Modalities for implementing the king's initiative to shift from GCC cooperation to unity in economic field

At the opening of the 32nd GCC summit of the Supreme Council, which was held in Riyadh on Dec. 19-20, Custodian of the Two Holy Mosques King Abdullah proposed to the leaders of the six-nation council to move from the phase of cooperation to unity in line with Article 4 of the GCC Statute. The leaders welcomed and blessed the proposal. The first paragraph of the Riyadh Declaration issued by the summit confirmed the "adoption of the initiative of the Custodian of the Two Holy Mosques to proceed from cooperation to unity so that the member countries would constitute a single entity that would enable them to achieve prosperity, drive away evil in response to the aspirations of the GCC citizens and ward off dangers facing them." The leaders decided to set up a special committee to study the proposal and present its recommendations to the 14th consultative meeting of the leaders to be held in Riyadh on May 14.
On the other hand, the GCC youth held a conference in Riyadh on April 27-28 under the sponsorship of the Institute for Diplomatic Studies of the Saudi Ministry of Foreign Affairs. The conference discussed the shifting of the GCC countries from cooperation to actual unity. I had the honor of participating in this conference. The great enthusiasm displayed by the young men and women participants for the immediate implementation of the initiative grabbed my attention. Some of them went further to say that the union was an inevitable eventuality, not just a strategic option. I supposed the attendants might have been deliberately chosen, but a result of a survey that was presented during the conference showed that about 60 percent of the GCC youth were for the immediate transition from cooperation to federation without any reservations. The remaining 40 percent were also supporting the transition from cooperation to unity that should be accompanied by more freedom, participation in the process of decision-making and guarantee of human rights.
The participants stressed the need to implement the initiative so as to enable the GCC countries to face the local challenges in the economic, political, security and social fields. They believed the initiative would enable their countries to confront the regional threats, help preserve their safety and protect them against the danger of disintegration that was facing a number of countries in the region, such as Iraq, Sudan, Yemen and Libya.
To contribute to the ongoing debate on the initiative that calls for a qualitative leap in the work of the GCC moving it from cooperation to unity, I will consider the issue from two central angles on the economic side - firstly, the steps required to be taken so as to shift from the present state to achieving economic unity, and secondly, the procedural and institutional aspects that should be initiated to achieve and maintain this unity.

The basic issues
The elements of the economic unity are represented in two steps. Firstly, the establishment of a free-trade zone that will cancel the custom duties on commodities of national origin and remove other obstacles obstructing trade between the member countries. This step was implemented in 1983, and the move was further consolidated in 2003 when the international classification of goods approved the exemption and the subsequent cancellation of the certificate of origin. Only few technical simple problems remained, which could be solved by the technicians, such as the eligibility of the products of the free zone for custom exemption.
The second step was the endorsement of the custom union, the implementation of which was started in 2003 when a unified tariff was applied on foreign goods (commodities imported from a third party). However, the complete implementation of this union was postponed several times to take place finally in 2015 due to obstacles and differences of views represented in the following:
a. Lack of agreement on the distribution of custom duties proceeds among the members of the union and then shifting to one point of entry;
b. Lack of agreement on a unified list of protected goods. There are some differences concerning the list of protected commodities;
c. Obstructing the entry of some of the re-exported goods for non-compliance of the local specifications.
d. Some member countries protect the agent and prevent the import of goods for which a local agent exists, except through him or by his consent;
e. Ways of dealing with the American commodities that are exempted from custom duties under agreements of free trade between Bahrain and Oman on the one side and the US on the other when re-exported to the other GCC countries.
The transition from cooperation to union, especially the economic one, necessitates the solution of these problems and the completion of the custom union. Several ideas could be mooted to solve these problems.
Concerning the issue of distribution of custom returns, it should be noted that the GCC countries have earmarked large funds to meet the requirements of the future development of Bahrain and Oman and that the unification of the currency, which will be explained later, would require the creation of a special fund or an independent account to ensure the stability of the new currency as the experience of the Euro has proved. Shifting to the unity will necessitate the strengthening of the Secretariat General of the GCC and the creation of new structures.
Therefore, the largest portion of the custom returns could be spent on these three areas. This practice is not new, as the European Commission gets the bulk of its budget and gives huge subsidies to agriculture every year from the proceeds of custom charges.
In my opinion, the lists of protected goods, the exempted commodities and the noncompliance to the local specifications are practices being made by some member countries to encourage re-exporting and to confine the benefits to the local businessmen and the local basic infrastructures only, such as the seaports and airports. The best way to remedy this is by encouraging competition, raising the competency of businessmen in the member countries and improving the airport and seaport services in addition to clearance and operation.
Concerning the protection of the agent, this issue is against the rules of the World Trade Organization (WTO). Therefore, the GCC countries are invited to abide by these rules, encourage competition and reduce prices in favor of the consumer.
As for the American goods exempted from customs according to the two free-trade agreements and that are re-exported from Bahrain and Oman, the solutions that could be offered include the consideration of the possibility of signing a collective agreement on free trade between the GCC countries and the US. At a time the US is hectically looking for allies under the international polarizations, in the light of the current understanding between America and the GCC countries on security and strategic matters, and in view of the economic position of the GCC countries, the United States will be more prompted to sign such an agreement.
Thirdly, the completion of the common market means that in addition to the implementation of the free-trade zone and the custom union, the liberation of the production elements, such as labor and capital, has to be completed and their prices made similar or closer. This means the full liberalization of trade including commodities, services and production factors prior to achieving full economic citizenship, i.e. realizing complete equality among GCC natural and moral individuals when they practice the economic activities in any member country. The gradual application of the economic citizenship began in 1982, a year before the establishment of the WTO. Since 2010, it has become the right of natural and moral GCC citizens to practice their economic activities in any member country where they will be treated equally without any disparity in four main domains: Haj and Umrah services, offices for the recruitment of foreign manpower, establishing commercial agencies, and establishing printing presses, publishing houses, newspapers and magazines.
In case the recommendation given above was approved in respect of not providing protection to the local dealer in line with the rules of the WTO, complete equality will be achieved except in certain fields that are considered marginal if compared to the entire economic activity in the country.
Fourthly, to complete the implementation of a customs union, the currency has to be unified. In 2008, the Supreme Council approved the agreement about the monetary union and the basic statute of the monetary council. The unified currency would be launched in 2010. The withdrawal of two countries (UAE and Oman) from this project and the outbreak of the world financial crisis cast their shadows on the scheme. New life was breathed into this vital project through the initiative of the Custodian of the Two Holy Mosques. The two following suggestions can be made:
1. We cannot talk about an economic union without the unification of the currency. We cannot envisage a successful monetary union with the GCC's second largest economic power outside it. However, as long as the differences with the United Arab Emirates are not about the rejection of the idea itself or its components, the prevailing political and security atmosphere encourages the arrival of certain understandings on the issue;
2. The current Euro crisis has highlighted the necessity of the creation of a fund - a program or financial commitment by the member countries entering into an agreement to unify the currency to use these funds to assist the countries that might face financial pressures due to their commitment to the terms and conditions of the unified currency. This will be an extra incentive to the International Monetary Fund to assist in need as it happened in the Euro zone area.
The development programs in Bahrain and Oman could be considered a precedent in this direction. Oman expressed a viewpoint that was later proved correct. It called for financial support by the other GCC members to assist any country that might face financial pressures as a result of its commitment to the conditions of the unified currency. The creation of such a program would definitely encourage Oman to join the unified currency. There are economic blocks that are not as close among themselves as the GCC countries, such as the ASEAN group, which created a fund for financial stability on an initiative by China, Japan and South Korea with resources amounting to $240 billion. These countries, however, so far have not entered into arrangements to have a unified currency.

