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The six-nation Gulf Cooperation Council has suspended the free trade talks with the European Union.
The decision comes as no surprise, with member nation Qatar warning on December 15 that a suspension was in the offing if an impasse in the 20-year-old negotiations continued.
"We are suspending the negotiations until the European side agrees to sign the (most recent) draft accord. We had made many concessions and responded favourably to the EU's many demands," says the GCC's secretary general Abderrahman Al-Attiyah.
The accord should have been signed at the end of November during a visit to Qatar by French President Nicolas Sarkozy. But the European Union "retracted at the last minute".
In April, EU External Relations Commissioner Benita Ferrero-Waldner said the question of human rights was one of the bones of contention. Following that up, Attiyah said in June the GCC would not accept any political conditions.
"The GCC countries reject the imposition of conditions and political demands by the European side in order to sign an economic agreement," Ferrero-Waldner said.
"Every time we start a round of talks, the European party surprises us by raising new questions or by mixing politics and trade," says Al-Attiyah.
"The GCC is ready to sign the accord when the European side accepts the few final propositions made by the Gulf countries. If not, the GCC is not prepared to resume negotiations."
For the European Union, the sticking point was also GCC export duties on a number of goods, which the EU could not accept because it would set a precedent for other countries.
Also the EU wanted more access for EU services such as banks and insurance.
A free-trade agreement with the EU would have improved economic co-operation, increased the trade of goods and offered further investment opportunities between the two regions.
The EU can extend its assistance to support GCC integration efforts such as in the implementation of the GCC common market. Regionally, the EU and GCC could focus on development projects in both Yemen and the wider Mediterranean region as a contribution to stability and economic advancement. These are areas of vital concern for both sides and the combination of financial assistance and practical expertise from the EU and the GCC can go a long way to add to regional security. But benefits are more likely to come in the medium and long term rather than the short term.
Although the agreement has been under consideration for a very long period, the fact remains that if concluded, the EU-GCC FTA would have been the first free trade agreement negotiated between two multilateral groups.
The GCC and the 25-member EU signed an Economic Co-operation Agreement in 1988 that laid the framework for the elaboration of a bilateral free trade agreement between the two regional blocs. Formal negotiations began in 1990 and have been off and on for the last 18 years. However, the talks got bogged down when the EU brought up new issues that really shouldn't have been a part of an FTA agreement: human rights, political reform and anti-terrorism strategies.
Market access, government procurement and application of the investment protection and guarantees criteria, are some of the key issues on which negotiations came to a stalemate. For instance, the EU asked to invest in the Gulf energy industry, heavily protected by local governments, while Gulf countries asked to ease up conditions attached to rules of origin for qualifying GCC products.
The GCC is currently the EU's sixth largest export market and the EU is GCC's first trading partner. The EU's exports to the GCC cover a wide range of products, the largest part of which is machinery and transport materials such as aircraft, electrical machinery and mechanical appliances. EU imports from the GCC are largely confined to fuels and derivatives. GCC countries currently benefit from preferential access to the EU market under the EU's Generalised System of Preferences.
The stalled trade talks, which got revived in 2006, made headway early last year when negotiators from the GCC and the EU completed "a constructive round of negotiations" on the creation of a free trade area between the two regional groups.
A GCC-EU FTA would have countered the momentum of the US bilateral push. It would also have put in place a mechanism to reinvigorate the multilateral approach to regional relations. As far as the GCC is concerned, such an agreement would strengthen the institution at a time in which it is coming under increased scrutiny in terms of its achievements and relevance.
The FTA would have sent a powerful message about the regional integration process with the GCC serving as a catalyst for the continued development and co-operation of the region.
