UK-GCC free trade agreement: What’s on offer?

Naysayers have told me that negotiating a Free Trade Agreement (FTA) with the GCC is an exercise in futility. That it will be an overdrawn and protracted process. That it’s not worth the effort.

I’ve told them that I simply disagree. Every week I speak to businesses who tell me that an FTA will deliver real benefits to them. The naysayers are outnumbered, and here’s why.

Political and economic will
Firstly, the will is there from both sides – and indeed from government and business leaders of all seven countries – to deliver a comprehensive UK-GCC free trade agreement.

Our Secretary of State for International Trade, Anne Marie Trevelyan and the GCC Secretary General Dr Nayef Falah M. Al-Hajraf launched the FTA process in June, at the GCC Secretariat in Riyadh in the presence of Ministers from all six GCC states. We build on strong foundations.

Our Joint Trade and Investment Review with the GCC, completed last summer, enabled both sides to identify future opportunities and priorities, paving the way for Round 1 of formal FTA negotiations which launch today.

Momentum is on our side
Secondly, the UK has embarked on a programme of negotiations with key trading partners to build relationships as an independent trading nation, breaking down trade barriers and supporting economic growth. We have already agreed trade deals with 71 countries plus the EU, accounting for £808bn of UK bilateral trade in 2021.

These include signed FTAs with Australia and New Zealand, both of which were negotiated and delivered from scratch in less than two years, as well as a Digital Economy Agreement with Singapore, which is now in force.

So far this year the UK has launched trade negotiations with India, Canada, Mexico and Israel, as well as the GCC, who themselves are managing several other trade negotiations already underway. With both parties working at pace to reach trade agreements, momentum is on our side.

The size of the prize
Thirdly, the more ambitious the FTA, the greater the gains for both the UK and the GCC. Government analysis shows that a deal with the GCC is expected to increase trade by at least 16 per cent, whilst a highly ambitious deal could boost trade by up to 30 per cent.

The UK already has strong trading relationships with every GCC market, with total trade amounting to over £33bn in 2021. The GCC is the UK’s seventh largest export market. An FTA will bring opportunities for businesses across the UK and the GCC by reducing barriers to trade in goods – for example by removing or reducing import tariffs.

From a GCC perspective, a highly ambitious FTA could boost GCC exports to the UK by £2bn. Intermediate goods (products used in the production process to make other goods) make up 52 per cent of GCC exports to the UK, and these important links will strengthen further as trade becomes easier.

As the world’s second largest services exporter, UK services are helping GCC nations to deliver their vision strategies. Services comprise over 50 per cent of UK exports to the region. GCC foreign direct investment (FDI) into the UK reached £15.7bn in 2020, and UK FDI into the GCC totalled £13.4bn in the same year. An FTA could also pave the way for valuable future investment in both directions.

We can be confident in reaching an agreement because there is complementarity in our strengths, our economies and in what we are trying to achieve.

Substance over speed
Today, our negotiations start in earnest. The UK and GCC teams will meet for Round 1, which will be negotiated over the course of two weeks starting today and finishing later in September. Our negotiating teams will discuss all areas of the FTA in Round 1, focusing on understanding each other’s objectives.

We cannot underestimate the process, the effort required, and the hours involved in preparing for and negotiating multiple sessions for every single round.

Behind the UK and GCC chief negotiators stand dozens of policy teams all aiming to achieve the best outcome for their businesses and wider economies.

So while there is momentum, and with parties working at pace, it’s equally important to prioritise substance over speed. This is the beginning of the negotiation, and I encourage businesses to stay engaged in the process and to continue to share thoughts and ideas with us.

There is huge political will on all sides to reach an FTA, and great business support from across the UK and the GCC to maximise the opportunities ahead. At the end of the day, all sides want a comprehensive, ambitious agreement which plays to our strengths, brings our economies closer, supports our businesses to trade and invest across borders, and ultimately creates jobs and delivers economic growth.

To counter what detractors may say, I believe that these outcomes are within our reach, and worthy of our effort.

Simon Penney is Her Majesty’s Trade Commissioner for the Middle East