On 22 August 2022, UK and Gulf Cooperation Council (GCC) negotiating teams met for the first round of negotiations on a free trade agreement. The talks are expected to continue for around two weeks and cover all areas of the FTA focusing on the main objectives of the parties.

GCC

The members of the Gulf Cooperation Council are Saudi Arabia, Kuwait, Oman, Qatar, Bahrain and the United Arab Emirates. The aims of the GCC are to strengthen relations and areas of cooperation and to formulate regulations in various fields including economic and financial affairs, commerce, customs and communications. The GCC operates through a Supreme Council of the leaders of member countries, a Council of Ministers and a Secretariat.

Preparation for negotiations

In October 2021 the UK launched a consultation requesting input on the objectives of an FTA with the GCC, and events were held to engage with stakeholders on the issues. Respondents considered that although tariffs for goods from the UK to the GCC countries are relatively low (5% for most UK exports), a priority for the UK should be the elimination of tariffs as this could increase the competitiveness of UK businesses in the GCC market. The removal of tariffs was seen as an important aim for the automotive, manufactured goods, and food and drink industries.

Respondents also favoured simple and flexible rules of origin, consistent application of customs procedures and fast clearance of goods. Other preferred objectives were the reduction of technical barriers and the protection of consumers.

Advantages of an FTA

An FTA would increase trading opportunities by reducing barriers to trade in goods, including the reduction or removal of import tariffs. The UK is currently the world’s second largest exporter of services, and more than 50% of UK exports to the GCC countries are in the form of services.

Foreign direct investment (FDI) from GCC countries into the UK reached GBP 15.7bn in 2020, and UK FDI into the GCC countries amounted to GBP 13.4 billion in that year.

A document outlining the UK’s strategic approach to the agreement was issued earlier in 2022. This notes that the aggregate nominal GDP of the GCC countries amounted to GBP 1.3 trillion in 2019. The GCC countries are important oil producers and around 70% of their goods exports are in the form of mineral fuels or oils. The countries of the GCC have all put in place Vision Plans for diversification of their economies away from oil and gas; and have prioritised certain sectors for future economic growth and development. These future growth sectors overlap with sectors in which the UK has a competitive advantage, including financial services, and implementation of the Vision Plans could therefore lead to increased demand for UK services and products.

A free trade agreement with the GCC could promote further specialisation in areas of economic complementarity, raising productivity within the relevant sectors.

In 2019, just before the pandemic, the total trade of the GCC countries with the UK amounted to GBP 44.6 billion; but it then fell to GBP 33.3 billion in 2020 as a result of the pandemic. The trade flow data highlights areas where the UK and GCC economies can combine well. The UK is strong in exports of transport equipment, motor vehicles, pharmaceuticals and financial services. The GCC countries specialise in exports in the areas of natural resource extraction, petrochemicals, aluminium, and other manufacturing sectors.