MUSCAT: As part of plans to expand and diversify its global trade partners, the GCC has launched negotiations with the UK on a free trade agreement that is expected to bolster the bloc’s economy, help attract investment and provide greater opportunities for local businesses.
On June 22 the two parties officially launched talks on a comprehensive trade deal, with Anne-Marie Trevelyan, the UK trade secretary, meeting with Nayef Falah al Hajraf, the GCC secretary-general, in Riyadh.
Trevelyan then travelled to Dubai to meet with representatives from the six GCC countries: Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE.
The talks, which followed months of exploratory discussions, are focused on securing a free trade agreement that would reduce or remove tariffs on a series of goods and services.
Current annual trade between the GCC and the UK stands at around $40 billion.
While there is no official timeline for the completion of the deal, UK and GCC policymakers hope to launch the first round of negotiations in the third quarter of this year, with local and international media reporting that both sides are hopeful of securing a deal before the end of 2023.
Energising renewables
One area where the deal is expected to have a significant impact is renewable energy.
While the GCC’s oil and gas reserves are not likely to be included in the deal, any prospective agreement is expected to help Gulf countries diversify their respective energy sectors and reduce their reliance on hydrocarbons.
Talks are set to look at removing tariffs on renewable energy infrastructure such as UK-made wind turbine parts, while GCC countries would also benefit from greater access to UK clean energy technology, such as innovations that improve energy efficiency in homes, buildings and businesses.
To this end, on July 27, Wednesday, Omani authorities will host a conference in London highlighting the various renewable energy and decarbonisation investment opportunities in the country.
Organised by the Ministry of Commerce, Industry and Investment Promotion, in partnership with the Oman Investment Authority and others, the “New Energy in Oman” event will feature a series of speakers from both Oman and the UK, and aims to provide a forum for bilateral meetings with UK companies operating in the sector.
Like many Gulf countries, Oman has set ambitious renewable energy targets, with the country aiming to generate 30 per cent of electricity from renewable sources by 2030.
The event builds on recent developments between the GCC and the UK in the energy sector. In January Oman and UK energy major BP signed two deals to support the construction of renewable energy and green hydrogen projects in the Sultanate of Oman.
Meanwhile, during bilateral talks in March, then-UK Prime Minister Boris Johnson urged Saudi Arabia to increase oil output to help secure global energy supplies, highlighting the key role that Gulf countries play in ensuring global energy security.
Bolstering food security
Elsewhere, free trade talks are also expected to yield progress on agricultural imports and food security.
Figures involved in the discussions have flagged the possibility of the GCC reducing or removing tariffs on food and drinks imports from the UK, which currently range from 5 per cent to 25 per cent for various products.
In addition to providing a boost to farmers in the UK, such a deal would help shore up food security in the GCC.
Following the disruption of global supply chains associated with the Covid-19 pandemic and, more recently, Russia’s invasion of Ukraine, food security has become a more pertinent issue for governments in the GCC, which has some of the most import-dependent countries in the world when it comes to food.
As OBG has detailed, at the beginning of the pandemic countries in the bloc imported around 85 per cent of their food. Almost all rice consumed in the region was imported, as well as some 93 per cent of cereals, approximately 62 per cent of meat and 56 per cent of vegetables.
While countries in the region have reacted to recent events by increasing investment in agri-tech and improving efforts to bolster agricultural self-sufficiency, any agreement easing the import of food and drink products could further benefit the bloc’s food security.
GCC trade footprint
Aside from individual sectors, the launch of free trade talks is significant for the GCC as it seeks to diversify its trade partners and improve its position in global trade.
On top of existing free trade deals with New Zealand, Singapore and the European Free Trade Area countries of Iceland, Liechtenstein, Norway and Switzerland, the GCC 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.
For example, as part of its long-term economic plans, Saudi Arabia has launched a series of mega-projects designed to stimulate economic activity in non-oil sectors.
They include the $500bn NEOM start city, which operates as a high-tech city for residents and businesses and functions as a tourist destination; the $8bn Qiddiya entertainment city outside Riyadh; and the Red Sea Project, a 34,000-sq-km luxury tourism development.
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