GCC has trade surplus with EU states

Gulf News

The European Union enjoys a notable trade surplus with the Gulf Cooperation Council

Dr Jasim Ali, Special to Gulf News

A Qatari liquified natural gas (LNG) tanker being loaded at Ras Laffan

Image Credit: AP
A Qatari liquified natural gas (LNG) tanker being loaded at Ras Laffan. Under the sandy bottom of the Gulf lies a giant bubble of natural gas — the world’s largest gas field.

Notwithstanding imports of petroleum products, the European Union enjoys a notable trade surplus with the Gulf Cooperation Council (GCC), because size matters. Part of the logic lies in pure statistics, with the EU and GCC comprising 27 and six members, respectively.

True, in the past year GCC countries sought to expand membership by extending invitations to both Jordan and Morocco.

However, the full accession process is yet to commence and not likely to take place in the immediate future anyway. The focus now is on enhancing economic cooperation between the GCC, Jordan and Morocco.

Still, there is another reason for the trade gap, namely that of GCC economies being uniquely receptive to international trade. Certainly, this is a great quality that needs to be maintained and strengthened where possible. Unhindered international trade with regard to imports allows for proper use of scare resources, in turn reflected with regard to choices available for consumers, let alone prices of goods.

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Recently released statistics put the two-way trade at around ¤129 billion (Dh625 billion) in 2011, with GCC countries exporting goods worth ¤56.6 billion and importing ¤72.2 billion. Not surprisingly, the bulk of GCC exports comprise petroleum products, notably crude oil and liquefied natural gas (LNG). Suffice to say that Saudi Arabia and Qatar are the largest exporters of crude oil and LNG in the world, respectively.

Conversely, imports from the EU countries included machinery, planes, vehicles, chemicals and perfumes. It is fair to suggest that the EU countries pressed to expand exports to the GCC to help make for troubles in the Eurozone countries.

Not surprisingly, Saudi Arabia topped the list of GCC exporters to the EU with exports worth ¤28 billion by virtue of being the largest oil exporter. Understandably, Qatar followed with exports of ¤13.3 billion. In reality, Qatar is emerging as a leading exporter of LNG to numerous EU countries.

Not surprisingly, the UAE is the largest GCC importer from the EU with imports worth ¤32.6 billion. This fact further adds to the UAE’s qualities as an open economy and a primary trading centre despite being the second largest economy in the GCC after Saudi Arabia.

Trade agreement

Notwithstanding relatively significant trade relations, EU countries seem not prepared to sign a free trade agreement (FTA) with GCC countries at least partly due to statistics. Certainly, an FTA would grant GCC unrestricted access to 27 economies in Europe, the largest single economic bloc in the world. The EU includes mighty economies like Germany, France, Italy and the UK.

To be sure, there are numerous contentious issues between the two sides. On the other hand, the European side presses for unrestricted access to numerous investment opportunities including the crucial energy sector. Other demands deal with respect for human rights and environmental protection.

For their part, GCC countries would like to see the removal of customs charges on aluminium and petrochemicals products. The Europeans say that GCC producers do not pay full market rates for supply of electricity and other input materials.

Nevertheless, GCC countries enjoy a current account surplus in their global dealings on the back of steady oil prices. Recently published statistics put the trade balance for GCC countries collectively at $520 billion (Dh1.90 trillion) in 2011, up from $222 billion in 2010.

The sharp growth is attributed to rise of price and production of oil. Saudi Arabia was responsible for half of GCC’s trade balance in 2011 partly reflecting rise in export on the back of enhancing oil output to make up for disruption of production in Libya.

Clearly, GCC countries are playing by the rules of international trade.

The writer is a Member of Parliament in Bahrain