The United Arab Emirates (UAE) is seeking to initiate separate trade negotiations with the European Union (EU), according to informed sources, as discussions involving the entire Gulf Cooperation Council (GCC) bloc appear to have stalled.
The GCC, a six-nation economic and political alliance that includes the UAE, Saudi Arabia, Bahrain, Qatar, Oman, and Kuwait, has been engaged in on-again, off-again free trade agreement (FTA) talks with the EU for over two decades. However, these negotiations have been repeatedly hampered by internal disagreements within the GCC on issues like trade policies and intellectual property rights.
The UAE, the most economically diversified nation in the GCC and a major trading partner of the EU, is reportedly frustrated by the lack of progress in the collective talks. Fearing that further delays could hinder its economic growth, the UAE is now exploring the possibility of pursuing a bilateral FTA with the EU.
This move by the UAE could potentially complicate the already intricate web of trade relations within the GCC. The GCC operates under a common external tariff system, meaning member states generally apply the same import duties on goods from outside the bloc. A UAE-EU FTA could disrupt this system and lead to trade diversion, where businesses route goods through the UAE to take advantage of lower tariffs, even if those goods are destined for other GCC markets.
The EU is likely to carefully consider the UAE’s proposal. While a bilateral agreement would offer the benefit of streamlined negotiations, the EU may be hesitant to undermine the GCC’s efforts towards regional economic integration. The EU is a strong proponent of free trade agreements, and a successful deal with the UAE could pave the way for future agreements with other GCC states, once internal differences are resolved.
The potential for a UAE-EU FTA has generated mixed reactions within the GCC. Some member states, particularly those with less diversified economies, may view this as an opportunity to piggyback on the UAE’s negotiations and gain indirect access to the EU market. However, others might be concerned about the potential disruption to regional trade flows and a weakening of the GCC’s collective bargaining power.
The success of the UAE’s solo venture hinges on its ability to address the EU’s concerns about regional integration and convince the bloc that a bilateral deal would not come at the expense of a future GCC-EU FTA. The UAE will also need to navigate potential tensions within the GCC and assure its neighbors that a bilateral deal would ultimately benefit the entire region.
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This article first appeared on The WIRE and is brought to you by Hyphen Digital Network
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