptation as well as economic diversification. We can see everyday how the GCC states are  making massive investments in the development of blue and green hydrogen. Yet, the European Union has not signed any hydrogen cooperation partnership with GCC countries, despite having reached such agreements with several other partners who are years behind the production schedule of the GCC monarchies, such as Kazakhstan, Egypt and Namibia.

One can here explore better synergies with the European Green Deal with projects such as the Saudi and Middle East Green Initiative. The biggest challenge for European Countries here is to act fast, be flexible and anticipate competition from Asian countries. 

People to people networks

Finally, emphasis must be placed on extending people-to-people networks. All EU countries enjoy almost complete visa free access to the GCC states. In Saudi Arabia, visas are issued online within hours. The same privilege does not exist for GCC citizens in Europe. This has implications for educational, cultural, and overall social ties. Capacity building remains essential to promoting long-term engagement, and addressing these dynamics is crucial to establishing trust and ensuring that EU-GCC cooperation can thrive. 

Conclusion

Point 7 in the The joint statement states that '...we will strive to foster investment events such as investment forums, round table discussions and workshops for the private sectors...' Well, right on cue, that is what we, at the Europe-GCC Platform for Economic Initiative are actually doing, just a few weeks after the First European Union-Gulf Cooperation Council Summit.

We recognize that the goal of both sides, that is the GCC and the EU, is to actually work on trade liberalization, investment, technology, culture, education and other areas. We understand that the Gulf is a significant connectivity node and an important gateway between Europe, Asia and Africa; recognise that the GCC states require stability in their neighborhood to implement their far-reaching economic modernization and diversification programs. 

Our role to act as a bridge for both sides to pursue wide-ranging economic opportunities, to promote the Gulf as a highly relevant market for European companies with lucrative opportunities in the many mega-projects being pursued and implemented there. To assist European companies help the Gulf region with the latter's diversification efforts, trade ties to Europe and access to European knowhow, expertise and technology. The next summit between the the GCC and the  European Union will be held in Saudi Arabia in 2026. Until then, we will work to accomplish our agenda and exceed our mission

Author: Dr Aaron Farrugia is a former Minister, current Member of Parliament and Founder of ECONOMIQ,  Board Member Euro-GCC Economic Platform.

*This is Partner content.

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Partner Content

EU-GCC Trade cooperation: Elevating it to the next level

12 November 2024

The Euro-GCC Economic Initiative Launch Event being organized on the 12th and 13th of November in Bucharest is taking place amidst big geo-political changes. Not only is the European Commission shaking up its team with a new college of commissioners under the leadership of Ursula Von Der Leyen (mark II) and the European Parliament and the Council of Ministers set to implement a new strategic partnership with the Gulf, but we have also just witnessed the re-election of President-Elect Donald Trump.

These changes will mark a change in approach to geo-political tensions, international trade and above all, new cynergies and dynamics. All this points to a plethora of opportunities starting with the certainty that Donald Trump will  restore relations with the Arab Gulf but also through the possibility of the creation of a free trade zone between the the Gulf Cooperation Council and the European Union as reiterated in the first EU-GCC Summit held a month ago.

The present and future will not be all rosy. The GCC members still view the European Union as divided and not talking with a single voice. Discussions and negotiations on a regional free trade zone have been stalled for almost 30 years while all ongoing discussions on a shengen visa for GCC nationals were halted following the Qatargate corruption scandal saga. Furthermore, disagreements on human rights, humanitarian law, and justice together with the parties' individual position on Iran and Israel are viewed as stumbling blocks to further enhanced cooperation. 

One must also add that many fear that all hands will be on deck to focus on war-torn countries such as Ukraine and the Middle East and other important regional issues from Iraq to Syria, Lebanon and Yemen leaving no room to other areas such as trade, people to people relations and climate, amongst others. 

That is why such initiatives like the one being organized during these two days by a team of eternal optimists, founders and directors at the Euro-GCC Platform for Economic Initiative, including the undersigned, can help charter the way to elevating trade, eduction and cultural exchanges to the next level.

The current state of play

But lets pause for a while and dissect the current state of play between the GCC and the European Union. Two years ago the European Parliament and Council drafted a new blueprint on a strategic partnership with the Gulf. Unilaterally and without much discussion with the other side, the European Union identified six areas or clusters to focus on, namely trade and investment, green transition and energy security, regional stability and global security, humanitarian and development issues, reform and human rights, and institutional cooperation.

The mixed reaction from the six monarchies of the Gulf Cooperation Council (GCC) and therefore Saudi Arabia, the United Arab Emirates (UAE), Qatar, Bahrain, Kuwait and Oman was justified. On one hand, this was a move in the right direction and cooperation in such areas identified above was definitely welcome. But the downside was that the latter were not extensively consulted during the process. Making matters worse, the GCC members viewed the document as too high level and not detailed enough to charter its implimentation. It was boiled down to a wish list without the necessary tools for action, key performance indicators, milestones and benchmarks. Many questioned whether the EU was in a frenzy to restore its relations with the GCC in the context that the former needed a quick substitute to Russian fossil fuels. 

