RIYADH, 24 December 2002 — Gulf Cooperation Council states have trumpeted the birth of a customs union on Jan. 1, but technical problems, domestic interests and political uncertainty will hinder implementation of an effective union until 2005, economists said yesterday.
Leaders of GCC states ended a two-day annual summit in Doha on Sunday by announcing that the long-awaited customs union would be launched as scheduled. “Under the union, the member states will become a single customs zone in which customs duties, charges and measures hindering inter-trade will be removed,” stated a special declaration.
“It’s a giant step forward,” Qatar’s Al-Sharq newspaper said.
Unified customs measures and a five-percent duty on foreign imports are to be implemented by Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. According to the declaration, the launch of the union will improve the quality of products, cut production cost and prices and promote trade and investments between GCC states.
However, the reality is complex and full of hurdles.
“The GCC states have failed to reach a satisfactory formula for sharing customs revenue. Currently they are discussing a number of options,” Omar Bagour of King Abdul Aziz University’s economics department said.
The GCC finance ministers in June decided to distribute customs revenues on the basis of the final destination of imports for a period of three years. “The member states are now looking into better mechanisms including proportional distribution based on the size of imports of each country,” Bagour told AFP.
According to official figures in 2000, the total value of trade of the six states with the world reached $150 billion, of which Saudi Arabia alone accounted for $102.5 billion. The value of trade between the GCC states reached only $11 billion the same year, of which Saudi Arabia accounted for $5.2 billion.
Another problem facing the customs union is the entry of alcohol and “contraband” goods, which are allowed by some states but banned by others. It was agreed that such goods be imported only by states permitting them, without allowing free onward movement.
Other problematic issues include preferential treatment, anti-dumping and protectionist measures applied by some GCC members, Bagour said. “With these measures in force, there can be no fully-free customs zone. These create barriers that must be removed,” he said.
The declaration stipulates that products manufactured in a member-state will be treated like national products in other states and will not be subjected to customs measures. GCC assistant undersecretary for economic affairs Mohammed Al-Mazruwi said last week GCC finance ministers had agreed to continue to charge customs duties on certain goods bought from other states for a limited period.
Bagour said the customs union must be supplemented with measures such as capital mobility, free transfer of labor and essential economic reforms to become “effective and fruitful.”
The launch of the union also coincides with growing US threats to attack Iraq and enforce disarmament if not regime change, he said, adding that the launch of a war could seriously disrupt the regional economies.
The GCC states have also agreed to establish a computer link-up between their customs posts and also approved the duties of joint customs centers. The customs union is seen as an essential step on the way to forming a common Gulf market. Foreign economic blocs, especially the European Union, have urged the GCC states to establish a customs union before any free trade deals can be signed. The GCC also approved a time-table for monetary union planned for 2005 and a single currency in 2010. (AFP)
