EU keeps close watch on Gulf moves towards customs union

Date: 18/12/1997

THIS week's Gulf Cooperation Council (GCC) summit in Kuwait may appear rather removed from EU concerns, but it is being watched with close interest by European Commission officials.

The outcome could be an important indication of how quickly the region is likely to adopt a common customs tariff and thus pave the way for a free trade agreement with the Union.

Since 1996, both regions have been nominally pushing for a deal by the end of next year and steadily building links between officials and businessmen.

Although Europe-Gulf relations are still firmly embedded in bilateral contacts, both sides - or their secretariats at least - increasingly see the value in a more inter-regional approach to trade and politics.

But it is clear that this will be difficult until the Gulf countries - Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Oman and Bahrain - go considerably further in shoring up cooperation between themselves.

One of the prerequisites for a viable EU-GCC agreement, according to the European Commission at least, is a common external tariff amongst the Gulf countries, although talks can be held in the meantime.

GCC officials accept that a deal would be "a plus for inter-regional trade", but stress that "we do not hold it as a precondition".

The Gulf is nonetheless making progress towards an accord and has agreed on around 85% of the preconditions for a customs union, according to Riyadh officials.

"Of 1,000 items to be discussed, over 800 have already been agreed," said one. Nevertheless, "it does not appear possible that it will be completed this December", he admitted.

EU-Gulf talks are expected to be reactivated next February, after the Muslim holy month of Ramadan. Although the talks have tailed off slightly of late, partly because the Gulf's chief negotiator was unwell, there is still a possibility that a deal can be reached at the end of next year. An EU-GCC troika will attempt to pave the way this April, although Brussels officials privately admit that the date is ambitious.

The Gulf is still pushing to be allowed liberal EU access for its petrochemical products and aluminium, which have been classed by the Union as 'sensitive' and not eligible for completely free trade.

If the Union proves unwilling to move on that, and also on energy taxes, the Gulf may not be willing to close a deal, especially as its oil and gas already enter Europe tariff free.

Nonetheless, Europe is keen to ensure a long-term supply of oil from the region and sees a free trade deal as a way of securing relations.

The two regions have also boosted cooperation between high-technology companies of late, and the Commission has hosted seminars to teach Gulf exporters about EU certification and procedures. "We would like them to adopt European standards as soon as possible," said a Commission official.

Finally, the EU has promised to support Saudi Arabia's bid to join the World Trade Organisation.