Trade Agreements: Europe or Asia?

Eighteen years ago, the world was a very different place. When the negotiators from the GCC and the EU first sat around the table in a bid to thrash out a free trade agreement (FTA), Europe was the Gulf’s number one priority — a vital partner in the region’s bid to kick-start its dramatic economic evolution.Yet one could have imagined that it would take the two sides this long to reach an accord. Now, we are told, the two parties are closer than they have ever been to signing on the dotted line. EU negotiator the Rt. Hon. Peter Mandelson is apparently confident that the agreement will be inked by the end of June, and we’ve heard nothing from the GCC to disprove this statement.It is no secret, however, that the Gulf region is increasingly turning to the rapidly emerging markets of China and India. In 2006, the value of trade between India and Dubai alone was US$10.9bn, while bilateral trade between China and the GCC was estimated at US$21.1bn in the first half of the year. According to the US government’s Energy Information Administration, by 2020, the Middle East will provide 69.4% of China’s oil.
As Giacomo Luciani, senior consultant and professor of political economy at the Switzerland-based Gulf Research Centre, points out: “For the GCC, access to the EU’s petrochemicals markets is not as important as access to the Asian market. The focus of attention is now clearly towards Asia. That is where [the GCC states] will go, and Europe is declining in interest.”

Admittedly, ADCCI also penned deals with two British companies — but such agreements are undoubtedly becoming the exception, not the rule. Of course, an FTA would bring with it many benefits. The growth of the private sector through European investment could provide much-needed future employment for the Middle East’s youthful population. Additionally, the FTA would offer the GCC tariff-free trade in goods with Europe, benefiting both labour intensive sectors such as clothing and textiles, and energy-intensive sectors that require skilled labour, such as petrochemicals and metal products.Nevertheless, as the saga draws to a close, we may reflect that the 2007 FTA is of considerably less significance than it would have been all those years ago — after all, it seems that Asia is the future, Europe the past. Source