Procedures and mechanisms
Through my long experience in the GCC, I have noticed that agreeing on the mechanisms and procedural issues to achieve objectives usually consumes more time and efforts during the discussions among the member countries' representatives than agreeing on the objectives themselves. The GCC might not be an exception compared to other organizations. Regretfully, this issue was repeated twice during the last two meetings of the special committee entrusted by the leaders to implement the initiative of the Custodian of the Two Holy Mosques.
The Supreme Council is the sole party authorized to take decisions according to the basic statute of the council. Committees emanating from the council submit their proposals and recommendations to it through the Ministerial Council (foreign ministers). The Secretariat General organizes the meetings and prepares studies for all the activities and the committees of the council. Any decision to be adopted by the council must be contained in an executive decision to be issued by the concerned authority in each member country so as to be committing. As the process of transitioning from cooperation to union will entail in the economic field the adoption of many resolutions and quick solution of the pending issues, the following suggestions, as earlier indicated, may be considered:
1. Any decision to be issued by the council will not be committing unless the concerned authority in the member country issued an executive decision on it, as is the case now. This will confirm the sovereignty of the state within the union;
2. The Supreme Council should make its meetings quarterly (once every three months) so as to gain more vitality, avoid delaying of issues and prevent stockpiling of items on its agenda;
3. The ministerial committees should be authorized to take decisions and submit reports to the Supreme Council. The Ministerial Council (foreign ministers) should not be exhausted by revisiting the issues that were already approved by the concerned ministers. In this regard, the financial cooperation committee (ministers of finance) should be given more authorities and should make its meetings monthly, similar to the economic and financial committee of the EU;
4. Turning the Secretariat General into an authority that can participate in the decision-making and be gradually given authorities above the national ones, similar to the EU authority in Brussels;
5. Expediting the establishment of the judicial authority that will rule on economic conflicts.

Conclusion
It is obvious that the initiative of the Custodian of the Two Holy Mosques to shift from cooperation to unity is a crowning of the achievements of the council during the past 31 years, which transferred the relationship in the economic field from cooperation to partnership. This is proved by the resolutions of the council and the procedures taken for their implementation including the amendment of laws, facilitating trade, movement of citizens, coordinating procedures, more freedom for mobility of capital and investments, the economic citizenship, and the joint ventures. In order to realize the directives of the leaders and the wish of the people to shift to the level of union, quick measures must be adopted to complete the establishment of the custom union, eliminating all obstacles impeding this step, launching the unified currency, encouraging the two reserving countries to join after making financial arrangements for the protection of the unified currency and assisting any member country that might face financial pressures as a result of arriving at the unified currency.
To introduce more vitality in the work of the council in the economic field, I suggest the holding of more periodical meetings of the Supreme and the Ministerial councils, giving the financial cooperation committee the power to take economic decisions, similar to the same EU committee. The Ministerial Committee (foreign ministers) should not be burdened by re-discussing the issues agreed upon by the concerned ministers, and the Secretariat General should gradually be empowered like its EU counterpart in Brussels. The establishment of the judicial authority must be expedited to rule on conflicts concerning economic issues.

(Abdullah bin Ibrahim Al-Kuwaiz is a Saudi economist. He served as associate secretary general for economic affairs at the Gulf Cooperation Council and deputy chairman of the governing board of Oxford Energy Policy Institute, U.K.)