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, the then-UK secretary of trade, meeting with Nayef Falah Al Hajraf, the GCC secretary-general at the time, 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
GCC-UK talks are focused on securing an FTA that would reduce or remove tariffs on a series of goods and services. The agreement is expected to be a substantial economic opportunity for the UK-GCC relationship, especially considering in 2022 annual trade in goods between the GCC and the UK stood at $42bn. GCC member countries are important partners for the UK. Indeed, the bloc as a whole is equivalent to the UK’s seventh-largest export market, and the fourth-largest outside of the EU. Underscoring the potential of the agreement, 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, took place in July 2023. Technical discussions were held across 23 policy areas over 44 sessions, and the fifth round of discussions was held in Riyadh in November in a hybrid fashion. A sixth round of talks between the entities is scheduled for the first quarter of 2024.
In May 2023 Kemi Badenoch, the 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 Sharjah’s publicprivate organisation BEEAH Group, established in 2007, aiming to support the growth of green technologies in the region. The UAE was the UK’s 19th-largest trading partner in the second quarter of 2023, with the bilateral trade volume growing by 47.3% from the second quarter of 2022 to reach £25.5bn.
In addition to the advancement of stronger ties with the UK, the GCC also has opportunities to deepen relations with the EU. In 2022 trade between the two blocs surpassed $183bn. As the EU is working to deepen its engagement with the Gulf, GCC governments are urging swift, tangible action beyond high-level visits, and are seeking assurances that this partnership extends beyond the EU’s immediate need for alternative energy sources to Russian fossil fuels.
Energising Renewables
One area where the UK-GCC agreement 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. In a move to meet this goal, in July 2022 Oman hosted a conference in London highlighting renewable energy and decarbonisation investment opportunities in the country.
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 the Covid-19 pandemic and, more recently, the Russia-Ukraine conflict, 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 approximately 85% of their food. While GCC countries have reacted to recent events by increasing investment in agri-tech and improving efforts to strengthen agricultural self-sufficiency, any future agreement making it easier to import food and drink products from outside the GCC stands to further benefit the bloc’s food security.
Trade Footprint
The launch of free trade talks is a significant step for the GCC as the bloc seeks to diversify its trade partners and bolster its position in global trade. In addition to existing free trade deals with Singapore and the European Free Trade Association countries of Iceland, Liechtenstein, Norway and Switzerland, in September 2023 the GCC initialised an agreement with Pakistan. The bloc is also in trade negotiations with China, the EU, India Japan, New Zealand, South Korea, Turkey and the Southern Common Market member countries of South America. Future agreements are expected to play a key role in attracting foreign investment, as GCC countries embark on transformation strategies to diversify their economies.
New Corridor
As GCC countries seek to broaden their trade relations, the India-Middle East-Europe Economic Corridor (IMEC), unveiled at the G20 summit in New Delhi, India, in September 2023, marks a significant development. This corridor, comprising an eastern leg connecting India with the UAE, Saudi Arabia, Jordan and Israel, and a northern leg linking these Middle Eastern countries to Europe, aims to enhance connectivity and economic integration between Asia and Europe.
IMEC leverages the strategic locations and logistics capabilities of the UAE and Saudi Arabia. It is also in line with the multi-aligned foreign policies of the GCC countries. Amid the global geopolitical changes accelerated by the Russia-Ukraine conflict, GCC members have chosen to pursue independent and multi-aligned foreign policies.
However, IMEC’s advancement faces political and operational challenges. The corridor’s inclusion of Israel introduces complexities in light of the ongoing Hamas-Israel conflict, and its impact on regional economic and political ties. Additionally, the lack of a clear action plan and the rebranding of existing projects under IMEC, without detailed financial backing at the time of writing in November 2023, hint at potential challenges in bringing projects to fruition.
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