As part of plans to expand and diversify its global trade partners and fulfil their respective national development strategies, the GCC has launched negotiations with the UK on a free trade agreement (FTA). This partnership is expected to bolster the bloc’s economy, help attract investment and provide greater opportunities for local businesses.
On June 22, 2022 the two parties signed a joint statement and officially launched talks on a comprehensive trade deal, with Anne-Marie Trevelyan, then the UK secretary of trade, meeting with Nayef Falah Al Hajraf, then the GCC secretary-general, in Riyadh, before travelling to Dubai to meet with representatives from the six GCC countries: Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE.
Partnership
The talks are focused on securing an FTA that would reduce or remove tariffs on a series of goods and services. In 2022 annual trade between the GCC and the UK stood at around £61.3bn. The FTA is expected to be a substantial economic opportunity for the UK-GCC relationship. GCC member countries are important partners for the UK, and the bloc as a whole is equivalent to the UK’s seventh-largest export market, and the fourth-largest outside of the EU. The GCC’s demand for imported products and services is expected to grow rapidly to £800bn by 2035 – a 35% increase from 2022 – creating new businesses and employment opportunities.
While there is no official timeline for the completion of the deal, in July 2022 local and international media reported that both sides were hopeful of securing an agreement before the end of 2023. The fourth round of negotiations, which were conducted in London and in a hybrid fashion, took place in July 2023. Technical discussions were held across 23 policy areas over 44 sessions, with a fifth round of discussions to be held in the GCC later in the year.
In May 2023 Kemi Badenoch, UK secretary of trade, visited the UAE at the end of a tour of the GCC to promote a trade deal with the bloc. In addition to discussing areas for growth and investment with her counterparts in the UAE, Badenoch signed a memorandum of understanding (MoU) with sustainable industries holding company Beeah Group, aiming to support the growth of green technologies in the region (see Energy chapter). The UAE was the UK’s 19th-largest trading partner in the first quarter of 2023, with bilateral trade volume growing by 63% from the first quarter of 2022 to reach £21.6bn.
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, and 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. During bilateral talks in March 2022 then-UK Prime Minister Boris Johnson urged Saudi Arabia to increase oil production after pledging to phase out imports of Russian oil by the end of 2022. This action underscored the region’s key role in global energy security.
During Abu Dhabi Sustainability Week in January 2023 the UK and UAE governments signed a clean energy MoU to bolster joint clean energy ambitions. The agreement aims to facilitate the sharing of knowledge and technology, opening up avenues for cooperation and boosting employment and investment in both countries, especially in the development of hydrogen products. This follows energy company ADNOC’s 2022 acquisition of a 25% share of BP’s blue hydrogen project H2Teesside. In April 2023 Abu Dhabi-based energy and utilities company Abu Dhabi National Energy Company announced an investment of $31m to support the Xlinks project, which aims to transfer power generated from renewable sources in Morocco to the UK via high-voltage direct current subsea cables. With completion slated for 2030, the project could provide for up to 8% of the UK’s energy needs, equivalent to powering 7m homes.
Bolstering Food Security
Free trade talks are expected to yield progress on agricultural imports and food security. Individuals involved in the discussions have flagged the possibility of the GCC reducing or removing tariffs on food and drink imports from the UK, which range from 5% to 25% for various products. In addition to supporting UK farmers, such a deal would help shore up food security in the GCC.
Following the disruption of global supply chains associated with Russia’s invasion of Ukraine in February 2022, food security has become a more pertinent issue for governments in the GCC, which has some of the world’s most import-dependent countries. At the beginning of the pandemic countries in the bloc imported around 85% of their food. Almost all rice consumed in the region was imported, as well as some 93% of cereals, approximately 62% of meat and 56% of vegetables. In April 2020 the GCC accepted a Kuwaiti proposal triggered by concerns about pandemic-related disruptions in trade to set up special arrangements at border control and Customs posts, facilitating the movement of basic food and medical supplies within the alliance. While GCC countries have reacted to recent events by increasing investment in agri-tech and improving efforts to bolster agricultural self-sufficiency, any agreement making it easier to import food and drink products from outside the GCC could further benefit the bloc’s food security.
GCC Trade Footprint
The launch of free trade talks is a significant step for the GCC as it seeks to diversify its trade partners and strengthen its position in global trade. In addition to existing free trade deals with New Zealand, Singapore, and the European Free Trade Association 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 Southern Common Market member countries of South America. These agreements are expected to play an essential role in attracting foreign investment to the region, as GCC countries embark on transformation strategies to diversify their economies.
For example, as part of the country’s long-term economic plans, Saudi Arabia has launched a series of mega-projects that are designed to stimulate economic activity in non-oil sectors, including the $500bn NEOM smart city; the $8bn Qiddiya entertainment city outside Riyadh; and The Red Sea Project, a 34,000-sq-km luxury tourism development.
Strengthening Bilateral Ties
The launch of trade talks is the culmination of efforts to bolster cooperation between GCC countries and the UK. In March 2022 Saudi Arabia and the UK signed an MoU to form a strategic partnership council to bolster bilateral investment and cooperation. With $21.6bn in bilateral trade in 2022 – an increase of 68% from 2021 – Saudi Arabia is the UK’s largest trading partner in the GCC, accounting for one-third of its business with the bloc.
In May 2022 it was announced that Qatar would invest $12bn in the UK economy between 2022 and 2027 as part of a new strategic investment partnership. The deal, which builds on the estimated £40bn in existing Qatari investment in the country, will focus on sectors such as financial technology, zero-emissions vehicles, life sciences and cybersecurity. Similarly, a deal between the UK and the UAE signed in March 2021, the UAE-UK Sovereign Investment Partnership, will see Mubadala Investment Company, Abu Dhabi’s private investment vehicle, invest £800m in UK life sciences between 2022 and 2027. The partnership expanded in September 2021, with Mubadala committing to invest an additional £10bn in technology and innovation-led sectors such as infrastructure development and energy transition.
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