Trade

COMMENT

The UK-GCC free trade agreement: What’s on o er?

Increased trade and investment can unlock further growth in the UK and the GCC. An ambitious free trade agreement is the key

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 e ort.

I’ve told them that I simply disagree. Every week I speak to businesses who tell me that an FTA will deliver real benefi ts 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, together with the GCC Secretary General 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 FTA negotiations.

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,

WE HAVE ALREADY AGREED TRADE DEALS WITH 71 COUNTRIES PLUS THE EU, ACCOUNTING FOR GBP808bn

OF UK BILATERAL TRADE IN 2021

breaking down trade barriers and supporting economic growth. We have already agreed trade deals with 71 countries plus the EU, accounting for GBP808bn 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 GBP33bn 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 tari s.

From a GCC perspective, a highly ambitious FTA could boost GCC exports to the UK by GBP2bn. 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 GBP15.7bn in 2020, and UK FDI into the GCC totalled GBP13.4bn in the same year. An FTA could also pave the way for valuable future investment in both directions.

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

SUBSTANCE OVER SPEED Our negotiations have started in earnest, with the UK and GCC teams meeting in September for Round 1 of negotiations where they discussed all areas of the FTA, focusing on understanding each other’s objectives. We cannot underestimate the process, the e ort required, and the hours involved in preparing for and negotiating multiple sessions for every single round.

Behind the UK and GCC’s 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 e ort.

Simon Penney, His Majesty’s Trade Commissioner for the Middle East

THE UK ALREADY HAS STRONG TRADING RELATIONSHIPS WITH EVERY GCC MARKET, WITH TOTAL TRADE IN 2021 AMOUNTING TO OVER GBP33bn

“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 GBP15.7BN IN 2020, AND UK FDI INTO THE GCC TOTALLED GBP13.4BN IN THE SAME YEAR”

A HIGHLY AMBITIOUS DEAL COULD BOOST TRADE BY UP TO 30 PER CENT

A DEAL WITH THE GCC IS EXPECTED TO INCREASE TRADE BY AT LEAST 16 PER CENT