Prospects improve for UK-GCC free trade ties
The British prime minister, Theresa May, appointed Liam Fox as the new secretary of state for international trade on July 13, and he made his first official speech on July 21. And it was fitting that it should have been delivered at the second UK-GCC Economic Forum, hosted by the Arab British Chamber of Commerce in London.
This could augur a free-trade agreement (FTA) as beneficial as the one the UAE has with Singapore.
Those with long memories will recall that former prime minister David Cameron’s first official visit after the election of the coalition government in 2010 was to the UAE. That visit led directly to the establishment of the bilateral UAE-UK Taskforce. It will also be recalled that Mr Fox, as the then secretary of state for defence, visited the UAE in early June, within a month of the coalition administration being formed.
These events demonstrate the enduring importance the UK attaches to the UAE and the Gulf. Indeed, Mr Fox began his speech at the UK-GCC Economic Forum by reaffirming that national commitment. What he said mapped out the nature of that commitment over the remaining four years of the present conservative administration, and beyond.
Mr Fox spoke of “ever closer collaboration” between the GCC and the UK, which will take a number of tangible forms.
On trade and investment, he said the UK is the most open trading nation in the world, and acknowledged the support of strong Gulf economies through major investments made by the UAE and other Gulf states in the UK.
The interest is reciprocal. At the economic forum, the Saudi commerce minister Majid bin Abdullah Al Qasabi told The National that GCC officials were already working on a free trade deal with the UK.
Mr Al Qasabi, together with other senior Gulf ministers and diplomats, met Mr Fox privately at the forum.
On capacity building, Mr Fox spoke of the increased sharing of knowledge skills.
On security, he paid tribute to the work the UAE and UK have accomplished (for example, cooperation in countering violent extremism). Mr Fox announced that a £100 million (Dh485.9m) fund has been earmarked to promote cyber-resilience and security in the Gulf.
In response, the Gulf ministers made it clear in their speeches that the GCC looked to the UK for experience and ideas for improving governance. Mr Al Qasabi, for example, looked forward to re-engaging with the UK.
The British government has clearly signalled that, post-Brexit, bilateral relations between the UK and the UAE and other Gulf states will be more – not less – important. The scope is plain to see.
Switzerland and other countries in the European Free Trade Association have an FTA with the GCC. Singapore has one, too. It took only 15 months to negotiate and is comprehensive, covering services (including financial and legal), as well as goods.
But there is no FTA between the GCC and the EU. It has been under discussion for more than a quarter of a century, but an agreement has never been reached. As FTAs come within the common commercial policy and, therefore, the exclusive competence of the EU, the UK, while it remained a member of the EU, could not conclude a bilateral FTA with the UAE or the GCC.
When Mr Cameron became prime minister in 2010, bilateral UAE-UK trade was lagging. In 2000, the UK’s share of UAE trade had stood at 8 per cent, the same as China. A decade later, that share had slipped to 4 per cent, and China’s had grown to 16 per cent.
In the absence of FTAs, trade promotion was the only option. The UAE-UK Taskforce took up the challenge. The UAE-UK trade rose dramatically – by more than 60 per cent – in the four years between year-to-end (YTE) 2009 and YTE 2013. Since then, trade volumes have steadied and grown more modestly.
The GCC-Singapore FTA came into force on January 1 last year, and the results have been striking.
The FTA resulted in a 32 per cent increase in trade between Dubai and Singapore. According to the director of Dubai Customs, Mahboob Musabih, bilateral trade between Dubai and Singapore increased from Dh9.21 billion in the January 1 to September 30 period in 2014 to Dh12.16bn in the same period last year – that is, in the first three quarters after the GCC-Singapore FTA had become effective.
Over the same period, the UAE-UK trade showed no more than a modest increase.
Back in June 2010, Mr Cameron had said: “I do sometimes sense when I look at how we deal with international relations in terms of trade and trade promotion that we are playing softball while the rest of the world is playing hardball”.
The lesson from the GCC-Singapore FTA is clear – such agreements can work dramatically to the advantage of all parties. Without an FTA, Britain has been playing with the wrong ball.
There are other indicators of the seriousness of Britain’s intent.
The department for international trade, which is headed by Mr Fox, will work in conjunction with the foreign office, led by Boris Johnson as foreign secretary, and the newly formed department for international development, with Priti Patel as the secretary of state. All have a seat in the cabinet at the head of the government.
Britain has centuries of experience as a commercial centre, trading with the rest of the world. It has strong links with the UAE and the GCC, forged over many decades. There is a track record of trust, cooperation and mutual understanding on the essentials of geopolitics, such as security and counter-terrorism.
These attributes provide a broad platform on which the UK can capitalise to make good on its claim to being the most open trading nation.
Mr Fox ended his speech at the forum by saying he will visit the Gulf soon.
This should herald a new chapter in bilateral trade relations between the UK, the UAE and GCC, from which everyone will benefit.
Michael Patchett-Joyce is a commercial lawyer and arbitrator, based in London and the UAE.
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Published: July 31, 2016 04:00 AM