Mutual benefits

It was therefore positive to see that the strategic partnership feature prominently in the official statement a month ago and  endorsed by all parties as a win-win vision. Because even in the absence of a regional free trade zone, trade between the EU and the GCC has remained robust, with trade exchange worth EUR 170 million as of last year. And even if Asia has overtook Europe to become the key trade partner with the GCC accounting for 11.1% and 15.9% of all GCC trade, respectively, for the EU, fuels and mining products remain the key imports from the Gulf (82.3% in 2023), with exports being more diverse: food amounting to 10.5%, machinery and transport equipment 41.4%, and chemicals 16.3% of EU exports to the GCC. 

Kudos to the EU for walking its talk in apppointing its own representative to push further irs interests and fast track the implementation of its goals by Luigo Di Maio, an Italian politician who has been serving as EU Special Representative for the Gulf region since 1 June 2023. His efforts would surely be enforced with the establishment of a European Union chamber of commerce in the GCC to strengthen the European private sector’s role in the Gulf economic transition programmes.

The stumbling blocks

Which are the main stumbling blocks to further cooperation one might ask. They are many and I would focus on three, namely trade, energy and people to people interaction.

A regional free trade agreement

The obstacles that prevent the EU and the GCC from signing an FTA since 2008 are the EU’s lack of flexibility when it comes to the inclusion of clauses on human rights and the GCC’s insistence on maintaining the right to impose export tariffs. Given that the matter has been practically stalled for all these years the UAE has signalled its preparedness to sign an individual trade agreement with the EU. This piecemeal approach might be the best way forward in the circumstances. Another option would be to focus on ways to liberalise trade and investment in those sectors where the EU has a strategic added value as a trading partner for the GCC, and vice versa. These sectors are linked to the energy transition and the European Green Deal, including desalination technologies, green building, and renewable energy, amongst others.

CBAM

A new, significant stumbling block in EU-GCC trade will be the Carbon Border Adjustment Mechanism (CBAM), as the EU will tax imports that rely on polluting, energy-intensive industrial processes to balance out the high costs imposed on European producers to cut emissions. CBAM will impact some key Gulf exports, such as steel, aluminium, fertilisers and cement. 

Climate and Energy transition

In fact, on the energy side, European cooperation in terms of technology transfer is critical with the GCC determined to make their industry more climate neutral. Notably, the EU aims to become the first carbon-neutral continent by 2030, and all GCC countries except for Qatar have announced net-zero goals by 2050/2060. The GCC states understand that the energy transition, including renewable energy deployment, is creating wide-spread opportunities for climate change mitigation and adaptation as well as economic diversification. We can see everyday how the GCC states are  making massive investments in the development of blue and green hydrogen. Yet, the European Union has not signed any hydrogen cooperation partnership with GCC countries, despite having reached such agreements with several other partners who are years behind the production schedule of the GCC monarchies, such as Kazakhstan, Egypt and Namibia.

One can here explore better synergies with the European Green Deal with projects such as the Saudi and Middle East Green Initiative. The biggest challenge for European Countries here is to act fast, be flexible and anticipate competition from Asian countries. 

People to people networks

Finally, emphasis must be placed on extending people-to-people networks. All EU countries enjoy almost complete visa free access to the GCC states. In Saudi Arabia, visas are issued online within hours. The same privilege does not exist for GCC citizens in Europe. This has implications for educational, cultural, and overall social ties. Capacity building remains essential to promoting long-term engagement, and addressing these dynamics is crucial to establishing trust and ensuring that EU-GCC cooperation can thrive. 

Conclusion

Point 7 in the The joint statement states that '...we will strive to foster investment events such as investment forums, round table discussions and workshops for the private sectors...' Well, right on cue, that is what we, at the Europe-GCC Platform for Economic Initiative are actually doing, just a few weeks after the First European Union-Gulf Cooperation Council Summit.

We recognize that the goal of both sides, that is the GCC and the EU, is to actually work on trade liberalization, investment, technology, culture, education and other areas. We understand that the Gulf is a significant connectivity node and an important gateway between Europe, Asia and Africa; recognise that the GCC states require stability in their neighborhood to implement their far-reaching economic modernization and diversification programs. 

Our role to act as a bridge for both sides to pursue wide-ranging economic opportunities, to promote the Gulf as a highly relevant market for European companies with lucrative opportunities in the many mega-projects being pursued and implemented there. To assist European companies help the Gulf region with the latter's diversification efforts, trade ties to Europe and access to European knowhow, expertise and technology. The next summit between the the GCC and the  European Union will be held in Saudi Arabia in 2026. Until then, we will work to accomplish our agenda and exceed our mission

Author: Dr Aaron Farrugia is a former Minister, current Member of Parliament and Founder of ECONOMIQ,  Board Member Euro-GCC Economic Platform.

*This is Partner content.

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